Good day ladies and gentlemen and welcome to the ATN International Second Quarter 2019 Earnings 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. [Operator Instructions]. Now I'd like to introduce your host for today's conference, Justin Benincasa, Chief Financial Officer. Sir, you may begin.

Great, thank you operator. Good morning everyone and thank you for joining us on our call to review our second quarter 2019 results. With me here is Michael Prior, ATN's Chief Executive Officer. And during the call, I'll cover the relevant financial information, and Michael will provide an update and outlook on the business. Before I turn the call over to Michael for his comments, I'd like to point out that the 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 reconciliations to comparable GAAP measures and for further information regarding the factors that may affect our future operating results, I would refer you to our earnings release on our website at atni.com or the 8-K filing provided to the SEC. And I'll turn the call over to Michael.

Thank you, Justin. Good morning, everyone. So just some highlights I would say from our perspective, overall this quarter was quite consistent with the first quarter as to both the financial and operating trends. And those trends included the continued strong organic growth of our largest operating segment, International Telecom, and ongoing weakness in the smaller U.S. Telecom segment. As noted in the release, we have reasons to be cautiously optimistic that we can improve that situation. And we have even more confidence in our expectation that the International Telecom direction will continue to be favorable. Overall, again, we see more opportunity in the upside than the downside from here. And now I'll move on to some additional details, starting with International Telecom. So the good news in this segment as it falls into four major buckets; data subscriber and revenue growth, expanding cash flows following heavy network spending in recent years, the return to normal operations in the Virgin Islands, and opportunities to continue this growth through 2020 and potentially beyond. So first, on the data growth, you can see that, of course, partly in subscriber numbers with data subscribers ending the quarter above 125,000, which is 9% higher than a year ago. In addition, we have seen growth in certain enterprise and commercial accounts that are reflected in the results. Where we have not seen enough growth, quite frankly, is in mobile data subscribers and revenues. We have to do better on that score, and I think it's an opportunity moving forward. Partially offsetting the wire line data growth are lower-legacy voice and video revenues, which is something the entire industry has been experiencing for some time and we expect those trends to continue despite some efforts to mitigate. While we still have pockets of work underway, we…

Okay, thank you Michael. Just to cover some of the relevant financial information, for the second quarter total consolidated reported revenues were 107.7 million. On a recurring revenue basis, this represents a 4% year-on-year increase after adjusting for the onetime 8.2 million of the FCC hurricane support that Michael mentioned we received in the second quarter last year. And for the revenues related to the U.S. -- and for revenues related to the U.S. solar portfolio and wholesale roaming sites, which were sold in 2018. Consistent with the trends we saw in the first quarter, revenue growth from recurring services and the International Telecom segment more than offset lower U.S. Telecom wholesale revenues. Consolidated adjusted EBITDA for the quarter was 24.2 million, below the 36 million in the prior year but would be slightly ahead adjusted for FCC funding in the sale transaction I just noted. Looking at the segments and starting with International Telecom, revenues were 79.9 million compared to 81.5 million last year. Adjusted for FCC funding, revenues would be up 9% from 73.3 million. Adjusted EBITDA was 24.7 million compared to 26.7 million reported last year. Without the 8.2 million FCC money, last year, adjusted EBITDA would be up 27%. As Michael noted, much of the year-on-year growth relates to post-hurricane recovery in the U.S. Virgin Islands, a strong subscriber of revenue growth in the markets where we made investments in upgrading and expanding our fiber networks. While operating expenses for the segment have fluctuated in the past few quarters as a result of the U.S. Virgin Islands returning to more normal operations, we anticipate more consistent operating expense trends moving forward. We expect capital expenditures in this segment to be approximately 50 million this year, which includes additional growth project spending in multiple markets. This would…

[Operator Instructions]. Our first question is going to come from Allen Klee. Your line is now open.

Yes, good morning. You talked about in U.S. wholesale telecom some of your actions have been positive to improve that business. I was wondering if you could expand a little on the actions that you're doing, and how that's making you cautiously optimistic?

Hi, I think it's -- I'm not going to expand much as I hinted in my opening remarks, but it's not really major improvements to the business today. Things worth pursuing that could improve it tomorrow, right? This is the simplest way to say. So I just wanted to make sure you understood that. What those are, I'm not going to speak further.

Okay. Is there anything you can talk about related to your emerging investments that you've done incrementally in the last quarter in your outlook and maybe how we should think about how much you are spending on this, and how you think about the longer-term, what this can contribute to revenues and earnings?

I think it's too soon to give that kind of prediction, Allen, but I think we still feel that there is some very interesting upside in some of the emerging businesses. But they are early stage, and in some cases the industry surrounds them is at somewhat early stage. And we're much more focused on positioning and milestones that aren't really financial at this point in those businesses. So there's just -- it just -- in the scale of what ATN is, it doesn't make a lot of sense to, at this stage in those businesses, focus on in a quarterly basis. But overall, we think well, I am not going to try to quantify it, I think there is some exciting upside and elements of that down the line. Nothing in the near term.

