ATN International, Inc.

My name is Sia, and I will be the conference operator today. At this time, I would like to welcome everyone to the ATN International Q1 2021 Earnings Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star and the number 1 on your telephone keypad. To withdraw the question, press the pound key. Thank you. At this time, I would like to turn the conference over to Justin Benincasa, Chief Financial Officer. Please go ahead, sir.

Great. Thank you, everyone, and good morning. And thanks for joining us on our call to review our first quarter 2021 results. With me here is Michael Pryor, ATN's Chief Executive Officer. And 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 contain 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 reconciliation to comparable gap measures, and for further information regarding the factors that may affect our future operating results, we would refer you to our earnings release on our website at atni.com or to the 8-K filing provided to the SEC.

And I'll turn it over to Michael for his comments. Michael Nutterman- Okay. Thank you, Justin. Good morning, all. So, this quarter was largely in line with the trends and expectations we discussed just two months ago. Our most important revenue drivers in international telecom, broadband and mobile subscriber levels, continue to show strength even as we await economic activity recovery from pandemic restrictions. However, the quarter showed we have some more work to do on the cost side of the equation. And as expected, activity and related expense has picked up in several areas of our U.S. telecom operations. particularly the FirstNet build and other infrastructure builds and private network development efforts. Meanwhile, the Alaska communications acquisition, which we announced at the start of the quarter, continues to move promisingly towards a close. And the partial exit from our Indian renewable energy business was completed in January, freeing up resources to focus on communications services businesses closer to home. Now I'll turn to some more detail on the individual operating segments, starting with international telecom. Fixed data subscribers in this segment increased by about 9% year on year as we continue to see growth in this space every quarter. Our past and ongoing investments in our network and service quality have enabled us to capture underlying demand. Mobile subscribers also increased by 9% year on year. This was the third consecutive quarter of good growth in this metric, and as you can see in the information in our press release, we saw year-on-year growth in both postpaid and prepaid subscribers. We credit better retail and marketing strategies for these share gains. Video subscribers continued to decline, though, with some recent signs of leveling off, and voice subscribers remained steady. Expenses rose faster than revenue for this segment year-on-year, While some of that was new regulatory fees and some of it more one-time in nature, we are implementing cost reduction initiatives in several markets, and we will be working hard to bring expense levels down over the next few quarters. Conditions in these markets are still fairly difficult as overall economic activity remains historically low due to the pandemic. Roaming, both inbound and outbound, revenues from hospitality customers and other commercial customers all continue to feel some negative impacts. So we would expect to see a pickup in revenue as travel restrictions ease and the vaccination rollout drives increased tourist travel. In US telecom, we started to see a more significant impact of the first net construction inflows and outflows. We delivered a lot of sites in the first quarter and expect that pace to continue throughout the year and into the first half of 2022 in accordance with our obligations. In addition to the important FirstNet activity, our engineering and operational teams are very busy with middle-mile fiber builds, expansion of our broadband network, and private network trials and deployments. Much of the middle-mile fiber and broadband activity is related to public-private partnership solutions with federal, state, and local subsidy programs helping to make these investments financially sound for us. We have a lot of experience in that realm, and we are closely examining the recently passed and proposed federal infrastructure programs to see where we might be part of the solution to identified areas of the digital divide. Our private network capabilities also can be part of that solution. As mentioned briefly on the February call, GeoVerse partnered with other providers to win a bid to build out two mid-sized cities with a neutral host wireless network to support both local education and municipal services. Financially, results for U.S. Telecom were in line with the transition phase we spoke about last quarter, which we expect to last throughout the year. Operational and capital spending has increased as we ramp up our capabilities in several areas and pursue growth opportunities. Of course, this segment will look very different following close of the Alaska Communications deal. To illustrate the impact, if you added ACS's most recently reported quarterly results, which were for the fourth quarter of last year, revenue reported for this segment would be over $100 million for the quarter, with adjusted EBITDA of roughly $20 million. And of course, we are hoping to do better than that. On that front, very pleased that Alaska Communications shareholders voted to approve our acquisition of the company on March 12th, and we look forward to gaining regulatory approvals in coming months. In the meantime, we've been working with Alaska Communications management team to identify opportunities to gain revenue synergies and potentially accelerate execution of their business strategy. While still early in the process, we have identified several stage one priorities, including the opportunity to accelerate growth of the company's fiber-based revenues, the expansion of anchor tenant fiber builds, and cross-selling next-generation managed services and private network solutions. The teams are also hard at work on the blocking and tackling of integration planning, including opportunities for cost efficiencies. So more to come. on both fronts, but for now, I'll turn it back over to you, Justin.

