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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2025
OR
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 001-12593
ATN INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware |
47-0728886 |
500 Cummings Center, Suite 2450 |
01915 |
(978) 619-1300
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Common Stock, par value $.01 per share |
ATNI |
The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ◻ |
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Accelerated filer ⌧ |
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Non-accelerated filer ◻ |
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Smaller reporting company ☐ |
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Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ⌧
As of May 12, 2025, the registrant had outstanding 15,216,530 shares of its common stock ($.01 par value).
ATN INTERNATIONAL, INC.
FORM 10-Q
Quarter Ended March 31, 2025
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Condensed Consolidated Balance Sheets at March 31, 2025 and December 31, 2024 |
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Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2025 and 2024 |
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Condensed Consolidated Statements of Equity for the Three Months Ended March 31, 2025 and 2024 |
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Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2025 and 2024 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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CERTIFICATIONS |
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2
Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q (or the “Report”) contains forward-looking statements relating to, among other matters, the Company’s future financial performance, business goals and objectives, and results of operations, expectations regarding its strategic investment plan, its future revenues, operating income, operating margin, cash flows, network and operating costs, EBITDA, Adjusted EBITDA, Net Debt, Net Debt Ratio, cost management initiatives, and capital investments; demand for the Company’s services and industry trends; the timing of revenue, the Company’s liquidity; the expansion of the Company’s customer base and networks; receipt of certain government grants and management’s plans, expectations and strategy for the future. These forward-looking statements are based on estimates, projections, beliefs, and assumptions and are not guarantees of future events or results. Actual future events and results could differ materially from the events and results indicated in these statements as a result of many factors, including, among others, (1) the general performance of the Company’s operations, including operating margins, revenues, capital expenditures, the impact of cost savings initiatives, and the retention of and future growth of the Company’s subscriber base and ARPU; (2) the Company’s reliance on a limited number of key suppliers and vendors for timely supply of equipment and services relating to the Company’s network infrastructure; (3) the Company’s ability to satisfy the needs and demands of the Company’s major carrier customers; (4) the Company’s ability to realize expansion plans for its fiber markets; (5) the adequacy and expansion capabilities of the Company’s network capacity and customer service system to support the Company’s customer growth; (6) the Company’s ability to efficiently and cost-effectively upgrade the Company’s networks and information technology platforms to address rapid and significant technological changes in the telecommunications industry; (7) the Company’s continued access to capital and credit markets on terms it deems favorable; (8) government subsidy program availability and regulation of the Company’s businesses, which may impact the Company’s telecommunications licenses, the Company’s revenue and the Company’s operating costs; (9) the Company’s ability to successfully transition its US Telecom business away from wholesale mobility to other carrier and consumer-based services; (10) ongoing risk of an economic downturn, political, geopolitical and other risks and opportunities facing the Company’s operations, including those resulting from changes to trade policies or tariff regulations, financial market volatility and disruption, uncertain economic conditions in the U.S. and abroad, inflationary concerns, and other macroeconomic headwinds including increased costs and supply chain disruptions; (11) management transitions, and the loss of, or an inability to recruit skilled personnel in the Company’s various jurisdictions, including key members of management; (12) the Company’s ability to find investment or acquisition or disposition opportunities that fit the strategic goals of the Company; (13) the occurrence of weather events and natural catastrophes and the Company’s ability to secure the appropriate level of insurance coverage for these assets; and the impact of such events on the timing of project implementation and corresponding revenue, and (14) increased competition. These and other additional factors that may cause actual future events and results to differ materially from the events and results indicated in the forward-looking statements above are set forth more fully under Item 1A “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 17, 2025, and the other reports the Company files from time to time with the SEC. The Company undertakes no obligation and has no intention to update these forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors that may affect such forward-looking statements, except as required by law.
In this Report, the words “the Company,” “we,” “our,” “ours,” “us” and “ATN” refer to ATN International, Inc. and its subsidiaries. This Report contains trademarks, service marks and trade names that are the property of, or licensed by, ATN and its subsidiaries.
References to dollars ($) refer to US dollars unless otherwise specifically indicated.
3
PART I—FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
ATN INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands, Except Share Data)
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March 31, |
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December 31, |
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2025 |
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2024 |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
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$ |
83,452 |
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$ |
73,393 |
Restricted cash |
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13,807 |
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15,851 |
Short-term investments |
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395 |
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300 |
Accounts receivable, net of allowances for credit losses of $14.3 million and $15.1 million, respectively |
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85,600 |
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83,719 |
Government grant receivables |
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44,155 |
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50,511 |
Customer receivable |
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7,713 |
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7,986 |
Inventory, materials and supplies |
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13,642 |
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15,191 |
Prepayments and other current assets |
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56,943 |
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62,210 |
Total current assets |
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305,707 |
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309,161 |
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Fixed Assets, net |
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1,029,165 |
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1,040,193 |
Telecommunication licenses, net |
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113,319 |
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113,319 |
Goodwill |
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4,835 |
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4,835 |
Intangible assets, net |
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10,855 |
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11,990 |
Operating lease right-of-use assets |
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97,683 |
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99,427 |
Customer receivable - long term |
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40,289 |
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41,030 |
Other assets |
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105,596 |
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107,148 |
Total assets |
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$ |
1,707,449 |
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$ |
1,727,103 |
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY |
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Current Liabilities: |
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Current portion of long-term debt |
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$ |
8,226 |
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$ |
8,226 |
Current portion of customer receivable credit facility |
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8,127 |
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8,031 |
Accounts payable and accrued liabilities |
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171,781 |
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178,172 |
Dividends payable |
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3,652 |
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3,627 |
Accrued taxes |
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8,089 |
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8,234 |
Current portion of lease liabilities |
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17,164 |
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16,188 |
Advance payments and deposits |
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46,633 |
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44,836 |
Total current liabilities |
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263,672 |
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267,314 |
Deferred income taxes |
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3,474 |
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4,882 |
Lease liabilities, excluding current portion |
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73,910 |
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77,469 |
Deferred revenue, long-term |
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53,065 |
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55,116 |
Other liabilities |
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66,790 |
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65,235 |
Customer receivable credit facility, net of current portion |
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34,105 |
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36,203 |
Long-term debt, excluding current portion |
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554,158 |
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549,130 |
Total liabilities |
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1,049,174 |
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1,055,349 |
Redeemable noncontrolling interests: |
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Preferred redeemable noncontrolling interests |
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67,162 |
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65,704 |
Common redeemable noncontrolling interests |
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10,393 |
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10,599 |
Total redeemable noncontrolling interests |
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77,555 |
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76,303 |
ATN International, Inc. Stockholders’ Equity: |
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Preferred stock, $0.01 par value per share; 10,000,000 shares authorized, none issued and outstanding |
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— |
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— |
Common stock, $0.01 par value per share; 50,000,000 shares authorized; 18,017,763 and 17,879,110 shares issued, respectively, 15,216,530 and 15,114,216 shares outstanding, respectively |
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180 |
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179 |
Treasury stock, at cost; 2,801,233 and 2,764,894 shares, respectively |
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(103,143) |
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(102,413) |
Additional paid-in capital |
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214,362 |
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212,759 |
Retained earnings |
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350,728 |
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368,191 |
Accumulated other comprehensive income |
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11,208 |
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10,777 |
Total ATN International, Inc. stockholders’ equity |
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473,335 |
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489,493 |
Noncontrolling interests |
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107,385 |
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105,958 |
Total equity |
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580,720 |
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595,451 |
Total liabilities, redeemable noncontrolling interests and equity |
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$ |
1,707,449 |
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$ |
1,727,103 |
The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
4
ATN INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024
(Unaudited)
(In Thousands, Except Per Share Data)
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Three months ended March 31, |
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2025 |
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2024 |
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REVENUE: |
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Communication services |
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$ |
174,031 |
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$ |
181,268 |
Construction |
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1,046 |
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1,586 |
Other |
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4,217 |
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3,940 |
Total revenue |
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179,294 |
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|
186,794 |
OPERATING EXPENSES (excluding depreciation and amortization unless otherwise indicated): |
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Cost of communication services and other |
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78,224 |
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80,390 |
Cost of construction revenue |
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1,501 |
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1,570 |
Selling, general and administrative |
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55,228 |
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61,315 |
Stock-based compensation |
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1,905 |
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1,909 |
Transaction-related charges |
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1,436 |
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19 |
Restructuring and reorganization expenses |
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1,830 |
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1,190 |
Depreciation and amortization |
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34,527 |
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34,340 |
Amortization of intangibles from acquisitions |
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1,226 |
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1,980 |
(Gain) loss on disposition of assets and transfers |
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750 |
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(493) |
Total operating expenses |
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176,627 |
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182,220 |
Income from operations |
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2,667 |
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4,574 |
OTHER INCOME (EXPENSE) |
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Interest income |
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272 |
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|
445 |
Interest expense |
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(11,950) |
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(11,520) |
Other income (expense) |
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(2,568) |
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|
172 |
Other expense |
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(14,246) |
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(10,903) |
LOSS BEFORE INCOME TAXES |
|
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(11,579) |
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(6,329) |
Income tax expense (benefit) |
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(192) |
|
|
1,619 |
NET LOSS |
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(11,387) |
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|
(7,948) |
Net loss attributable to noncontrolling interests, net of tax (benefit) expense of $(0.2) million and $0.3 million respectively |
|
|
2,459 |
|
|
1,633 |
NET LOSS ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS |
|
$ |
(8,928) |
|
$ |
(6,315) |
NET LOSS PER WEIGHTED AVERAGE SHARE ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS: |
|
|
|
|
|
|
Basic |
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$ |
(0.69) |
|
$ |
(0.50) |
Diluted |
|
$ |
(0.69) |
|
$ |
(0.50) |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: |
|
|
|
|
|
|
Basic |
|
|
15,131 |
|
|
15,437 |
Diluted |
|
|
15,131 |
|
|
15,437 |
DIVIDENDS PER SHARE APPLICABLE TO COMMON STOCK |
|
$ |
0.24 |
|
$ |
0.24 |
The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
5
ATN INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024
(Unaudited)
(In Thousands)
|
Three months ended |
||||
|
2025 |
|
2024 |
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Net loss |
$ |
(11,387) |
|
$ |
(7,948) |
Other comprehensive income (loss): |
|
|
|
|
|
Unrealized gain on derivatives, net of tax expense of $0 million and $0.5 million |
|
431 |
|
|
1,432 |
Other comprehensive income, net of tax |
|
431 |
|
|
1,432 |
Comprehensive loss |
|
(10,956) |
|
|
(6,516) |
Less: Comprehensive loss attributable to noncontrolling interests |
|
2,459 |
|
|
1,633 |
Comprehensive loss attributable to ATN International, Inc. |
$ |
(8,497) |
|
$ |
(4,883) |
The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
6
ATN INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024
(Unaudited)
(In Thousands, Except Per Share Data)
|
Total Equity |
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|
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Treasury |
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Additional |
|
|
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Other |
|
ATNI |
|
Non- |
|
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|
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Common |
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Stock, |
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Paid In |
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Retained |
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Comprehensive |
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Stockholders’ |
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Controlling |
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Total |
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Stock |
|
at cost |
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Capital |
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Earnings |
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Income/(Loss) |
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Equity |
|
Interests |
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Equity |
Balance, December 31, 2024 |
$ |
179 |
$ |
(102,413) |
$ |
212,759 |
$ |
368,191 |
$ |
10,777 |
$ |
489,493 |
$ |
105,958 |
$ |
595,451 |
Issuance of 138,013 common units |
|
1 |
|
— |
|
(1) |
|
— |
|
— |
|
— |
|
— |
|
— |
Purchase of 35,699 shares of common stock |
|
— |
|
(730) |
|
— |
|
— |
|
— |
|
(730) |
|
— |
|
(730) |
Stock-based compensation |
|
— |
|
— |
|
1,611 |
|
— |
|
— |
|
1,611 |
|
293 |
|
1,904 |
Dividends declared on common stock ($0.24 per common share) |
|
— |
|
— |
|
— |
|
(3,652) |
|
— |
|
(3,652) |
|
— |
|
(3,652) |
Repurchase of noncontrolling interests |
|
— |
|
— |
|
(7) |
|
— |
|
— |
|
(7) |
|
(38) |
|
(45) |
Accrued dividend - redeemable preferred units |
|
— |
|
— |
|
— |
|
(1,458) |
|
— |
|
(1,458) |
|
— |
|
(1,458) |
Deemed dividend - redeemable common units |
|
— |
|
— |
|
— |
|
(3,425) |
|
— |
|
(3,425) |
|
3,631 |
|
206 |
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
— |
|
— |
|
— |
|
(8,928) |
|
— |
|
(8,928) |
|
(2,459) |
|
(11,387) |
Other comprehensive income |
|
— |
|
— |
|
— |
|
— |
|
431 |
|
431 |
|
— |
|
431 |
Total comprehensive income |
|
— |
|
— |
|
— |
|
(8,928) |
|
431 |
|
(8,497) |
|
(2,459) |
|
(10,956) |
Balance, March 31, 2025 |
$ |
180 |
$ |
(103,143) |
$ |
214,362 |
$ |
350,728 |
$ |
11,208 |
$ |
473,335 |
$ |
107,385 |
$ |
580,720 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2023 |
$ |
173 |
$ |
(90,447) |
$ |
205,797 |
$ |
417,282 |
$ |
8,268 |
$ |
541,073 |
$ |
96,730 |
$ |
637,803 |
Purchase of 62,940 shares of common stock |
|
— |
|
(2,016) |
|
— |
|
— |
|
— |
|
(2,016) |
|
— |
|
(2,016) |
Stock-based compensation |
|
— |
|
— |
|
1,754 |
|
— |
|
— |
|
1,754 |
|
155 |
|
1,909 |
Dividends declared on common stock ($0.24 per common share) |
|
— |
|
— |
|
— |
|
(3,720) |
|
— |
|
(3,720) |
|
(40) |
|
(3,760) |
Accrued dividend - redeemable preferred units |
|
— |
|
— |
|
— |
|
(1,348) |
|
— |
|
(1,348) |
|
— |
|
(1,348) |
Deemed dividend - redeemable common units |
|
— |
|
— |
|
— |
|
(868) |
|
— |
|
(868) |
|
3,512 |
|
2,644 |
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
— |
|
— |
|
— |
|
(6,315) |
|
— |
|
(6,315) |
|
(1,633) |
|
(7,948) |
Other comprehensive income |
|
— |
|
— |
|
— |
|
— |
|
1,432 |
|
1,432 |
|
— |
|
1,432 |
Total comprehensive income (loss) |
|
— |
|
— |
|
— |
|
(6,315) |
|
1,432 |
|
(4,883) |
|
(1,633) |
|
(6,516) |
Balance March 31,2024 |
$ |
173 |
$ |
(92,463) |
$ |
207,551 |
$ |
405,031 |
$ |
9,700 |
$ |
529,992 |
$ |
98,724 |
$ |
628,716 |
7
ATN INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024
(Unaudited)
(In Thousands)
|
Three Month Ended March 31, |
||||
|
2025 |
|
2024 |
||
Cash flows from operating activities: |
|
|
|
|
|
Net loss |
$ |
(11,387) |
|
$ |
(7,948) |
Adjustments to reconcile net loss to net cash flows provided by operating activities: |
|
|
|
|
|
Depreciation and amortization |
|
34,527 |
|
|
34,340 |
Amortization of intangibles from acquisitions |
|
1,226 |
|
|
1,980 |
Provision for doubtful accounts |
|
1,854 |
|
|
1,322 |
Amortization of debt issuance costs |
|
716 |
|
|
625 |
(Gain) loss on disposition of assets and transfers |
|
750 |
|
|
(493) |
Stock-based compensation |
|
1,905 |
|
|
1,909 |
Deferred income taxes |
|
(2,520) |
|
|
(2,181) |
(Gain) loss on investments |
|
4 |
|
|
(170) |
Changes in operating assets and liabilities, excluding the effects of acquisitions and dispositions: |
|
|
|
|
|
Accounts receivable and government grant receivables |
|
(2,440) |
|
|
2,183 |
Customer receivable |
|
1,015 |
|
|
254 |
Accrued taxes |
|
2,223 |
|
|
3,966 |
Materials and supplies, prepayments, and other current assets |
|
6,004 |
|
|
(626) |
Accounts payable and accrued liabilities and advance payments and deposits |
|
2,567 |
|
|
(9,624) |
Other assets |
|
1,501 |
|
|
340 |
Other liabilities |
|
(2,040) |
|
|
(2,701) |
Net cash provided by operating activities |
|
35,905 |
|
|
23,176 |
Cash flows from investing activities: |
|
|
|
|
|
Capital expenditures |
|
(20,832) |
|
|
(36,016) |
Government capital programs |
|
|
|
|
|
Amounts disbursed |
|
(22,445) |
|
|
(13,473) |
Amounts received |
|
17,281 |
|
|
10,546 |
Purchase of intangible assets |
|
— |
|
|
(573) |
Purchase of investments - employee benefit plan |
|
(14) |
|
|
(25) |
Proceeds from investments - employee benefit plan |
|
729 |
|
|
201 |
Proceeds from sale of assets |
|
141 |
|
|
3,655 |
Net cash used in investing activities |
|
(25,140) |
|
|
(35,685) |
Cash flows from financing activities: |
|
|
|
|
|
Dividends paid on common stock |
|
(3,627) |
|
|
(3,701) |
Payment of debt issuance costs |
|
(172) |
|
|
(72) |
Finance lease payments |
|
(494) |
|
|
(443) |
Term loan - repayments |
|
(1,653) |
|
|
(3,801) |
Revolving credit facility – borrowings |
|
13,000 |
|
|
46,000 |
Revolving credit facility – repayments |
|
(7,000) |
|
|
(18,302) |
Proceeds from customer receivable credit facility |
|
— |
|
|
3,700 |
Repayment of customer receivable credit facility |
|
(2,030) |
|
|
(1,804) |
Purchases of common stock – stock- based compensation |
|
(730) |
|
|
(1,896) |
Purchases of common stock – share repurchase plan |
|
— |
|
|
(121) |
Repurchases of noncontrolling interests |
|
(44) |
|
|
— |
Net cash (used in) provided by financing activities |
|
(2,750) |
|
|
19,560 |
Net change in cash, cash equivalents, and restricted cash |
|
8,015 |
|
|
7,051 |
Total cash, cash equivalents, and restricted cash, beginning of period |
|
89,244 |
|
|
62,167 |
Total cash, cash equivalents, and restricted cash, end of period |
$ |
97,259 |
|
$ |
69,218 |
Supplemental cash flow information: |
|
|
|
|
|
Interest paid |
$ |
10,366 |
|
$ |
10,291 |
Taxes paid |
$ |
1,053 |
|
$ |
748 |
Dividends declared, not paid |
$ |
3,652 |
|
$ |
3,720 |
Noncash investing activity: |
|
|
|
|
|
Purchases of property, plant and equipment included in accounts payable and accrued expenses |
|
|
|
|
|
Amounts accrued for reimbursable capital expenditures from government capital programs |
$ |
22,191 |
|
$ |
33,446 |
Amounts accrued for non-reimbursable capital expenditures |
$ |
13,970 |
|
$ |
14,032 |
The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
8
ATN INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.ORGANIZATION AND BUSINESS OPERATIONS
The Company is a leading provider of digital infrastructure and communications services with a focus on rural and remote markets in the United States and internationally, including Bermuda and the Caribbean region.
The Company has developed significant operational expertise and resources that it uses to augment its capabilities in its local markets. With this support, the Company’s operating subsidiaries can improve their quality of service with greater economies of scale and expertise than would typically be available in the size markets the Company operates in. The Company provides management, technical, financial, regulatory and marketing services to its operating subsidiaries and typically receives a management fee calculated as a percentage of their revenues, which is eliminated in consolidation. The Company also actively evaluates investment opportunities and other strategic transactions, both domestic and international, and generally looks for those that it believes fit its profile of telecommunications businesses while keeping a focus on generating excess operating cash flows over extended periods of time. The Company uses the cash generated from its operations to maintain an appropriate ratio of debt and cash on hand and to re-invest in organic growth, fund capital expenditures, return value to its stockholders through dividends or stock repurchases and make strategic investments or acquisitions.
For further information about the Company’s financial segments and geographical information about its operating revenues and assets, see Notes 1 and 12 to the Consolidated Financial Statements included in this Report.
As of March 31, 2025, the Company offered the following types of services to its customers:
| ● | Fixed Telecommunications Services. The Company provides fixed data and voice telecommunications services to business and consumer customers. These services include high-speed broadband for consumers and high-speed data solutions for businesses. For some markets, fixed services also include video services and revenue derived from support under certain government programs. |
| ● | Carrier Telecommunication Services. The Company delivers services to other telecommunications providers including the leasing of critical network infrastructure such as tower and transport facilities, wholesale roaming and long-distance voice services, site maintenance and international long-distance services. |
| ● | Mobile Telecommunications Services. The Company offers mobile communications services over its wireless networks and related equipment (such as handsets) to both business and consumer customers. |
| ● | Managed Services. The Company provides information technology services such as network, application, infrastructure and hosting services to both its business and consumer customers to complement its fixed telecommunications services in its existing markets. |
Through March 31, 2025, the Company identified two operating segments to manage and review its operations, as well as to support investor presentations of its results. These two operating segments are as follows:
| ● | US Telecom. In the United States, the Company offers fixed, carrier, and managed services to business customers and consumers in Alaska and the western United States. In 2024, the Company concluded the provision of mobility services to retail customers. |
| ● | International Telecom. In its international markets, the Company offers fixed, carrier, mobility and managed services to customers in Bermuda, the Cayman Islands, Guyana and the US Virgin Islands. |
9
The following chart summarizes the operating activities of the Company’s principal subsidiaries, the segments in which it reports its revenue and the markets it served during the three months ended March 31, 2025:
International Telecom |
US Telecom |
||||||||
Services |
|
Markets |
|
Tradenames (1) |
Services |
|
Markets |
|
Tradenames |
Mobility Services |
|
Bermuda, Guyana, US Virgin Islands |
|
One Communications, Viya |
Mobility Services |
|
United States (rural markets) |
|
Choice, Choice NTUA Wireless |
Fixed Services |
|
Bermuda, Cayman Islands, Guyana, US Virgin Islands |
|
One Communications, Logic, Viya |
Fixed Services |
|
United States |
|
Alaska Communications, Commnet, Choice, Choice NTUA Wireless, Sacred Wind Communications, Ethos Broadband, Deploycom |
Carrier Services |
|
Bermuda, Guyana, US Virgin Islands |
|
One Communications, Viya, Essextel |
Carrier Services |
|
United States |
|
Alaska Communications, Commnet, Sacred Wind Communications |
Managed Services |
|
Bermuda, Cayman Islands, US Virgin Islands, Guyana |
|
One Communications, Logic, Viya, Brava |
Managed Services |
|
United States |
|
Alaska Communications, Choice |
| (1) | In 2024, the Company completed a rebranding in Guyana and GTT is now known as One Communications. The Company refers throughout this report to its business in Guyana as “OneGY.” In April 2025, the Company completed a rebranding in the US Virgin Islands and Viya is now known as One Communications. The Company will refer to Viya in future reports as “OneVI.” |
In 2024, the Company undertook a rebranding of its retail services in its International Telecom segment to “One Communications” in Guyana, completed the brand implementation in the US Virgin Islands during the second quarter of 2025 and is scheduled to implement that brand in the Cayman during the first half of 2025. The Company intends to utilize the GTT and Viya brands for legacy voice services in certain markets for a period of time.
