Good day, and thank you for standing by. Welcome to the ATN International Q3 2024 Earnings Conference Call and Webcast. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Michele Satrowsky, Corporate Treasurer. Please go ahead.

Thank you, operator, and good morning, everyone. I'm joined today by Brad Martin, ATN's Chief Executive Officer; and Carlos Doglioli, ATN's Chief Financial Officer. This morning, we'll be reviewing our third quarter 2024 results and providing additional insights on the 2024 outlook. As a reminder, we announced our 2024 third quarter results yesterday afternoon after the market closed. Investors can find the earnings release and conference call slide presentation on our Investor Relations website. Our earnings release and the presentation contain certain forward-looking statements concerning our current expectations, objectives and underlying assumptions regarding our future operations. These statements 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 for 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 ir.atni.com or the 8-K filing provided to the SEC. And now, I'll turn the call over to Brad.

Thank you, Michele. Good morning, everyone, and thank you for joining us for our fiscal third quarter 2024 earnings conference call. We remain focused on executing our strategy to leverage our upgraded network assets and manage the business prudently, aiming to increase cash flow by margin improvements and deliver sustainable value to our shareholders and customers over the long-term. Looking at our Q3 performance is a tale of two segments, with progress in the International segment and underperformance in our U.S. operations. While there are several bright spots in the third quarter, including strong free cash flow from operations and international margin improvement driven by effective cost management, our top and bottom line performance was affected by a few key factors. These included lower levels of non-planned prepaid consumer mobility sales, slower consumer sales execution in key U.S. markets, and underperformance with enterprise in sales and delivery, specifically in Alaska. We had expected these revenue pipelines would offset more of the anticipated impact from the conclusion of the ACP and ECF government programs, but these have not transpired at the pace projected. As a result, we are updating our full year financial outlook expectations. We are taking strategic actions to align our cost structure with current revenue levels, while focusing on margin improvement in cash flow generation. These actions include advancing cost efficiency initiatives, optimizing value of our assets, and leveraging our upgraded network and offerings to maintain market share and drive customer conversion to higher value services. With that, let's take a look at our operational strategic highlights from the quarter within each segment. Starting with US Telecom, based on our underperformance related to the previously mentioned dynamics and compression in market multiples, we reported a non-cash $35 million goodwill impairment charge during the third quarter. We are assessing…

Thank you, Brad. Good morning, everyone, and thanks for joining us today. Our focus remains on managing the business with an emphasis on optimizing value, by improving cash flow and expanding margins through cost management, driving positive returns on our high quality assets. Although we faced top line headwinds, primarily in our domestic markets, there were some highlights in the quarter, most notably stronger year-over-year free cash generation from operations and improved margins in our International segment. Let's review our third quarter financial results in more detail. Total company revenue of $178.5 million was down 7% compared with the same period in 2023. The step down in revenue primarily reflects the conclusion of the Emergency Connectivity Fund and Affordable Care programs, mostly impacting the US Telecom segment, as well as a year-over-year reduction in construction revenues. Operating loss in the third quarter was $38.4 million versus operating income of $6.8 million in Q3 of 2023. The operating loss includes a non-cash $35.3 million goodwill impairment charge we took in the quarter, which reflects the current U.S. market dynamics Brad spoke about and the compression of market multiples. Q3 operating income was also impacted by $3.8 million in transaction fees related to our previously announced debt refinancing in Alaska and $2.3 million of restructuring and reorganization expenses related to the cost management efforts mentioned during our Q2 call. Net loss was $32.7 million or $2.26 per share. This compares with the prior year's net loss of $3.6 million or $0.31 per share. The difference was mostly driven by the aforementioned factors as well as an increase in interest expense. Adjusted EBITDA for the third quarter was $45.7 million, down 5% from the year ago period, primarily as a result of the decline in revenues and margins in the US Telecom segment.…

Thanks, Carlos. We are confident that our strategy will enable ATN to deliver value to our shareholders, employees, customers, partners and local communities for the long-term. Our upgraded and expanded footprint, skilled team and dedication to our mission empower us to provide essential connectivity to our customers, expand in our markets and achieve profitable growth, increase cash flow and value creation for our shareholders. With that, operator, we'd like to open it up for questions.

Thank you so much. At this time, we will conduct the question-and-answer session [Operator Instructions] Our first question comes from the line of Ric Prentiss with Raymond James. Your line is now open.

Thanks. Good morning, everybody.

Morning, Ric.

Obviously, a tough quarter on the US Telecom side. You mentioned addressing margins on that side. Should we think that there's -- is this like forced cuts, so we're going to see a kind of a restructuring charge coming? Or what kind of timeframe does it take to kind of address and right size the costs given the revenues haven't really replaced the ACP and the ECF programs?

