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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-12593

ATN INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)	47-0728886 (I.R.S. Employer Identification No.)
500 Cummings Center, Suite 2450 Beverly, Massachusetts (Address of principal executive offices)	01915 (Zip Code)

(978) 619-1300

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $.01 per share	ATNI	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ◻		Accelerated filer ⌧

Non-accelerated filer ◻		Smaller reporting company ☐
		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ⌧

As of May 10, 2023, the registrant had outstanding 15,738,576 shares of its common stock ($.01 par value).

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ATN INTERNATIONAL, INC.

FORM 10-Q

Quarter Ended March 31, 2023


CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS		3

PART I—FINANCIAL INFORMATION		4

Item 1	Unaudited Condensed Consolidated Financial Statements	4

	Condensed Consolidated Balance Sheets at March 31, 2023 and December 31, 2022	4

	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and 2022	5

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2023 and 2022	6

	Condensed Consolidated Statements of Equity for the Three Months Ended March 31, 2023 and 2022	7

	Condensed Consolidated Statements of Cash Flows for Three Months Ended March 31, 2023 and 2022	8

	Notes to Unaudited Condensed Consolidated Financial Statements	9-35

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36

Item 3	Quantitative and Qualitative Disclosures About Market Risk	57

Item 4	Controls and Procedures	58

PART II—OTHER INFORMATION		58

Item 1	Legal Proceedings	58

Item 1A	Risk Factors	58

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	59

Item 5	Other Information	60

Item 6	Exhibits	61

SIGNATURES		62

CERTIFICATIONS

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Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (or the “Report”) contains forward-looking statements relating to, among other matters, our future financial performance and results of operations, including our expectations regarding the benefits of our acquisition of Alaska Communications; the impact of federal support program revenues; expectations regarding future revenue, operating income, EBITDA and capital expenditures; expectations regarding our ability to refinance our existing debt and/or obtain additional financing on or before the maturity of our 2019 CoBank Credit Facility; the competitive environment in our key markets, demand for our services and industry trends; our expectations regarding construction progress under our agreement as part of the FirstNet Transaction and the effect such progress will have on our financial results; expectations regarding litigation; our liquidity; and management’s plans and strategy for the future. These forward-looking statements are based on estimates, projections, beliefs, and assumptions and are not guarantees of future events or results. Actual future events and results could differ materially from the events and results indicated in these statements as a result of many factors, including, among others, (1) our ability to successfully transition our U.S. Telecom business away from wholesale wireless to other carrier and consumer-based services; (2) our ability to replace and remove all ZTE equipment in our U.S. network, as required by the FCC in a timely and cost-effective manner; (3) the general performance of our operations, including operating margins, revenues, capital expenditures, and the retention of and future growth of our subscriber base and average revenue per user; (4) our ability to realize cost synergies and expansion plans for our newly acquired Alaska Communications business; (5) our ability to satisfy the needs and demands of our major carrier customers; (6) our ability to efficiently and cost-effectively upgrade our networks and IT platforms to address rapid and significant technological changes in the telecommunications industry; (7) government funding and subsidy program availability and regulation of our businesses, which may impact our revenue, expansion plans and operating costs; (8) our reliance on a limited number of key suppliers and vendors for timely supply of equipment and services relating to our network infrastructure; (9) economic, political and other risks and opportunities facing our operations, including those resulting from the pandemic, geopolitical tensions, including the invasion of Ukraine, and from inflation, including increased costs and supply chain disruptions; (10) the loss of or an inability to recruit skilled personnel in our various jurisdictions, including key members of management; (11) our ability to find investment or acquisition or disposition opportunities that fit our strategic goals; (12) the occurrence of weather events and natural catastrophes and our ability to secure the appropriate level of insurance coverage for our assets; (13) increased competition; (14) the adequacy and expansion capabilities of our network capacity and customer service system to support our customer growth; (15) our continued access to capital and credit markets, including our ability to extend or refinance our current credit facility; 16) our ability to successfully recognize the expected benefits of our acquisition of Sacred Wind Enterprises. These and other additional factors that may cause actual future events and results to differ materially from the events and results indicated in the forward-looking statements above are set forth more fully under Item 1A “Risk Factors” in each of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 15, 2023, and the other reports we file from time to time with the SEC. The Company undertakes no obligation and have no intention to update these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors that may affect such forward-looking statements, except as required by law.