For further information about the Company’s financial segments and geographical information about its operating revenues and assets, see Note 12 to the Unaudited Condensed Consolidated Financial Statements included in this Report.
Restructuring and reorganization expense
The Company engages in restructuring and reorganization activities from time to time. These activities include contract termination and reduction in force costs and are incurred to reduce operating costs and improve the Company’s operating margins. The Company’s 2023 restructuring plan began in first quarter of 2023 and was complete in March 2024. The Company’s 2024 reorganization plan began in June 2024 and was complete in December 2024. The Company’s 2025 restructure plan began in January 2025. As of March 31, 2025, $1.6 million was accrued and payable under these restructuring and reorganization plans. A summary of the restructuring and reorganization costs is below (in thousands).
|
|
Three months ended March 31, |
||||
|
|
|
2025 |
|
|
2024 |
2023 Restructuring Plan |
|
$ |
— |
|
$ |
1,190 |
2024 Reorganization Plan |
|
|
— |
|
|
— |
2025 Reorganization Plan |
|
|
1,830 |
|
|
— |
Total |
|
$ |
1,830 |
|
$ |
1,190 |
10
2. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The financial information included herein is unaudited; however, the Company believes such information and the disclosures herein are adequate to make the information presented not misleading and reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair statement of the Company’s financial position and results of operations for the periods described therein. The year-end condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. Results of interim periods may not be indicative of results for the full year. These condensed consolidated financial statements and related notes should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 17, 2025.
The condensed consolidated financial statements include the accounts of the Company, its subsidiaries in which the Company holds controlling interests and certain entities which are consolidated in accordance with the provisions of the Financial Accounting Standards Board’s (“FASB”) authoritative guidance on the consolidation of variable interest entities, since it is determined that the Company is the primary beneficiary of these entities.
Recent Accounting Pronouncements
In December 2023, the FASB released ASU 2023-09, titled "Enhancements to Income Tax Disclosures," with the aim of improving the clarity and usefulness of income tax disclosures. The update focuses primarily on enhancing disclosures related to rate reconciliation and income taxes paid. ASU 2023-09 becomes effective for annual reporting periods starting after December 15, 2024, with early adoption permitted. While the changes prescribed by ASU 2023-09 are implemented prospectively, retrospective application is also allowed. The Company has chosen not to early adopt this standard and is currently assessing its potential impact on our consolidated financial statements and accompanying disclosures.
In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (ASU 2023-07), which requires that a public entity disclose, on an interim and annual basis, significant segment expense categories and amounts that are regularly provided to its chief operating decision maker (CODM) and included in each reported measure of segment profit or loss. An entity must also disclose, by reportable segment, the amount and composition of other expenses. The standard requires an entity to disclose the title and position of its CODM and explain how the CODM uses these reported measures in assessing segment performance and determining how to allocate resources. The Company adopted the standard on December 31, 2024 and the disclosures are included in Note 12.
In November 2024, the FASB issued ASU No. 2024-03, “Disaggregation of Income Statements Expenses (DISE)” (ASU 2024-03), which requires that a public entity provide additional disclosure of the nature of expenses included in the income statement. The new standard requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. ASU 2024-03 will be effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with retrospective application. The standard allows early adoption of these requirements and the Company is currently evaluating the disclosure impacts of adoption.
11
3. REVENUE RECOGNITION AND RECEIVABLES
Revenue Accounted for in Accordance with Other Guidance
The Company records revenue in accordance with ASC 606 from contracts with customers and ASC 842 from lease agreements, as well as government grants. Lease revenue recognized under ASC 842 is disclosed in Note 4 and government support revenue is disclosed in Note 8.
Timing of Revenue Recognition
Revenue accounted for in accordance with ASC 606 consisted of the following for the periods presented below (in thousands):
|
Three months ended March 31, 2025 |
|||||||
|
International |
|
US |
|
|
|
||
|
Telecom |
|
Telecom |
|
Total |
|||
Services transferred over time |
$ |
89,516 |
|
$ |
68,705 |
|
$ |
158,221 |
Goods and services transferred at a point in time |
|
3,512 |
|
|
2,906 |
|
|
6,418 |
Total revenue accounted for under ASC 606 |
$ |
93,028 |
|
$ |
71,611 |
|
$ |
164,639 |
Operating lease income |
|
155 |
|
|
1,828 |
|
|
1,983 |
Government support revenue (1) |
|
1,312 |
|
|
11,360 |
|
|
12,672 |
Total revenue |
$ |
94,495 |
|
$ |
84,799 |
|
$ |
179,294 |
|
Three months ended March 31, 2024 |
|||||||
|
International |
|
US |
|
|
|
||
|
Telecom |
|
Telecom |
|
Total |
|||
Services transferred over time |
$ |
88,560 |
|
$ |
78,043 |
|
$ |
166,603 |
Goods and services transferred at a point in time |
|
3,034 |
|
|
3,271 |
|
|
6,305 |
Total revenue accounted for under ASC 606 |
$ |
91,594 |
|
$ |
81,314 |
|
$ |
172,908 |
Operating lease income |
|
72 |
|
|
2,034 |
|
|
2,106 |
Government support revenue (1) |
|
1,393 |
|
|
10,387 |
|
|
11,780 |
Total revenue |
$ |
93,059 |
|
$ |
93,735 |
|
$ |
186,794 |
| (1) | Revenue recognized from CAF II, USF and RDOF programs. Refer to Note 8. |
Contract Assets and Liabilities
The Company recognizes contract assets and liabilities on its balance sheet. Contract assets represent unbilled amounts typically resulting from consumer Mobility contracts with both a multiyear service period and a promotional discount. In these contracts, the revenue recognized exceeds the amount billed to the customer. The current portion of the contract asset is recorded in prepayments and other current assets and the noncurrent portion is included in other assets on the Company’s balance sheets.
Contract liabilities consist of advance payments and billings in excess of revenue recognized. Mobility and Fixed revenue for postpaid customers is generally billed one month in advance and recognized over the period that the corresponding service is rendered to customers. To the extent the service is not provided by the reporting date the amount is recognized as a contract liability. Prepaid service, including Mobility services, sold to customers is recorded as deferred revenue prior to the commencement of services. Contract liabilities also include certain long term fixed business and carrier service customer contracts. The current portion of contract liabilities are recorded in advanced payments and deposits and the noncurrent portion is included in deferred revenue, long-term on the Company’s balance sheets.
12
In July 2019, the Company entered into a Network Build and Maintenance Agreement with AT&T Mobility, LLC (“AT&T”) that was subsequently amended through March 31, 2025 (the “FirstNet Agreement”). In connection with the FirstNet Agreement, the Company is building a portion of AT&T’s network for the First Responder Network Authority in or near the Company’s current operating areas in the western United States (the “FirstNet Transaction”). The FirstNet Transaction includes construction and service performance obligations. The current portion of receivables under this agreement is recorded in customer receivable and the long-term portion is recorded in customer receivable long-term on the Company’s balance sheet.
In May 2023, the Company amended its current roaming agreement and entered into a carrier management services agreement with Verizon Wireless (the “Verizon CMS Agreement”). The transaction includes service performance obligations under which revenue is recognized over time. The Company allocates the transaction price of these agreements to each performance obligation based on the relative standalone selling price of each performance obligation in the contract. The standalone selling price is the estimated price the Company would charge for the good or service in a separate transaction with similar customers in similar circumstances.
Contract assets and liabilities consisted of the following (amounts in thousands):
|
March 31, 2025 |
|
December 31, 2024 |
|
|
$ Change |
|
% Change |
||||
Contract asset – current |
$ |
3,774 |
|
$ |
3,920 |
|
$ |
(146) |
|
|
(3.7) |
% |
Contract asset – noncurrent |
|
4,090 |
|
|
5,368 |
|
|
(1,278) |
|
|
(23.8) |
% |
Contract liability – current |
|
(29,164) |
|
|
(28,932) |
|
|
(232) |
|
|
0.8 |
% |
Contract liability – noncurrent |
|
(53,471) |
|
|
(55,116) |
|
|
1,645 |
|
|
(3.0) |
% |
Net contract liability |
$ |
(74,771) |
|
$ |
(74,760) |
|
$ |
(11) |
|
|
0.0 |
% |
The Company’s net contract liability remained unchanged during the three months ended March 31, 2025. During the three months ended March 31, 2025, the Company recognized revenue of $18.3 million related to its December 31, 2024 contract liability and amortized $1.1 million of the December 31, 2024 contract asset to revenue.
Contract Acquisition Costs
The March 31, 2025 and December 31, 2024 balance sheets include contract acquisition costs of $11.2 million and $10.7 million, respectively, in other assets. During the three months ended March 31, 2025 and 2024, the Company amortized $1.8 million and $1.6 million, respectively, of contract acquisition costs.
Remaining Performance Obligations
Remaining performance obligations represent the transaction price allocated to unsatisfied performance obligations of certain multiyear Mobility and Fixed communication services contracts, Managed Services contracts, and the Company’s Carrier Services construction and service contracts. The transaction price allocated to unsatisfied performance obligations was $595 million at March 31, 2025. The Company expects to satisfy approximately 43% of the remaining performance obligations and recognize the transaction price within 24 months and approximately $60 million annually from 2027 through 2032. The Company omits performance obligations with a duration of one year or less and variable consideration under the right to invoice or wholly unsatisfied performance obligation practical expedients from this disclosure.
Disaggregation
The Company's revenue is presented on a disaggregated basis in Note 12 based on an evaluation of disclosures outside the financial statements, information regularly reviewed by the chief operating decision makers for evaluating the financial performance of operating segments and other information that is used for performance evaluation and resource allocations.
13
This includes revenue from Communication Services, Construction, and Other revenue. Communication Services revenue is further disaggregated into business and consumer Mobility, business and consumer Fixed, Carrier Services, and Other services. Other revenue is further disaggregated into Managed Services revenue.
Receivables
The Company records an estimate of future credit losses in conjunction with revenue transactions based on the information available including historical experience and management’s expectations of future conditions. Those estimates are updated as additional information becomes available. The Company’s allowance for uncollectible accounts receivable is based on management’s assessment of the collectability of assets pooled together with similar risk characteristics.
The Company had gross accounts receivables of $99.9 million and $98.8 million as of March 31, 2025 and December 31, 2024, respectively. The Company also recorded allowances for credit losses against these receivables of $14.3 million and $15.1 million as of March 31, 2025 and December 31, 2024, respectively.
In addition, the Company has also recorded a receivable under the FirstNet Agreement totaling $48.0 million as of March 31, 2025 of which $7.7 million was current and $40.3 million was long-term and had a receivable under that same agreement of $49.0 million as of December 31, 2024, of which $8.0 million was current and $41.0 million was long-term. As of March 31, 2025, the Company has recorded $44.2 million of receivables under certain government support agreements which include $32.3 million under the Replace and Remove Program and $11.9 million related to the Company’s participation in other government support programs. As of December 31, 2024, the Company had recorded $50.5 million of receivables under certain government support agreements which included $37.7 million under the Replace and Remove Program and $12.8 million under the Company’s participation in other government support programs (refer to Note 8).
The Company monitors receivables through the use of historical operating data adjusted for the expectation of future performance as appropriate. Activity in the allowance for credit losses is below (in thousands):
|
|
Three months ended |
||||
|
|
March 31, 2025 |
|
March 31, 2024 |
||
|
|
|
|
|
|
|
Balance at beginning of period |
|
$ |
15,132 |
|
$ |
16,362 |
Current period provision for expected losses |
|
|
1,854 |
|
|
1,322 |
Write-offs charged against the allowance |
|
|
(2,887) |
|
|
(903) |
Recoveries collected |
|
|
207 |
|
|
83 |
Balance at end of period |
|
$ |
14,306 |
|
$ |
16,864 |
14
4. LEASES
Lessee Disclosure
The Company has operating and financing leases for towers, land, corporate offices, retail facilities, and data transport capacity. The lease terms are generally between three and 10 years, some of which include additional renewal options.
Supplemental lease information
The components of lease expense were as follows (in thousands):
|
Three months ended |
||||
|
March 31, 2025 |
|
March 31, 2024 |
||
Operating lease cost: |
|
|
|
|
|
Operating lease cost |
$ |
5,906 |
|
$ |
5,479 |
Short-term lease cost |
|
1,332 |
|
|
691 |
Variable lease cost |
|
1,955 |
|
|
1,429 |
Total operating lease cost |
$ |
9,193 |
|
$ |
7,599 |
|
|
|
|
|
|
Finance lease cost: |
|
|
|
|
|
Amortization of right-of-use asset |
$ |
1,879 |
|
$ |
612 |
Variable costs |
|
287 |
|
|
198 |
Interest costs |
|
88 |
|
|
100 |
Total finance lease cost |
$ |
2,254 |
|
$ |
910 |
During the three months ended March 31, 2025 and 2024, the Company paid $6.3 million and $4.8 million, respectively, for operating lease liabilities. During the three months ended March 31, 2025 and 2024, the Company recorded $5.2 million and $2.3 million, respectively, of operating lease liabilities arising from right of use assets.
At March 31, 2025, finance leases with a net book value of $27.5 million were included in fixed assets, net. During the three months ended March 31, 2025, the Company paid $0.5 million of financing cash flows and $0.1 million of operating cash flows for finance lease liabilities. During the three months ended March 31, 2024, the Company paid $0.4 million of financing cash flows and $0.1 million of operating cash flows for finance lease liabilities. At March 31, 2025, finance leases had a lease liability of $4.3 million, of which $1.0 million was current.
At December 31, 2024, finance leases with a net book value of $29.6 million were included in fixed assets, net.
The weighted average remaining lease terms and discount rates as of March 31, 2025 and December 31, 2024 are noted in the table below:
|
March 31, 2025 |
|
December 31, 2024 |
||
Weighted-average remaining lease term |
|
|
|
|
|
Operating leases |
|
12.6 years |
|
|
12.6 years |
Financing leases |
|
3.9 years |
|
|
11.5 years |
|
|
|
|
|
|
Weighted-average discount rate |
|
|
|
|
|
Operating leases |
|
6.8% |
|
|
6.8% |
Financing leases |
|
7.5% |
|
|
7.4% |
15
Maturities of lease liabilities as of March 31, 2025 were as follows (in thousands):
|
Operating Leases |
|
Financing Leases |
||
2025 (excluding the three months ended March 31, 2025) |
$ |
17,474 |
|
$ |
1,135 |
2026 |
|
15,799 |
|
|
848 |
2027 |
|
13,029 |
|
|
812 |
2028 |
|
9,867 |
|
|
620 |
2029 |
|
7,080 |
|
|
516 |
Thereafter |
|
79,553 |
|
|
1,658 |
Total lease payments |
|
142,802 |
|
|
5,589 |
Less imputed interest |
|
(56,013) |
|
|
(1,304) |
Total |
$ |
86,789 |
|
$ |
4,285 |
Maturities of lease liabilities as of December 31, 2024 were as follows (in thousands):
|
Operating Leases |
|
Financing Leases |
||
2025 |
$ |
20,764 |
|
$ |
1,649 |
2026 |
|
15,881 |
|
|
847 |
2027 |
|
12,949 |
|
|
825 |
2028 |
|
9,901 |
|
|
632 |
2029 |
|
7,134 |
|
|
516 |
Thereafter |
|
79,843 |
|
|
1,630 |
Total lease payments |
|
146,472 |
|
|
6,099 |
Less imputed interest |
|
(57,512) |
|
|
(1,402) |
Total |
$ |
88,960 |
|
$ |
4,697 |
As of March 31, 2025, the Company did not have any material operating or finance leases that have not yet commenced.
Lessor Disclosure
The Company is the lessor in agreements to lease the use of its network assets including its wireless cell sites and buildings. For the three months ended March 31, 2025 and 2024, the Company recorded $2.0 million and $2.1 million, respectively, of lease income from agreements in which the Company is the lessor. Lease income is classified as Carrier Services revenue in the statement of operations.
The following table presents the maturities of future undiscounted lease payments for the periods indicated (in thousands):
2025 (excluding the three months ended March 31, 2025) |
$ |
5,895 |
2026 |
|
7,634 |
2027 |
|
6,309 |
2028 |
|
5,626 |
2029 |
|
4,924 |
Thereafter |
|
4,204 |
Total future lease payments |
$ |
34,592 |
16
5. USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. The most significant estimates relate to the allowance for credit losses on trade receivables, useful lives of the Company’s fixed and finite-lived intangible assets, allocation of purchase price to assets acquired and liabilities assumed in business combinations, fair value of indefinite-lived intangible assets, goodwill and income taxes. Actual results could differ significantly from those estimates.
6. FAIR VALUE MEASUREMENTS AND INVESTMENTS
In accordance with the provisions of fair value accounting, a fair value measurement assumes that a transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability, and defines fair value based upon an exit price model.
The fair value measurement guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance describes three levels of inputs that may be used to measure fair value:
Level 1 |
|
Quoted prices in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset and liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 assets and liabilities include money market funds, debt and equity securities and derivative contracts that are traded in an active exchange market. |
|
|
|
Level 2 |
|
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes corporate obligations and non-exchange traded derivative contracts. |
|
|
|
Level 3 |
|
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments and intangible assets that have been impaired whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. |
17
Assets and liabilities of the Company measured at fair value on a recurring basis as of March 31, 2025 and December 31, 2024 are summarized as follows (in thousands):
|
|
March 31, 2025 |
||||||||||
|
|
Significant Other |
||||||||||
|
|
Quoted Prices in |
|
Observable |
|
Unobservable |
|
|
|
|||
|
|
Active Markets |
|
Inputs |
|
Inputs |
|
|
|
|||
Description |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
Total |
||||
Short term investments |
|
$ |
395 |
|
$ |
— |
|
$ |
— |
|
$ |
395 |
Employee benefit plan investments |
|
|
2,048 |
|
|
— |
|
|
— |
|
|
2,048 |
Interest rate swap |
|
|
— |
|
|
(410) |
|
|
— |
|
|
(410) |
Total assets and liabilities measured at fair value |
|
$ |
2,443 |
|
$ |
(410) |
|
$ |
— |
|
$ |
2,033 |
|
|
December 31, 2024 |
||||||||||
|
|
Significant Other |
||||||||||
|
|
Quoted Prices in |
|
Observable |
|
Unobservable |
|
|
|
|||
|
|
Active Markets |
|
Inputs |
|
Inputs |
|
|
|
|||
Description |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
Total |
||||
Short term investments |
|
$ |
300 |
|
$ |
— |
|
$ |
— |
|
$ |
300 |
Employee benefit plan investments |
|
|
2,768 |
|
|
— |
|
|
— |
|
|
2,768 |
Interest rate swap |
|
|
— |
|
|
(723) |
|
|
— |
|
|
(723) |
Warrants on Alaska Communications redeemable common units |
|
|
— |
|
|
— |
|
|
(249) |
|
|
(249) |
Total assets and liabilities measured at fair value |
|
$ |
3,068 |
|
$ |
(723) |
|
$ |
(249) |
|
$ |
2,096 |
18
Other Investments
The Company holds investments in equity securities consisting of noncontrolling investments in privately held companies. Historically, the investments are accounted for using equity method accounting, the measurement alternative for investments without a readily determinable fair value, or fair value. The fair value investments are valued using Level 3 inputs and the Company used the income approach to fair value the investment. The inputs consisted of a discount rate and future cash flows calculated based on the investment attributes. As of March 31, 2025, the Company’s investments are all accounted for under the measurement alternative for investments without a readily determinable value. A roll forward of the investments is below (in thousands):
|
|
Investments without a readily determinable fair value |
|
Fair value investments |
|
Equity method investments |
|
Total |
||||
Balance, December 31, 2024 |
|
$ |
41,956 |
|
$ |
— |
|
$ |
— |
|
$ |
41,956 |
Income recognized |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
Distributions |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
Sale of investment |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
Balance, March 31, 2025 |
|
$ |
41,956 |
|
$ |
— |
|
$ |
— |
|
$ |
41,956 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2023 |
|
$ |
41,710 |
|
$ |
1,197 |
|
$ |
— |
|
$ |
42,907 |
Income recognized |
|
|
— |
|
|
19 |
|
|
— |
|
|
19 |
Contributions / (distributions) |
|
|
— |
|
|
(140) |
|
|
— |
|
|
(140) |
Balance, March 31, 2024 |
|
$ |
41,710 |
|
$ |
1,076 |
|
$ |
— |
|
$ |
42,786 |
These investments are included with other assets on the consolidated balance sheets.