Okay. And then in International Telecom, you mentioned data is doing well. You'd like to see mobiles do a little better. Can you talk a little about what's going on with mobile and what do you think you can do to improve that?

I think the main thing is we are -- we just haven't clicked on the sales and marketing side. I think we have invested and have very high quality, extremely competitive, potentially best network in a couple of markets where we don't have the market share that follows that. So it's really gaining market share and also in some cases, that also should mean ARPU share because we need to gain more market share in the bigger spending segment and have more of the spend -- collective spend beyond our network. So what I would say is we're -- what we have achieved to date in International Telecom, which is just an highlight if you take away some of the things, the organic numbers are quite positive, its despite not really gaining ground on the mobile side. And so we believe we can do better, and we think we have to do better.

Okay. And then moving to the U.S. Virgin Islands, could you give sort of where you are in the -- it seems like you're pretty far along with the recovery but maybe a little more expand on where you think that is and what else has to be done and understand the opportunity you see ahead?

Yes, I -- there are -- that was such a major event or events. There are some lingering things, but I think they are pretty small, and I think our mindset is what's -- that's in the rearview mirror. Let's -- we consider it normalized, and it's all about going and doing, executing on the plan we had when we made that investment a year before the hurricane. So I think that is everything from margin expansion, both in revenue growth and in greater productivity and cost controls and the revenue growth is multipronged. I think there is opportunity in mobile, we talked about, there is opportunity on enterprise side in multiple markets but certainly in the Virgin Islands. And then there is macroeconomic growth. So even though I would say we are treating it as normalized, there are -- certainly that economy is still not where it was before the storm. But most of the -- there is still a large number of hotel rooms that are not opened, but we expect that to change in the coming high season.

Okay, great. And in the past, you had mentioned that there could be some government money associated with some -- in U.S. Virgin Islands, Puerto Rico and that you guys had a pretty good opportunity to get some of that, can you just maybe update us on if that's still available, and where that stands?

Yes. I think what you are referring to is the plan that FCC put out for $186 million over 10 years to fund the Virgin Island's telecom infrastructure, and just keep it very high level and that replaces the traditional high-cost funds, which we are receiving today. So that's not all incremental to what is flowing through our financials today but that high-cost program was related to end and change into a new program based on FCC review in all these places. So we still think it's very positive, but they haven't made the final determination and awards yet. And as you tad aware they have been were very busy. But -- and to some extent, we think we are -- it's a little slow for us in part because it's been linked also to the hurricane on the forward funding in Puerto Rico, which is a very, very different market than the Virgin Islands. There has been very different issues as they consider how best -- to get the best banks for bucks for those tax payer funds. So I think we are waiting, I wouldn't say patiently, but we are still waiting.

Okay, thank you. And then more of a strategic question, in the past, it seems like you had focused your acquisitions on -- or your capital on areas where you are managing a services business and buying it opportunistically and then improving the performance. And more recently, you've been investing in some more different touch of maybe a little more emerging type of technologies. Is there still interesting opportunities in managing opportunities out there related to telecom services opportunities?

Yes, I think there are Allen. I mean I think there are not a lot of them that are highly synergistic to what we are doing today, but there are some that had some synergies and/or businesses that we like, that we think of the types of businesses that served us well in the past. But I think there is a lot of capital out there, looking at a lot of different things. And so the things that tend to be interesting to us from a value standpoint are complicated. And there's a reason that they may not be in the frothier end of the market. And so that makes some of them hard to execute on, even for us. So it's -- we are overall optimistic about the opportunities for more -- the balance sheet to work but it's a tricky market as an investor.

Okay, thank you. And then lastly on renewables, tell me if I heard this right, but it sounded like your tone on the market was maybe slightly more positive in terms of this growing and potentially getting some financial partners on the financing. Has anything changed there since the last call just in terms of how you have been feeling about this?

Yes, I think you've read it right. I think we're seeing a lot more interest and potentially nothing done yet, potentially more interest along levels that are attractive to us. But -- and we've -- the team has really done a good job building up high quality pipeline and operating the assets well. And I think potential partners recognize that, and we also want to keep that momentum up, which is why we're looking at moving forward with some careful but some additional expansion.

Okay, great. Thank you so much.

Thank you. And our next question comes from Rick Prentiss from Raymond James. Your line is now open.

Yes, good morning guys. I'd like to focus most of my questions on nearly quarter-to-quarter versus year-over-year because obviously, there was a lot of stuff going on last year puts and takes in there. If we look quarter-over-quarter in 2019, how much CAF II funding did you receive in the second quarter, when said you started getting some?

It's about 1.5 million in the second quarter, Rick, and then it will be about 1.9 million run rate going forward.

Right, okay. So getting to that 8 million a year kind of thing which is the...

Yes. Yes. These are the small -- right, right. Small reserves again but yes.

Okay. And does that go into wireless or wire line, I assume wire line wasn't that large?

Its wireless, yeah.

Hey Rick, you are slightly muffled. We can hear you, but it's...