Great. Thanks, Michael. For the quarter, total consolidated revenues were $124.5 million, up 12 percent from last year's reported total of $110.9 million. $12.3 million of the revenue increase was associated with the FirstNet construction project, and the remainder represented a modest uptick in revenue in the international segment. Consolidated adjusted EBITDA for the quarter was $24.7 million versus $29.9 million in the first quarter of 2020, and I'll speak more about that decrease in a moment. I wanted to note that we slightly restructured the presentation of our operating expenses on our consolidated P&L to better align with industry standards and in preparation for the consolidation of Alaska Communications when the acquisition closes. We're now combining termination and access fees with engineering and operations into cost of services and putting together our sales, marketing, customer service, and general administrative expenses to form selling and general and administrative costs. Looking at each of the segments and starting with international telecom, revenues were 83.8 million, up from 82.3 million last year. and adjusted EBITDA was $26.9 million compared to $27.8 million. As Michael mentioned, segment revenues benefited from broadband and mobile subscribers growth in several markets, but we did incur higher operating expenses in the quarter, which led to a modest decline in adjusted EBITDA. We also took advantage of the opportunity to purchase additional shares in our One Communications subsidiary, which is our Bermuda and Cayman Island companies. this quarter and now own approximately 77% of the outstanding equity. Capital expenditures in the quarter were $10.5 million for the segment. In the U.S. telecom segment, revenues were $40.3 million for the quarter, up from $27.3 million a year ago, and as I noted earlier, this includes $12.3 million of construction revenue related to the FirstNet project. As a reminder, we anticipate completing an additional 50 percent of the $85 million project this year, which will bring us to approximately 65 percent completion at year end. The decline in adjusted EBITDA for the segment to $4.6 million from $8.1 million last year was due to the anticipated higher operating costs we discussed last quarter. Specifically, we had higher fixed costs associated with completion of the CARES Act-funded build out of our rural broadband in advance of driving additional revenues, and FirstNet sites coming online as we shift from historically providing predominantly wholesale roaming services to more lease income and maintenance services. Additionally, we've increased spending on sales efforts and product development in our early stage private network business. We will experience lower year-on-year EBITDA comparisons in the segment until the completion of the Alaska communications transaction. Capital expenditures in the quarter were reported at $14.9 million, but I would note that $6.2 million of that is reimbursable to ATN through various government grants, as we footnoted in the segment table within our press release. Consolidated net income for the quarter was $2.7 million, or 17 cents per share, which includes a $2.5 million write-up of one of our minority investments. Also included in operating expenses for the quarter was $1.3 million of non-cash stock-based compensation expense. The effective tax rate for the quarter was approximately 6.4 percent, reflecting our forecasted jurisdictional mix of income and tax rates in our markets. Moving to the balance sheet, on March 31st, total cash was $91 million and total debt outstanding was $72 million. I should point out that as part of the first net contract, we agreed to a structured repayment schedule for each of the completed sites. This is presented on our balance sheet starting this quarter as customer receivable for $23.4 million. And in combination with the structured repayment schedule, we've entered into an arrangement with one of our banks to monetize that receivable through a separate financing agreement that is backed only by that customer receivable. This is presented on our balance sheet this quarter as customer receivable credit facility for 10.8 million. There's a few months delay between the site acceptance and the drawing on the credit facility, but as we get closer to completing the build in 2022, the receivable balance and the credit facility balance should closely align. And with that, operator, we'd like to open the call up for questions.

Yes, sir. At this time, I would like to remind everyone that if you would like to ask a question, you may press star followed by the number one on your telephone keypad now. Again, that's star and the number one on your telephone keypad to ask a question. We'll pause for just a moment to compile the Q&A roster. And the first question will come from Rick Prentice with Raymond James. Please go ahead.

Can you hear me okay? We can now. A little faint, Rick. Okay. All right.

I'll talk up a little bit. First, thanks for giving the international EBITDA percent ownership. That does help. So I appreciate that number and the press release. Talking about regulatory stuff, obviously a lot going on. Can you expand a little bit about where you see the infrastructure bill headed and what it might mean for you guys? But also the EBB, the Emergency Broadband Benefit. Is there anything there that might be applicable for you guys?

I think yes to the last. I don't have more detail to speak about, but we're looking at that closely. We're looking at all the programs. I mean, it's not 100% clear yet. where this infrastructure build lands. We do think there's bipartisan support for communications infrastructure builds, but you probably know this well, but there's some question about how does it relate to existing programs? For example, the second part of RDOF, does that get rolled in? What we look at, and by the way, it's not just federal, it can be federal direct, it can be federal through the states, and it can be some state funding, but we look at the amounts that are being talked about, and they dwarf even the Rural Digital Opportunity Fund. So they're obviously significant, and we have a history of participating in these programs and looking at them carefully. We, you know, we are identifying areas where we think we can help. And for us, a lot of it is that, you know, bringing in the key infrastructure. So I mentioned, you know, the middle mile fiber builds. We have, you know, just completed one and we have, you know, a couple others ongoing. And, you know, those are typically driven by things like, you know, bringing fiber some considerable distance into light up a school district in an area, and then we obviously tried to route it and make it work for all users in the area. So I think there's a lot of infrastructure still needs to be built, and we're hoping to participate in that.

Any thoughts of how long the timing takes to kind of shake out this, and DC is always a tough one to peg that way, but any thoughts about how long it takes to bake this cake?

You know, again, this sort of, you know, more pure infrastructure side of things, you know, obviously transportation infrastructure and things like that, as well as communications infrastructure seems to have a lot of support from both sides of the aisle, from all the people we speak to on the Hill. And so I think, you know, I mean, who knows? I can't predict. whether there's something that stymies it, right? Because there is definitely a difference on the larger bill. But there seems to be, you know, a lot of folks who are pushing to solve the digital infrastructure because the pandemic made it, you know, really accentuated the differences between haves and have-nots in terms of communities, you know, for distance learning, for all sorts of things. So... I'm pretty optimistic that it gets resolved in the next couple months, you know, in terms of there's an agreement about the way forward. Now, it'll take a little longer probably undoubtedly to roll out the program and figure out how to install safeguards.