In this Report, the words “the Company,” “we,” “our,” “ours,” “us” and “ATN” refer to ATN International, Inc. and its subsidiaries. This Report contains trademarks, service marks and trade names that are the property of, or licensed by, ATN and its subsidiaries.

References to dollars ($) refer to US dollars unless otherwise specifically indicated.

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PART I—FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements

ATN INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In Thousands, Except Share Data)


	March 31,		December 31,
	2023		2022
ASSETS
Current Assets:
Cash and cash equivalents	$	56,016	$	54,660
Restricted cash		4,961		5,068
Short-term investments		300		300
Accounts receivable, net of allowances for credit losses of $16.0 million and $15.2 million, respectively		84,483		86,816
Customer receivable		6,083		5,803
Inventory, materials and supplies		18,485		17,902
Prepayments and other current assets		61,224		59,139
Total current assets		231,552		229,688
Fixed Assets:
Property, plant and equipment		2,001,455		1,977,978
Less accumulated depreciation		(945,092)		(922,024)
Net fixed assets		1,056,363		1,055,954
Telecommunication licenses, net		113,698		113,698
Goodwill		40,104		40,104
Intangible assets, net		28,823		31,992
Operating lease right-of-use assets		101,953		108,702
Customer receivable - long term		45,681		46,706
Other assets		81,841		81,025
Total assets	$	1,700,015	$	1,707,869
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current Liabilities:
Current portion of long-term debt	$	11,537	$	6,173
Current portion of customer receivable credit facility		6,574		6,073
Accounts payable and accrued liabilities		118,240		155,224
Dividends payable		3,323		3,310
Accrued taxes		13,611		7,335
Current portion of lease liabilities		13,785		15,457
Advance payments and deposits		38,314		39,608
Total current liabilities		205,384		233,180
Deferred income taxes		26,697		28,650
Lease liabilities, excluding current portion		78,360		83,319
Other liabilities		137,148		138,420
Customer receivable credit facility, net of current portion		41,533		39,275
Long-term debt, excluding current portion		453,144		415,727
Total liabilities		942,266		938,571
Redeemable noncontrolling interests:
Preferred redeemable noncontrolling interests		56,197		55,152
Common redeemable noncontrolling interests		37,026		37,317
Total redeemable noncontrolling interests		93,223		92,469
ATN International, Inc. Stockholders’ Equity:
Preferred stock, $0.01 par value per share; 10,000,000 shares authorized, none issued and outstanding		—		—
Common stock, $0.01 par value per share; 50,000,000 shares authorized; 17,679,616 and 17,584,057 shares issued, respectively, 15,787,337 and 15,763,341 shares outstanding, respectively		173		173
Treasury stock, at cost; 1,892,279 and 1,820,716 shares, respectively		(76,665)		(73,825)
Additional paid-in capital		200,015		198,449
Retained earnings		437,030		449,806
Accumulated other comprehensive income		6,690		6,210
Total ATN International, Inc. stockholders’ equity		567,243		580,813
Noncontrolling interests		97,283		96,016
Total equity		664,526		676,829
Total liabilities, redeemable noncontrolling interests and equity	$	1,700,015	$	1,707,869

The accompanying condensed notes are an integral part of these condensed consolidated financial statements.

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ATN INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

(Unaudited)

(In Thousands, Except Per Share Data)


	Three months ended March 31,
	2023		2022
REVENUE:
Communication services	$	181,308	$	166,543
Construction		590		1,987
Other		3,876		3,489
Total revenue		185,774		172,019
OPERATING EXPENSES (excluding depreciation and amortization unless otherwise indicated):
Cost of communication services and other		79,040		73,011
Cost of construction revenue		588		2,033
Selling, general and administrative		61,348		54,882
Stock-based compensation		1,778		1,461
Transaction-related charges		13		554
Restructuring expenses		2,887		—
Depreciation and amortization		36,404		33,292
Amortization of intangibles from acquisitions		3,247		3,258
(Gain) Loss on disposition of long-lived assets		(167)		3,420
Total operating expenses		185,138		171,911
Income from operations		636		108
OTHER INCOME (EXPENSE)
Interest income		182		51
Interest expense		(8,807)		(3,363)
Other income		194		4,199
Other income (expense)		(8,431)		887
INCOME (LOSS) BEFORE INCOME TAXES		(7,795)		995
Income tax (benefit) expense		(740)		2,952
NET LOSS		(7,055)		(1,957)
Net loss attributable to noncontrolling interests, net of tax benefit of $(0.6) million and $(0.5) million respectively		1,170		1,009
NET LOSS ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS	$	(5,885)	$	(948)
NET LOSS PER WEIGHTED AVERAGE SHARE ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS:
Basic	$	(0.44)	$	(0.13)
Diluted	$	(0.44)	$	(0.13)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		15,768		15,708
Diluted		15,768		15,708
DIVIDENDS PER SHARE APPLICABLE TO COMMON STOCK	$	0.21	$	0.17

The accompanying condensed notes are an integral part of these condensed consolidated financial statements.