Okay, I am not picking it up here, sorry about that. So wireless? Okay. And as we look at the international segment quarter-to-quarter, the wire line business in international, revenues were down slightly quarter-to-quarter but margins were down much more markedly on total international EBITDA from 1Q to 2Q. Is there not much seasonality, or just I think I heard you call out that maybe now you are more at a consistent OPEX trend going forward, so just trying to think what happened from 1Q to 2Q and how do we think about that going forward?

It was -- a lot of that was around the OPEX kind of fluctuating as I noted. And so I think we've kind of settled that out in the second quarter. I think we do expect to continue to see -- get some margin expansion moving forward, but it was -- the kind of lumpiness was more around OPEX in the last couple of quarters.

Right, so this is a good level to build off from what we saw in 2Q?

Yes.

Okay, and when you think about the spectrum out there I think you guys participated in the ACA comments on the C-band, and can you just talk a little bit about what you see happening with spectrum and maybe also address CBRS spectrum and what the opportunities are, what you are hoping to see happen?

Yes, I'm not sure I'm qualified -- I am not sure who is qualified to predict where the C-band is going, right? It's clear that first, some of the obvious things, it's clear that the SEC has a real push to release spectrum so that, that is not slowing down 5G and 5G-related deployments. So I think they're really working hard on getting that out there in various ways, and they have done a lot. And I think they are also very conscious, there's a lot of players who are anxious for CBRS to get to the next stage. And I just think there is -- it's just the logjam of an ambitious counter with a lot to do but we do expect that to resolve itself. And you look around the world, there seems to be a lot of people coalescing around 3-5, 3-6 for some of that. And Rick, you know as well as anybody else, the technologies in terms of the devices and things will expand to fit many, many bands. But what's interesting about the CBRS that the U.S. has done, that I've heard a lot of other country start to look at, really with admiration is this contemplated approach of some assigned spectrum under traditional license auction and some on a use-by-use dynamic basis. I think it's very attractive to a lot of people in the technology area and so I think that gets done and it will have its ups and downs in the beginning, I expect. I think it's a little tricky to do, but we're certainly expecting it to happen. And we're expected to participate in that and utilize CBRS in multiple areas. Did I answer your question?

Yes, obviously. As far as T-Mobile's decision, maybe we get something today from GOJ that could also help the FCC maybe move forward on some of the spectrum stuff as you pointed out. They are pretty busy there?

Yes.

Circling back on the U.S. side again, on quarter-to-quarter then, if I look at the wireless revenue in 1Q to wireless revenue in 2Q, you got 1.5 million benefit from CAF II high-margin business, but then it looks like you saw a decent seasonality there within the wireless U.S. segment. How should we think about that seasonality or the way the contracts play out in the second half of 2019 as we think then also modeling trend lines into 2020 because there was a nice uptick, 1Q to 2Q, in the U.S. wireless, even pointing out that CAF II stuff.

Yes. I would let Justin, add or correct me, but I think it's complicated to get -- to make that too much of science in the answer because of a bunch of things going on. But I would just say first quarter felt like a really low quarter. So it's not all seasonality. I don't -- we still do not expect anything like the return to seasonality that we had in past years. But there is as contracts change, and we work through the accounting or if there is some time to little what looks like seasonality that is updating your assumptions on the total year.

Yes. And by updating the functions, as we kind of record the revenues based on traffic flows, right. So there definitely is some seasonality in Q2 and Q3 have always been those kind of quarters.

Right, so as we think that 1Q was probably low versus what might be typically expected as we look into the next, the future of U.S. telecom and 2Q up but 3Q up some, so I'm just trying to think 1Q was probably lower than what you might have expected and 2Q more of a decent run rate than point out...

No, no, it was more -- there is more seasonality in Q2 and Q3, right than there is -- in terms of upside seasonality, yeah that is what you are saying. And then I'm not just speaking historically and because it's really -- it's where we operate obviously, right, lot of bifurcation [ph] areas and seasonal traffic out there. So it kind of follows warmer weather.

Alright, then the wire line in the U.S. side looks like it's kind of -- now you sold that other asset hiding in that $1 million a quarter or even $700,000 this quarter?

Yes. That's been our wholesale business as well, which even if we had more revenue on there, it's really low margins stuff so...

Great, okay, perfect. Thank you so much guys.

Thank you. [Operator Instructions]. Our next question comes from Hamed Khorsand from BWS. Your line is now open.

Hey, good morning, just a couple of questions. First, is there any risk to U.S. wireless revenue declining further after new programs you are focusing on do not pan out in the immediate term?

Yes, yes. There always is, I mean, I think you heard our body language we think more likely the other direction, but there certainly is some risk to that.

And then how long before these services do get adopted by carriers?

I -- there's not going to say more about that now. It's...

Okay, thank you.

Thank you. And I'm showing no further questions. I would now like to turn the call back to management for any further remarks.

No further remarks. Thank you everybody and have a great rest of the summer.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. And everyone, have a great day.