Right. Okay. And as you think about Alaska coming on board, hopefully – How does your early view of that fit into infrastructure bill, EBB, opportunities there as well?

For sure. I mean, there are significant opportunities there. And, you know, one of the things we hope to do is to, you know, is to give the team there the resources to pursue those things more proactively than in the past and, you And, you know, there's no doubt there is going to be, you know, in our minds that there's going to be builds there and there'll be opportunities that we think we can participate in that will make sense for us.

Okay. And on Alaska, you mentioned now kind of middle 21, couple of months, hopefully we get through the process. As you think about a closing timeline, I know T-Mobile historically likes to always close something on the first of the month, the first or second month of a quarter, doesn't like to do doesn't want to do third month of a quarter. As you think about when Alaska might close, would you close it on any day, like let's get going on this, or how should we think about timing potential closing?

I mean, my general attitude is the get her done attitude. But, you know, we have – Justin, do you want to add on that?

Yeah, I'm just saying the deal is kind of four days from approval, so we kind of, I'm not sure we can steer it as much on that, but I think our general approach is, yeah, yeah, close when you can close.

Yeah, yeah, okay.

And I think we're ready. I mean, we've done this before, and, you know, I think we're ready to do it, and the teams have been, you know, this is not like a lot of sort of you know, private deals in the nature and, you know, or overlapping competitive situations where you have, you know, antitrust issues. I mean, we have, you know, ability to really work those details ahead of time and be ready. Great.

And you touched on private networks a couple of times. Can you help us understand sizing, timing, winning of kind of private network transactions and what it might mean to your business? And I assume CBRS fits into this as well.

I missed the first part, Rick. Can you repeat the question?

Yeah, so you mentioned private networks a couple of times. Can you help us kind of size what you think the addressable market is, the timing of approaching that market, what it's going to take to win, just to kind of help think about what the magnitude of what you're looking at might mean for you guys?

Yeah, I don't want to cite the total addressable market. There's big numbers out there all over the place depending on how you how you measure it, but I think the size that we're going after is more than material to us if we're successful, so it could be a significant area. What we've been doing on private networks more and more is pursuing sort of a channel partner strategy rather than what you would have seen in a lot of other areas, including DAS, where it's kind of onesie-twosie builds. Instead, we are partnering with other providers of the whole technology solution around private networks and edge compute and looking to do that across many different segments You know, we're obviously pursuing the municipal, state, and local education. And, you know, there's other verticals where, you know, we've got partners and talks to go forward. So it could, you know, I think, again, I can't really give you a total addressable market at this time, except, you know, it's substantial opportunity. if we're able to execute on it and position ourselves as one of the leaders. But it's still early. It's still early in the sense that even other folks we've spoken to, including potential competitors that are backed by private equity firms we know, everybody thought 2020 was pretty slow in this sector and is expecting it to pick up. And we see some signs of that, but definitely see some signs of that, but there's still more to go. So that's really the best I can do for you now.

Okay. Thanks, guys. I'll come back in if there's time for more questions. Take care.

The next question will come from Greg Burns with Sidoti Company. Please go ahead.

Morning. I just want to follow up on that last comment around seeing some positive signs on the private network business. Can you maybe just give us a sense of Or maybe a little bit more color on what those signs are or what the pipeline looks like. Is it growing? Are the conversations getting more positive or constructive with customers? What are you seeing that gives you the confidence in that part of the business?

It's really mainly the channel partner side that I spoke to before, Greg. So it's... We are in discussions with some very big players who have ambitions around solutions across a lot of real estate, if you will. And I think we're very encouraged by what people see and the value we bring to the solution with sort of an overarching network platform to be used as part of that. So I think what gives me the optimism is the types of partners we're speaking to or prospective partners are those who aren't doing this in a small way. And for them, you know, much bigger companies than us looking for major solutions. So, and, you know, nobody... People don't devote those resources. All the other potential partners don't devote those resources and prospective customers unless they think this is coming. So those are the sort of tea leaves we're reading.

Okay. What percent of your international EBITDA does the One Communication subsidiary contribute?

We don't break it out, Greg, but they're all a very substantial portion of it. They're all important to that segment, but we don't really break that piece out.

Okay.

And then, has there been any change in the... I know there was a change in the FCC support that you're getting in the U.S. Virgin Islands. Is there any change in the status of that?

No, no, still, still ongoing discussions and, and, um, waiting to see what's, what's next.

Okay. But that hasn't, you're, you're still receiving that, that change hasn't, uh, wasn't reflected in this quarter's results. Okay. No, no. Okay. Okay. Uh, any timeline on when, you know, some final decision or, might be made where, you know, that'll start to impact the P&L?

You know, there are several layers of decisions that need to be made, and we're, you know, in discussions about that. So, I mean, I think, you know, some decisions will be made certainly in the next few months, maybe this quarter, but there's, I don't want to get into the details of the conversations, but, you know, we're I expect it to develop and, you know, an outcome and timelines to be clear, you know, in the next quarter or so. Okay.

Thank you.

Yeah.