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ATN INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

(Unaudited)

(In Thousands)


	Three months ended March 31,
	2023		2022
Net loss	$	(7,055)	$	(1,957)
Other comprehensive income:
Foreign currency translation adjustment		111		256
Reclassification of loss on pension settlement		369		—
Unrealized gain on derivatives		—		166
Other comprehensive income, net of tax		480		422
Comprehensive loss		(6,575)		(1,535)
Less: Comprehensive loss attributable to noncontrolling interests		1,170		1,009
Comprehensive loss attributable to ATN International, Inc.	$	(5,405)	$	(526)

The accompanying condensed notes are an integral part of these condensed consolidated financial statements.

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ATN INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

FOR THE THREE MONTHS ENDED MARCH 31 2023 AND 2022

(Unaudited)

(In Thousands, Except Per Share Data)


	Total Equity
				Treasury		Additional				Other		ATNI		Non-
		Common		Stock,		Paid In		Retained		Comprehensive		Stockholders’		Controlling		Total
		Stock		at cost		Capital		Earnings		Income/(Loss)		Equity		Interests		Equity
Balance, December 31, 2022	$	173	$	(73,825)	$	198,449	$	449,806	$	6,210	$	580,813	$	96,016	$	676,829
Purchase of 71,563 shares of common stock		—		(2,840)		—		—		—		(2,840)		—		(2,840)
Stock-based compensation		—		—		1,634		—		—		1,634		144		1,778
Dividends declared on common stock ($0.21 per common share)		—		—		—		(3,315)		—		(3,315)		—		(3,315)
Repurchase of noncontrolling interests		—		—		(68)		—		—		(68)		(527)		(595)
Deemed dividend - redeemable preferred units		—		—		—		(1,045)		—		(1,045)		—		(1,045)
Deemed dividend - redeemable common units		—		—		—		(2,531)		—		(2,531)		2,820		289
Comprehensive income:
Net loss		—		—		—		(5,885)		—		(5,885)		(1,170)		(7,055)
Other comprehensive income		—		—		—		—		480		480		—		480
Total comprehensive income (loss)		—		—		—		(5,885)		480		(5,405)		(1,170)		(6,575)
Balance, March 31, 2023	$	173	$	(76,665)	$	200,015	$	437,030	$	6,690	$	567,243	$	97,283	$	664,526

Balance, December 31, 2021	$	172	$	(71,714)	$	192,132	$	475,887	$	4,773	$	601,250	$	101,003	$	702,253
Purchase of 56,284 shares of common stock		—		(2,081)		—		—		—		(2,081)		—		(2,081)
Stock-based compensation		—		—		1,310		—		—		1,310		150		1,460
Dividends declared on common stock ($0.17 per common share)		—		—		—		(2,675)		—		(2,675)		(263)		(2,938)
Repurchase of noncontrolling interests		—		—		(278)		—		—		(278)		(2,205)		(2,483)
Accrued dividend - redeemable preferred units		—		—		—		(1,116)		—		(1,116)		—		(1,116)
Deemed dividend - redeemable common units		—		—		—		—		—		—		—		—
Comprehensive income:
Net income (loss)		—		—		—		(2,040)		—		(2,040)		83		(1,957)
Other comprehensive income (loss)		—		—		—		—		422		422		—		422
Total comprehensive income (loss)		—		—		—		(2,040)		422		(1,618)		83		(1,535)
Balance, March 31, 2022	$	172	$	(73,795)	$	193,164	$	470,056	$	5,195	$	594,792	$	98,768	$	693,560

The accompanying condensed notes are an integral part of these condensed consolidated financial statements.