Redeemable Common Units and Warrants
The Company has issued redeemable common units, and warrants to purchase additional common units, in consolidated subsidiaries of the Company. The instruments are redeemable at the option of the holder. The common units are recorded at the higher or historical cost or fair value and the warrants to purchase common units are recorded at fair value in the Company’s financial statements. The common units are recorded in redeemable noncontrolling interest and the warrants are recorded in other liabilities on the Company’s balance sheets. The put options for the Alloy redeemable common units begin in November 2026. The put options for the Alaska Communications redeemable common units begin the earlier of a public offering or July 2028. The fair value of the Alaska Commun Units was zero at both March 31, 2025 and December 31, 2024. The fair value of the warrants to purchase Alaska common units was zero and $(0.2) million at March 31, 2025 and December 31, 2024, respectively. The Alloy common units were carried at historical cost at of $10.4 million and $10.6 million at March 31, 2025 and December 31, 2024, respectively, which exceeded its fair value. The Company calculates the fair value of the instruments using a combination of market and discounted cash flows approaches with Level 3 inputs.
Other Fair Value Disclosures
The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximate their fair values because of the relatively short-term maturities of these financial instruments.
The fair value of long-term debt is estimated using Level 2 inputs. At March 31, 2025, the fair value of long-term debt, including the current portion, was $569.4 million and its book value was $562.4 million. At December 31, 2024, the fair value of long-term debt, including the current portion, was $564.4 million and its book value was $557.4 million.
19
The fair value of the customer receivable credit facility is estimated using Level 2 inputs. At March 31, 2025, the fair value of the customer receivable credit facility, including the current portion, was $41.3 million and its book value was $42.2 million. At December 31, 2024, the fair value of the customer receivable credit facility, including the current portion, was $42.7 million and its book value was $44.2 million.
7. LONG-TERM DEBT
2023 CoBank Credit Facility
On July 13, 2023, the Company, along with certain of its subsidiaries as guarantors, entered into a new Credit Agreement with CoBank, ACB and a syndicate of other lenders (as may be amended from time to time, the “2023 CoBank Credit Facility”). On July 10, 2024, the Company amended the 2023 CoBank Credit Facility to add certain subsidiaries as guarantors and to provide further flexibility in order to accept certain grant and government program obligations.
The 2023 CoBank Credit Facility provides for a five-year $170 million revolving credit facility (the “2023 CoBank Revolving Loan”) and a six-year $130 million term loan facility (the “2023 CoBank Term Loan”). The Company may use (i) up to $25 million under the 2023 CoBank Revolving Loan for letters of credit, and (ii) up to $20 million under a swingline sub-facility. Upon the closing of the 2023 CoBank Credit Facility, the Company drew all of the 2023 CoBank Term Loan and approximately $13.6 million of the 2023 CoBank Revolving Loan. These borrowings were used to repay all of the $139.5 million of debt outstanding under a previously held credit facility, upon close.
The 2023 CoBank Term Loan has scheduled quarterly principal payments in the amounts set forth below, with the outstanding principal balance maturing on July 13, 2029. The 2023 CoBank Revolving Loan may be repaid at any time on or prior to its maturity on July 13, 2028. All amounts outstanding under the 2023 CoBank Credit Facility will be due and payable upon the earlier of the maturity date or the acceleration of the loans and commitments upon an event of default.
2023 CoBank Term Loan Quarterly Payment Dates |
2023 CoBank Term Loan Quarterly Repayments |
December 31, 2023 – June 30, 2025 |
$812,500 (2.5% per annum) |
September 30, 2025 – June 30, 2026 |
$1,625,000 (5% per annum) |
September 30, 2026 – June 30, 2029 |
$2,437,500 (7.5% per annum) |
Amounts borrowed under the 2023 CoBank Credit Facility bear interest at a rate equal to, at the Company’s option, either (i) the secured overnight financing rate as administered by the Federal Reserve Bank of New York (SOFR) plus an applicable margin ranging between 2.00% to 3.75% for the 2023 CoBank Term Loan and 1.75% to 3.50% for Revolving Loans or (ii) a base rate plus an applicable margin ranging from 1.00% to 2.75% for the Term Loan and 0.75% to 2.50% for the 2023 CoBank Revolving Loans. Swingline loans bear interest at the base rate plus the applicable margin for base rate loans. The base rate is equal to the higher of (i) 1.00% plus the one-month SOFR rate (ii) the federal funds effective rate (as defined in the 2023 CoBank Credit Agreement) plus 0.50% per annum; or (iii) the prime rate (as defined in the 2023 CoBank Credit Agreement). The applicable margin is determined based on the ratio (as further defined in the 2023 CoBank Credit Agreement) of the Company’s maximum Total Net Leverage Ratio. Under the terms of the 2023 CoBank Credit Agreement, the Company must also pay a fee ranging from 0.25% to 0.50% on the average daily unused portion of the 2023 CoBank Credit Facility over each calendar quarter.
The 2023 CoBank Credit Agreement contains a financial covenant (as further defined in the 2023 CoBank Credit Agreement) that imposes a maximum Total Net Leverage Ratio, as well as customary representations, warranties and covenants, including covenants limiting additional indebtedness, liens, guaranties, mergers and consolidations, substantial asset sales, investments and loans, sale and leasebacks, transactions with affiliates and fundamental changes. The maximum Total Net Leverage Ratio is measured each fiscal quarter and is required to be less than or equal to 3.25 to 1.0.
20
The 2023 CoBank Credit Agreement provides for events of default customary for credit facilities of this type, including but not limited to non-payment, defaults on other debt, misrepresentation, breach of covenants, representations and warranties, insolvency and bankruptcy.
The Company capitalized $4.5 million of fees associated with the 2023 CoBank Credit Facility which are being amortized over the life of the debt and $3.1 million were unamortized as of March 31, 2025.
The Company had $125.1 million outstanding under the 2023 CoBank Term Loan as of March 31, 2025. Under the 2023 CoBank Revolving Loan, the Company had $64.6 million outstanding and $105.4 million of availability as of March 31, 2025. The Company was in compliance with all financial covenants as of March 31, 2025.
In October 2023, the Company entered into a two year, forward starting 1-month floating to fixed SOFR interest rate swap agreement. The swap was effective November 13, 2023 in a non-amortizing notional amount of $50.0 million, has a fixed SOFR rate of 4.896% and matures on November 13, 2025. The swap agreement had a fair value of $(0.2) million and $(0.3) million as of March 31, 2025 and December 31, 2024, respectively.
Letter of Credit Facility
On November 14, 2022, the Company entered into a General Agreement of Indemnity to issue performance Standby Letters of Credit on behalf of the Company and its subsidiaries. As of March 31, 2025, $34.8 million of Standby Letters of Credit had been issued under this agreement.
2024 Alaska Credit Facility
On August 29, 2024, Alaska Communications (the “Borrower”) entered into a Credit Agreement (the “2024 Alaska Credit Agreement”) with Bank of America, N.A., as administrative agent, and a syndicate of lenders (the “2024 Alaska Credit Facility”), to provide debt financing in the form of a $300 million, five-year secured term loan facility (the “2024 Alaska Term Facility”) and a $90 million revolving facility (the “2024 Alaska Revolving Facility”).
The 2024 Alaska Term Facility proceeds were used (a) to refinance Alaska Communications’ outstanding indebtedness under the 2022 Alaska Credit Facility, as defined below, in the amount of approximately $279 million plus accrued and unpaid interest, (b) to pay fees and expenses associated with the completion of this transaction, and (c) for general corporate purposes. As of March 31, 2025, $300.0 million was outstanding under the 2024 Alaska Term Facility.
Proceeds from the 2024 Alaska Revolving Facility are to be used, subject to certain limitations, (a) to issue letters of credit to replace or backstop existing letters of credit of Alaska Communications and its direct and indirect subsidiaries, and (b) for working capital purposes, capital expenditures and other general corporate purposes. As of March 31, 2025 there were no outstanding borrowings under the 2024 Alaska Revolving Facility and $1.0 million of letters of credit were issued. As a result, $89.0 million was available under the 2024 Alaska Revolving Facility as of March 31, 2025.
The 2024 Alaska Credit Facility also provides for incremental term loans (“Incremental Term Loans”) up to an aggregate principal amount of the greater of $91 million and Alaska Communications’ trailing consolidated twelve-month EBITDA (as defined in the 2024 Alaska Credit Agreement), subject to the Borrower meeting certain conditions.
In connection with the 2024 Alaska Credit Facility, the Company incurred $6.9 million of fees and rolled over $2.1 million of fees for the 2022 Alaska Credit Facility to be amortized over the life of the debt. As of March 31, 2025, the Company had $8.0 million of unamortized fees, which are being amortized over the life of the debt, associated with the 2024 Alaska Credit Facility.
The maturity date for the 2024 Alaska Credit Facility is August 29, 2029.
21
Amounts outstanding under the 2024 Alaska Credit Facility bear an interest rate of the following:
Tier / |
Alaska |
Applicable Margin |
Applicable |
Applicable |
I |
Greater than 4.00:1.00 |
4.50% |
3.50% |
0.40% |
II |
Less than or equal to 4.00:1.00 but greater than 3.25:1.00 |
4.00% |
3.00% |
0.35% |
III |
Less than or equal to 3.25:1.00 but greater than 2.50:1.00 |
3.50% |
2.50% |
0.30% |
IV |
Less than or equal to 2.50:1.00 |
3.00% |
2.00% |
0.25% |
Principal payments on the 2024 Alaska Term Facility are due quarterly commencing in the fourth quarter of 2026 in quarterly amounts as follows: from the fourth quarter of 2026 through the third quarter of 2027, $1,875,000; and from the fourth quarter of 2027 through the second quarter of 2029, $3,750,000. The remaining unpaid balance is due on the final maturity date. Payments on any principal amount outstanding under the Incremental Term Loans will be made in installments, on the dates and in the amounts set forth in the applicable amendment for such Incremental Term Loans. The Borrower may prepay all revolving loans under the 2024 Alaska Revolving Facility at any time without premium or penalty (other than any customary SOFR breakage costs), subject to certain notice requirements and balance restrictions.
The Borrower is required to maintain financial ratios, based on a calculation of EBITDA defined in the 2024 Alaska Credit Agreement, including (a) a maximum Consolidated Net Total Leverage Ratio of 4.75:1.00, stepping down to 4.50:1.00 beginning with the third quarter of 2027, and stepping down to 4.25:1.00 beginning with the third quarter of 2028; and (b) a minimum Consolidated Fixed Charge Coverage Ratio of not less than 1.25:1.00. Customary covenants restricting the incurrence or assumption of debt, granting or assuming liens, declaring dividends and making other restricted payments, making investments, dispositions, engaging in transactions with affiliates, changes to the nature of business, modifying organizational documents and material agreements, entering into sale and leaseback transactions, amending or making prepayments on certain subordinated debt, and entering into mergers and acquisitions.
The 2024 Alaska Credit Facility is secured by substantially all of the personal property and certain material real property owned by Alaska Communications Systems Holdings, the parent company of Alaska Communications (“Holdings”), the Borrower, and its wholly owned subsidiaries, excluding, among other things, certain federal and state licenses where a pledge is prohibited by applicable law or is permitted only with the consent of a governmental authority that has not been obtained.
The 2024 Alaska Credit Agreement contains usual and customary affirmative and negative covenants of the parties for credit facilities of this type or as otherwise deemed appropriate by the administrative agent, subject to customary exceptions and materiality standards.
The Company is not a guarantor under the 2024 Alaska Credit Agreement, and the lenders have no recourse against the Company in the event of an occurrence of an “Event of Default.”
2022 Alaska Credit Facility
On December 23, 2022, Alaska Communications entered into a Credit Agreement (the “2022 Alaska Credit Facility”) with Fifth Third Bank, National Association, as Administrative Agent, and a syndicate of lenders to provide a Revolving Credit Commitment of $75.0 million (the “2022 Alaska Revolving Facility”) and Term Loan Commitment of $230.0 million (the “2022 Alaska Term Loan”).
The key terms and conditions of the 2022 Alaska Credit Facility included the following:
22
| ● | Amounts outstanding bore an interest rate of the forward-looking SOFR rate with a one-month interest period, plus the SOFR Spread Adjustment of 10 basis points, plus a margin ranging from 3.00% to 4.00% based on Alaska Communications’ Consolidated Total Net Leverage Ratio (as defined in the Credit Agreement) or at an alternate base rate at a margin that is 1% lower than the counterpart SOFR margin; |
| ● | Principal repayments of $1.4 million were made quarterly commencing with the fourth quarter of 2023; |
| ● | Alaska Communications was required to maintain financial ratios as defined in the 2022 Alaska Credit Facility, including (a) a maximum Consolidated Net Total Leverage Ratio of 4.00 to 1, stepping down to 3.75 to 1 beginning with the second quarter of 2024; and (b) a minimum Consolidated Fixed Charge Coverage Ratio of not less than 1.25 to 1. In addition to these financial ratios, Alaska Communications was subject to customary representations, warranties and covenants, including limitations on additional indebtedness, liens, consolidations, mergers, assets sales, advances, investments and loans, transactions with affiliates, sale and leaseback transactions, subordinated indebtedness, and changes in the nature of its business; and |
| ● | The 2022 Alaska Credit Facility was non-recourse to the Company and was secured by substantially all of the personal property and certain material real property owned by Alaska Communications. |
On August 29, 2024, all outstanding amounts under the 2022 Alaska Credit Facility were repaid in full using the proceeds received upon the completion of the 2024 Alaska Credit Facility.
Alaska Term Facility
On June 15, 2022, Holdings entered into a secured lending arrangement with Bristol Bay Industrial, LLC (the “Alaska Term Facility”).
The Alaska Term Facility provided for a secured delayed draw term loan in an aggregate principal amount of up to $7.5 million and the proceeds were used to pay certain invoices from a contractor for work performed in connection with a fiber build. Interest on the Alaska Term Facility accrued at a fixed rate of 4.0% and scheduled quarterly payments of principal commenced on March 31, 2023. The Alaska Term Facility was repaid in full during the three months ended June 30, 2024.
Alaska Interest Rate Swap Agreements
In November 2023, Alaska Communications entered into two forward starting 1-month floating to fixed SOFR interest rate swap agreements. The total non-amortizing notional amount of the agreements is $200.0 million, with fixed SOFR rates of 4.8695% and 4.8980% and both agreements mature on June 30, 2025. The swap agreements had an aggregate fair value of $(0.2) million and $(0.5) million as of March 31, 2025 and December 31, 2024, respectively.
FirstNet Receivables Credit Facility
On March 26, 2020, Commnet Finance, a wholly owned subsidiary of Commnet Wireless, entered into a receivables credit facility with Commnet Wireless, and CoBank, ACB (the “Receivables Credit Facility”).
The Receivables Credit Facility provides for a senior secured delayed draw term loan in an aggregate principal amount of up to $75.0 million and the proceeds may be used to acquire certain receivables from Commnet Wireless. The receivables to be financed and sold under the Receivables Credit Facility, which provides the loan security, relate to the obligations of AT&T under the FirstNet Agreement.
23
On December 27, 2024, CoBank amended the Receivables Credit Facility and extended the delayed draw period to December 31, 2025.
The maturity date for each loan will be set by CoBank and will match the weighted average maturity of the certain receivables financed.
Interest on the loans accrue at a fixed annual interest rate to be quoted by CoBank.
The Receivables Credit Facility contains customary events of termination, representations and warranties, affirmative and negative covenants and events of default customary for facilities of this type.
As of March 31, 2025, Commnet Wireless had $42.6 million outstanding, of which $8.1 million was classified as being current and $34.5 million as long-term on the Company’s balance sheet, and $9.2 million of availability under the Receivables Credit Facility. Commnet Wireless capitalized $0.8 million in fees associated with the Receivables Credit Facility which are being amortized over the life of the debt and $0.3 million were unamortized as of March 31, 2025.
OneGY Credit Facilities
On October 12, 2022, OneGY entered into a $2.9 million term facility and a $5.7 million overdraft facility (the “Guyana Credit Facilities”) with Republic Bank (Guyana) Limited.
The OneGY Credit Facilities were secured by real estate assets and carried a fixed interest rate of 7.5%. On November 29, 2024, the overdraft facility and term facility were canceled at the request of OneGY.
Sacred Wind Term Debt
The Sacred Wind Term Debt with the United States of America, acting through the Administrator of the Rural Utilities Service (“RUS”) which provides financial assistance in the form of loans under the Rural Electrification Act of 1936 to furnish or improve telecommunications and/or broadband services in rural areas, is secured by substantially all of the assets of Sacred Wind and is an underlying mortgage to the United States of America. These mortgage notes are to be repaid in equal monthly installments covering principal and interest beginning after date of issue and expiring by 2035.
The Sacred Wind Term Debt contains certain restrictions on the declaration or payment of dividends, redemption of capital stock or investment in affiliated companies without the consent of the RUS noteholders. The agreements also contain a financial covenant which Sacred Wind was not in compliance with as of December 31, 2024. Sacred Wind submitted a corrective action plan to comply with the financial covenant by December 31, 2028. The corrective action plan was accepted by the RUS and, as of March 31, 2025, the Company was in compliance with that corrective action plan.
As of March 31, 2025, $24.0 million was outstanding under the Sacred Wind Term Debt. Of that amount, $3.4 million was current and $20.6 million was long term.
The mortgage notes carry fixed interest rates ranging from 0.88% to 5.0%.
Viya Debt
The Company, and certain of its subsidiaries, have entered into a $60.0 million loan agreement (the “Viya Debt”) with National Cooperative Services Corporation (“NCSC”). The Viya Debt agreement contains customary representations, warranties, and affirmative and negative covenants (including limitations on additional debt, guaranties, sale of assets and liens) and a financial covenant that limits the maximum ratio of indebtedness to annual operating cash flow to 3.5 to 1.0 (the “Net Leverage Ratio”).
24
This covenant is tested on an annual basis at the end of each fiscal year. Interest is paid quarterly at a fixed rate of 4.0% per annum and principal repayment is not required until maturity on July 1, 2026. Prepayment of the Viya Debt may be subject to a fee under certain circumstances. The debt is secured by certain assets of the Viya subsidiaries and is guaranteed by the Company.
The Company paid a fee of $0.9 million in 2016 to lock the interest rate at 4% per annum over the term of the Viya Debt. The fee was recorded as a reduction to the Viya Debt carrying amount and is being amortized over the life of the loan.
As of March 31, 2025, $60.0 million of the Viya Debt remained outstanding and $0.1 million of the rate lock fee was unamortized.
On May 5, 2022, the Net Leverage Ratio was amended to 7.0 to 1.0 through the maturity date of July 1, 2026. The Ratio is tested annually, and the Company was in compliance with the Net Leverage Ratio as of December 31, 2024.
IDB Credit Facilities
On May 8, 2025, OneGY entered into a Credit Agreement (the “2025 IDB Credit Facilities”) with Inter-American Investment Corporation (IDB Invest) to provide a Revolving Credit Commitment of $10.0 million (the “2025 IDB Revolving Facility”) and Term Loan Commitment of up to $30.0 million (the “2025 IDB Term Loan”). The debt is secured by certain assets of OneGY and is not guaranteed by the Company.
Beginning in the second quarter of 2027, the 2025 IDB Term Loan must be repaid in quarterly principal payments in the amounts set forth below, with the outstanding principal balance maturing on the tenth anniversary of the effective date. The 2025 IDB Revolving Loan may be repaid at any time on or prior to its maturity of 360 days after the first disbursement date.
2025 IDB Term Loan Quarterly Payment Dates |
2025 IDB Term Loan Quarterly Repayments |
June 22, 2027 – December 22, 2030 |
5.0% bi-annually |
June 22, 2031 – December 22, 2034 |
7.5% bi-annually |
Amounts borrowed under the 2025 IDB Credit Facilities bear interest at a rate equal to the applicable secured overnight financing rate as administered by the Federal Reserve Bank of New York (SOFR) plus an applicable margin ranging of 2.4% for the Revolving Facility and 3.0% for the Term Loans. In the case of the IDB Term Loan, there is a prepayment fee equal to 1% until the first anniversary, 0.5% until the second anniversary, and 0.0% thereafter.
The 2025 IDB Credit Agreement contains a financial covenant that imposes on OneGY a maximum Net Financial Debt to EBITDA Ratio and a maximum Debt to Equity ratio and a minimum EBITDA to Net Financial Expense Ratio, as well as customary representations, warranties and covenants The 2025 IDB Credit Agreement provides for events of default customary for credit facilities of this type, including but not limited to non-payment, defaults on other debt, misrepresentation, breach of covenants, representations and warranties, insolvency and bankruptcy.
