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ATN Reports Second Quarter 2020 Results

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  • Generated Double-Digit Operating Income and EBITDA Growth on Stable Revenues
  • International and US Telecom Services Demonstrated Resilience to COVID-19 Pandemic Disruptions
  • Strong Balance Sheet Provides Significant Strength and Financial Flexibility

BEVERLY, Mass., July 29, 2020 (GLOBE NEWSWIRE) -- ATN International, Inc. (Nasdaq: ATNI) today reported results for the second quarter ended June 30, 2020.

Business Review and Outlook

“Our second quarter results benefited from past investments and initiatives, which have led to steady operating income and EBITDA performance across our International Telecom and US Telecom segments. Strong year-on-year operating income and EBITDA comparisons in International Telecom reflect increased usage of our broadband services, which we believe are the best in our markets. This demand for our fixed services helped offset the impact of lower mobile revenue and handset sales due to pandemic-related travel and stay-at-home restrictions,” said Michael Prior, ATN’s Chief Executive Officer.

“In US Telecom, similar to first quarter segment results, we continued to execute on the carrier and CAFII federal revenue support contracts, which will provide relatively consistent revenues for the year. These contracts include our revenue support around the build-out of broadband services in under-served rural areas of the country as part of the federally funded CAFll program, and increased carrier service revenue as part of the FirstNet transaction. We continue to work through pandemic-related construction delays in our FirstNet network buildout and now expect to complete some FirstNet sites in late 2020.  

“We were pleased with our telecom operations’ performance and the role we have been able to play in providing essential connectivity and communications during this crisis, thanks to the commitment and dedication of our employees. Both our domestic and international operations showed resilience in a dynamic and uncertain environment. Looking ahead, we are concerned about the economic impact that long delays in the return of tourism and travel could have on international markets and will adjust our course as needed.  At the same time, we believe that the pandemic will lead to changes in global business and social behaviors and accelerate a shift to heavy telecom and data reliant activity.  This could provide attractive growth opportunities for ATN’s established and emerging businesses. We believe that our conservative approach to balance sheet management should provide the resources to manage through any potential downturns and continue to allow us to make investments that position our telecom services platforms for longer term growth,” Mr. Prior concluded.

Second Quarter Results

Second quarter 2020 consolidated revenues of $109.1 million were up 1% compared to the prior year quarter’s revenue of $107.7 million.  Operating income for the quarter was $7.0 million, up $4.2 million compared with the prior year quarter’s $2.8 million.  EBITDA1 was $29.0 million in the second quarter, up by 19% compared to $24.3 million in the prior year period.  Net income attributable to ATN’s stockholders for the second quarter was $4.7 million, or $0.30 per diluted share, compared with the prior year period’s net loss of $0.9 million, or $0.05 loss per share.

Second Quarter 2020 Operating Highlights

The Company has three reportable segments: (i) International Telecom; (ii) US Telecom; and (iii) Renewable Energy. 

Segment Results (in Thousands)
 Three Months Ended June 30, 2020
 International
Telecom
US TelecomRenewable
Energy
Corporate
and Other
Total
Revenue$80,064$28,160$874 $- $109,098
Operating Income (loss)$14,617$1,826$(620)$(8,799)$7,024
EBITDA1$28,749$7,543$(134)$(7,143)$29,015
 Six Months Ended June 30, 2020
Capital Expenditures$19,929$8,883$1,634 $1,519 $31,965


Segment Results (in Thousands)
 Three Months Ended June 30, 2019
 International
Telecom
US TelecomRenewable
Energy
Corporate
and Other
Total
Revenue$79,859$26,414$1,448$- $107,721
Operating Income$11,057$1,521$167$(9,991)$2,754
EBITDA1$24,663$7,072$805$(8,237)$24,303
 Six Months Ended June 30, 2019
Capital Expenditures$23,692$6,368$817$4,519 $35,396


Beginning in the first quarter of 2020 the Company restructured its presentation of revenue in the Condensed Consolidated Statement of Operations and in the Selected Segment Financial Information tables.  This change is intended to better align our reporting of financial performance with views of the Company management, industry competitors, and to facilitate discussions with investors and analysts.

International Telecom

International Telecom consists of a broad range of communications services including fixed and mobile data, voice and video service revenues from our operations in Bermuda and the Caribbean.  International Telecom revenues were $80.1 million for the quarter, a slight increase year-on-year mainly due to increases in fixed broadband revenues and increases in managed services revenues partially offset by lower mobile revenues.  Compared to the prior year quarter, operating income increased 32% to $14.6 million and EBITDA1 increased 17% to $28.7 million, respectively, primarily from lower operating costs in the quarter of which approximately $1.0 million was related to one-time expense reductions in the quarter.