Your next question will come from Hamid Kursand with BWS Financial. Please go ahead.

Hey, good morning. First question I have is on the private network side of Geoverse, are you – actually generating revenue at this point or is it still in development stage? And how far along do you think it'll be before generating positive free cash flow from that business?

Hamid, we are generating revenue, but it's the perspective revenue, what we're chasing is, you know, it's much bigger than the current generated revenue. And when we're pursuing it, we, you know, our focus is on you know, overall contract pipeline, building, you know, multi-year contracts of revenues and positioning. So, and in terms of free cash flow, we certainly don't expect it this year. In a way, if this is successful, that could prolong, you know, in the near term, the negative free cash flow as we continue to you know, work for that growth. So certainly not expecting that, you know, this year, for example.

Okay.

And then on the cost-cutting comments, is that related to being in preparation for the Alaska communications purchase, or is that purely separate because something has just fallen out of the whack for the moment?

I was really speaking mainly to the international telecom area. So we have some initiatives that already were in play that are, you know, not moving as fast as we would like, and we're looking to identify additional areas. Okay. Thank you. Okay.

And once again, ladies and gentlemen, that's star followed by the number one for any questions. Again, star followed by the number one for any questions over the phone line. We'll pause for just a moment to compile the Q&A roster. We do have a follow-up from Rick Prentice with Raymond James. Please go ahead.

Yeah, thanks, guys. A couple of follow-ups, if I could. Justin, you were talking about the CapEx in the U.S. and how the $14.9 million includes about $6.2 million reimbursable. What's the timeframe of how that gets reimbursed, and how will you report that? Will you report it as a net capex, or how should we think about that, the comments you made about the reimbursable capex?

Yeah, no, that's why I brought it up, Rick, because we can't report it as a net capex. And what I would say is some of it's already been received and then now spent, and some of it's still to come. So what we're trying to do is, in our statement of cash flows, is show – what capex spending that either we have received or going to receive. But the receipt of the money is kind of somewhere else within the statement of cash flow. So I wanted to try to net them, but accountants wouldn't let me. So that's why we'll keep bringing it up on what the number is.

I appreciate that. Shakespeare should have said accountants instead of lawyers. On FirstNet, I think I heard you say 50, 5, 0% incremental to get to 85 million, but I thought I heard or read in the press release that you're going from 30 to 65 by the end of the year.

Yeah, so we did about 15% last year. We'll do another 50% this year. So, and we, that's, yeah, and we had in the press release, we had a little bit more in the first quarter than, you know, than a quarter of 50, call it, so. But it's generally by the end of the year will be 65% done is the ballpark. Gotcha. That makes sense.

Yeah. Okay. And then still finished by end of 2Q.

Yeah. Yeah. That's still the rough, yeah, mid-year kind of thing. Tough.

Yeah. Okay. And was not any explicit guidance in the press release that Previously, you've given some CapEx guidance. Obviously, Alaska used to give a lot of guidance. How should we think about guidance based on the Alaska deal around the corner here and what you might do going forward?

I mean, we're always hesitant to give a lot of P&L guidance, right? But I think we will help people with what Alaska means, although they're public, right, so that you can get a lot of that information. we will definitely guide on CapEx. And I didn't refresh anything on CapEx, seeing that we just kind of gave that guidance a couple of months ago, so we're still anticipating what we said at year end. But I think you should expect at least some CapEx guidance in addition to the other segments from Alaska.

And I think, Rick, we're also expecting next quarter it should be good timing for it to talk in more detail about the plans and expectations for ACS.

Okay, that makes sense. And how should we think about the tax implication? You mentioned the effective tax rate in the quarter. What does Alaska do to cash taxes as well as book taxes?

Actually, on a cash tax basis, Alaska helps us because there's some NOLs there. And I would say on a consolidated basis, if you look at 2021, we'd be slightly above where we were this quarter, right, at the 6%. So we're thinking we're still in that 6% to 10% range on effective tax rate through the P&L. But I think from a cash tax standpoint, it'll be beneficial to us.

Great. Yeah, it makes sense. Oh, one other one I thought of. Do you report how much of the CapEx was FirstNet? I've given that.

We've kind of said in the initial guidance, right, we said that U.S. was, you know, I think it was 40 to 50 or 45 to 50 the bulk of that is the first net. And by first, that's like call it 25, 30 million of it is first net. And that is associated with infrastructure, like towers, back hall, that we will own at the end of the day. Because sometimes it gets confusing with the sites we're actually building and turning over to AT&T, not our CapEx. That's their CapEx, but we're building it. That's CapEx's towers and backhaul that we keep.

Right. And so you report it out as far as the actuals. Yeah, it's a big chunk. Are you reporting out kind of how much you spent in 4Q last year, how much you spent in 1Q this year that was, quote, FirstNet? That's kind of obviously a bubble versus what would be a more traditional kind of spend.

Yeah, that's a good point. We probably could do some of that.

Okay. That'd be great. All right. Thanks, guys. All right. Thanks, Rich.

And at this time, if there are no further questions, I'd like to turn the conference back over to management for any closing remarks.

No closing remarks, everybody. Thanks for joining, and we'll see you in a quarter.

Ladies and gentlemen, thank you for participating in today's conference call. You may all disconnect.

Thank you. Thank you. you Thank you. Thank you. Thank you.

