ATN International, Inc.

Good day, ladies and gentlemen, and welcome to the ATN International fourth quarter and full year 2018 conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star, then zero on your touchstone telephone. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Justin Benincasa, Chief Financial Officer. Mr. Benincasa, you may begin.

Great, thank you, Josh. Good morning, everyone, and thank you for joining us on our call to review our fourth quarter and full year 2018 results. As you know, Michael Prior is here. He's ATN's Chief Executive Officer. During the call, I'll cover the relevant financial information, and Michael will provide an update on the business and outlook. Before I turn the call over to Michael for his comments, I'd like to point out that this call and our press release contained forward-looking statements concerning our current expectations, objectives and underlying assumptions regarding our future operating results and are subject to risks and uncertainties that could cause actual results to differ materially from those described. Also, in an effort to provide useful information to investors, our comments today include non-GAAP financial measures. For details on these measures and reconciliations to comparable GAAP measures and for further information regarding the factors that may affect our future operating results, please refer to our earnings release on our website at atni.com or the 8K filing provided to the SEC. And with that, I'll turn it over to Michael for his comments.

All right. Thank you, Justin, and good morning, everyone. As usual, I will start with some highlights for the quarter and follow with more details In addition, since this is the fourth quarter review, I will end with some thoughts on the full year and 2019. So, as noted in our press release, overall results for the quarter were mixed, and apples-to-apples comparisons in our U.S. telecom and renewable energy segments were made more difficult by asset sales that we successfully completed in 2018. Longer-term investors in ATN should be familiar with this situation. Our approach is to make investment and operating decisions entirely based on projected returns on invested capital and the related risks and strategic value. This can lead to investments in finite revenue scenarios, such as the Build to Suit rural network that changed hands in 2018, to dispositions of otherwise healthy businesses or assets, such as the U.S. solar sale, and other situations like the mobility fund where there is an anticipated revenue or profit downturn in the future. The good news is that the returns turned out to be quite good in each of the transactions affecting the comparisons for this quarter and the next few quarters. Of course, results in our U.S. telecom segment also suffered from some negative operating trends with lower traffic causing a return to seasonality and a significant decline from the third quarter wholesale revenues. On the other hand, international telecoms operating trends were much more positive with quality growth in fiber broadband customers, the ongoing recovery in the U.S. Virgin Islands, completion of some major network upgrades and operating improvements in a number of areas. Outside of the U.S. solar portfolio sale, there were no significant developments in the renewable energy segment, and our intention there is primarily focused on the India business. So now I've turned to a little more detail on international telecom. As noted, this was a strong quarter for this segment in many respects. We saw a continued benefit from our investment in fiber networks in many of our markets, with consumer broadband subscriber and ARPU growth being major contributors to the 17% year-on-year growth in segment revenue. And we are pleased with the customer response to our new and enhanced data services. We think there will be continued benefits from these and other recent network investments. The related good news is that, as I already alluded to, the bulk of this program network investment was completed in 2018, so we expect to see a major improvement in free cash flow in 2019. The substantial completion of our network rebuild in the U.S. Virgin Islands will also provide a big benefit to segment cash flow moving forward. There is still work to be done in some of the more difficult areas, but the main focus there is now on revenue recovery. And on that note, information from federal and local authorities indicates that somewhere just shy of 10% of residences in the territory are still without wireline are still unoccupied or not with a wireline network connected. Beyond that, some of the repaired and occupied homes are not reconnecting for the full pre-storm services. This not unexpected cord cutting or cord shaving is mainly impacting landline voice and video services. We believe we will continue to win back some of those customers and service revenues over time, and indeed, excluding the one-time federal subsidies received in 2018, we would expect to see year-on-year revenue growth from this market throughout 2019. Then turning to U.S. telecom, the story in this segment continues to be one of repositioning. Continued work on the cost structure and the structure of our offerings to our wholesale customers and the profitability and quality of our smaller retail operations, while at the same time developing new growth opportunities. On the wholesale side, traffic and revenues were down significantly from the third quarter and year on year. Part of this was a change in some service providers' approach, with some carriers throttling their subscribers aggressively while others sought to maximize customer experience. and a smaller factor in the decline in traffic was the proposed large carrier merger. Close to one-half of the year-on-year EBITDA decline was related to the previously mentioned Midwestern network sale that we completed in July of last year, the wind-down of the FCC Mobility Fund 1 program, and higher expenses related to a number of early-stage U.S. telecom investments such as the expansion of our in-building coverage business. And we made good progress in a number of areas outside of legacy wholesale, increasing data revenues from consumers, carriers, and enterprise customers alike, while at the same time improving profitability from the smaller wireless retail business. We think there are additional opportunities in serving these rural communities, and our CAF II award will help us go after them. In renewable energy, the headline was the closing in early November of the previously announced sale of our entire U.S. solar production portfolio. Although we were happy that we got the deal closed, it of course reduced revenues in EBITDA for the fourth quarter as title transferred on those facilities. In India, it was a similar story as the previous quarter, a good and consistent operating performance and power production. and we made progress bringing facilities into full production mode under existing power purchasing agreements. And at the same time, the team continued to build a strong pipeline of additional builds and are actively engaging with prospective funding partners. So looking back as I promised at the year overall in review and looking forward a little bit, When you look at the full year results, it's interesting to note that despite the post-hurricane downtime of the Virgin Islands network, the decline in U.S. wholesale traffic and revenue, and to a lesser extent, the sale of the U.S. solar portfolio, we still managed to produce a 28% consolidated adjusted EBITDA margin, which I think indicates the benefits of our fairly diversified portfolio of operating assets. A particular bright spot for the year was the performance of our international telecom operations, with all markets other than the Virgin Islands executing above expectations. We think this segment is positioned well for continued organic growth in 2019 and, of course, a substantial expansion in free cash flow. ATN Ventures also had a successful launch in first year, and we are encouraged about the potential of this unit and its early investments to contribute to future growth and Investor Returns. The India solar business was successfully restructured during the year and we believe the strategic opportunities will expand in 2019. We are closely managing our U.S. telecom segment in the face of some difficult market conditions. We continue to believe that there could be opportunities for us to invest in shared infrastructure as the industry moves to lower costs and we are optimistic on the longer-term outlook for the business. Lastly, the sale of the U.S. solar portfolio was an example of our team's ability to deliver returns through opportunistic portfolio management and capital allocation. So to close, it was a challenging year in many respects for ATN, but our teams also had many successes. Growth in broadband and other data revenue, the solar asset sale, Securing critical additional government funding for our network rebuild after the hurricanes, improving cost discipline, and winning the CAF II award for federal funding for expansion for our rural broadband network in the western United States. And so with that, I'll turn it back over to you, Justin.