25
Debt Maturity
The table below summarizes the annual maturities of the Company’s debt instruments (amounts in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
Customer |
|
|
US |
|
International |
|
Corporate and |
|
Total |
Receivable |
|||||
Amounts Maturing During |
Telecom |
|
Telecom |
|
Other |
|
Debt |
Credit Facility |
|||||
April 1, 2025 through December 31, 2025 |
$ |
2,628 |
|
$ |
— |
|
$ |
3,945 |
|
$ |
6,573 |
$ |
6,000 |
Year ending December 31, 2026 |
|
5,469 |
|
|
60,000 |
|
|
8,125 |
|
|
73,594 |
|
8,409 |
Year ending December 31, 2027 |
|
13,098 |
|
|
— |
|
|
9,750 |
|
|
22,848 |
|
8,807 |
Year ending December 31, 2028 |
|
18,858 |
|
|
— |
|
|
74,370 |
|
|
93,228 |
|
9,229 |
Year ending December 31, 2029 |
|
277,749 |
|
|
— |
|
|
93,555 |
|
|
371,304 |
|
6,041 |
Thereafter |
|
6,239 |
|
|
— |
|
|
— |
|
|
6,239 |
|
4,084 |
Total |
|
324,041 |
|
|
60,000 |
|
|
189,745 |
|
|
573,786 |
|
42,570 |
Debt Discounts |
|
(8,180) |
|
|
(125) |
|
|
(3,097) |
|
|
(11,402) |
|
(338) |
Book Value as of March 31, 2025 |
$ |
315,861 |
|
$ |
59,875 |
|
$ |
186,648 |
|
$ |
562,384 |
$ |
42,232 |
8. GOVERNMENT SUPPORT AND SPECTRUM MATTERS
Universal Service Fund and Other Domestic Funding Programs
The Company recognizes revenue from several government funded programs including but not limited to, as follows:
| ● | The Company receives federal USF support under the Alaska Connect Fund (“ACF”). Beginning January 1, 2025, the Company began receiving $25.6 million per year and expects such annual funding to continue until December 31, 2028. Beginning in 2029 and continuing through 2034, the amount of ACF support will be determined by FCC staff taking into consideration broadband deployment funded through the Broadband Equity Access and Deployment Program. The ACF replaced the $19.7 million per year that the Company had previously received in Connect America Fund II support in Alaska; |
| ● | As part of the Enhanced Alternative Connect America Model funding available to the Company’s operations in the southwest, we are estimated to receive approximately $109 million over the next 14 years, through 2038, with approximately $9 million annually through 2030 before a gradual step down to $6 million annually in 2038; |
| ● | The Company receives $8.0 million per year in Connect America Fund II support in the rural southwest until July 2028; |
| ● | The Company receives $5.5 million annually in the US Virgin Islands through December 31, 2025, subject to the requirement to enhance network resiliency and operations in those markets; |
| ● | The Company was awarded $2.3 million annually in the western United States through December 31, 2031 as part of the Rural Digital Opportunity Fund Phase I (“RDOF”) auction. In exchange for this support, we committed to deploy voice and broadband service to covered areas within six years and to provide service in those areas for ten years. In 2024, we transferred $1.3 million of the annual awards to other providers and returned $0.3 million of the annual awards to the FCC; and |
| ● | The Company receives state USF support in Alaska of approximately $2.5 million annually. |
As of March 31, 2025, the Company was in compliance in all material respects with its requirements associated with such funding.
26
Additionally, the Company recognized revenue from the FCC’s Affordable Connectivity Program (“ACP”) and the Emergency Connectivity Fund (“ECF”) in 2024 that expired in the second quarter of 2024. The Company has a liability of $4.9 million accrued related to transferring its RDOF awards as of March 31, 2025. The Company expects to complete the transfers in the second half of 2025.
Revenue recognized from the USF High Cost Program, including the CAF II, ACF, E-ACAM, and RDOF programs, is recognized as revenue from government grants. Revenue from other programs is recognized in accordance with ASC 606.
The Company recorded the amounts below as communication services revenue for the reported periods (in thousands):
|
Three months ended |
|||||||
|
March 31, 2025 |
|||||||
|
|
|
|
|
|
|
|
|
|
US Telecom |
|
International Telecom |
|
Total |
|||
|
|
|
|
|
|
|
|
|
High cost support |
$ |
3,115 |
|
$ |
1,312 |
|
$ |
4,427 |
CAF II |
|
8,170 |
|
|
— |
|
|
8,170 |
RDOF |
|
75 |
|
|
— |
|
|
75 |
RHC |
|
4,363 |
|
|
— |
|
|
4,363 |
Other |
|
1,636 |
|
|
5 |
|
|
1,641 |
Total |
$ |
17,359 |
|
$ |
1,317 |
|
$ |
18,676 |
|
Three months ended |
|||||||
|
March 31, 2024 |
|||||||
|
|
|
|
|
|
|
|
|
|
US Telecom |
|
International Telecom |
|
Total |
|||
|
|
|
|
|
|
|
|
|
High cost support |
$ |
3,455 |
|
$ |
1,393 |
|
$ |
4,848 |
CAF II |
|
6,787 |
|
|
— |
|
|
6,787 |
RDOF |
|
145 |
|
|
— |
|
|
145 |
ECF |
|
6,813 |
|
|
— |
|
|
6,813 |
RHC |
|
3,437 |
|
|
— |
|
|
3,437 |
Other |
|
6,701 |
|
|
315 |
|
|
7,016 |
Total |
$ |
27,338 |
|
$ |
1,708 |
|
$ |
29,046 |
27
Construction Grants
The Company has also been awarded construction grants to build network connectivity for eligible communities. The funding of these grants, used to reimburse the Company for its construction costs, is generally distributed upon completion of a project. Completion deadlines begin in 2025 and once these projects are constructed, the Company is obligated to provide service to the participants. The Company expects to meet all requirements associated with these grants. A roll forward of the Company’s grant awards is below (in thousands).
|
|
Amount |
Grants awarded, December 31, 2024 |
$ |
150,189 |
New grants |
|
14,520 |
Construction complete |
|
(8,610) |
Transferred grants |
|
(879) |
Grants awarded, March 31, 2025 |
$ |
155,220 |
In addition, the Company partners with tribal governments to obtain grants under various government grant programs including, but not limited to, the Tribal Broadband Connectivity Program ("TBCP") and the Rural Development Broadband ReConnect Program (“ReConnect”). These programs are administered by United States government agencies to deploy broadband connectivity in certain underserved areas. The Company was identified as a sub recipient of grants under these programs totaling $237 million as of March 31, 2025. Under these grants the Company expects to enter into agreements to construct and operate the networks for the grant recipient. Once construction is complete the Company will hold a long-term lease to operate the network. The operating agreement will require the Company to meet certain minimum service requirements. Through March 31, 2025, the Company has received $23.2 million of funding under these programs and spent $22.2 million on construction obligations. These amounts are recorded as operating cash flows in the Company’s statement of cash flows.
28
Replace and Remove Program
In July 2022, the Company was approved to participate in the Federal Communication Commission’s Secure and Trusted Communications Networks Reimbursement Program (the “Replace and Remove Program”), designed to reimburse providers of advanced communications services for reasonable costs incurred in the required removal, replacement, and disposal of communications equipment and services in their networks that has been deemed to pose a national security risk. Pursuant to the Replace and Remove Program, our eligible subsidiaries were initially allocated up to approximately $207 million to replace, remove and securely destroy such communications equipment and services in the Company’s networks in the western United States and in the US Virgin Islands, however, in December 2024 this program was fully funded for an increased allocation to the Company of an aggregate amount of approximately $517 million. The Replace and Remove Program requires each of the Company’s participating subsidiaries to complete the project no later than a specified deadline, which was recently extended to the second quarter of 2026.
A summary of the amounts spent and reimbursed under the Replace and Remove Program is below (in thousands):
|
Capital |
|
Operating |
|
Total |
|||
|
|
|
|
|
|
|
|
|
Total spend, December 31, 2024 |
$ |
140,949 |
|
$ |
27,446 |
|
$ |
168,395 |
Amounts spent |
|
11,051 |
|
|
2,625 |
|
|
13,676 |
Total spend, March 31, 2025 |
$ |
152,000 |
|
$ |
30,071 |
|
$ |
182,071 |
|
|
|
|
|
|
|
|
|
Total reimbursements, December 31, 2024 |
$ |
(103,540) |
|
$ |
(27,181) |
|
$ |
(130,721) |
Reimbursements received |
|
(16,211) |
|
|
(2,890) |
|
|
(19,101) |
Total reimbursements, March 31, 2025 |
$ |
(119,751) |
|
$ |
(30,071) |
|
$ |
(149,822) |
|
|
|
|
|
|
|
|
|
Amount pending reimbursement |
$ |
32,249 |
|
$ |
- |
|
$ |
32,249 |
|
Capital |
|
Operating |
|
Total |
|||
|
|
|
|
|
|
|
|
|
Total spend, December 31, 2023 |
$ |
49,262 |
|
$ |
15,126 |
|
$ |
64,388 |
Amounts spent |
|
11,734 |
|
|
4,568 |
|
|
16,302 |
Total spend, March 31, 2024 |
$ |
60,996 |
|
$ |
19,694 |
|
$ |
80,690 |
|
|
|
|
|
|
|
|
|
Total reimbursements, December 31, 2023 |
$ |
(12,773) |
|
$ |
(4,354) |
|
$ |
(17,127) |
Reimbursements received |
|
(8,586) |
|
|
(5,843) |
|
|
(14,429) |
Total reimbursements, March 31, 2024 |
$ |
(21,359) |
|
$ |
(10,197) |
|
$ |
(31,556) |
|
|
|
|
|
|
|
|
|
Amount pending reimbursement |
$ |
39,637 |
|
$ |
9,497 |
|
$ |
49,134 |
At March 31, 2025, $19.5 million of the capital expenditures spent under the Replace and Remove Program were accrued and unpaid. The Company expects to be reimbursed, within the next twelve months, for all amounts spent to date. Amounts identified as capital are recorded as investing cash flows and amounts identified as operating are recorded as operating cash flows in the Company’s statement of cash flows.
29
9. RETIREMENT PLANS
Multi-employer Defined Benefit Plan
Pension benefits for substantially all of the Company’s Alaska-based employees are provided through the Alaska Electrical Pension Fund (“AEPF”). The Company pays a contractual hourly amount based on employee classification or base compensation to the AEPF. As a multi-employer defined benefit plan, the accumulated benefits and plan assets are not determined for, or allocated separately to, the individual employer. This plan was not in endangered or critical status during the plan year.
Defined Benefit Plan
The Company has noncontributory defined benefit pension and noncontributory defined medical, dental, vision, and life benefit plans for eligible employees who meet certain eligibility criteria. The majority of benefits under the plans are frozen and the plans no longer allow new participants to join.
The Company recorded the net periodic benefit cost identified below (in thousands):
|
|
Three months ended |
||||||||||
|
|
March 31, 2025 |
|
March 31, 2024 |
||||||||
|
|
Pension benefits |
|
Postretirement benefits |
|
Pension benefits |
|
Postretirement benefits |
||||
Operating expense |
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
20 |
|
$ |
19 |
|
$ |
22 |
|
$ |
16 |
Non-operating expense |
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost |
|
|
795 |
|
|
49 |
|
|
824 |
|
|
45 |
Expected return on plan assets |
|
|
(749) |
|
|
— |
|
|
(729) |
|
|
— |
Amortization of unrecognized actuarial gain |
|
|
(44) |
|
|
(14) |
|
|
(11) |
|
|
(28) |
Settlements |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
Net periodic pension expense (benefit) |
|
$ |
22 |
|
$ |
54 |
|
$ |
106 |
|
$ |
33 |
The Company was not required to make contributions to its pension plans during the three months ended March 31, 2025 and 2024. However, the Company periodically evaluates whether to make discretionary contributions. The Company funds its postretirement benefit plans as claims are made and did not make contributions to its pension plans during the three months ended March 31, 2025 and 2024.
10. INCOME TAXES
The Company’s effective tax rate for the three months ended March 31, 2025 and 2024 was 1.7% and (25.6%) respectively.
The Company recorded an income tax benefit of $0.2 million in relation to a pretax loss of $11.6 million for the three months ended March 31, 2025. The effective tax rate for the three months ended March 31, 2025 was primarily impacted by the following items (i) the mix of income generated among the jurisdictions in which the Company operates, (ii) net expense related to valuation allowances placed on certain deferred tax assets that are not expected to be realized based on the weight of positive and negative evidence, and (iii) discrete expenses including $0.6 million for interest on prior years uncertain tax positions and $0.5 million expense associated with shortfalls from share-based compensation.
30
The Company recorded an income tax expense of $1.6 million in relation to a pretax loss of $6.3 million for the three months ended March 31, 2024. The effective tax rate for the three months ended March 31, 2024 was primarily impacted by the following items: (i) the mix of income generated among the jurisdictions in which the Company operates, (ii) net expense related to valuation allowances placed on certain deferred tax assets that are not expected to be realizable based on the weight of positive and negative evidence, (iii) forecasted tax impact of global intangible low-taxed income (“GILTI”) inclusion, and (iv) discrete items including expense of $1.5 million to record an uncertain tax position for the current year, and expense of $0.7 million for interest on uncertain tax positions for prior years.
The Company’s effective tax rate is based upon estimated income before provision for income taxes for the year, composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for potential tax consequences, benefits and/or resolutions of tax contingencies. The Company’s consolidated tax rate will continue to be impacted by any transactional or one-time items in the future and the mix of income in any given year generated among the jurisdictions in which the Company operates. While the Company believes it has adequately provided for all tax positions, amounts asserted by taxing authorities could materially differ from the Company’s accrued positions as a result of uncertain and complex application of tax law and regulations. Additionally, the recognition and measurement of certain tax benefits include estimates and judgments by management. Accordingly, the Company could record additional provisions or benefits for US federal, state, and foreign tax matters in future periods as new information becomes available.
11. EARNINGS PER SHARE AND REDEEMABLE NONCONTROLLING INTERESTS
Earnings Per Share
The following table reconciles the numerator and denominator in the computations of basic and diluted earnings per share (in thousands):
|
Three months ended March 31, |
||||
|
2025 |
|
2024 |
||
Numerator: |
|
|
|
|
|
Net loss attributable to ATN International, Inc. stockholders- Basic |
|
(8,928) |
|
|
(6,315) |
Less: Preferred dividends |
|
(1,458) |
|
|
(1,348) |
Net loss attributable to ATN International, Inc. common stockholders- Diluted |
$ |
(10,386) |
|
$ |
(7,663) |
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
Weighted-average shares outstanding- Basic |
|
15,131 |
|
|
15,437 |
Weighted-average shares outstanding- Diluted |
|
15,131 |
|
|
15,437 |
31
Redeemable Noncontrolling Interests
In connection with certain acquisitions, the Company accounts for third-party non-controlling minority investments as redeemable noncontrolling interests, which consist of both redeemable common and, in some instances, preferred units, in its consolidated financial statements.
The common units contain put options allowing the holder to sell at a future date, the common units to a subsidiary of the Company at the then fair market value. The common units participate in the earnings and losses of the subsidiaries and are allocated their applicable share of earnings and losses. After the allocation of earnings and losses, the Company estimates the fair value of the common units and records the common units at the higher of the book value or the estimated fair value of the common units.
The preferred units contain put options allowing the holder to sell at a future date, the preferred units to a subsidiary of the Company at a fixed price equal to face value of the units plus unpaid dividends. The preferred units hold a distribution preference over common units and carry a fixed dividend rate.
The put options for both the common and preferred units, if any, are nonrecourse to the Company. The put options for the Alloy common units are exercisable beginning in 2026 and the put options for the Alaska Communications common and preferred units are exercisable at the earlier of a future initial public offering of the subsidiary or July 2028.
For the three months ended March 31, 2025 and 2024, the Company allocated losses of $3.6 million and $3.5 million, respectively, to the redeemable common units representing their proportionate share of operating losses. The Company then compared the book value of the common units to the fair value. As a result, the book value was increased by $3.4 million and $0.9 million during the three months ended March 31, 2025 and 2024, respectively. The fair value of the Alaska common units was zero at both March 31, 2025 and December 31, 2024. The Alloy common units were carried at historical cost at of $10.4 million and $10.6 million at March 31, 2025 and December 31, 2024, respectively, which exceeded its fair value.
32
The following table provides a roll forward of the activity related to the Company’s redeemable noncontrolling interests for the three months ended March 31, 2025 and 2024 (in thousands):
|
Redeemable Preferred Units |
|
Redeemable Common Units |
|
Total Redeemable Noncontrolling Interests |
|||
Balance, December 31, 2024 |
$ |
65,704 |
|
$ |
10,599 |
|
$ |
76,303 |
Accrued preferred dividend |
|
1,458 |
|
|
— |
|
|
1,458 |
Allocated net loss |
|
— |
|
|
(3,631) |
|
|
(3,631) |
Change in fair value |
|
— |
|
|
3,425 |
|
|
3,425 |
Balance, March 31, 2025 |
$ |
67,162 |
|
$ |
10,393 |
|
$ |
77,555 |
|
Redeemable Preferred Units |
|
Redeemable Common Units |
|
Total Redeemable Noncontrolling Interests |
|||
Balance, December 31, 2023 |
$ |
60,094 |
|
$ |
25,823 |
|
$ |
85,917 |
Accrued preferred dividend |
|
1,348 |
|
|
— |
|
|
1,348 |
Allocated net loss |
|
— |
|
|
(3,512) |
|
|
(3,512) |
Change in fair value |
|
— |
|
|
868 |
|
|
868 |
Balance, March 31, 2024 |
$ |
61,442 |
|
$ |
23,179 |
|
$ |
84,621 |
12. SEGMENT REPORTING
Through March 31, 2025, the Company has the following two reportable and operating segments: (i) International Telecom and (ii) US Telecom.
Operating income is the segment measure of profit or loss reported to the chief operating decision maker for purposes of assessing the segments' performance and making capital allocation decisions. The Company believes operating income is a useful measure of its operating results as it provides relevant and useful information to investors and other users of its financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management's evaluation of business performance. The Company’s chief operating decision maker is its Chief Executive Officer.
The following tables provide information for each operating segment (in thousands):
33
For the Three Months Ended March 31, 2025 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International |
|
US |
|
Corporate and |
|
|
|
|||
|
|
Telecom |
|
Telecom |
|
Other (1) |
|
Consolidated |
||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Communication Services |
|
|
|
|
|
|
|
|
|
|
|
|
Mobility - Business |
|
$ |
4,849 |
|
$ |
39 |
|
$ |
— |
|
$ |
4,888 |
Mobility - Consumer |
|
|
21,192 |
|
|
— |
|
|
— |
|
|
21,192 |
Total Mobility |
|
|
26,041 |
|
|
39 |
|
|
— |
|
|
26,080 |
Fixed - Business |
|
|
18,493 |
|
|
29,244 |
|
|
— |
|
|
47,737 |
Fixed - Consumer |
|
|
42,872 |
|
|
22,415 |
|
|
— |
|
|
65,287 |
Total Fixed |
|
|
61,365 |
|
|
51,659 |
|
|
— |
|
|
113,024 |
Carrier Services |
|
|
3,904 |
|
|
29,227 |
|
|
— |
|
|
33,131 |
Other |
|
|
1,740 |
|
|
56 |
|
|
— |
|
|
1,796 |
Total Communication Services Revenue |
|
|
93,050 |
|
|
80,981 |
|
|
— |
|
|
174,031 |
Construction |
|
|
— |
|
|
1,046 |
|
|
— |
|
|
1,046 |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
Managed Services |
|
|
1,446 |
|
|
2,771 |
|
|
— |
|
|
4,217 |
Total other revenue |
|
|
1,446 |
|
|
2,771 |
|
|
— |
|
|
4,217 |
Total Revenue |
|
|
94,496 |
|
|
84,798 |
|
|
— |
|
|
179,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of communication services and other |
|
|
34,963 |
|
|
43,261 |
|
|
— |
|
|
78,224 |
Cost of construction revenue |
|
|
— |
|
|
1,501 |
|
|
— |
|
|
1,501 |
Selling, general and administrative |
|
|
27,143 |
|
|
22,521 |
|
|
5,564 |
|
|
55,228 |
Stock-based compensation |
|
|
215 |
|
|
78 |
|
|
1,612 |
|
|
1,905 |
Transaction-related charges |
|
|
— |
|
|
— |
|
|
1,436 |
|
|
1,436 |
Restructuring and reorganization expenses |
|
|
1,506 |
|
|
134 |
|
|
190 |
|
|
1,830 |
Depreciation and amortization |
|
|
15,377 |
|
|
18,284 |
|
|
866 |
|
|
34,527 |
Amortization of intangibles from acquisitions |
|
|
251 |
|
|
975 |
|
|
— |
|
|
1,226 |
(Gain) loss on disposition of assets and transfers |
|
|
291 |
|
|
459 |
|
|
— |
|
|
750 |
Total Operating Expenses |
|
|
79,746 |
|
|
87,213 |
|
|
9,668 |
|
|
176,627 |
Income from operations |
|
|
14,750 |
|
|
(2,415) |
|
|
(9,668) |
|
|
2,667 |
Other income (expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
|
|
|
|
|
272 |
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
(11,950) |
Other income |
|
|
|
|
|
|
|
|
|
|
|
(2,568) |
Other expense |
|
|
|
|
|
|
|
|
|
|
|
(14,246) |
Loss before income taxes |
|
|
|
|
|
|
|
|
|
|
|
(11,579) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other segment disclosures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International |
|
US |
|
Corporate and |
|
|
|
|||
|
|
Telecom |
|
Telecom |
|
Other (1) |
|
Consolidated |
||||
Net (income) loss attributable to non-controlling interests |
|
|
(1,474) |
|
|
3,933 |
|
|
— |
|
|
2,459 |
| (1) | Corporate and other items refer to corporate overhead costs and consolidating adjustments. |
34
For the Three Months Ended March 31, 2024 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International |
|
US |
|
Corporate and |
|
|
|
|||
|
|
Telecom |
|
Telecom |
|
Other (1) |
|
Consolidated |
||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Communication Services |
|
|
|
|
|
|
|
|
|
|
|
|
Mobility - Business |
|
$ |
4,808 |
|
$ |
74 |
|
$ |
— |
|
$ |
4,882 |
Mobility - Consumer |
|
|
21,229 |
|
|
764 |
|
|
— |
|
|
21,993 |
Total Mobility |
|
|
26,037 |
|
|
838 |
|
|
— |
|
|
26,875 |
Fixed - Business |
|
|
18,532 |
|
|
34,965 |
|
|
— |
|
|
53,497 |
Fixed - Consumer |
|
|
42,789 |
|
|
22,919 |
|
|
— |
|
|
65,708 |
Total Fixed |
|
|
61,321 |
|
|
57,884 |
|
|
— |
|
|
119,205 |
Carrier Services |
|
|
3,574 |
|
|
30,052 |
|
|
— |
|
|
33,626 |
Other |
|
|
818 |
|
|
744 |
|
|
— |
|
|
1,562 |
Total Communication Services Revenue |
|
|
91,750 |
|
|
89,518 |
|
|
— |
|
|
181,268 |
Construction |
|
|
— |
|
|
1,586 |
|
|
— |
|
|
1,586 |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
Managed Services |
|
|
1,309 |
|
|
2,631 |
|
|
— |
|
|
3,940 |
Total Other Revenue |
|
|
1,309 |
|
|
2,631 |
|
|
— |
|
|
3,940 |
Total Revenue |
|
|
93,059 |
|
|
93,735 |
|
|
— |
|
|
186,794 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of communication services and other |
|
|
34,154 |
|
|
46,385 |
|
|
(149) |
|
|
80,390 |
Cost of construction revenue |
|
|
— |
|
|
1,570 |
|
|
— |
|
|
1,570 |
Selling, general and administrative |
|
|
29,632 |
|
|
25,076 |
|
|
6,607 |
|
|
61,315 |
Stock-based compensation |
|
|
23 |
|
|
132 |
|
|
1,754 |
|
|
1,909 |
Transaction-related charges |
|
|
— |
|
|
— |
|
|
19 |
|
|
19 |
Restructuring and reorganization expenses |
|
|
1,190 |
|
|
— |
|
|
— |
|
|
1,190 |
Depreciation and amortization |
|
|
16,124 |
|
|
18,138 |
|
|
78 |
|
|
34,340 |
Amortization of intangibles from acquisitions |
|
|
251 |
|
|
1,729 |
|
|
— |
|
|
1,980 |
(Gain) loss on disposition of assets and transfers |
|
|
— |
|
|
108 |
|
|
(601) |
|
|
(493) |
Total Operating Expenses |
|
|
81,374 |
|
|
93,138 |
|
|
7,708 |
|
|
182,220 |
Income from operations |
|
|
11,685 |
|
|
597 |
|
|
(7,708) |
|
|
4,574 |
Other income (expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
|
|
|
|
|
445 |
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
(11,520) |
Other income |
|
|
|
|
|
|
|
|
|
|
|
172 |
Other expense |
|
|
|
|
|
|
|
|
|
|
|
(10,903) |
Loss before income taxes |
|
|
|
|
|
|
|
|
|
|
|
(6,329) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other segment disclosures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International |
|
US |
|
Corporate and |
|
|
|
|||
|
|
Telecom |
|
Telecom |
|
Other (1) |
|
Consolidated |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (income) loss attributable to non-controlling interests |
|
|
(1,436) |
|
|
3,069 |
|
|
— |
|
|
1,633 |
| (1) | Corporate and other items refer to corporate overhead costs and consolidating adjustments. |
35
Selected balance sheet data for each of the Company’s segments as of March 31, 2025 and December 31, 2024 consists of the following (in thousands):
|
|
International |
|
US |
|
Corporate and |
|
|
|
|||
|
|
Telecom |
|
Telecom |
|
Other |
|
Consolidated |
||||
March 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents, and restricted cash |
|
$ |
51,614 |
|
$ |
44,529 |
|
$ |
1,116 |
|
$ |
97,259 |
Total current assets |
|
|
150,933 |
|
|
146,714 |
|
|
8,060 |
|
|
305,707 |
Fixed assets, net |
|
|
461,077 |
|
|
559,816 |
|
|
8,272 |
|
|
1,029,165 |
Goodwill |
|
|
4,835 |
|
|
— |
|
|
— |
|
|
4,835 |
Total assets |
|
|
689,243 |
|
|
926,372 |
|
|
91,834 |
|
|
1,707,449 |
Total current liabilities |
|
|
96,590 |
|
|
130,274 |
|
|
36,808 |
|
|
263,672 |
Total debt, including current portion |
|
|
59,875 |
|
|
315,861 |
|
|
186,648 |
|
|
562,384 |
December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents, and restricted cash |
|
$ |
35,231 |
|
$ |
51,604 |
|
$ |
2,409 |
|
$ |
89,244 |
Total current assets |
|
|
129,866 |
|
|
168,754 |
|
|
10,541 |
|
|
309,161 |
Fixed assets, net |
|
|
466,861 |
|
|
565,625 |
|
|
7,707 |
|
|
1,040,193 |
Goodwill |
|
|
4,835 |
|
|
— |
|
|
— |
|
|
4,835 |
Total assets |
|
|
675,642 |
|
|
957,914 |
|
|
93,547 |
|
|
1,727,103 |
Total current liabilities |
|
|
85,588 |
|
|
147,490 |
|
|
34,236 |
|
|
267,314 |
Total debt, including current portion |
|
|
59,850 |
|
|
316,241 |
|
|
181,265 |
|
|
557,356 |
For the three months ended March 31, 2025 and 2024, the Company spent $43.3 million and $49.5 million, respectively, on capital expenditures relating to its telecommunications networks and business support systems of which $22.4 million and $13.5 million, respectively, are reimbursable under various government programs. The following notes the Company’s capital expenditures, by operating segment, for these periods (in thousands).