Good morning. My name is Sia, and I will be the conference operator today. At this time, I would like to welcome everyone to the ATN International Q1 2021 Earnings Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during that time, simply press star and the number 1 on your telephone keypad. To withdraw the question, press the pound key. Thank you. At this time, I would like to turn the conference over to Justin Benincasa, Chief Financial Officer. Please go ahead, sir.

Great. Thank you, everyone, and good morning. And thanks for joining us on our call to review our first quarter 2021 results. With me here is Michael Pryor, ATN's Chief Executive Officer. And 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 contain 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 reconciliation to comparable gap measures, and for further information regarding the factors that may affect our future operating results, we would refer you to our earnings release on our website at atni.com or to the 8-K filing provided to the SEC. And I'll turn it over to Michael for his comments.

Michael Nutterman- Okay. Thank you, Justin. Good morning, all. So, this quarter was largely in line with the trends and expectations we discussed just two months ago. Our most important revenue drivers in international telecom, broadband and mobile subscriber levels, continue to show strength even as we await economic activity recovery from pandemic restrictions. However, the quarter showed we have some more work to do on the cost side of the equation. And as expected, activity and related expense has picked up in several areas of our U.S. telecom operations. particularly the first net build and other infrastructure builds and private network development efforts. Meanwhile, the Alaska communications acquisition, which we announced at the start of the quarter, continues to move promisingly towards a close. And the partial exit from our Indian renewable energy business was completed in January, freeing up resources to focus on communications services businesses closer to home. Now I'll turn to some more detail on the individual operating segments, starting with international telecom. Fixed data subscribers in this segment increased by about 9% year on year as we continue to see growth in this space every quarter. Our past and ongoing investments in our network and service quality have enabled us to capture underlying demand. Mobile subscribers also increased by 9% year on year. This was the third consecutive quarter of good growth in this metric, and as you can see in the information in our press release, we saw year-on-year growth in both postpaid and prepaid subscribers. We credit better retail and marketing strategies for these share gains. Video subscribers continued to decline, though, with some recent signs of leveling off, and voice subscribers remained steady. Expenses rose faster than revenue for this segment year-on-year. While some of that was new regulatory fees and some of it more one-time in nature, we are implementing cost reduction initiatives in several markets, and we will be working hard to bring expense levels down over the next few quarters. Conditions in these markets are still fairly difficult as overall economic activity remains historically low due to the pandemic. Roaming, both inbound and outbound, revenues from hospitality customers and other commercial customers all continue to feel some negative impacts. So we would expect to see a pickup in revenue as travel restrictions ease and the vaccination rollout drives increased tourist travel. In US telecom, we started to see a more significant impact of the first net construction inflows and outflows. We delivered a lot of sites in the first quarter and expect that pace to continue throughout the year and into the first half of 2022, in accordance with our obligations. In addition to the important FirstNet activity, our engineering and operational teams are very busy with middle-mile fiber builds, expansion of our broadband network, and private network trials and deployments. Much of the middle-mile fiber and broadband activity is related to public-private partnership solutions with federal, state, and local subsidy programs helping to make these investments financially sound for us. We have a lot of experience in that realm, and we are closely examining the recently passed and proposed federal infrastructure programs to see where we might be part of the solution to identified areas of the digital divide. Our private network capabilities also can be part of that solution. As mentioned briefly on the February call, GeoVerse partnered with other providers to win a bid to build out two mid-sized cities with a neutral host wireless network to support both local education and municipal services. Financially, results for US Telecom were in line with the transition phase we spoke about last quarter, which we expect to last throughout the year. Operational and capital spending has increased as we ramp up our capabilities in several areas and pursue growth opportunities. Of course, this segment will look very different following close of the Alaska Communications deal. To illustrate the impact, if you added ACS's most recently reported quarterly results, which were for the fourth quarter of last year, revenue reported for this segment would be over $100 million for the quarter, with adjusted EBITDA of roughly $20 million. And of course, we are hoping to do better than that. On that front, very pleased that Alaska Communications shareholders voted to approve our acquisition of the company on March 12th, and we look forward to gaining regulatory approvals in coming months. In the meantime, we've been working with Alaska Communications management team to identify opportunities to gain revenue synergies and potentially accelerate execution of their business strategy. While still early in the process, we have identified several Stage 1 priorities, including the opportunity to accelerate growth of the company's fiber-based revenues, the expansion of anchor tenant fiber builds, and cross-selling next-generation managed services and private network solutions. The teams are also hard at work on the blocking and tackling of integration planning, including opportunities for cost efficiencies. So more to come. on both fronts. But for now, I'll turn it back over to you, Justin.