Hey, Ric. This is Carlos. I'll take this one. Thanks for the question. As we talked about it in Q2, and we reiterate a little bit this quarter, some of the efforts that we have been pursuing across the different segments are already kind of reflecting into the numbers. You saw some of the restructuring and reorganization charges, some efforts that are related to the U.S. segment are embedded there. And some of the benefits that we did in International as well, you saw them flowing through the numbers as well. In terms of some of the more structural changes that we are pursuing, those naturally take a little more time and we expect to see more of those benefits into 2025 and beyond. So that's kind of the process we're pursuing.

Okay. And then, I think, we continue to kind of see a deemphasis of fixed wireless and mobility. Spectrum is certainly an asset. We've seen UScellular propose a sale of a third of its spectrum to T-Mobile in that merger. There was the announcement of Verizon buying -- proposing to buy a significant chunk of low band spectrum from USM. How should we think about your spectrum position? Is that something that might be an asset to monetize? And ballpark wise, I think we had you guys down at somewhere north of 100 million megahertz Pops. Maybe just talk a little bit about the spectrum asset.

So, Ric, yeah, so spectrum certainly has been a key piece of our business within our U.S. market being a legacy mobile operator. We are always looking at opportunities and how we can take advantage of non-strategic assets. We talked about a deal last quarter, a small deal for spectrum divestiture. So, it's something that we're always looking at how do we extract the highest value from. We obviously are still using spectrum for certain service lines. But certainly, the exit of our retail mobility, which is something that is in process as we speak, will certainly be something that we look at and something that we are always looking at how we can optimize that particular asset base.

Is there a way to kind of size how much spectrum you have, or how much might be non-core, not supporting of? Is there some way to kind of ballpark goalpost on it?

No, not directly, Ric. That's an evolving dynamic. So that's not something we have here.

Okay. And Carlos, you mentioned that the construction revenues were down year-over-year. It's a fairly low margin business. But how should we think about FirstNet or other construction projects as far as what's left to go the rest of this year and as we look into '25?

I think at this point, Ric, we have approximately $8 million of remaining revenues there. But given some of the public -- publicly known dynamics with some of the equipment choices, et cetera, that are impacting the timing, we see most of that coming in 2025.

Okay. And on the International front -- one more on the U.S. side. You mentioned a sales leadership change. What does that person bring to the table or persons that you're looking for them to change? What's kind of the top mission for the new sales leadership?

Yeah. So, Ric, I mentioned in my prepared remarks, I mean, we have had some challenges with execution on both delivery and pipeline conversion. So, we are really looking for -- and we have multiple new positions filled around enterprise and carrier sales. So that's an area of driving disciplined process, driving disciplined pipeline management in a very mature enterprise market. So, we are bringing in new resourcing to help enhance our overall capacity and capability to deliver.

And last one for me. I think you mentioned on the International front that -- this is part of it, but there could be some beneficial items coming into 4Q versus 3Q, because you had some hurricane costs and some rebranding costs. Can you help us kind of size what kind of improvements we might see in 4Q versus 3Q on the International side?

I would say, Ric, the way we think about it is there were over $1 million of expenses related to some of the quarter specific items that we mentioned during our remarks. But in terms of the Q4, we don't specifically give guidance on segment-by-segment and quarter-by-quarter. But certainly the numbers, you see that there's been benefits from some of the efforts that we pursued and those are included in the guidance.

Okay. Very good. Thanks.

Thank you so much. One moment for our next question. Our next question comes from the line of Greg Burns with Sidoti. Your line is now open.

Morning. In the U.S., how would you, I guess, characterize the demand environment relative to maybe where you thought it was six to 12 months ago? Because I'm just trying to kind of maybe better understand how much of this is just execution on your part or maybe -- versus maybe a shift in the market dynamics, which you weren't expecting where maybe competitors are getting more competitive on pricing or offering or whatnot?