|
|
Capital Expenditures |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International |
|
|
US |
|
|
Corporate and |
|
|
|
Three months ended March 31, |
|
|
Telecom |
|
|
Telecom |
|
|
Other (1) |
|
|
Consolidated |
2025 |
|
$ |
10,803 |
|
$ |
32,472 |
|
$ |
2 |
|
$ |
43,277 |
2024 |
|
|
16,915 |
|
|
31,233 |
|
|
1,341 |
|
|
49,489 |
| (1) | Corporate and other items refer to corporate overhead costs and consolidating adjustments. |
13. COMMITMENTS AND CONTINGENCIES
Regulatory and Litigation Matters
The Company and its subsidiaries are subject to certain regulatory and legal proceedings and other claims arising in the ordinary course of business, some of which involve claims for damages and taxes that are substantial in amount. Historically, the Company’s subsidiary, OneGY, has been subject to other long-standing litigation proceedings and disputes in Guyana that have not yet been resolved. It has been OneGY’s practice to make payments of undisputed spectrum and license fees as amounts are invoiced by the Telecommunications Authority (“TA”) and to accrue for a reasonable determination of any amounts that are disputed or not invoiced by the TA. The Company believes that, except for the items discussed below, for which the Company is currently unable to predict the final outcome, the disposition of matters currently pending will not have a material adverse effect on the Company’s financial position or results of operations.
36
Beginning in 2006, the National Frequency Management Unit (now the Telecommunications Agency, or the “NFMU/TA”) and OneGY have been engaged in discussions regarding the amount of and methodology for calculation of spectrum fees payable by OneGY in Guyana. Since that time, OneGY has made payments of undisputed spectrum, license and other fees when invoiced by the NFMU, and to its successor, the Telecommunications Authority (“TA”). There have been limited further discussions on the subject of a revised spectrum fee methodology with the TA.
OneGY has filed several lawsuits in the High Court of Guyana asserting that, despite its denials, Digicel is engaged in international bypass in violation of OneGY’s exclusive license rights, the interconnection agreement between the parties, and the laws of Guyana. Digicel filed counterclaims alleging that OneGY has violated the terms of the interconnection agreement and Guyana laws. These suits, filed in 2010 and 2012, are currently pending in the Court of Appeals in Guyana, however, the Company cannot accurately predict at this time when the consolidated suit will reach a court of final determination.
OneGY is also involved in several legal claims regarding its tax filings with the Guyana Revenue Authority (the “GRA”) dating back to 1991 regarding the deductibility of intercompany advisory fees as well as other tax assessments. OneGY has maintained that it has no unpaid corporation tax due to the GRA and that any liability OneGY might be found to have with respect to the disputed tax assessments would be offset in part by the amounts claimed with respect to rights ATN has pursuant to its agreement with the government of Guyana. OneGY’s position has been upheld by various High Court rulings made in its favor including most recently in February 2024, and while all matters have been appealed by the GRA, only one remains pending for determination by the High Court.
In February 2020, the Company’s Alaska Communications subsidiary received a draft audit report from USAC in connection with USAC’s inquiry into Alaska Communications’ funding requests under the Rural Health Care Support Program for certain customers for the time period of July 2012 through June 2017. Alaska Communications also received a Letter of Inquiry on March 18, 2018, and subsequent follow up information requests, from the FCC Enforcement Bureau requesting historical information regarding Alaska Communications’ participation in the FCC’s Rural Health Care Support Program. On May 8, 2024, the Company entered into a Consent Decree with the FCC Enforcement Bureau, regarding both the USAC and FCC Enforcement Bureau’s investigation and agreed to (i) pay a settlement amount of approximately $6.3 million, and (ii) enter into a three-year compliance agreement in connection with Alaska Communication’s continued participation in the RHC Program. At this time, the Company believes that it can comply with all of the terms of the compliance agreement.
The settlement amount of $6.3 million consists of a $5.3 million cash payment and the $1.0 million forgiveness of certain receivables, both of which have been accrued on the Company’s balance sheet as of March 31, 2025. As such, this settlement will not impact the statement of operations in future periods.
With respect to all of the foregoing unresolved matters, the Company believes that some adverse outcome is probable and has accordingly accrued $14.5 million as of March 31, 2025 for these and other potential liabilities arising in various claims, legal actions and regulatory proceedings arising in the ordinary course of business. The Company also faces contingencies that are reasonably possible to occur that cannot currently be estimated. It is the Company’s policy to expense costs associated with loss contingencies, including any related legal fees, as they are incurred.
14. SUBSEQUENT EVENTS
See Note 7 for a discussion of the Company’s IDB Credit Facilities.
37
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We are a leading provider of digital infrastructure and communications services with a focus on rural and remote markets in the United States, and internationally, including Bermuda and the Caribbean region.
We have developed significant operational expertise and resources that we use to augment our capabilities in our local markets. With this support, our operating subsidiaries can improve their quality of service with greater economies of scale and expertise than would typically be available in the size markets we operate in. We provide management, technical, financial, regulatory, and marketing services to our operating subsidiaries and typically receive a management fee calculated as a percentage of their revenues, which is eliminated in consolidation. We also actively evaluate investment opportunities and other strategic transactions, both domestic and international, and generally look for those that we believe fit our profile of telecommunications businesses while keeping a focus on generating excess operating cash flows over extended periods of time. We use the cash generated from our operations to maintain an appropriate ratio of debt and cash on hand and to re-invest in organic growth, to fund capital expenditures, to return value to our stockholders through dividends or stock repurchases, and to make strategic investments or acquisitions.
For further information about our financial segments and geographical information about our operating revenues and assets, see Notes 1 and 12 to the Consolidated Financial Statements included in this Report.
As of March 31, 2025, we offered the following types of services to our customers:
| ● | Fixed Telecommunications Services. We provide fixed data and voice telecommunications services to business and consumer customers. These services include high-speed consumer broadband and high-speed data solutions for businesses. For some markets, fixed services also include video services and revenue derived from support under certain government programs. |
| ● | Carrier Telecommunication Services. We deliver services to other telecommunications providers including the leasing of critical network infrastructure such as tower and transport facilities, wholesale roaming and long-distance voice services, site maintenance and international long-distance services. |
| ● | Mobile Telecommunications Services. We offer mobile communications services over our wireless networks and related equipment (such as handsets) to both business and consumer customers. |
| ● | Managed Services. We provide information technology services such as network, application, infrastructure and hosting services to both our business and consumer customers to complement our fixed telecommunications services in our existing markets. |
Through March 31, 2025, we identified two operating segments to manage and review our operations, as well as to support investor presentations of our results. These operating segments are as follows:
| ● | US Telecom. In the United States, we offer fixed, carrier, and managed services to business customers and consumers in Alaska and the western United States. In 2024, we ceased providing mobility services to retail customers in the western United States. |
| ● | International Telecom. In our international markets, we offer fixed, carrier, mobility and managed services to customers in Bermuda, the Cayman Islands, Guyana and the US Virgin Islands. |
38
The following chart summarizes the operating activities of our principal subsidiaries, the segments in which we reported our revenue and the markets we served as of March 31, 2025:
International Telecom |
US Telecom |
||||||||
Services |
|
Markets |
|
Tradenames (1) |
Services |
|
Markets |
|
Tradenames |
Mobility Services |
|
Bermuda, Guyana, US Virgin Islands |
|
One Communications, Viya |
Mobility Services |
|
United States (rural markets) |
|
Choice, Choice NTUA Wireless |
Fixed Services |
|
Bermuda, Cayman Islands, Guyana, US Virgin Islands |
|
One Communications, Logic, Viya |
Fixed Services |
|
United States |
|
Alaska Communications, Commnet, Choice, Choice NTUA Wireless, Sacred Wind Communications, Ethos Broadband, Deploycom |
Carrier Services |
|
Bermuda, Guyana, US Virgin Islands |
|
One Communications, Viya, Essextel |
Carrier Services |
|
United States |
|
Alaska Communications, Commnet, Sacred Wind Communications |
Managed Services |
|
Bermuda, Cayman Islands, US Virgin Islands, Guyana |
|
One Communications, Logic, Viya, Brava |
Managed Services |
|
United States |
|
Alaska Communications, Choice |
| (1) | In 2024, we completed a rebranding in Guyana and GTT is now known as One Communications. We refer throughout this report to our business in Guyana as “OneGY.” In April 2025, we completed a rebranding in the US Virgin Islands and Viya is now known as One Communications. We will refer to Viya in future reports as “OneVI.” |
Carrier Managed Services
In July 2019, we entered into a Network Build and Maintenance Agreement with AT&T Mobility, LLC (“AT&T”) that we subsequently amended through March 31, 2025 (the “FirstNet Agreement”). In connection with the FirstNet Agreement, we are building a portion of AT&T’s network for the First Responder Network Authority (“FirstNet”) in or near our current operating areas in the western United States. Pursuant to the FirstNet Agreement and subject to certain limitations contained therein, all cell sites must be completed and accepted within a specified period of time. Since the inception of the project through March 31, 2025, we have recorded $75 million in construction revenue and expect to record approximately $8 million in additional construction revenue and related costs as sites are completed. We expect to substantially complete the build by the end of 2025. Revenues from construction are expected to have minimal impact on the Company’s operating income.
Following acceptance of a cell site, AT&T will own the cell site and we will assign to AT&T any third-party tower lease applicable to such cell site. If the cell site is located on a communications tower we own, AT&T will pay us pursuant to a separate lease agreement for an initial term of eight years. In addition to building the network, we will provide ongoing equipment and site maintenance and high-capacity transport to and from these cell sites for an initial term ending in 2031.
On May 10, 2023, we entered into a Carrier Managed Services Master Agreement (the “Verizon CMS Agreement”) with Cellco Partnership d/b/a Verizon Wireless (“Verizon”), pursuant to which we will provide a variety of network, infrastructure and technical services that will help deliver next generation wireless services to Verizon’s subscribers in our current operating area in the southwestern United States.
Pursuant to the Verizon CMS Agreement and subject to certain limitations contained therein, we will upgrade our wireless service in specific areas and provide services to Verizon for an initial term ending in 2030.
39
Following acceptance of a cell site, we will continue to own the cell site. In addition to building the network, we will provide ongoing equipment and site maintenance and high-capacity transport to and from these cell sites for an initial term ending in 2030.
With respect to each of our FirstNet and Verizon agreements, our carrier partners will continue to use our wholesale domestic mobility network for roaming services at a fixed rate per site during the construction period until such time as the cell site is completed. Thereafter, revenue from the maintenance, leasing and transport services provided is expected to generally offset revenue from wholesale mobility roaming services.
Universal Service Fund and Other Domestic Funding Programs
In general, all telecommunications providers are obligated to contribute to the Universal Service Fund (“USF”), which is used to promote the availability of qualifying telecommunications and broadband service to low-income households, households located in rural and high-cost areas, and to schools, libraries, and rural health care providers. We contribute to the USF and also receive various forms of USF support. We are subject to audit by the Universal Service Administrative Company (“USAC”) with respect to our federal contributions and our receipts of universal service funding. To our knowledge, we comply in all material respects with applicable federal and state USF assessment and support requirements.
USF High-Cost Support. The Federal Communications Commission’s (“FCC) high-cost USF (or alternatives to former high-cost USF) mechanisms promote the deployment and operation of voice and broadband networks in areas where high costs would otherwise undermine the availability of service to consumers, including in rural, insular, and remote areas. High-cost support mechanisms generally include explicit conditions to deploy broadband to new locations and provide service meeting specified standards. We receive several forms of high-cost support, including but not limited to, as follows:
| ● | We receive federal USF support under the Alaska Connect Fund (“ACF”). Beginning January 1, 2025, we began receiving $25.6 million per year and expect such annual funding to continue until December 31, 2028. Beginning in 2029 and continuing through 2034, the amount of ACF support we receive will be determined by FCC staff taking into consideration broadband deployment funded through the Broadband Equity Access and Deployment Program. The ACF replaced the $19.7 million per year that we had previously received in Connect America Fund II support in Alaska; |
| ● | As part of the Enhanced Alternative Connect America Model funding available to our operations in the southwest, we are estimated to receive approximately $109 million over the next 14 years, through 2038, with approximately $9 million annually through 2030 before a gradual step down to $6 million annually in 2038. This funding is subject to a requirement to deploy voice and broadband service at speeds of 100/20 Mbps to all required locations by the end of calendar year 2028; |
| ● | We expect to receive approximately $8 million per year in Connect America Fund II support in the rural southwest until July 2028; |
| ● | We are estimated to receive approximately $5.5 million annually in the US Virgin Islands through December 31, 2025 (this annual support is scheduled to end in 2025), subject to the requirement to enhance network resiliency and operations in those markets; |
| ● | We were awarded approximately $2.3 million annually in the western United States through December 31, 2031 as part of the Rural Digital Opportunity Fund Phase I (“RDOF”) auction. In exchange for this support, we committed to deploy voice and broadband service to covered areas within six years and to provide service in those areas for ten years. In 2024, we transferred $1.3 million of the annual awards to other providers and returned $0.3 million of the annual awards to the FCC; |
| ● | We receive state USF support in Alaska of approximately $2.5 million annually. |
As of March 31, 2025, we were in compliance in all material respects with our deployment and service requirements associated with such funding. If we fail to meet these obligations or require substantial additional capital expenditures to meet the obligations in a timely manner, our revenue, results of operations and liquidity may be materially adversely impacted.
40
Construction Grants
We have also been awarded construction grants to build network connectivity for eligible communities. The funding of these grants, used to reimburse us for our construction costs, is generally distributed after we incur reimbursable costs. Completion deadlines began in 2025 and once these projects are constructed, we are obligated to provide service to the participants. We expect to meet all requirements associated with these grants. As of March 31, 2025, we were awarded $155.2 million of construction grants.
During the three months ended March 31, 2025, we disbursed capital expenditures of $1.1 million under these programs and received reimbursement of $5.9 million. These cash flows are classified as investing activities in our statement of cash flows.
In addition, we partner with tribal governments to obtain grants under various government grant programs including, but not limited to, the Tribal Broadband Connectivity Program (“TBCP”) and the Rural Development Broadband ReConnect Program (“ReConnect”). These programs are administered by United States government agencies to deploy broadband connectivity in certain underserved areas. We were identified as a sub recipient of grants under these programs totaling $237 million as of March 31, 2025. Through March 31, 2025, we have received $23.2 million of funding under these programs and spent $22.2 million on construction obligations. These amounts are recorded as operating cash flows in the Company’s statement of cash flows.
Replace and Remove Program
In July 2022, we were approved to participate in the Federal Communication Commission’s Secure and Trusted Communications Networks Reimbursement Program (the “Replace and Remove Program”), designed to reimburse providers of advanced communications services for reasonable costs incurred in the required removal, replacement, and disposal of communications equipment and services in their networks that has been deemed to pose a national security risk. Pursuant to the Replace and Remove Program, our eligible subsidiaries were initially allocated up to approximately $207 million to replace, remove and securely destroy such communications equipment and services in our networks in the western United States and in the US Virgin Islands, however, in December 2024, this program was fully funded for an increased allocation to the Company of an aggregate amount of approximately $517 million. The Replace and Remove Program requires each of our participating subsidiaries to complete the project no later than a specified deadline, which was recently extended to the second quarter of 2026.
We have incurred total expenditures of $182.1 million related to this project, of which $13.7 million were incurred in 2025. Of these total expenditures, $152.0 million were classified as capital.
At March 31, 2025, $19.5 million of capital expenditures were accrued and unpaid under the Replace and Remove Program. We expect to be reimbursed, within the next twelve months, for all amounts spent to date. During the three months ended March 31, 2025, we received $19.1 million of reimbursement under the program, of which $2.9 million was classified as operating cash inflows and $16.2 million was classified as investing cash inflows in our statement of cash flows.
41
Selected Segment Financial Information
Through March 31, 2025, the Company has the following two reportable and operating segments: (i) International Telecom and (ii) US Telecom.
Operating income is the segment measure of profit or loss reported to the chief operating decision maker for purposes of assessing the segments' performance and making capital allocation decisions. We believe operating income is a useful measure of our operating results as it provides relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends in a manner that is consistent with management's evaluation of business performance. Our chief operating decision maker is our Chief Executive Officer.