Great. Thanks, Michael. For the quarter, total consolidated revenues were $124.5 million, up 12% from last year's reported total of $110.9 million. $12.3 million of the revenue increase was associated with the FirstNet construction project, and the remainder represented a modest uptick in revenue in the international segment. Consolidated adjusted EBITDA for the quarter was $24.7 million versus $29.9 million in the first quarter of 2020, and I'll speak more about that decrease in a moment. I wanted to note that we slightly restructured the presentation of our operating expenses on our consolidated P&L to better align with industry standards and in preparation for the consolidation of Alaska Communications when the acquisition closes. We're now combining termination and access fees with engineering and operations into cost of services and putting together our sales, marketing, customer service, and general administrative expenses to form selling and general and administrative costs. Looking at each of the segments and starting with international telecom, revenues were 83.8 million up from 82.3 million last year. and adjusted EBITDA was $26.9 million compared to $27.8 million. As Michael mentioned, segment revenues benefited from broadband and mobile subscribers growth in several markets, but we did incur higher operating expenses in the quarter, which led to a modest decline in adjusted EBITDA. We also took advantage of the opportunity to purchase additional shares in our one communications subsidiary, which is our Bermuda and Cayman Islands Company. this quarter and now own approximately 77% of the outstanding equity. Capital expenditures in the quarter were $10.5 million for the segment. In the U.S. telecom segment, revenues were $40.3 million for the quarter, up from $27.3 million a year ago, and as I noted earlier, this includes $12.3 million of construction revenue related to the FirstNet project. As a reminder, we anticipate completing an additional 50 percent of the $85 million project this year, which will bring us to approximately 65 percent completion at year end. The decline in adjusted EBITDA for the segment to $4.6 million from $8.1 million last year was due to the anticipated higher operating costs we discussed last quarter. Specifically, we had higher fixed costs associated with completion of the CARES Act-funded build out of our rural broadband in advance of driving additional revenues, and FirstNet sites coming online as we shift from historically providing predominantly wholesale roaming services to more lease income and maintenance services. Additionally, we've increased spending on sales efforts and product development in our early stage private network business. We will experience lower year-on-year EBITDA comparisons in the segment until the completion of the Alaska communications transaction. Capital expenditures in the quarter were reported at $14.9 million, but I would note that $6.2 million of that is reimbursable to ATN through various government grants, as we footnoted in the segment table within our press release. Consolidated net income for the quarter was $2.7 million, or 17 cents per share, which includes a $2.5 million write-up of one of our minority investments. Also included in operating expenses for the quarter was $1.3 million of non-cash stock-based compensation expense. The effective tax rate for the quarter was approximately 6.4 percent, reflecting our forecasted jurisdictional mix of income and tax rates in our markets. Moving to the balance sheet, on March 31st, total cash was $91 million and total debt outstanding was $72 million. I should point out that as part of the first net contract, we agreed to a structured repayment schedule for each of the completed sites. This is presented on our balance sheet starting this quarter as customer receivable for $23.4 million. And in combination with the structured repayment schedule, we've entered into an arrangement with one of our banks to monetize that receivable through a separate financing agreement that is backed only by that customer receivable. This is presented on our balance sheet this quarter as customer receivable credit facility for 10.8 million. There's a few months delay between the site acceptance and the drawing on the credit facility, but as we get closer to completing the build in 2022, the receivable balance and the credit facility balance should closely align. And with that, operator, we'd like to open the call up for questions.

Yes, sir. At this time, I would like to remind everyone that if you would like to ask a question, you may press star followed by the number one on your telephone keypad now. Again, that's star and the number one on your telephone keypad to ask a question. We'll pause for just a moment to compile the Q&A roster. And the first question will come from Rick Prentice with Raymond James. Please go ahead.

Can you hear me okay?

We can now. A little faint, Rick. Okay. All right.

I'll talk up a little bit. First, thanks for giving the international EBITDA percent ownership. That does help. So I appreciate that number and the press release. Talking about regulatory stuff, obviously a lot going on. Can you expand a little bit about where you see the infrastructure bill headed and what it might mean for you guys, but also the EBB, the Emergency Broadband Benefit? Is there anything there that might be applicable for you guys?

I think yes to the last. I don't have more detail to speak about, but we're looking at that closely. We're looking at all the programs. I mean, it's not 100% clear yet. where this infrastructure build lands. We do think there's bipartisan support for communications infrastructure builds, but you probably know this well, but there's some question about how does it relate to existing programs? For example, the second part of RDOF, does that get rolled in? What we look at, and by the way, it's not just federal. It can be federal direct. It can be federal through the states, and it can be some state funding, but we look at the amounts that are being talked about, and they dwarf even the Rural Digital Opportunity Fund, so they're obviously significant, and we have a history of participating in these programs and looking at them carefully. We, you know, we are identifying areas where we think we can help. And for us, a lot of it is that, you know, bringing in the key infrastructure. So I mentioned, you know, the middle mile fiber builds. We have, you know, just completed one and we have, you know, a couple others ongoing. And, you know, those are typically driven by things like, you know, bringing fiber some considerable distance into light up a school district in an area, and then we obviously tried to route it and make it work for all users in the area. So I think there's a lot of infrastructure still needs to be built, and we're hoping to participate in that.

Any thoughts of how long the timing takes to kind of shake out this, and DC's always a tough one to peg that way, but any thoughts about how long it takes to bake this cake?

You know, again, this sort of, you know, more pure infrastructure side of things, you know, obviously transportation infrastructure and things like that, as well as communications infrastructure seems to have a lot of support from both sides of the aisle, from all the people we speak to on the Hill. And so I think, you know, I mean, who knows? I can't predict whether there's something that stymies it, right, because there is definitely a difference on the larger bill. But there seems to be, you know, a lot of folks who are pushing to solve the digital infrastructure because the pandemic made it, you know, really accentuated the differences between haves and have-nots in terms of communities, you know, for distance learning, for all sorts of things. So I I'm pretty optimistic that it gets resolved in the next couple months, you know, in terms of there's an agreement about the way forward. Now, it'll take a little longer probably undoubtedly to roll out the program and figure out how to install safeguards.