Yeah. So, really, I think there's -- to distinguish between the two key areas, consumer and enterprise, there are, again, very different dynamics happening in those markets. So, on the -- so maybe on the enterprise care and wholesale, a lot of the -- we do see strong demand, and that is something -- a lot of the delays that we've had or misses that we've had have been more on delayed deals, has not necessarily been -- the majority is certainly on delayed deals, not necessarily lost deals. We obviously have had some lost deals. But we do see the demand for broadband services on the wholesale side continuing to grow. So that's something that is encouraging for the business moving forward. On the consumer side, Greg, there are a lot of dynamics and I'll specifically speak to the Southwest, where we had the larger -- largest impact on the ACP shutdown. That is -- there are a lot -- a couple of dynamics. One, we are -- we have been in the process of deemphasizing and shutting down some of our legacy fixed wireless broadband service areas. Part of that is due to R&R. Part of that is just due to the remote nature and the profitability of certain sites. So that has been a unique focus for us to rationalize where we have network and rationalize operations. From a competitive market, it has changed. The fixed wireless access progress you see from the major carriers, that is a product set that is a new competitive dynamic as they overbuild. A dynamic for us is we actually get to participate in that, because we sell through our carrier managed services to those carriers. So, we provide backhaul, tower lease that flows through our enterprise and carrier lines of service. So that's an area where we are trying to focus where we have what we consider next-gen fixed wireless technology. This is north of 100 megabit to 500 megabit to gigabit style solutions. We think those are very competitive with the MNO fixed wireless service offerings. So, when we talk about refocusing our efforts, it's where we have superior technology, because it's very difficult to compete with inferior technology against the quality of those brands, if that makes sense.

Got it. Yeah. Yeah. And then, I guess, maybe this -- some of what you just said kind of leads to my next question. But I just want to understand the dynamic between -- I see the high-speed data subscribers are growing, but total broadband subscribers are declining. So, is that due to this dynamic of network optimization?

That's exactly it. Yes, we have -- it's a combination not only of fixed wireless network rationalization, but even fixed. We have legacy copper network that has been shutting down as we have built -- overbuilt with fiber in some of our markets.

Okay. Thank you.

Thank you so much. [Operator Instructions] All right. Our next question comes from the line of Hamed Khorsand with BWS Financial. Your line is now open.

Hey, good morning. Just some follow-up here. I think all year, you've been talking about this loss of the ECF and ACP programs. So, if you could just help me understand why that impact that you've been talking about all year, now all of a sudden is, you weren't ready for subscriber losses and the softness in consumer.

So, Hamed, yeah, so maybe distinguish between the two programs. So, ECF was a program that went away earlier this year. We spoke about the failure to fill that pipeline, to backfill that pipeline on some deals in one of our markets. So that has been -- the ability to backfill -- that pipeline is one of the dynamics we've been working towards all year. So that's to distinguish between ACP. ACP, generally, we have -- from a subscriber -- maintenance of subscriber base through that transition actually roughly came in line with our expectations. A dynamic with ACP that we did not predict our largest market, which is in the Southwest of ACP subscribers, which lost about 28% of their consumer subscriber base. We were projecting keeping about -- losing about 30%. So, we actually did a little better than we had planned. What we did not plan for was the amount of work required to retain those customers. There was a four-month period where we were out, reaching out to every customer renewing them and that had an impact on the ability to sell new. So that was something that we did not foresee as impactful in one of our Southwest markets. So that's the distinction between ACP and ECF. But they were ultimately big programs. ACP was really announced after the start of the year. ECF, we knew about late last year. So that was something we were planning for. And that is still a dynamic of filling that significant pipeline, both revenue and EBITDA is something that we're working towards.

Okay. And then specifically to Alaska, do you feel like the market is just too mature and saturated with competition to win more enterprise customers there?

No, we don't. The market dynamics are market dynamics that we like. We've got really great assets in that market. We've got great relationships in that market. So, we don't see that as the challenge. We see the challenge as some execution challenges. Delivery delays has been a big dynamic that has been a challenge in that market. And that's been the biggest impact on the performance to date and through the forecasted year.

Okay. And my last question is on Guyana. You I remember talking about the restrategizing your approach to mobile there. Is it still a focus on postpaid, or are you just focusing more on higher ARPU kind of subscribers?

Yeah. So, the focus in that market is continuing to upgrade the customer base to higher services and the primary focus is data. So, we talk about plan-based revenue. These are data plan customers that are getting a component of data along with their voice, and that's where we've seen significant growth in the last year. So, we are seeing the quality, and importantly, we're seeing the consumption of data. For a market like Guyana, that's a really important dynamic. We're seeing the consumption of data in Guyana really going up. That is where I think we're very well-positioned with the quality of the network we've delivered there. And broadly, the demand for ubiquitous data access is a very good market dynamic that we're happy seeing the results. What we are continuing to lose are very low ARPU voice customers to a new competitor in that market. And that's something that is -- we do think that, that will -- the impact of that will start to limit as we get into '25, but ultimately, that's the dynamic that we're fighting. And I think ultimately, we believe that data consumption trend is a great trend for us.

Okay. Thank you.

Thank you so much. I'm showing no further questions at this time. I would now like to turn the call back over to Brad Martin for closing remarks. End of Q&A:

Thank you, operator. Thank you all for joining us today. We look forward to speaking with many of you in the months ahead. Thank you again for your time. Have a good day.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.