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ATN INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THREE MONTHS ENDED MARCH 31, 2023 AND 2022

(In Thousands)


	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities:
Net loss	$	(7,055)	$	(1,957)
Adjustments to reconcile net loss to net cash flows provided by operating activities:
Depreciation and amortization		36,404		33,292
Amortization of intangibles from acquisitions		3,247		3,258
Provision for doubtful accounts		1,378		1,913
Amortization of debt discount and debt issuance costs		569		501
(Gain) loss on disposition of long-lived assets		(167)		3,420
Stock-based compensation		1,778		1,461
Deferred income taxes		(1,953)		191
Loss on pension settlement		369		—
Gain on equity investments		(315)		(4,222)
Changes in operating assets and liabilities, excluding the effects of acquisitions and dispositions:
Accounts receivable		3,573		1,677
Customer receivable		745		(746)
Prepaid income taxes		679		6,206
Accrued taxes		6,953		2,763
Materials and supplies, prepayments, and other current assets		(3,503)		(5,330)
Accounts payable and accrued liabilities, advance payments and deposits and other current liabilities		(24,548)		(27,465)
Other assets		141		(325)
Other liabilities		(2,283)		(3,249)
Net cash provided by operating activities		16,012		11,388
Cash flows from investing activities:
Capital expenditures		(50,598)		(34,220)
Government capital programs
Amounts disbursed		(2,127)		(248)
Amounts received		593		—
Purchases of strategic investments		(630)		—
Net cash used in investing activities		(52,762)		(34,468)
Cash flows from financing activities:
Dividends paid on common stock		(3,310)		(2,672)
Distributions to noncontrolling interests		—		(263)
Payment of debt issuance costs		(119)		—
Finance lease payment		(249)		(338)
Term loan - repayments		(1,171)		(938)
Revolving credit facility – borrowings		57,553		36,500
Revolving credit facility – repayments		(14,000)		(15,500)
Proceeds from customer receivable credit facility		4,300		8,000
Repayment of customer receivable credit facility		(1,570)		(1,003)
Purchases of common stock – stock- based compensation		(1,433)		(1,136)
Purchases of common stock – share repurchase plan		(1,407)		(941)
Repurchases of noncontrolling interests		(595)		(2,481)
Net cash provided by financing activities		37,999		19,228
Net change in cash, cash equivalents, and restricted cash		1,249		(3,852)
Total cash, cash equivalents, and restricted cash, beginning of period		59,728		80,697
Total cash, cash equivalents, and restricted cash, end of period	$	60,977	$	76,845
Noncash investing activity:
Purchases of property, plant and equipment included in accounts payable and accrued expenses	$	16,208	$	13,221

The accompanying condensed notes are an integral part of these condensed consolidated financial statements.

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ATN INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.ORGANIZATION AND BUSINESS OPERATIONS

The Company provides digital infrastructure and communications services in the United States and internationally, including in the Caribbean region, with a focus on smaller markets, many of which are rural or remote, with a growing demand for infrastructure investments, Through its operating subsidiaries, it primarily provides: (i) carrier and enterprise communications services, such as terrestrial and submarine fiber optic transport, and communications tower facilities; and (ii) fixed and mobile telecommunications connectivity to residential, business and government customers, including a range of high-speed internet and data services, fixed and mobile wireless solutions, and video and voice services.

At the holding company level, the Company oversees the allocation of capital within and among its subsidiaries, affiliates, new investments, and stockholders. The Company has developed significant operational expertise and resources that it uses to augment the capabilities of its individual operating subsidiaries in its local markets. The Company has built a platform of resources and expertise to support its operating subsidiaries and to improve their quality of service with greater economies of scale and expertise than would typically be available at the operating subsidiary level. The Company provides management, technical, financial, regulatory, and marketing services to its operating subsidiaries and typically receive a management fee calculated as a percentage of their revenues, which is eliminated in consolidation. The Company also actively evaluates potential acquisitions, investment opportunities and other strategic transactions, both domestic and international, and generally look for those that it believes fit the Company’s profile of telecommunications businesses and have the potential to complement its “glass and steel” and “first to fiber” approach in markets while generating steady excess cash flows over extended periods of time. The Company uses the cash generated from its operations to re-invest in organic growth in its existing businesses, to make strategic investments in additional businesses, and to return cash to its investors through dividends or stock repurchases.

As of March 31, 2023, the Company offered the following types of services to its customers:

●

Mobility Telecommunications Services. The Company offers mobile communications services over its wireless networks and related equipment (such as handsets) to both its business and consumer customers.