US Telecom

US Telecom revenues consist mainly of carrier services revenues and fixed and mobile communications services from our retail operations in the Southwestern United States, as well as communications services provided to enterprise customers.  US Telecom segment revenues were $28.2 million in the quarter, an increase of 7% over the prior year period primarily due to a full quarter of federal support CAF II revenues in the current year quarter and increased FirstNet carrier services revenue.  The network build portion of the FirstNet agreement has continued during the pandemic, but the overall timing of the build schedule has been delayed.  Subject to ongoing delays caused by the pandemic-related restrictions, we currently expect construction revenues to begin in late 2020 and continue through 2021.  As revenues from the build will be largely offset by construction costs, we do not expect a material impact on operating income or EBITDA1 from this delay.  Operating income increased by $0.3 million from the prior year’s quarter to $1.8 million and EBITDA1 for this segment increased by $0.4 million to $7.5 million. The year-over-year profitability improvements were mainly driven by the revenue increases which were partially offset by additional operating costs related to our early stage business operations.   

Renewable Energy

Renewable Energy segment revenues are principally the result of the generation and sale of energy from our commercial solar projects in India.  We ended the second quarter of 2020 with 52 Megawatts (MWs) of revenue generating solar facilities and expect to begin generating revenue from additional MWs later in the year.  The current quarter’s operating loss was $0.6 million and EBITDA1 was a loss of $0.1 million, both below the prior year’s quarter due to pandemic-related restrictions which resulted in the temporary suspension of some of our customers’ operations.  Those restrictions lifted late in the quarter, and our customers’ operations and revenue generation resumed.  Absent additional government-mandated closures, we expect most of our customers to be fully operational again in the third quarter.

Balance Sheet and Cash Flow Highlights

Total cash, cash equivalents and restricted cash at June 30, 2020 was $125.9 million.  Net cash provided by operating activities was $40.4 million for the six months ended June 30, 2020, compared with $18.5 million for the prior year period.  The increase in operating cash flow compared with the prior year is mostly the result of increased net income and lower tax payments over last year.  For the six months ended June 30, 2020, the Company used net cash of $76.7 million for investing and financing activities compared to $64.8 million for the prior year period.  In the current year, this included $32.0 million in capital expenditures, $20.0 million in purchases of intangible assets, $7.9 million of dividends on common stock and share repurchases, and $5.5 million in minority partner distributions.  Management expects full year 2020 capital expenditures to be lower than originally forecasted at the beginning of the year as a result of the pandemic.  We expect full year 2020 capital expenditures in International Telecom to be approximately $35.0 - $40.0 million.  In the US Telecom segment, we expect capital expenditures to be approximately $25.0 - $30.0 million, including $10.0 million on towers and backhaul to support the FirstNet contract.    

Conference Call Information

ATN will host a conference call on Thursday, July 30, 2020 at 11:30 a.m. Eastern Time (ET) to discuss its second quarter results and business outlook. The call will be hosted by Michael Prior, Chairman and Chief Executive Officer, and Justin Benincasa, Chief Financial Officer. The dial-in numbers are US/Canada: (877) 734-4582 and International: (678) 905-9376, conference ID 4642926. A replay of the call will be available at ir.atni.com beginning at approximately 2:30 p.m. (ET) on July 30, 2020.

About ATN

ATN International, Inc. (Nasdaq: ATNI), headquartered in Beverly, Massachusetts, invests in and operates communications, energy and technology businesses in the United States and internationally, including the Caribbean region and Asia-Pacific, with a particular focus on markets with a need for significant infrastructure investments and improvements. Our operating subsidiaries today primarily provide: (i) advanced wireless and wireline connectivity to residential and business customers, including a range of mobile wireless solutions, high speed internet services, video services and local exchange services, (ii) distributed solar electric power to corporate and government customers and (iii) wholesale communications infrastructure services such as terrestrial and submarine fiber optic transport, communications tower facilities, managed mobile networks, and in-building systems. For more information, please visit www.atni.com.