Right. Okay. And as you think about Alaska coming on board, hopefully – How does your early view of that fit into infrastructure bill, EBB, opportunities there as well?

For sure. I mean, there are significant opportunities there. And, you know, one of the things we hope to do is to, you know, is to give the team there the resources to pursue those things more proactively than in the past and, you And, you know, there's no doubt there is going to be, you know, in our minds that there's going to be builds there and there'll be opportunities that we think we can participate in that will make sense for us.

Okay. And on Alaska, you mentioned now kind of middle 21, couple of months, hopefully we get through the process. As you think about a closing timeline, I know T-Mobile historically likes to always close something on the first of the month, the first or second month of a quarter, doesn't like to do doesn't want to do third month of a quarter. As you think about when Alaska might close, would you close it on any day, like let's get going on this, or how should we think about timing potential closing?

I mean, my general attitude is the get her done attitude. But, you know, we have – Justin, do you want to add on that?

Yeah, I'm just saying the deal is kind of four days from approval, so we kind of, I'm not sure we can steer it as much on that, but I think our general approach is, yeah, yeah, close when you can close.

Yeah, yeah, okay.

And I think we're ready. I mean, we've done this before, and, you know, I think we're ready to do it, and the teams have been, you know, this is not like a lot of sort of you know, private deals in the nature and, you know, or overlapping competitive situations where you have, you know, antitrust issues. I mean, we have, you know, ability to really work those details ahead of time and be ready. Great.

And you've touched on private networks a couple of times. Can you help us understand sizing, timing, winning of kind of private network transactions and what it might mean to your business? And I assume CBRS fits into this as well.

I missed the first part, Rick. Can you repeat the question?

Yeah, so you mentioned private networks a couple of times. Can you help us kind of size what you think the addressable market is, the timing of approaching that market, what it's going to take to win, just to kind of help think about what the magnitude of what you're looking at might mean for you guys?

Yeah, I don't want to cite the total addressable market. There's big numbers out there all over the place depending on how you how you measure it. But, you know, I think, you know, it's very, the size that we're going after is, you know, more than material to us, you know, if we're successful. So it could be a significant area. And, you know, we are, what we've been doing on private networks more and more is pursuing sort of a partner, channel partner strategy rather than what you would have seen in a lot of other areas, including DAS, where it's kind of onesie-twosie builds. Instead, we are partnering with other providers of the whole technology solution around private networks and edge compute and looking to do that across many different segments You know, we're obviously pursuing the municipal, state, and local education. And, you know, there's other verticals where, you know, we've got partners and talks to go forward. So it could, you know, I think, again, I can't really give you a total addressable market at this time, except, you know, it's substantial opportunity. if we're able to execute on it and position ourselves as one of the leaders. But it's still early. It's still early in the sense that even other folks we've spoken to, including potential competitors that are backed by private equity firms we know, everybody thought 2020 was pretty slow in this sector and is expecting it to pick up. And we see some signs of that, but definitely see some signs of that, but there's still more to go. So that's really the best I can do for you now.

Okay. Thanks, guys. I'll come back in if there's time for more questions.

Thank you.

The next question will come from Greg Burns with Sedoti Company. Please go ahead.

Morning. I just want to follow up on that last comment around seeing some positive signs on the private network business. Can you maybe just give us a sense of Or maybe a little bit more color on what those signs are or what the pipeline looks like. Is it growing? Are the conversations getting more positive or constructive with customers? What are you seeing that gives you the confidence in that part of the business?

It's really mainly the channel partner side that I spoke to before, Greg. So it's... We are in discussions with some very big players who have ambitions around solutions across a lot of real estate, if you will. And I think we're very encouraged by what people see and the value we bring to the solution with sort of an overarching network platform to be used as part of that. So I think what gives me the optimism is the types of partners we're speaking to or prospective partners are those who aren't doing this in a small way. And for them, you know, much bigger companies than us looking for major solutions. So, and, you know, nobody... People don't devote those resources. All the other potential partners don't devote those resources and prospective customers unless they think this is coming. So those are the sort of tea leaves we're reading.

Okay. What percent of your international EBITDA does the one communication subsidiary contribute?

We don't break it out, Greg, but they're all a very substantial portion of it. They're all important to that segment, but we don't really break that piece out.

Okay.

And then, has there been any change in the... I know there was a change in the FCC support that you're getting in the U.S. Virgin Islands. Is there any change in the status of that?

No, no, still, still ongoing discussions and, and, um, waiting to see what's, what's next.

Okay. But that hasn't, you're, you're still receiving that, that change hasn't, uh, wasn't reflected in this quarter's results. Okay. No, no. Okay. Okay. Uh, any timeline on when, you know, some final decision or, might be made where, you know, that'll start to impact the P&L?

You know, there are several layers of decisions that need to be made, and we're, you know, in discussions about that. So, I mean, I think, you know, some decisions will be made certainly in the next few months, maybe this quarter, but there's, I don't want to get into the details of the conversations, but, you know, we're I expect it to develop and, you know, an outcome and timelines to be clear, you know, in the next quarter or so. Okay. Thank you. Yeah.