The following represents selected segment information for the three months ended March 31, 2025 and 2024 (in thousands):
42
For the Three Months Ended March 31, 2025 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International |
|
US |
|
Corporate and |
|
|
|
|||
|
|
Telecom |
|
Telecom |
|
Other (1) |
|
Consolidated |
||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Communication Services |
|
|
|
|
|
|
|
|
|
|
|
|
Mobility - Business |
|
$ |
4,849 |
|
$ |
39 |
|
$ |
— |
|
$ |
4,888 |
Mobility - Consumer |
|
|
21,192 |
|
|
— |
|
|
— |
|
|
21,192 |
Total Mobility |
|
|
26,041 |
|
|
39 |
|
|
— |
|
|
26,080 |
Fixed - Business |
|
|
18,493 |
|
|
29,244 |
|
|
— |
|
|
47,737 |
Fixed - Consumer |
|
|
42,872 |
|
|
22,415 |
|
|
— |
|
|
65,287 |
Total Fixed |
|
|
61,365 |
|
|
51,659 |
|
|
— |
|
|
113,024 |
Carrier Services |
|
|
3,904 |
|
|
29,227 |
|
|
— |
|
|
33,131 |
Other |
|
|
1,740 |
|
|
56 |
|
|
— |
|
|
1,796 |
Total Communication Services Revenue |
|
|
93,050 |
|
|
80,981 |
|
|
— |
|
|
174,031 |
Construction |
|
|
— |
|
|
1,046 |
|
|
— |
|
|
1,046 |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
Managed Services |
|
|
1,446 |
|
|
2,771 |
|
|
— |
|
|
4,217 |
Total other revenue |
|
|
1,446 |
|
|
2,771 |
|
|
— |
|
|
4,217 |
Total Revenue |
|
|
94,496 |
|
|
84,798 |
|
|
— |
|
|
179,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of communication services and other |
|
|
34,963 |
|
|
43,261 |
|
|
— |
|
|
78,224 |
Cost of construction revenue |
|
|
— |
|
|
1,501 |
|
|
— |
|
|
1,501 |
Selling, general and administrative |
|
|
27,143 |
|
|
22,521 |
|
|
5,564 |
|
|
55,228 |
Stock-based compensation |
|
|
215 |
|
|
78 |
|
|
1,612 |
|
|
1,905 |
Transaction-related charges |
|
|
— |
|
|
— |
|
|
1,436 |
|
|
1,436 |
Restructuring and reorganization expenses |
|
|
1,506 |
|
|
134 |
|
|
190 |
|
|
1,830 |
Depreciation and amortization |
|
|
15,377 |
|
|
18,284 |
|
|
866 |
|
|
34,527 |
Amortization of intangibles from acquisitions |
|
|
251 |
|
|
975 |
|
|
— |
|
|
1,226 |
(Gain) loss on disposition of assets and transfers |
|
|
291 |
|
|
459 |
|
|
— |
|
|
750 |
Total Operating Expenses |
|
|
79,746 |
|
|
87,213 |
|
|
9,668 |
|
|
176,627 |
Income from operations |
|
|
14,750 |
|
|
(2,415) |
|
|
(9,668) |
|
|
2,667 |
Other income (expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
|
|
|
|
|
272 |
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
(11,950) |
Other income |
|
|
|
|
|
|
|
|
|
|
|
(2,568) |
Other expense |
|
|
|
|
|
|
|
|
|
|
|
(14,246) |
Loss before income taxes |
|
|
|
|
|
|
|
|
|
|
|
(11,579) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other segment disclosures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International |
|
US |
|
Corporate and |
|
|
|
|||
|
|
Telecom |
|
Telecom |
|
Other (1) |
|
Consolidated |
||||
Net (income) loss attributable to non-controlling interests |
|
|
(1,474) |
|
|
3,933 |
|
|
— |
|
|
2,459 |
| (1) | Corporate and other items refer to corporate overhead costs and consolidating adjustments. |
43
For the Three Months Ended March 31, 2024 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International |
|
US |
|
Corporate and |
|
|
|
|||
|
|
Telecom |
|
Telecom |
|
Other (1) |
|
Consolidated |
||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Communication Services |
|
|
|
|
|
|
|
|
|
|
|
|
Mobility - Business |
|
$ |
4,808 |
|
$ |
74 |
|
$ |
— |
|
$ |
4,882 |
Mobility - Consumer |
|
|
21,229 |
|
|
764 |
|
|
— |
|
|
21,993 |
Total Mobility |
|
|
26,037 |
|
|
838 |
|
|
— |
|
|
26,875 |
Fixed - Business |
|
|
18,532 |
|
|
34,965 |
|
|
— |
|
|
53,497 |
Fixed - Consumer |
|
|
42,789 |
|
|
22,919 |
|
|
— |
|
|
65,708 |
Total Fixed |
|
|
61,321 |
|
|
57,884 |
|
|
— |
|
|
119,205 |
Carrier Services |
|
|
3,574 |
|
|
30,052 |
|
|
— |
|
|
33,626 |
Other |
|
|
818 |
|
|
744 |
|
|
— |
|
|
1,562 |
Total Communication Services Revenue |
|
|
91,750 |
|
|
89,518 |
|
|
— |
|
|
181,268 |
Construction |
|
|
— |
|
|
1,586 |
|
|
— |
|
|
1,586 |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
Managed Services |
|
|
1,309 |
|
|
2,631 |
|
|
— |
|
|
3,940 |
Total Other Revenue |
|
|
1,309 |
|
|
2,631 |
|
|
— |
|
|
3,940 |
Total Revenue |
|
|
93,059 |
|
|
93,735 |
|
|
— |
|
|
186,794 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of communication services and other |
|
|
34,154 |
|
|
46,385 |
|
|
(149) |
|
|
80,390 |
Cost of construction revenue |
|
|
— |
|
|
1,570 |
|
|
— |
|
|
1,570 |
Selling, general and administrative |
|
|
29,632 |
|
|
25,076 |
|
|
6,607 |
|
|
61,315 |
Stock-based compensation |
|
|
23 |
|
|
132 |
|
|
1,754 |
|
|
1,909 |
Transaction-related charges |
|
|
— |
|
|
— |
|
|
19 |
|
|
19 |
Restructuring and reorganization expenses |
|
|
1,190 |
|
|
— |
|
|
— |
|
|
1,190 |
Depreciation and amortization |
|
|
16,124 |
|
|
18,138 |
|
|
78 |
|
|
34,340 |
Amortization of intangibles from acquisitions |
|
|
251 |
|
|
1,729 |
|
|
— |
|
|
1,980 |
(Gain) loss on disposition of assets and transfers |
|
|
— |
|
|
108 |
|
|
(601) |
|
|
(493) |
Total Operating Expenses |
|
|
81,374 |
|
|
93,138 |
|
|
7,708 |
|
|
182,220 |
Income from operations |
|
|
11,685 |
|
|
597 |
|
|
(7,708) |
|
|
4,574 |
Other income (expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
|
|
|
|
|
445 |
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
(11,520) |
Other income |
|
|
|
|
|
|
|
|
|
|
|
172 |
Other expense |
|
|
|
|
|
|
|
|
|
|
|
(10,903) |
Loss before income taxes |
|
|
|
|
|
|
|
|
|
|
|
(6,329) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other segment disclosures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International |
|
US |
|
Corporate and |
|
|
|
|||
|
|
Telecom |
|
Telecom |
|
Other (1) |
|
Consolidated |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (income) loss attributable to non-controlling interests |
|
|
(1,436) |
|
|
3,069 |
|
|
— |
|
|
1,633 |
(1) Corporate and other items refer to corporate overhead costs and consolidating adjustments.
44
A comparison of our segment results for the three months ended March 31, 2025 and 2024 is as follows:
International Telecom. Revenues within our International Telecom segment increased $1.4 million, or 1.5%, to $94.5 million from $93.1 million for the three months ended March 31, 2025 and 2024, respectively, primarily as a result of an increase in carrier services revenue due to increased roaming revenues, certain project-related revenues and revenues from ancillary services.
Operating expenses within our International Telecom segment decreased by $1.7 million, or 2.1%, to $79.7 million from $81.4 million for the three months ended March 31, 2025 and 2024, respectively. The net decrease was primarily the result of certain cost savings initiatives, including reorganizations and reductions in force, that were implemented in the current and previous periods.
As a result, our International Telecom segment’s operating income increased $3.1 million, or 26.5%, to $14.8 million from $11.7 million for the three months ended March 31, 2025 and 2024, respectively.
US Telecom. Revenue within our US Telecom segment decreased by $8.9 million, or 9.5%, to $84.8 million from $93.7 million for the three months ended March 31, 2025 and 2024, respectively, primarily as a result of a $6.2 million reduction in Fixed revenues which were negatively impacted by the conclusion of both the Emergency Connectivity Fund and the Affordable Care Program, both of which provided revenue through April 2024. In addition, the US Telecom segment’s Carrier Services revenue decreased by $0.9 million primarily as the result of the transition of legacy roaming arrangements to carrier service management contracts, construction revenue declined by $0.6 million as a result of a decrease in the number of sites completed during 2025 as compared to 2024 and Mobility revenue decreased $0.8 million within our retail operations as a result of our conclusion of our providing retail mobility services under our own brand name to retail customers.
Operating expenses within our US Telecom segment decreased $5.9 million, or 6.3%, to $87.2 million from $93.1 million for the three months ended March 31, 2025 and 2024, respectively, as a result of the reduction in the direct costs of services associated with the revenue decline, and the impact of certain cost savings initiatives, including reorganization and reductions in force, that were implemented in the current and previous periods.
As a result of the above, our US Telecom segment’s operating income decreased to a loss of $2.4 million from income of $0.6 million for the three months ended March 31, 2025 and 2024, respectively.
45
The following represents a year over year discussion and analysis of our results of operations for the three months ended March 31, 2025 and 2024 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Amount of |
|
Percent |
|
|||||
|
|
March 31, |
|
Increase |
|
Increase |
|
|||||
|
|
2025 |
|
2024 |
|
(Decrease) |
|
(Decrease) |
|
|||
REVENUE: |
|
|
|
|
|
|
|
|
|
|
|
|
Communication services |
|
$ |
174,031 |
|
$ |
181,268 |
|
$ |
(7,237) |
|
(4.0) |
% |
Construction |
|
|
1,046 |
|
|
1,586 |
|
|
(540) |
|
(34.0) |
|
Other |
|
|
4,217 |
|
|
3,940 |
|
|
277 |
|
7.0 |
|
Total revenue |
|
|
179,294 |
|
|
186,794 |
|
|
(7,500) |
|
(4.0) |
|
OPERATING EXPENSES (excluding depreciation and amortization unless otherwise indicated): |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of communications services and other |
|
|
78,224 |
|
|
80,390 |
|
|
(2,166) |
|
(2.7) |
|
Cost of construction revenue |
|
|
1,501 |
|
|
1,570 |
|
|
(69) |
|
(4.4) |
|
Selling, general and administrative |
|
|
55,228 |
|
|
61,315 |
|
|
(6,087) |
|
(9.9) |
|
Stock-based compensation |
|
|
1,905 |
|
|
1,909 |
|
|
(4) |
|
(0.2) |
|
Transaction-related charges |
|
|
1,436 |
|
|
19 |
|
|
1,417 |
|
7,457.9 |
|
Restructuring charges |
|
|
1,830 |
|
|
1,190 |
|
|
640 |
|
53.8 |
|
Depreciation and amortization |
|
|
34,527 |
|
|
34,340 |
|
|
187 |
|
0.5 |
|
Amortization of intangibles from acquisitions |
|
|
1,226 |
|
|
1,980 |
|
|
(754) |
|
(38.1) |
|
Loss on disposition of long-lived assets |
|
|
750 |
|
|
(493) |
|
|
1,243 |
|
(252.1) |
|
Total operating expenses |
|
|
176,627 |
|
|
182,220 |
|
|
(5,593) |
|
(3.1) |
|
Income from operations |
|
|
2,667 |
|
|
4,574 |
|
|
(1,907) |
|
(41.7) |
|
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
272 |
|
|
445 |
|
|
(173) |
|
(38.9) |
|
Interest expense |
|
|
(11,950) |
|
|
(11,520) |
|
|
(430) |
|
3.7 |
|
Other income (expense) |
|
|
(2,568) |
|
|
172 |
|
|
(2,740) |
|
(1,593.0) |
|
Other expense, net |
|
|
(14,246) |
|
|
(10,903) |
|
|
(3,343) |
|
30.7 |
|
LOSS BEFORE INCOME TAXES |
|
|
(11,579) |
|
|
(6,329) |
|
|
(5,250) |
|
83.0 |
|
Income tax expense (benefit) |
|
|
(192) |
|
|
1,619 |
|
|
(1,811) |
|
(111.9) |
|
NET LOSS |
|
|
(11,387) |
|
|
(7,948) |
|
|
(3,439) |
|
43.3 |
|
Net loss attributable to noncontrolling interests, net of tax: |
|
|
2,459 |
|
|
1,633 |
|
|
826 |
|
50.6 |
|
NET LOSS ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS |
|
$ |
(8,928) |
|
$ |
(6,315) |
|
$ |
(2,613) |
|
41.4 |
% |
46
Communications Services Revenue
Mobility Revenue. Our Mobility revenue consists of revenue generated within both our International Telecom and US Telecom segments by providing business and retail mobile voice and data services over our wireless networks as well as through the sale and repair services of related equipment, such as handsets and other accessories, to our subscribers.
Mobility revenue decreased by $0.8 million, or 3.0%, to $26.1 million for the three months ended March 31, 2025 from $26.9 million for the three months ended March 31, 2024. The decrease in Mobility revenue, within our segments, consisted of the following:
| ● | International Telecom. Within our International Telecom segment, Mobility revenue remained consistent at $26.0 million between the three months ended March 31, 2025 and 2024. Revenue from both business and consumer customers also remained consistent with the previous year. |
| ● | US Telecom. Mobility revenue within our US Telecom segment decreased by $0.8 million for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 as we recorded only a nominal amount of Mobility revenue within this segment during the three months ended March 31, 2025 due to the conclusion of our providing retail mobility services under our own brand name to retail customers. |
Mobility revenue within our International Telecom may decrease as a result of increased competition and regulatory changes partially offset by our continued network upgrades, marketing efforts and conversion of our current subscriber base to higher margin prepaid and postpaid plans.
We do not expect to record Mobility revenue within our US Telecom segment in future periods due to the conclusion of our providing retail mobility services under our own brand name to retail customers.
Fixed Revenue. Fixed revenue is primarily generated by broadband, voice, and video service revenues provided to retail and business customers over our wireline networks. Fixed revenue within our US Telecom segment also includes awards from the Connect America Fund Phase II program, the Enhanced Alternative Connect America Cost Model program, and the Alaska Universal Service Fund. In addition, and through early April 2024, Fixed revenue within the US Telecom segment also included revenue from the Emergency Connectivity Fund (ECF) and Affordable Care Program (ACP). Within our International Telecom segment, Fixed revenue includes funding under the FCC’s High-Cost Program in the US Virgin Islands.
Fixed revenue decreased by $6.2 million, or 5.2%, to $113.0 million from $119.2 million for the three months ended March 31, 2025 and 2024, respectively. This decrease primarily pertained to a decrease in Fixed revenue from business customers and consisted of the following:
| ● | International Telecom. Within our International Telecom segment, Fixed revenue increased by $0.1 million, or 0.2%, to $61.4 million from $61.3 million for the three months ended March 31, 2025 and 2024, respectively. This increase included a $0.1 million increase in revenue from consumer customers while revenue from business customers remained consistent with the previous year. |
| ● | US Telecom. Fixed revenue within our US Telecom segment decreased by $6.2 million, or 10.7%, to $51.7 million from $57.9 million for the three months ended March 31, 2025 and 2024, respectively. Of this decrease, $0.5 million and $5.7 million related to decreases in revenue from consumer and business customers, respectively, primarily as a result of the conclusion of the Emergency Connectivity Fund and Affordable Care Programs, both of which provided revenue through April 2024. |
47
Fixed revenue within our International Telecom segment may continue to increase as we expect the popularity of video and audio streaming, the demand for cloud services and smart home, business and city solutions to increase the demand for broadband and other data services from consumers, businesses and governments. However, such increases may be offset by a decrease in demand for our legacy services due to subscribers using alternative methods to receive video and audio content.
Within our US Telecom segment, we expect Fixed revenue to decrease in the short term as a result of the impact of the expiration of the Emergency Connectivity Fund and Affordable Care Program. Over time, we expect these decreases to be partially offset by increases in other business revenue in Alaska and our western United States operations as we further deploy fiber and fiber-fed broadband with organic and government grants to access to both consumers and businesses.
Carrier Services Revenue. Carrier Services revenue is generated by both our International Telecom and US Telecom segments. Within our International Telecom segment, Carrier Services revenue includes international long-distance services, roaming revenues generated by other carriers’ customers roaming into our retail markets, transport services and access services provided to other telecommunications carriers. Within our US Telecom segment, Carrier Services revenue includes services provided under the FirstNet Agreement and Verizon Carrier Managed Services Agreement, wholesale roaming revenues, the provision of network switching services, tower lease revenue and other services provided to other carriers.
Carrier Services revenue decreased by $0.5 million, or 1.5%, to $33.1 million from $33.6 million for the three months ended March 31, 2025 and 2024, respectively. The decrease, within our segments, consisted of the following:
| ● | International Telecom. Within our International Telecom segment, Carrier Services revenue increased by $0.3 million, or 8.3%, to $3.9 million, from $3.6 million for the three months ended March 31, 2025 and 2024, respectively, primarily as a result of an increase in roaming revenues in some of our international markets. |
| ● | US Telecom. Carrier Services revenue within our US Telecom segment decreased by $0.9 million, or 3.0%, to $29.2 million from $30.1 million, for the three months ended March 31, 2025 and 2024, respectively. This decrease is primarily the result of the transition of legacy roaming arrangements to carrier service management contracts. |
Within our International Telecom segment, Carrier Services revenue may increase if international travel increases.
Within our US Telecom segment, Carrier Services revenue may decrease as a result of the impact of recent carrier service management contracts.
Other Communications Services Revenue. Other Communications Services revenue includes project-related revenue generated within both our International and US Telecom segments and ancillary services that the operations within our International Telecom segment provide to its retail subscribers. Other Communications Services revenue increased $0.2 million, or 12.5%, to $1.8 million from $1.6 million for the three months ended March 31, 2025 and 2024, respectively, as a result of an increase in project-related revenue and revenue from ancillary services in our International Telecom segment partially offset by a reduction in certain non-recurring project-related revenue being recognized in our US Telecom segment.
Other Communication Services revenue may increase in future periods as the demand for ancillary services increase but may be partially offset by a decrease in project-related revenues as the projects are completed.
48
Construction Revenue
Construction revenue represents revenue generated within our US Telecom segment for the construction of network cell sites related to the FirstNet Agreement. During the three months ended March 31, 2025 and 2024, Construction revenue decreased to $1.0 million from $1.6 million, respectively, primarily as a result of a decrease in the number of sites completed during 2025 as compared to 2024. We expect to substantially complete the build by the end of 2025.
Other Revenue
Managed Services Revenue. Managed Services revenue is generated within both our International and US Telecom segments and includes network, application, infrastructure, and hosting services.
Managed Services revenue increased by $0.3 million, or 7.7%, to $4.2 million from $3.9 million for the three months ended March 31, 2025 and 2024, respectively. The increases, within our segments, which were driven by a continued effort to sell our Managed Services solution to primarily business customers, consisted of the following:
International Telecom. Managed Services revenue in our International Telecom segment increased $0.1 million, or 7.7%, to $1.4 million from $1.3 million for the three months ended March 31, 2025 and 2024, respectively.
US Telecom. Within our US Telecom segment, Managed Services revenue increased $0.2 million, or 7.7%, to $2.8 million from $2.6 million for the three months ended March 31, 2025 and 2024, respectively.
Managed Services revenue may continue to increase in both our US and International Telecom segments as a result of our continued effort to sell certain Managed Services solutions to primarily business customers in all of our markets.
Operating Expenses
Cost of communication services and other. Cost of communication services and other are charges that we incur for voice and data transport circuits, internet capacity, video programming costs, access fees we pay to terminate our calls, telecommunication spectrum fees and direct costs associated within our managed services businesses. These costs also include expenses associated with developing, operating, upgrading and supporting our telecommunications networks, including the salaries and benefits paid to employees directly involved in the development and operation of those businesses, as well as credit loss allowances and the cost of handsets and customer resale equipment incurred by our retail businesses.
Cost of communication services and other decreased by $2.2 million, or 2.7%, to $78.2 million from $80.4 million for the three months ended March 31, 2025 and 2024, respectively. The net decrease in cost of communication services and other, within our segments, consisted of the following:
| ● | International Telecom. Within our International Telecom segment, cost of communication services and other increased by $0.8 million, or 2.3%, to $35.0 million from $34.2 million, for the three months ended March 31, 2025 and 2024, respectively. This increase was the result of increased transport costs, to secure capacity, and equipment expenses, as a result of an increase in equipment revenue, partially offset by the impact of cost savings initiatives, including reorganizations and reductions in force, that were implemented in the current and previous periods. |
| ● | US Telecom. Cost of communication services and other within our US Telecom segment decreased by $3.1 million, or 6.7%, to $43.3 million from $46.4 million for the three months ended March 31, 2025 and 2024, respectively. Such decrease was a result of the beneficial impact of certain cost savings initiatives, including reorganizations and reductions in force, that were implemented in the current and previous |
49
| periods as well as a reduction in the costs associated with the Emergency Connectivity Fund program which concluded during the second quarter of 2024. |
Cost of communication services in both our International and US Telecom segments may decrease as a result of the ongoing cost reduction initiatives that commenced in previous periods, but such decrease may be partially offset by future inflationary pressure.
Cost of construction revenue. Cost of construction revenue includes the expenses incurred in connection with the construction of and the delivery to AT&T of cell sites in accordance with our FirstNet Agreement. During the three months ended March 31, 2025 and 2024, cost of construction revenue decreased to $1.5 million from $1.6 million, respectively, as a result of a decrease in the number of sites completed during 2025 as compared to 2024. We expect to substantially complete the build by the end of 2025.
Selling, general and administrative expenses. Selling, general and administrative expenses include salaries and benefits we pay to sales personnel, customer service expenses and the costs associated with the development and implementation of our promotional and marketing campaigns. Selling, general and administrative expenses also include salaries, benefits and related costs for general corporate functions including executive management, finance and administration, legal and regulatory, facilities, information technology and human resources as well as internal costs associated with our performance of due-diligence and integration related costs associated with acquisition activities.
Selling, general and administrative expenses decreased by $6.1 million, or 10.0%, to $55.2 million from $61.3 million for the three months ended March 31, 2025 and 2024, respectively. The decreases in selling, general and administrative expenses occurred within all of our segments and were primarily related to certain cost containment initiatives, including reorganizations and reductions in force, that were implemented in the current and previous periods. The impact to each of our segments, consisted of the following:
| ● | International Telecom. Within our International Telecom segment, our selling, general and administrative expenses decreased by $2.5 million, or 8.4%, to $27.1 million from $29.6 million for the three months ended March 31, 2025 and 2024, respectively. |
| ● | US Telecom. Selling, general and administrative expenses decreased within our US Telecom segment by $2.6 million, or 10.4%, to $22.5 million from $25.1 million, for the three months ended March 31, 2025 and 2024, respectively. |
| ● | Corporate Overhead. Selling, general and administrative expenses within our corporate overhead decreased by $1.0 million, or 15.2%, to $5.6 million from $6.6 million, for the three months ended March 31, 2025 and 2024, respectively. |
Selling, general and administrative expenses in all our segments may continue to decrease as a result of the ongoing cost reduction initiatives that commenced in previous periods, but such decrease may be partially offset by future inflationary pressure.