Cautionary Language Concerning Forward Looking Statements

This press release contains forward-looking statements relating to, among other matters, our future financial performance and results of operations, including the impact of the novel coronavirus pandemic on the economies of the markets we serve, our business and operations; expectations regarding revenue, operating income, EBITDA expectations and capital expenditures for 2020; the competitive environment in our key markets, demand for our services and industry trends; the impact of the CAF II federal support revenues and the FirstNet transaction; the impact of digital enhancements; our liquidity; and management’s plans 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 our operations, including operating margins, revenues, capital expenditures, and the future growth and retention of our major customers and subscriber base and consumer demand for solar power;  (2) our ability to maintain favorable roaming arrangements, receive roaming traffic and satisfy the needs and demands of our major wireless customers; (3) our ability to efficiently and cost-effectively upgrade our networks and IT platforms to address  rapid and significant technological changes in the telecommunications industry; (4) government regulation of our businesses, which may impact our FCC and other telecommunications licenses or our renewables businesses; (5) our reliance on a limited number of key suppliers and vendors for timely supply of equipment and services relating to our network infrastructure; (6) economic, political and other risks and opportunities facing our operations, including those resulting from the pandemic; (7) the loss of or an inability to recruit skilled personnel in our various jurisdictions, including key members of management; (8) our ability to expand and obtain funding for our renewable energy business; (9) our ability to find investment or acquisition or disposition opportunities that fit the strategic goals of the Company; (10) the occurrence of weather events and natural catastrophes; (11) increased competition;  (12) the adequacy and expansion capabilities of our network capacity and customer service system to support our customer growth; (13) our continued access to capital and credit markets; and (14) the risk of currency fluctuation for those markets in which we operate.  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, 2019, filed with the SEC on March 2, 2020 and the other reports we file 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.

Use of Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with generally accepted accounting principles (GAAP), this press release also contains non-GAAP financial measures. Specifically, ATN has included EBITDA in this release and in the tables included herein. 

EBITDA is defined as operating income (loss) before depreciation and amortization expense.   The Company believes that the inclusion of this non-GAAP financial measure helps investors gain a meaningful understanding of the Company's core operating results and enhances the usefulness of comparing such performance with prior periods. ATN’s management uses this non-GAAP measure, in addition to GAAP financial measures, as the basis for measuring our core operating performance and comparing such performance to that of prior periods. The non-GAAP financial measure included in this press release is not meant to be considered superior to or a substitute for results of operations prepared in accordance with GAAP. Reconciliations of this non-GAAP financial measure used in this press release to the most directly comparable GAAP financial measure are set forth in the text of, and the accompanying tables to, this press release.  While our non-GAAP financial measure is an important tool for financial and operational decision-making and for evaluating our own operating results over different periods of time, we urge investors to review the reconciliation of this financial measure to the comparable GAAP financial measure included below, and not to rely on any single financial measure to evaluate our business.


 
Table 1
ATN International, Inc.
Unaudited Condensed Consolidated Balance Sheets
(in Thousands)
    
 June 30, December 31,
 2020 2019
Assets:   
  Cash and cash equivalents$124,798 $161,287
  Restricted cash 1,072  1,071
  Short-term investments 285  416
  Other current assets 118,035  65,949
    
  Total current assets 244,190  228,723
    
  Property, plant and equipment, net 587,857  605,581
  Operating lease right-of-use assets 63,933  68,763
  Goodwill and other intangible assets, net 160,996  161,818
  Other assets 54,629  65,841
    
Total assets$1,111,605 $1,130,726
    
Liabilities and Stockholders’ Equity:   
  Current portion of long-term debt$3,750 $3,750
  Taxes payable 9,039  8,517
  Current portion of operating lease liabilities 11,313  11,406
  Other current liabilities 94,330  95,996
    
  Total current liabilities 118,432  119,669
    
  Long-term debt, net of current portion$80,874 $82,676
  Deferred income taxes 5,476  8,680
  Operating lease liabilities 52,420  56,164
  Other long-term liabilities 56,760  57,454
    
Total liabilities 313,962  324,643
    
  Total ATN International, Inc.’s stockholders’ equity 668,730  676,122
  Non-controlling interests 128,913  129,961
    
Total equity 797,643  806,083
    
  Total liabilities and stockholders’ equity$1,111,605 $1,130,726
    



       Table 2
ATN International, Inc.
Unaudited Condensed Consolidated Statements of Operations
(in Thousands, Except per Share Data)
        
 Three Months Ended Six Months Ended
June 30, June 30,
  2020   2019   2020   2019 
Revenues:       
  Communications services$106,240  $105,019  $214,145  $205,633 
  Other 2,858   2,702   5,859   5,388 
  Total revenue 109,098   107,721   220,004   211,021 
        
Operating expenses:       
  Termination and access fees 28,470   27,930   56,583   55,818 
  Engineering and operations 17,367   19,107   35,856   38,139 
  Sales, marketing and customer service 9,373   9,874   18,876   19,264 
  General and administrative 24,752   26,590   49,676   50,405 
  Transaction-related charges 72   28   116   68 
  Depreciation and amortization 21,991   21,549   44,509   42,267 
  (Gain) loss on disposition of assets 49   (111)  64   191 
Total operating expenses 102,074   104,967   205,680   206,152 
        
Operating income 7,024   2,754   14,324   4,869 
        
Other income (expense):     
ATN International, Inc.

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