Your next question will come from Hamid Kursand with BWS Financial. Please go ahead.

Hey, good morning. First question I have is on the private network side of Geoverse, are you – actually generating revenue at this point or is it still in the development stage and how far along do you think it'll be before generating positive free cash flow from that business?

Hamed, we are generating revenue, but it's the perspective revenue, what we're chasing is, you know, it's much bigger than the current generated revenue and when we're pursuing it, we, you know, our focus is on you know, overall contract pipeline, building, you know, multi-year contracts of revenues and positioning. So, and in terms of free cash flow, we certainly don't expect it this year. In a way, if this is successful, that could prolong, you know, in the near term, the negative free cash flow as we continue to you know, work for that growth. So certainly not expecting that, you know, this year, for example.

Okay.

And then on the cost-cutting comments, is that related to being in preparation for the Alaska communications purchase, or is that purely separate because something has just fallen out of the whack for the moment?

I was really speaking mainly to the international telecom area. So we have some initiatives that already were in play that are not moving as fast as we would like, and we're looking to identify additional areas. Okay. Thank you. Okay.

And once again, ladies and gentlemen, that's star followed by the number one for any questions. Again, star followed by the number one for any questions over the phone line. We'll pause for just a moment to compile the Q&A roster. We do have a follow-up from Rick Prentice with Raymond James. Please go ahead.

Yeah, thanks, guys. A couple of follow-ups, if I could. Justin, you were talking about the CapEx in the U.S. and how the $14.9 million includes about $6.2 million reimbursable. what's the timeframe of how that gets reimbursed and how will you report that? Will you report it as a net capex or how should we think about that, the comments made about reimbursable capex?

Yeah, no, that's why I brought it up, Rick, because we can't report it as a net capex. So it kind of, and what I would say is some of it's already been received and then now spent and some of it's still to come. So what we're trying to do is if in our statement of cash flows is show what CapEx spending that either we have received or going to receive. But the receipt of the money is kind of somewhere else within the statement of cash flow. So I wanted to try to net them, but accountants wouldn't let me. So that's why we'll keep bringing it up on what the number is.

I appreciate that. Shakespeare should have said accountants instead of lawyers. On FirstNet, I think I heard you say 50, 5, 0% incremental to get to 85 million, but I thought I heard or read in the press release that you're going from 30 to 65 by the end of the year.

Yeah, so we did about 15% last year. We'll do another 50% this year. So, and we, that's, yeah, and we had in the press release, we had a little bit more in the first quarter than, you know, than a quarter of 50, call it, so. But it's generally by the end of the year will be 65% done is the ballpark. Gotcha. That makes sense.

Yeah. Okay. And then still finished by end of 2Q.

Yeah. Yeah. That's still the rough, yeah, mid-year kind of thing. Tough.

Yeah. Okay. And was not any explicit guidance in the press release that Previously, you've given some CapEx guidance. Obviously, Alaska used to give a lot of guidance. How should we think about guidance based on the Alaska deal around the corner here and what you might do going forward?

I mean, we're always hesitant to give a lot of P&L guidance, right? But I think we will help people with what Alaska means, although they're public, right, so that you can get a lot of that information. we will definitely guide on CapEx. And I didn't refresh anything on CapEx, seeing that we just kind of gave that guidance a couple of months ago, so we're still anticipating what we said at year end. But I think you should expect at least some CapEx guidance in addition to the other segments from Alaska.

And I think, Rick, we're also expecting next quarter it should be good timing for it to talk in more detail about the plans and expectations for ACS.

Okay, that makes sense. And how should we think about the tax implication? You mentioned the effective tax rate in the quarter. What does Alaska do to cash taxes as well as book taxes?

Actually, on a cash tax basis, Alaska helps us because there's some NOLs there. And I would say on a consolidated basis, if you look at 2021, we'd be slightly above where we were this quarter, right, at the 6%. So we're thinking we're still in that 6% to 10% range on effective tax rate through the P&L. But I think from a cash tax standpoint, it'll be beneficial to us.

Great.

Yeah, it makes sense. Oh, one other one I thought of. Do you report how much of the CapEx was FirstNet?

I've given that.

We've kind of said in the initial guidance, right, we said that U.S. was, you know, I think it was 40 to 50 or 45 to 50 the bulk of that is the FirstNet. And it's the first, and what it, by first, and by, you know, that's like, call it 25, 30 million of it is FirstNet. And that is associated with infrastructure, like towers, backhaul, that we will own at the end of the day. So, because sometimes it gets confusing with the sites we're actually building and turning over to AT&T, not our CapEx, that's their CapEx, but we're building it. That's cap exit towers and backhaul that we keep.

Right. And so it's a big chunk. Are you reporting out kind of how much you spent in 4Q last year, how much you spent in 1Q this year that was, quote, first net? That's kind of obviously a bubble versus what would be a more traditional kind of spend.

Yeah, that's a good point. We probably could do some of that.

Okay. That'd be great. All right. Thanks, guys.

All right. Thanks, Rich.

And at this time, if there are no further questions, I'd like to turn the conference back over to management for any closing remarks.

No closing remarks, everybody. Thanks for joining, and we'll see you in a quarter.

Ladies and gentlemen, thank you for participating in today's conference call. You may all disconnect.