ATN International, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; unaudited. ATN provides communications services in the United States, Bermuda and the Caribbean, and holds technology and communications investments. Its segments were International Telecom, US Telecom and Renewable Energy.
Financial performance and liquidity
Amounts below are in millions of U.S. dollars, except per-share data.
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Total revenue | $124.5 | $110.9 |
| Operating income | $3.3 | $7.3 |
| Net income | $4.3 | $2.4 |
| Net income (loss) attributable to ATN stockholders | $2.7 | $(1.0) |
| Diluted EPS attributable to ATN stockholders | $0.17 | $(0.06) |
| Cash provided by operating activities | $5.3 | $15.5 |
| Capital expenditures | $25.7 | $14.1 |
- Revenue increased 12.3%; communication services revenue rose 2.5%, while other revenue grew primarily because of FirstNet construction activity.
- Operating income fell 54.1%. Operating margin was approximately 2.7%, versus 6.6% in Q1 2020. FirstNet construction costs, higher service costs and SG&A contributed to the decline.
- Cash and cash equivalents were $91.3 million, plus $1.1 million of restricted cash. Net cash fell $12.7 million during the quarter. Operating cash flow declined mainly due to FirstNet-related working-capital investment and payments of accrued liabilities.
- Debt, net of deferred financing costs, was $82.7 million, including $60.0 million of Viya debt, $12.5 million of One Communications debt and $10.8 million drawn under the FirstNet receivables facility. The $200 million revolving credit facility had no borrowings; reported availability was $184.0 million after outstanding letters of credit. The receivables facility had $64.2 million available.
- Total assets were $1.06 billion and total liabilities $315.5 million at March 31, 2021. The filing does not provide a consolidated EBITDA figure in the supplied text.
Material changes versus the prior comparable period
- US Telecom revenue increased to $40.3 million from $27.3 million, principally due to $12.3 million of FirstNet construction revenue and higher fixed broadband revenue. Segment operating results shifted from $2.2 million income to a $0.5 million loss as construction and related costs rose.
- International Telecom revenue increased to $83.8 million from $82.3 million, supported by mobility and fixed broadband growth; segment operating income decreased to $13.1 million from $13.5 million.
- Carrier Services revenue declined to $20.6 million from $22.4 million, reflecting pandemic-related roaming weakness and, in the United States, prior carrier-contract restructuring.
- Other income was $2.4 million, compared with a $2.9 million expense in Q1 2020. The current-period result included gains on non-controlling investments; a $2.5 million gain was recognized when a convertible debt investment converted to equity. This helped lift net income despite lower operating income.
- ATN completed the sale of 67% of its India solar business in January, retaining 33% and moving to equity-method accounting. Q1 cash proceeds from the divestiture were $18.6 million. The transaction’s reported loss, including transaction costs, was $22.8 million in total, with most recognized in 2020 and $0.6 million of transaction costs recorded in Q1 2021.
Outlook, risks and contingencies
- Capital spending: Management expects 2021 International Telecom capital expenditures of $45–$55 million and US Telecom capital expenditures of $40–$50 million, including $20–$30 million for FirstNet-related towers and backhaul. No consolidated revenue or earnings guidance is provided in the supplied filing text.
- FirstNet: ATN expects $80–$85 million of construction revenue through 2022, largely offset by construction costs and with minimal operating-income impact. About 30% of sites were complete at quarter-end; the company expected 65% complete by year-end 2021 and the remainder in the first half of 2022. The schedule was extended in May 2021 due to COVID-19-related delays.
- COVID-19: Mobility and fixed broadband demand improved in some markets, but restrictions reduced roaming and other carrier revenue. Tourism-dependent Caribbean markets, customer payment ability and future travel levels remain risks; management stated future effects could be material.
- Pending acquisition: ATN agreed to acquire Alaska Communications for approximately $340 million, including assumed debt. Alaska shareholders approved the agreement and the HSR waiting period expired, but FCC and Alaska regulatory consents and other closing conditions remained outstanding. ATN expected to own approximately 51%, with Freedom 3 Capital owning 49%.
- Regulatory funding: Viya’s challenge to the FCC’s provisional USVI support award remained pending. If unsuccessful, the filing says legacy support could step down from $16.4 million annually to $10.9 million, then $5.5 million, and ultimately cease. This creates a material potential revenue risk.
- Debt covenant: Viya was out of compliance with its leverage covenant for year-end 2020 and received a lender waiver on February 25, 2021. ATN reported compliance with the covenants under its revolving facility at March 31, 2021.
- Legal and tax matters: Guyana regulatory changes introduced competition and additional requirements; related license and spectrum-fee matters remain uncertain. GTT disputes tax assessments totaling $44.1 million; ATN accrued $5.0 million and said some adverse outcome was probable.
- Management said current cash, short-term investments and credit availability should meet working-capital and capital-expenditure needs for at least 12 months. It also reported effective disclosure controls and procedures.
Investor verification priorities
- Track FirstNet construction progress, margin contribution, working-capital needs and the revised completion schedule.
- Monitor the Alaska Communications transaction’s approvals, financing, closing terms and expected impact on leverage and liquidity.
- Check the outcome and timing of Viya’s USF appeal and the resulting level of future support.
- Assess whether operating cash flow recovers as FirstNet receivables and construction working capital develop, alongside planned capital spending.
- Review the status and potential exposure from Guyana’s regulatory changes and the disputed $44.1 million tax assessments.
- Distinguish recurring operating performance from construction revenue, investment gains and divestiture-related items when evaluating earnings.