Stock-based compensation. Stock-based compensation represents a non-cash expense related to the amortization of grants of equity awards to employees and directors.
Stock-based compensation for the three months ended March 31, 2025 and 2024 was consistent at $1.9 million.
Transaction-related charges. Transaction-related charges include the external costs, such as legal, tax, accounting and consulting fees directly associated with acquisition and disposition-related activities and certain financing activities that are expensed as incurred. Transaction-related charges do not include employee salary and travel-related expenses incurred in connection with acquisitions or dispositions or any integration-related costs.
50
We incurred $1.4 million and a nominal amount of transaction-related charges during the three months ended March 31, 2025 and 2024, respectively.
Restructuring and reorganization expenses. In our efforts to advance our cost management actions to drive higher operating efficiencies and margins, we incurred certain restructuring and reorganization expenses, primarily reductions in force, totaling $1.5 million, $0.1 million and $0.2 million within our International Telecom segment, US Telecom segment and Corporate and Other segment, respectively, during the three months ended March 31, 2025.
We incurred certain reduction in force costs totaling $1.2 million within our International Telecom segment during the three months ended March 31, 2024.
Depreciation and amortization expenses. Depreciation and amortization expenses represent the depreciation and amortization charges we record on our property and equipment.
Depreciation and amortization expenses increased by $0.2 million, or 0.6%, to $34.5 million from $34.3 million for the three months ended March 31, 2025 and 2024, respectively. The net increase in depreciation and amortization expenses, within our segments, consisted primarily of the following:
| ● | International Telecom. Depreciation and amortization expenses decreased within our International Telecom segment by $0.7 million, or 4.3%, to $15.4 million from $16.1 million, for the three months ended March 31, 2025 and 2024, respectively. The decrease was the result of this segment’s reduction in capital expenditures in recent periods. |
| ● | US Telecom. Depreciation and amortization expenses increased within our US Telecom segment by $0.2 million, or 1.1%, to $18.3 million from $18.1 million, for the three months ended March 31, 2025 and 2024, respectively, primarily as a result of an increase in assets being placed into service in certain markets. |
| ● | Corporate Overhead. Depreciation and amortization expenses increased within our corporate overhead to $0.9 million from $0.1 million, for the three months ended March 31, 2025 and 2024, respectively, primarily as a result of additional assets being placed into service. |
We expect depreciation and amortization expenses to decrease as a result of an expected decline in capital expenditures and as a result of some of our previously acquired assets becoming fully depreciated.
Amortization of intangibles from acquisitions. Amortization of intangibles from acquisitions include the amortization of customer relationships and trade names related to our completed acquisitions.
Amortization of intangibles from acquisitions decreased by $0.8 million to $1.2 million from $2.0 million for the three months ended March 31, 2025 and 2024, respectively.
We expect that amortization of intangibles from acquisitions will continue to decrease in future periods as such assets continue to amortize.
(Gain) loss on disposition of assets and transfers. During the three months ended March 31, 2025, we recorded a net loss on the disposition of assets of $0.8 million. Of this net loss, $0.3 million and $0.5 million was recognized within our International and US Telecom segments, respectively.
During the three months ended March 31, 2024, we recorded a gain on the disposition of assets of $0.5 million primarily relating to the previously completed disposition of our renewable energy assets.
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Interest income. Interest income represents interest earned on our cash, cash equivalents, restricted cash and short-term investment balances. Interest income was $0.3 million and $0.4 million for the three months ended March 31, 2025 and 2024, respectively.
Interest expense. We incur interest expense on the 2023 CoBank Credit Facility, the 2024 Alaska Credit Facilities, the FirstNet Receivables Credit Facility, the OneGY Credit Facilities, the Sacred Wind Term Debt and the Viya Debt. In addition, interest expense includes commitment fees, letter of credit fees and the amortization of debt issuance costs.
Interest expense increased to $12.0 million from $11.5 million for the three months ended March 31, 2025 and 2024, respectively, as additional interest expense was incurred as a result of an increase in borrowings under our credit facilities.
Interest expense may increase in future periods as a result of additional borrowings or an increase in interest rates on those borrowings.
Other income (expense). For the three months ended March 31, 2025, other income (expense) was $2.6 million of expense primarily related to a non-operating employee-related matter, and $0.4 million in losses on foreign currency transactions.
For the three months ended March 31, 2024, other income (expenses) was $0.2 million of income primarily related to certain employee benefit plans partially offset by losses on foreign currency transactions.
Income taxes. Our effective tax rate for the three months ended March 31, 2025 and 2024 was 1.7% and (25.6%), respectively.
We recorded an income tax benefit of $0.2 million in relation to a pretax loss of $11.6 million for the three months ended March 31, 2025. The effective tax rate for the three months ended March 31, 2025 was primarily impacted by the following items: (i) the mix of income generated among the jurisdictions in which we operate, (ii) net expense related to valuation allowances placed on certain deferred tax assets that are not expected to be realized based on the weight of positive and negative evidence, and (iii) discrete expenses including $0.6 million for interest on prior years uncertain tax positions and $0.5 million expense associated with stock option shortfalls.
We recorded an income tax expense of $1.6 million in relation to a pretax loss of $6.3 million for the three months ended March 31, 2024. The effective tax rate for the three months ended March 31, 2024 was primarily impacted by the following items: (i) the mix of income generated among the jurisdictions in which we operate, (ii) net expense related to valuation allowances placed on certain deferred tax assets that are not expected to be realizable based on the weight of positive and negative evidence, (iii) forecasted tax impact of global intangible low-taxed income (“GILTI”) inclusion, and (iv) discrete items including expense of $1.5 million to record an uncertain tax position for the current year, and expense of $0.7 million for interest on uncertain tax positions for prior years.
Our effective tax rate is based upon estimated income before provision for income taxes for the year, composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for potential tax consequences, benefits and/or resolutions of tax contingencies. Our consolidated tax rate will continue to be impacted by any transactional or one-time items in the future and the mix of income in any given year generated among the jurisdictions in which we operate. While we believe we have adequately provided for all tax positions, amounts asserted by taxing authorities could materially differ from our accrued positions as a result of uncertain and complex application of tax law and regulations. Additionally, the recognition and measurement of certain tax benefits include estimates and judgments by management. Accordingly, we could record additional provisions or benefits for US federal, state, and foreign tax matters in future periods as new information becomes available.
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Net loss attributable to noncontrolling interests, net of tax. Net loss attributable to noncontrolling interests, net of tax reflected an allocation of $2.5 million and $1.6 million of losses generated by our less than wholly owned subsidiaries for the three months ended March 31, 2025 and 2024, respectively. Changes in net loss attributable to noncontrolling interests, net of tax, within our segments, consisted of the following:
| ● | International Telecom. Within our International Telecom segment, net income attributable to noncontrolling interests, net of tax increased by $0.1 million, or 7.1%, to an allocation of $1.5 million of income from an allocation of $1.4 million of income for the three months ended March 31, 2025 and 2024, respectively, as the result of increased profitability at certain less than wholly owned subsidiaries. |
| ● | US Telecom. Within our US Telecom segment, net loss attributable to noncontrolling interests, net of tax increased by $0.8 million, or 25.8%, to an allocation of losses of $3.9 million from an allocation of losses of $3.1 million for the three months ended March 31, 2025 and 2024, respectively, as a result of increased losses at our less than wholly owned subsidiaries within this segment. |
Net loss attributable to ATN International, Inc. stockholders. Net loss attributable to ATN International, Inc. stockholders was $8.9 million for the three months ended March 31, 2025 as compared to $6.3 million for the three months ended March 31, 2024.
On a per diluted share basis, net loss was $0.69 per diluted share for the three months ended March 31, 2025 as compared to $0.50 per diluted share for the three months ended March 31, 2024. Such per share amounts were negatively impacted by accrued preferred dividends of $1.5 million and $1.3 million for the three months ended March 31, 2025 and 2024, respectively.
Regulatory and Tax Issues
We are involved in a number of regulatory and tax proceedings. A material and adverse outcome in one or more of these proceedings could have a material adverse impact on our financial condition and future operations. For discussion of ongoing proceedings, see Note 13 to the Consolidated Financial Statements in this Report.
Liquidity and Capital Resources
Historically, we have met our operational liquidity needs and have funded our capital expenditures and acquisitions through a combination of cash-on-hand, internally generated funds, borrowings under our credit facilities, proceeds from dispositions, and seller financings. We believe our current cash, cash equivalents, short term investments and availability under our current credit facilities will be sufficient to meet our cash needs for at least the next twelve months for working capital and capital expenditure requirements.
Total liquidity. As of March 31, 2025, we had approximately $97.3 million in cash, cash equivalents, and restricted cash. Of this amount, $42.6 million was held by our foreign subsidiaries and is indefinitely invested outside the United States. In addition, we had approximately $562.4 million of debt, net of unamortized deferred financing costs, as of March 31, 2025. How and when we deploy our balance sheet capacity, including the availability under our various credit facilities (as further described below), will figure prominently in our longer-term growth prospects and stockholder returns.
Uses of Cash
Acquisitions and investments. We have historically funded our acquisitions with a combination of cash-on-hand, borrowings under our credit facilities as well as equity investor and seller financing.
We continue to explore opportunities to expand our telecommunications business or acquire new businesses in the United States, the Caribbean and elsewhere. Such acquisitions may require external financing.
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While there can be no assurance as to whether, when or on what terms we will be able to acquire any such businesses or make such investments, such acquisitions may be completed through the issuance of shares of our capital stock, payment of cash or incurrence of additional debt. From time to time, we may raise capital ahead of any definitive use of proceeds to allow us to move more quickly and opportunistically if an attractive investment materializes.
Cash used in investing activities. Cash used in investing activities decreased by $10.6 million to $25.1 million from $35.7 million for the three months ended March 31, 2025 and 2024, respectively. This year-over-year decrease in cash used in investing activities was primarily the result of a decrease in cash used for non-reimbursable capital expenditures of $15.2 million and a $6.7 million increase in cash inflows related to the reimbursement of capital expenditures under certain government programs. These amounts were partially offset by the increase in cash outflows for reimbursable capital expenditures of $9.0 million and a reduction in proceeds received from the sale of assets of $3.5 million.
Cash provided (used) by financing activities. Cash used by financing activities was $2.8 million during the three months ended March 31, 2025. Cash provided by financing activities was $19.6 million during the three months ended March 31, 2024. The decrease in cash provided by financing activities of $22.4 million was primarily the result of an increase in cash used for debt repayments, net of borrowings, of $23.5 million partially offset by a decrease in cash used to repurchase our common stock from employees to satisfy certain tax withholding obligations of $1.2 million.
Working Capital. We have funded our working capital needs through a combination of internally generated funds and borrowings under our credit facilities. Pursuant to the FirstNet Agreement, AT&T has the option to repay construction costs, with interest, over an eight-year period. To fund the working capital needs created by AT&T’s option to extend its payment terms, we completed the Receivables Credit Facility, as discussed below, on March 26, 2020.
For the three months ended March 31, 2025, we spent approximately $20.8 million for capital expenditures and $22.4 million for capital expenditures that are reimbursable under certain government programs. For the three months ended March 31, 2024, we spent approximately $36.0 million for capital expenditures and $13.5 million for capital expenditures that are reimbursable under certain government programs. The following notes our capital expenditures, by operating segment, for these periods (in thousands):
|
|
Capital Expenditures |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International |
|
|
US |
|
|
Corporate and |
|
|
|
Three months ended March 31, |
|
|
Telecom |
|
|
Telecom |
|
|
Other (1) |
|
|
Consolidated |
2025 |
|
$ |
10,803 |
|
$ |
32,472 |
|
$ |
2 |
|
$ |
43,277 |
2024 |
|
|
16,915 |
|
|
31,233 |
|
|
1,341 |
|
|
49,489 |
| (1) | Corporate and other items refer to corporate overhead costs and consolidating adjustments. |
We are continuing to invest in our telecommunication networks along with our operating and business support systems in many of our markets. For the year ending December 31, 2025, such investments are expected to total approximately $90 million to $100 million of non-reimbursable capital expenditures and will primarily relate to network expansion and upgrades which are expected to further drive subscriber and revenue growth in future periods.
Income taxes. We have historically used cash-on-hand to make payments for income taxes. Our policy is to allocate capital where we believe we will get the best returns and to date has been to indefinitely reinvest the undistributed earnings of our foreign subsidiaries. As we continue to reinvest our remaining foreign earnings, no additional provision for income taxes has been made on the accumulated earnings of foreign subsidiaries.
Dividends. For the three months ended March 31, 2025, our Board of Directors declared $3.7 million of dividends to our stockholders which includes a $0.24 per share dividend declared on March 20, 2025 and paid on April 7, 2025. We have declared quarterly dividends since the fourth quarter of 1998.
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Stock Repurchase Plan. Our Board of Directors has authorized the repurchase of up to $25.0 million of our common stock, from time to time, on the open market or in privately negotiated transactions (the “2023 Repurchase Plan”). We did not repurchase any of our common stock under the 2023 Repurchase Plan during the three months ended March 31, 2025 and repurchased $0.1 million under that Plan during the three months ended March 31, 2024. As of March 31, 2025, we had $15.0 million available to repurchase shares of our common stock under the 2023 Repurchase Plan.
Sources of Cash
Cash provided by operations. Cash provided by operating activities was $35.9 million for the three months ended March 31, 2025 as compared to $23.2 million for the three months ended March 31, 2024. The increase of $12.7 million was primarily related to improvements in working capital.
2023 CoBank Credit Facility
On July 13, 2023, we, along with certain of our subsidiaries as guarantors, entered into a new Credit Agreement with CoBank, ACB and a syndicate of other lenders (as may be amended from time to time, the “2023 CoBank Credit Facility”). On July 10, 2024, we amended the 2023 CoBank Credit Facility to add certain subsidiaries as guarantors and to provide further flexibility in order to accept certain grant and government program obligations.
The 2023 CoBank Credit Facility provides for a five-year $170 million revolving credit facility (the “2023 CoBank Revolving Loan”) and a six-year $130 million term loan facility (the “2023 CoBank Term Loan”). We may use (i) up to $25 million under the 2023 CoBank Revolving Loan for letters of credit, and (ii) up to $20 million under a swingline sub-facility. Upon the closing of the 2023 CoBank Credit Facility, we drew all of the 2023 CoBank Term Loan and approximately $13.6 million of the 2023 CoBank Revolving Loan. These borrowings were used to repay all of the $139.5 million of debt outstanding under a previously held credit facility, upon close.
The 2023 CoBank Term Loan has scheduled quarterly principal payments in the amounts set forth below, with the outstanding principal balance maturing on July 13, 2029. The 2023 CoBank Revolving Loan may be repaid at any time on or prior to its maturity on July 13, 2028. All amounts outstanding under the 2023 CoBank Credit Facility will be due and payable upon the earlier of the maturity date or the acceleration of the loans and commitments upon an event of default.
2023 CoBank Term Loan Quarterly Payment Dates |
2023 CoBank Term Loan Quarterly Repayments |
December 31, 2023 – June 30, 2025 |
$812,500 (2.5% per annum) |
September 30, 2025 – June 30, 2026 |
$1,625,000 (5% per annum) |
September 30, 2026 – June 30, 2029 |
$2,437,500 (7.5% per annum) |
Amounts borrowed under the 2023 CoBank Credit Facility bear interest at a rate equal to, at our option, either (i) the secured overnight financing rate as administered by the Federal Reserve Bank of New York (SOFR) plus an applicable margin ranging between 2.00% to 3.75% for the 2023 CoBank Term Loan and 1.75% to 3.50% for Revolving Loans or (ii) a base rate plus an applicable margin ranging from 1.00% to 2.75% for the Term Loan and 0.75% to 2.50% for the 2023 CoBank Revolving Loans. Swingline loans bear interest at the base rate plus the applicable margin for base rate loans. The base rate is equal to the higher of (i) 1.00% plus the one-month SOFR rate (ii) the federal funds effective rate (as defined in the 2023 CoBank Credit Agreement) plus 0.50% per annum; or (iii) the prime rate (as defined in the 2023 CoBank Credit Agreement). The applicable margin is determined based on the ratio (as further defined in the 2023 CoBank Credit Agreement) of our maximum Total Net Leverage Ratio. Under the terms of the 2023 CoBank Credit Agreement, we must also pay a fee ranging from 0.25% to 0.50% on the average daily unused portion of the 2023 CoBank Credit Facility over each calendar quarter.
The 2023 CoBank Credit Agreement contains a financial covenant (as further defined in the 2023 CoBank Credit Agreement) that imposes a maximum Total Net Leverage Ratio, as well as customary representations, warranties and covenants, including covenants limiting additional indebtedness, liens, guaranties, mergers and consolidations, substantial asset sales, investments and loans, sale and leasebacks, transactions with affiliates and fundamental changes.
55
The maximum Total Net Leverage Ratio is measured each fiscal quarter and is required to be less than or equal to 3.25 to 1.0. The 2023 CoBank Credit Agreement provides for events of default customary for credit facilities of this type, including but not limited to non-payment, defaults on other debt, misrepresentation, breach of covenants, representations and warranties, insolvency and bankruptcy.
We capitalized $4.5 million of fees associated with the 2023 CoBank Credit Facility which are being amortized over the life of the debt and $3.1 million were unamortized as of March 31, 2025.
We had $125.1 million outstanding under the 2023 CoBank Term Loan as of March 31, 2025. Under the 2023 CoBank Revolving Loan, we had $64.6 million outstanding and $105.4 million of availability as of March 31, 2025. We were in compliance with all financial covenants as of March 31, 2025.
In October 2023, we entered into a two year, forward starting 1-month floating to fixed SOFR interest rate swap agreement. The swap was effective November 13, 2023 in a non-amortizing notional amount of $50.0 million, has a fixed SOFR rate of 4.896% and matures on November 13, 2025. The swap agreement had a fair value of $(0.2) million and $(0.3) million as of March 31, 2025 and December 31, 2024, respectively.
Letter of Credit Facility
On November 14, 2022, we entered into a General Agreement of Indemnity to issue performance Standby Letters of Credit on behalf of us and our subsidiaries. As of March 31, 2025, $34.8 million of Standby Letters of Credit had been issued under this agreement.
2024 Alaska Credit Facility
On August 29, 2024, Alaska Communications (the “Borrower”) entered into a Credit Agreement (the “2024 Alaska Credit Agreement”) with Bank of America, N.A., as administrative agent, and a syndicate of lenders (the “2024 Alaska Credit Facility”), to provide debt financing in the form of a $300 million, five-year secured term loan facility (the “2024 Alaska Term Facility”) and a $90 million revolving facility (the “2024 Alaska Revolving Facility”).
The 2024 Alaska Term Facility proceeds were used (a) to refinance Alaska Communications’ outstanding indebtedness under the 2022 Alaska Credit Facility, as defined below, in the amount of approximately $279 million plus accrued and unpaid interest, (b) to pay fees and expenses associated with the completion of this transaction, and (c) for general corporate purposes. As of March 31, 2025, $300.0 million was outstanding under the 2024 Alaska Term Facility.
Proceeds from the 2024 Alaska Revolving Facility are to be used, subject to certain limitations, (a) to issue letters of credit to replace or backstop existing letters of credit of Alaska Communications and its direct and indirect subsidiaries, and (b) for working capital purposes, capital expenditures and other general corporate purposes. As of March 31, 2025, there were no outstanding borrowings under the 2024 Alaska Revolving Facility and $1.0 million of letters of credit were issued. As a result, $89.0 million was available under the 2024 Alaska Revolving Facility as of March 31, 2025.
The 2024 Alaska Credit Facility also provides for incremental term loans (“Incremental Term Loans”) up to an aggregate principal amount of the greater of $91 million and Alaska Communications’ trailing consolidated twelve-month EBITDA (as defined in the 2024 Alaska Credit Agreement), subject to the Borrower meeting certain conditions.
In connection with the 2024 Alaska Credit Facility, we incurred $6.9 million of fees and rolled over $2.1 million of fees for the 2022 Alaska Credit Facility to be amortized over the life of the debt. As of March 31, 2025, we had $8.0 million of unamortized fees, which are being amortized over the life of the debt, associated with the 2024 Alaska Credit Facility.
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The maturity date for the 2024 Alaska Credit Facility is August 29, 2029.
Amounts outstanding under the 2024 Alaska Credit Facility bear an interest rate of the following:
Tier / |
Alaska |
Applicable Margin |
Applicable |
Applicable |
I |
Greater than 4.00:1.00 |
4.50% |
3.50% |
0.40% |
II |
Less than or equal to 4.00:1.00 but greater than 3.25:1.00 |
4.00% |
3.00% |
0.35% |
III |
Less than or equal to 3.25:1.00 but greater than 2.50:1.00 |
3.50% |
2.50% |
0.30% |
IV |
Less than or equal to 2.50:1.00 |
3.00% |
2.00% |
0.25% |
Principal payments on the 2024 Alaska Term Facility are due quarterly commencing in the fourth quarter of 2026 in quarterly amounts as follows: from the fourth quarter of 2026 through the third quarter of 2027, $1,875,000; and from the fourth quarter of 2027 through the second quarter of 2029, $3,750,000. The remaining unpaid balance is due on the final maturity date. Payments on any principal amount outstanding under the Incremental Term Loans will be made in installments, on the dates and in the amounts set forth in the applicable amendment for such Incremental Term Loans. The Borrower may prepay all revolving loans under the 2024 Alaska Revolving Facility at any time without premium or penalty (other than any customary SOFR breakage costs), subject to certain notice requirements and balance restrictions.
The Borrower is required to maintain financial ratios, based on a calculation of EBITDA defined in the 2024 Alaska Credit Agreement, including (a) a maximum Consolidated Net Total Leverage Ratio of 4.75:1.00, stepping down to 4.50:1.00 beginning with the third quarter of 2027, and stepping down to 4.25:1.00 beginning with the third quarter of 2028; and (b) a minimum Consolidated Fixed Charge Coverage Ratio of not less than 1.25:1.00. Customary covenants restricting the incurrence or assumption of debt, granting or assuming liens, declaring dividends and making other restricted payments, making investments, dispositions, engaging in transactions with affiliates, changes to the nature of business, modifying organizational documents and material agreements, entering into sale and leaseback transactions, amending or making prepayments on certain subordinated debt, and entering into mergers and acquisitions.
The 2024 Alaska Credit Facility is secured by substantially all of the personal property and certain material real property owned by Alaska Communications Systems Holdings, the parent company of Alaska Communications (“Holdings”), the Borrower, and its wholly owned subsidiaries, excluding, among other things, certain federal and state licenses where a pledge is prohibited by applicable law or is permitted only with the consent of a governmental authority that has not been obtained.
The 2024 Alaska Credit Agreement contains usual and customary affirmative and negative covenants of the parties for credit facilities of this type or as otherwise deemed appropriate by the administrative agent, subject to customary exceptions and materiality standards.
The Company is not a guarantor under the 2024 Alaska Credit Agreement, and the lenders have no recourse against the Company in the event of an occurrence of an “Event of Default.”
57
2022 Alaska Credit Facility
On December 23, 2022, Alaska Communications entered into a Credit Agreement (the “2022 Alaska Credit Facility”) with Fifth Third Bank, National Association, as Administrative Agent, and a syndicate of lenders to provide a Revolving Credit Commitment of $75.0 million (the “2022 Alaska Revolving Facility”) and Term Loan Commitment of $230.0 million (the “2022 Alaska Term Loan”).
The key terms and conditions of the 2022 Alaska Credit Facility included the following:
| ● | Amounts outstanding bore an interest rate of the forward-looking SOFR rate with a one-month interest period, plus the SOFR Spread Adjustment of 10 basis points, plus a margin ranging from 3.00% to 4.00% based on Alaska Communications’ Consolidated Total Net Leverage Ratio (as defined in the Credit Agreement) or at an alternate base rate at a margin that is 1% lower than the counterpart SOFR margin; |
| ● | Principal repayments of $1.4 million were made quarterly commencing with the fourth quarter of 2023; |
| ● | Alaska Communications was required to maintain financial ratios as defined in the 2022 Alaska Credit Facility, including (a) a maximum Consolidated Net Total Leverage Ratio of 4.00 to 1, stepping down to 3.75 to 1 beginning with the second quarter of 2024; and (b) a minimum Consolidated Fixed Charge Coverage Ratio of not less than 1.25 to 1. In addition to these financial ratios, Alaska Communications was subject to customary representations, warranties and covenants, including limitations on additional indebtedness, liens, consolidations, mergers, assets sales, advances, investments and loans, transactions with affiliates, sale and leaseback transactions, subordinated indebtedness, and changes in the nature of its business; and |
| ● | The 2022 Alaska Credit Facility was non-recourse to us and was secured by substantially all of the personal property and certain material real property owned by Alaska Communications. |
On August 29, 2024, all outstanding amounts under the 2022 Alaska Credit Facility were repaid in full using the proceeds received upon the completion of the 2024 Alaska Credit Facility.
Alaska Term Facility
On June 15, 2022, Holdings entered into a secured lending arrangement with Bristol Bay Industrial, LLC (the “Alaska Term Facility”).
The Alaska Term Facility provided for a secured delayed draw term loan in an aggregate principal amount of up to $7.5 million and the proceeds were used to pay certain invoices from a contractor for work performed in connection with a fiber build. Interest on the Alaska Term Facility accrued at a fixed rate of 4.0% and scheduled quarterly payments of principal commenced on March 31, 2023. The Alaska Term Facility was repaid in full during the three months ended June 30, 2024.
Alaska Interest Rate Swap Agreements
In November 2023, Alaska Communications entered into two forward starting 1-month floating to fixed SOFR interest rate swap agreements. The total non-amortizing notional amount of the agreements is $200 million, with fixed SOFR rates of 4.8695% and 4.8980% and both agreements mature on June 30, 2025. The swap agreement had a fair value of $(0.2) million and $(0.5) million as of March 31, 2025 and December 31, 2024, respectively.
58
FirstNet Receivables Credit Facility
On March 26, 2020, Commnet Finance, a wholly owned subsidiary of Commnet Wireless, entered into a receivables credit facility with Commnet Wireless, and CoBank, ACB (the “Receivables Credit Facility”).
The Receivables Credit Facility provides for a senior secured delayed draw term loan in an aggregate principal amount of up to $75.0 million and the proceeds may be used to acquire certain receivables from Commnet Wireless. The receivables to be financed and sold under the Receivables Credit Facility, which provides the loan security, relate to the obligations of AT&T under the FirstNet Agreement.
On December 27, 2024, CoBank amended the Receivables Credit Facility and extended the delayed draw period to December 31, 2025.
The maturity date for each loan will be set by CoBank and will match the weighted average maturity of the certain receivables financed.
Interest on the loans accrue at a fixed annual interest rate to be quoted by CoBank.
The Receivables Credit Facility contains customary events of termination, representations and warranties, affirmative and negative covenants and events of default customary for facilities of this type.
As of March 31, 2025, Commnet Wireless had $42.6 million outstanding, of which $8.1 million was classified as being current and $34.5 million as long-term on our balance sheet, and $9.2 million of availability under the Receivables Credit Facility. Commnet Wireless capitalized $0.8 million in fees associated with the Receivables Credit Facility which are being amortized over the life of the debt and $0.3 million were unamortized as of March 31, 2025.
OneGY Credit Facilities
On October 12, 2022 , OneGY entered into a $2.9 million term facility and a $5.7 million overdraft facility (the “Guyana Credit Facilities”) with Republic Bank (Guyana) Limited.
The OneGY Guyana Credit Facilities were secured by real estate assets and carried a fixed interest rate of 7.5%. On November 29, 2024, the overdraft facility and term facility were canceled at the request of OneGY.
Sacred Wind Term Debt
The Sacred Wind Term Debt with the United States of America, acting through the Administrator of the Rural Utilities Service (“RUS”) which provides financial assistance in the form of loans under the Rural Electrification Act of 1936 to furnish or improve telecommunications and/or broadband services in rural areas, is secured by substantially all of the assets of Sacred Wind and is an underlying mortgage to the United States of America. These mortgage notes are to be repaid in equal monthly installments covering principal and interest beginning after date of issue and expiring by 2035.
The Sacred Wind Term Debt contains certain restrictions on the declaration or payment of dividends, redemption of capital stock or investment in affiliated companies without the consent of the RUS noteholders. The agreements also contain a financial covenant which Sacred Wind was not in compliance with as of December 31, 2024. Sacred Wind submitted a corrective action plan to comply with the financial covenant by December 31, 2028. The corrective action plan was accepted by the RUS and, as of March 31, 2025, we were in compliance with that corrective action plan.
59
As of March 31, 2025, $24.0 million was outstanding under the Sacred Wind Term Debt. Of that amount, $3.4 million was current and $20.6 million was long term.
The mortgage notes carry fixed interest rates ranging from 0.88% to 5.0%.
Viya Debt
We, and certain of our subsidiaries, have entered into a $60.0 million loan agreement (the “Viya Debt”) with National Cooperative Services Corporation (“NCSC”). The Viya Debt agreement contains customary representations, warranties, and affirmative and negative covenants (including limitations on additional debt, guaranties, sale of assets and liens) and a financial covenant that limits the maximum ratio of indebtedness to annual operating cash flow to 3.5 to 1.0 (the “Net Leverage Ratio”). This covenant is tested on an annual basis at the end of each fiscal year. Interest is paid quarterly at a fixed rate of 4.0% per annum and principal repayment is not required until maturity on July 1, 2026. Prepayment of the Viya Debt may be subject to a fee under certain circumstances. The debt is secured by certain assets of the Viya subsidiaries and is guaranteed by us.
We paid a fee of $0.9 million in 2016 to lock the interest rate at 4% per annum over the term of the Viya Debt. The fee was recorded as a reduction to the Viya Debt carrying amount and is being amortized over the life of the loan.
As of March 31, 2025, $60.0 million of the Viya Debt remained outstanding and $0.1 million of the rate lock fee was unamortized.
On May 5, 2022, the Net Leverage Ratio was amended to 7.0 to 1.0 through the maturity date of July 1, 2026. The Ratio is tested annually, and we were in compliance with the Net Leverage Ratio as of December 31, 2024.
IDB Credit Facilities
On May 8, 2025, OneGY entered into a Credit Agreement (the “2025 IDB Credit Facilities”) with Inter-American Investment Corporation (IDB Invest) to provide a Revolving Credit Commitment of $10.0 million (the “2025 IDB Revolving Facility”) and Term Loan Commitment of up to $30.0 million (the “2025 IDB Term Loan”). The debt is secured by certain assets of OneGY and is not guaranteed by the Company.
Beginning in the second quarter of 2027, the 2025 IDB Term Loan must be repaid in quarterly principal payments in the amounts set forth below, with the outstanding principal balance maturing on the tenth anniversary of the effective date. The 2025 IDB Revolving Loan may be repaid at any time on or prior to its maturity of 360 days after the first disbursement date.
2025 IDB Term Loan Quarterly Payment Dates |
2025 IDB Term Loan Quarterly Repayments |
June 22, 2027 – December 22, 2030 |
5.0% bi-annually |
June 22, 2031 – December 22, 2034 |
7.5% bi-annually |
Amounts borrowed under the 2025 IDB Credit Facilities bear interest at a rate equal to the applicable secured overnight financing rate as administered by the Federal Reserve Bank of New York (SOFR) plus an applicable margin ranging of 2.4% for the Revolving Facility and 3.0% for the Term Loans. In the case of the IDB Term Loan, there is a prepayment fee equal to 1% until the first anniversary, 0.5% until the second anniversary, and 0.0% thereafter.
The 2025 IDB Credit Agreement contains a financial covenant that imposes on OneGY a maximum Net Financial Debt to EBITDA Ratio and a maximum Debt to Equity ratio and a minimum EBITDA to Net Financial Expense Ratio, as well as customary representations, warranties and covenants The 2025 IDB Credit Agreement provides for events of default customary for credit facilities of this type, including but not limited to non-payment, defaults on other debt, misrepresentation, breach of covenants, representations and warranties, insolvency and bankruptcy.
60
Debt Maturity
The table below summarizes the annual maturities of our debt instruments (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Customer |
|
|
US |
|
International |
|
Corporate and |
|
Total |
Receivable |
|||||
Amounts Maturing During |
Telecom |
|
Telecom |
|
Other |
|
Debt |
Credit Facility |
|||||
April 1, 2025 through December 31, 2025 |
$ |
2,628 |
|
$ |
— |
|
$ |
3,945 |
|
$ |
6,573 |
$ |
6,000 |
Year ending December 31, 2026 |
|
5,469 |
|
|
60,000 |
|
|
8,125 |
|
|
73,594 |
|
8,409 |
Year ending December 31, 2027 |
|
13,098 |
|
|
— |
|
|
9,750 |
|
|
22,848 |
|
8,807 |
Year ending December 31, 2028 |
|
18,858 |
|
|
— |
|
|
74,370 |
|
|
93,228 |
|
9,229 |
Year ending December 31, 2029 |
|
277,749 |
|
|
— |
|
|
93,555 |
|
|
371,304 |
|
6,041 |
Thereafter |
|
6,239 |
|
|
— |
|
|
— |
|
|
6,239 |
|
4,084 |
Total |
|
324,041 |
|
|
60,000 |
|
|
189,745 |
|
|
573,786 |
|
42,570 |
Debt Discounts |
|
(8,180) |
|
|
(125) |
|
|
(3,097) |
|
|
(11,402) |
|
(338) |
Book Value as of March 31, 2025 |
$ |
315,861 |
|
$ |
59,875 |
|
$ |
186,648 |
|
$ |
562,384 |
$ |
42,232 |
Factors Affecting Sources of Liquidity
Internally generated funds. The key factors affecting our internally generated funds are demand for our services, competition, regulatory developments, economic conditions in the markets where we operate our businesses and industry trends within the telecommunications industry.
Restrictions under 2023 Credit Facility. Our 2023 CoBank Credit Facility contains customary representations, warranties and covenants, including covenants limiting additional indebtedness, liens, guaranties, mergers and consolidations, substantial asset sales, investments and loans, sale and leasebacks, transactions with affiliates and fundamental changes.
In addition, the 2023 CoBank Credit Facility contains a financial covenant that imposes a maximum ratio of indebtedness to EBITDA. As of March 31, 2025, we were in compliance with all of the financial covenants of the 2023 CoBank Credit Facility.
Capital markets. Our ability to raise funds in the capital markets depends on, among other things, general economic conditions, the conditions of the telecommunications industry, our financial performance, the state of the capital markets and our compliance with SEC requirements for the offering of securities. In August 2022, we filed a new “universal” shelf registration statement with the SEC, to register potential future offerings of up to $300 million of our securities.
Foreign Currency
We translate the assets and liabilities of our foreign subsidiaries from their respective functional currencies, primarily the Guyana Dollar, to US Dollars at the appropriate rates as of the balance sheet date. Changes in the carrying value of these assets and liabilities attributable to fluctuations in rates are recognized in foreign currency translation adjustment, a component of accumulated other comprehensive income on our balance sheet. Income statement accounts are translated using the monthly average exchange rates during the year. Monetary assets and liabilities denominated in a currency that is different from a reporting entity’s functional currency must first be remeasured from the applicable currency to the legal entity’s functional currency.
61
The effect of this remeasurement process is reported in other income within our income statement. During the three months ended March 31, 2025 and 2024, we recorded $0.4 million and $0.2 million, respectively, in losses on foreign currency transactions. We will continue to assess the impact of our exposure to the Guyana Dollar.
Inflation
Several of our markets have experienced an increase in operating costs, some of which we believe is attributable to inflation. If inflation continues or worsens, it could negatively impact our Company by increasing our operating expenses. Inflation may lead to cost increases in multiple areas across our business, for example, rises in the prices of raw materials and manufactured goods, increased energy rates, as well as increased wage pressures and other expenses related to our employees. In particular, where we have agreed to undertake infrastructure build-outs on a fixed budget for our carrier customers or by accepting government grants, inflation may result in build costs that exceed our original budget given the long delays experienced in procuring equipment and materials due to global supply chain delays. To the extent that we are unable to pass on these costs through increased prices, revised budget estimates, or offset them in other ways, they may impact our financial condition and cash flows.
Tariffs
The United States government recently announced tariffs on goods imported from various countries to the United States. Furthermore, recent global trade tensions and policy shifts have created an unpredictable environment for businesses operating across international borders. Countries subject to such tariffs or other trade restrictions and other changes in trade policy by the United States or other countries have imposed or may, in the future, impose reciprocal or retaliatory tariffs and other trade measures that may impact our business. We are actively monitoring the tariff developments and analyzing the potential impacts on our businesses, cost structures, supply chain and broader economic environment. We are also working closely with our strategic suppliers to manage their potential impact.
Our International Telecom Segment, including the USVI which is classified as an economic development zone, is not subject to these tariffs.
To date, the implemented tariffs have not had a material impact on our financial condition or results of operations. However, due to their evolving nature, we cannot predict, with certainty, the ultimate impact they may have on our business or results in the future.
Critical Accounting Estimates
There were no changes to critical accounting estimates from those disclosed in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” of our Annual Report on Form 10-K for the year ended December 31, 2024.
Recent Accounting Pronouncements
See Note 2 to the Consolidated Financial Statements included in this Report.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Translation and Remeasurement. We translate the assets and liabilities of our foreign subsidiaries from their respective functional currencies, primarily the Guyana Dollar, to US Dollars at the appropriate rates as of the balance sheet date. Changes in the carrying value of these assets and liabilities attributable to fluctuations in rates are recognized in foreign currency translation adjustment, a component of accumulated other comprehensive income on our balance sheet. Income statement accounts are translated using the monthly average exchange rates during the year.
62
Monetary assets and liabilities denominated in a currency that is different from a reporting entity’s functional currency must first be remeasured from the applicable currency to the legal entity’s functional currency. The effect of this remeasurement process is reported in other income on our income statement.
Employee Benefit Plans. We sponsor pension and other postretirement benefit plans for employees of certain subsidiaries. Net periodic pension expense is recognized in our income statement. We recognize a pension or other postretirement plan’s funded status as either an asset or liability in our consolidated balance sheet. Actuarial gains and losses are reported as a component of other comprehensive income and amortized through other income in subsequent periods.
Interest Rate Sensitivity. As of March 31, 2025, we had $489.7 million of variable rate debt outstanding, which is subject to fluctuations in interest rates. Our interest expense may be affected by changes in interest rates. We believe that a 100-basis-point change in the interest rates on our variable rate debt would result in a $4.9 million change in our annual interest expense. We may have additional exposure to fluctuations in interest rates if we again borrow amounts under our revolver loans within our credit facilities.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2024. Disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), mean controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s (“SEC”) rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2025, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting.
There were no changes in our internal control over financial reporting that occurred during the three months ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
See Note 13 to the Unaudited Condensed Consolidated Financial Statements included in this Report.
63
Item 1A. Risk Factors
In addition to the other information set forth in this Report, you should carefully consider the factors discussed under Part I, Item 1A “Risk Factors” of our 2024 Annual Report on Form 10-K. The risks described herein and in our 2024 Annual Report on Form 10-K, as amended, are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of Equity Securities by the Issuer. On December 14, 2023, our Board of Directors authorized the repurchase of up to $25.0 million of our common stock, from time to time, on the open market or in privately negotiated transactions (the “2023 Repurchase Plan”). We have $15.0 million available to be repurchased under that plan as of March 31, 2025.
The following table reflects the repurchases by us of our common stock during the quarter ended March 31, 2025:
|
|
|
|
|
|
|
|
|
(d) |
|
|
|
|
|
|
|
|
|
|
Maximum |
|
|
|
|
|
|
|
|
|
|
Number (or |
|
|
|
|
|
|
|
|
(c) |
|
Approximate |
|
|
|
|
|
(b) |
|
Total Number of |
|
Dollar Value) of |
||
|
|
(a) |
|
Average |
|
Shares Purchased |
|
Shares that May |
||
|
|
Total Number |
|
Price |
|
as Part of Publicly |
|
be Purchased |
||
|
|
of Shares |
|
Paid per |
|
Announced Plans |
|
Under the Plans or |
||
Period |
|
Purchased |
|
Share |
|
or Programs |
|
Programs |
||
January 1, 2025 — January 31, 2025 |
|
— |
|
$ |
— |
|
— |
|
$ |
15,000,000 |
February 1, 2025 — February 28, 2025 |
|
— |
|
|
— |
|
— |
|
|
15,000,000 |
March 1, 2025 — March 31, 2025 |
|
35,699 |
(1) |
|
20.46 |
|
— |
|
|
15,000,000 |
| (1) | Includes 35,699 shares purchased on March 7, 2025, March 9, 2025, March 12, 2025 and March 25, 2025, from our executive officers and other employees who tendered these shares to us to satisfy their tax withholding obligations incurred in connection with the vesting of restricted stock awards at such date. These shares were not purchased under the 2023 Repurchase Plan discussed above. The price paid per share was the closing price per share of our common stock on the Nasdaq Stock Market on the date those shares were purchased. |
Item 5. Other Information
Rule 10b5-1 Trading Arrangements
While the Company does allow for its officers and directors to enter into trading arrangements intended to satisfy the affirmative defense conditions of Rule 10b5-1 with the Company’s prior approval, during the quarter ended March 31, 2025, none of the Company's directors or officers informed the Company of the adoption or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement”, as those terms are defined in Regulation S-K, Item 408.
64
Item 6. Exhibits:
|
|||
10.1 |
|
||
31.1* |
|
||
31.2* |
|
||
32.1** |
|
||
32.2** |
|
||
101.INS |
|
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
|
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema Document |
|
101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
101.PRE* |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
104 |
|
Cover Page Interactive Data file (formatted as Inline XBRL and embedded within Exhibit 101). |
|
* Filed herewith.
** The certifications furnished in Exhibit 32.1 and Exhibit 32.2 hereto are deemed to accompany this Report and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates them by reference.
65
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
ATN International, Inc. |
|
|
Date: May 12, 2025 |
/s/ Brad W. Martin |
|
Brad W. Martin |
|
Chief Executive Officer |
|
|
Date: May 12, 2025 |
/s/ Carlos R. Doglioli |
|
Carlos R. Doglioli |
|
Chief Financial Officer |
66
Exhibit 31.1
CERTIFICATIONS PURSUANT TO
RULE 13a-14(a) OR RULE 15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Brad W. Martin, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of ATN International, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
ATN International, Inc. |
|
|
Date: May 12, 2025 |
/s/ Brad W. Martin |
|
Brad W. Martin |
|
Chief Executive Officer |
Exhibit 31.2
CERTIFICATIONS PURSUANT TO
RULE 13a-14(a) OR RULE 15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Carlos R. Doglioli, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of ATN International, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
ATN International, Inc. |
|
|
|
|
Date: May 12, 2025 |
By: |
/s/ Carlos R. Doglioli |
|
|
Carlos R. Doglioli |
|
|
Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report on Form 10-Q of ATN International, Inc. (the “Company”) for the period ended March 31, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brad W. Martin, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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ATN International, Inc. |
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Date: May 12, 2025 |
By: |
/s/ Brad W. Martin |
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Brad W. Martin |
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Chief Executive Officer |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report on Form 10-Q of ATN International, Inc. (the “Company”) for the period ended March 31, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Carlos R. Doglioli, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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ATN International, Inc. |
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Date: May 12, 2025 |
By: |
/s/ Carlos R. Doglioli |
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Carlos R. Doglioli |
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Chief Financial Officer |