●

Fixed Telecommunications Services. The Company provides fixed data and voice telecommunications services to business and consumer customers. These services include consumer broadband and high-speed data solutions for businesses. For some markets, fixed services also include video services and revenue derived from support under certain government programs.

●

Carrier Telecommunication Services. The Company delivers services to other telecommunications providers such as the leasing of critical network infrastructure, such as tower and transport facilities, wholesale roaming, site maintenance and international long-distance services.

●

Managed Services. The Company provides information technology services such as network, application, infrastructure and hosting services to both its business and consumer customers to complement its fixed services in its existing markets.

As was previously disclosed, and effective January 27, 2021, the Company no longer provides distributed generation solar power to commercial and industrial customers. These operations were the only operations within the Company’s Renewable Energy segment. As such, the Company no longer identifies the Renewable Energy segment as

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an operating segment and now has only two operating segments to manage and review its operations and to facilitate investor presentations of its results. These two operating segments are as follows:

●

International Telecom. In the Company’s international markets, it offers fixed services, mobility services, carrier services and managed services to customers in Bermuda, the Cayman Islands, Guyana and the US Virgin Islands.

●

US Telecom. In the United States, the Company offers fixed services, carrier services, and managed services to business and consumer customers in Alaska and the western United States.

The following chart summarizes the operating activities of the Company’s principal subsidiaries, the segments in which it reports its revenue and the markets it served during the three months ended March 31, 2023:


Segment	Services	Markets	Tradenames
International Telecom	Mobility Services	Bermuda, Guyana, US Virgin Islands	One, GTT, Viya
	Fixed Services	Bermuda, Cayman Islands, Guyana, US Virgin Islands	One, Logic, GTT, Viya
	Carrier Services	Bermuda, Guyana, US Virgin Islands	One, GTT, Viya
	Managed Services	Bermuda, Cayman Islands, US Virgin Islands, Guyana	Fireminds, One, Logic, GTT, Viya
US Telecom	Mobility Services	United States (rural markets)	Choice, Choice NTUA Wireless
	Fixed Services	United States	Alaska Communications, Commnet, Choice, Choice NTUA Wireless, Sacred Wind Communications, Ethos
	Carrier Services	United States	Alaska Communications, Commnet, Essextel, Sacred Wind Communications
	Managed Services	United States	Alaska Communications, Choice

For further information about the Company’s financial segments and geographical information about its operating revenues and assets, see Note 13 to the Unaudited Condensed Consolidated Financial Statements included in this Report.

Liquidity

The Company’s 2019 CoBank Credit Facility matures on April 10, 2024, which is within twelve months of the issuance of these consolidated financial statements. At March 31, 2023, the Company owed $122.0 million for amounts drawn under the credit facility. For the year ended December 31, 2022, the Company generated positive cash flows from operating activities of $102.9 million. At March 31, 2023, the Company had $56.0 million of unrestricted cash and

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cash equivalents and $5.0 million of restricted cash. If the Company is unable to refinance its existing debt or obtain additional financing on or before the maturity of the 2019 CoBank Credit Facility, this could impact the Company’s ability to meet its obligations coming due within one year after issuance of these consolidated financial statements. Management is actively pursuing debt financing options which would extend the maturity date of the 2019 CoBank Credit Facility and may increase its capacity, and management expects to complete this financing process during 2023. In the event the Company is unable to refinance or replace its 2019 CoBank Credit Facility, the Company has additional actions at its discretion, including reducing capital expenditures not required to sustain current network operations, reducing operating cash outflows such as marketing and general and administrative expenses, and pursuing equity financing through issuance of equity securities in public markets. However, management does not currently believe these additional actions will be required to be implemented due to its debt refinancing plans.

In light of the plans discussed above, management believes it is probable the Company will meet its obligations as they come due for a minimum of twelve months from the issuance date of these consolidated financial statements. However, if the Company were unable to refinance its existing debt, obtain additional financing, or implement the above plans, as needed, there could be an adverse impact on the Company’s operations.

Restructuring Expense

In connection with the repositioning of the Company’s legacy wholesale roaming operations in its US Telecom segment, the Company recorded a $2.9 million restructuring charge during the three months ended March 31, 2023 related to the decommissioning of certain cell sites. The charge is recorded in the Restructuring Expense on the Company’s statement of operations. As of March 31, 2023, the Company paid $0.5 million, recorded a gain of $0.3 million on lease termination, and accrued $2.7 million of the restructuring expenses. In conjunction with the restructuring the Company terminated $5.0 million of lease right of use assets and $5.3 million of lease liabilities from its balance sheet.

2. BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The financial information included herein is unaudited; however, the Company believes such information and the disclosures herein are adequate to make the information presented not misleading and reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair statement of the Company’s financial position and results of operations for the periods described therein. The year-end condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. Results of interim periods may not be indicative of results for the full year. These condensed consolidated financial statements and related notes should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 15, 2023.

The condensed consolidated financial statements include the accounts of the Company, its subsidiaries in which the Company holds controlling interests and certain entities which are consolidated in accordance with the provisions of the Financial Accounting Standards Board’s (“FASB”) authoritative guidance on the consolidation of variable interest entities, since it is determined that the Company is the primary beneficiary of these entities.

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3. REVENUE RECOGNITION AND RECEIVABLES

Revenue Accounted for in Accordance with Other Guidance

The Company records revenue in accordance with ASC 606 from contracts with customers and ASC 842 from lease agreements, as well as government grants. Lease revenue recognized under ASC 842 is disclosed in Note 4 and government grant revenue is disclosed in Note 9.

Timing of Revenue Recognition

Revenue accounted for in accordance with ASC 606 consisted of the following for the periods presented below.


	Three months ended
		March 31, 2023		March 31, 2022
Services transferred over time
US Telecom	$	81,072	$	72,290
International Telecom		85,680		81,302
Total		166,752		153,592
Goods and services transferred at a point in time
US Telecom		2,546		3,597
International Telecom		3,259		2,723
Total		5,805		6,320
Total revenue accounted for under ASC 606		172,557		159,912

Contract Assets and Liabilities

The Company recognizes contract assets and liabilities on its balance sheet. Contract assets represent unbilled amounts typically resulting from consumer Mobility contracts with both a multiyear service period and a promotional discount. In these contracts, the revenue recognized exceeds the amount billed to the customer. The current portion of the contract asset is recorded in prepayments and other current assets and the noncurrent portion is included in other assets on the Company’s balance sheets.

Contract liabilities consist of advance payments and billings in excess of revenue recognized. Mobility and Fixed revenue for postpaid customers is generally billed one month in advance and recognized over the period that the corresponding service is rendered to customers. To the extent the service is not provided by the reporting date the amount is recognized as a contract liability. Prepaid service, including Mobility services, sold to customers is recorded as deferred revenue prior to the commencement of services. Contract liabilities also include certain long term fixed business and carrier service customer contracts. Contract liabilities are recorded in advanced payments and deposits and other liabilities on the Company’s balance sheets.

In July 2019, the Company entered into a Network Build and Maintenance Agreement with AT&T Mobility, LLC (“AT&T”) and subsequently entered into amendments in August 2020, May 2021 and August 2022 (the “FirstNet Agreement”). In connection with the FirstNet Agreement, the Company is building a portion of AT&T’s network for the First Responder Network Authority in or near the Company’s current operating areas in the western United States (the “FirstNet Transaction”). The FirstNet Transaction includes construction and service performance obligations. The Company allocated the transaction price of the FirstNet Agreement to each performance obligation based on the relative standalone selling price of each performance obligation in the contract. The standalone selling price is the estimated price the Company would charge for the good or service in a separate transaction with similar customers in similar circumstances. The current portion of receivables under this agreement is recorded in customer receivable and the long-term portion is recorded in customer receivable long-term on the Company’s balance sheet.

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Contract assets and liabilities consisted of the following (amounts in thousands):


	March 31, 2023		December 31, 2022			$ Change	% Change
Contract asset – current	$	3,010	$	2,932	$	78	3	%
Contract asset – noncurrent		3,734		3,775		(41)	(1)	%
Contract liability – current		(26,086)		(27,284)		1,198	4	%
Contract liability – noncurrent		(70,444)		(72,543)		2,099	3	%
Net contract liability	$	(89,786)	$	(93,120)	$	3,334	4	%

The contract asset – current is included in prepayments and other current assets and the contract asset – noncurrent is included in other assets on the Company’s balance sheet. The contract liability – current is included in advance payments and deposits and the contract liability – noncurrent is included in other liabilities on the Company’s balance sheet. The decrease in the Company’s net contract liability was due to the timing of customer prepayments, contract billings, and recognition of deferred revenue. During the three months ended March 31, 2023, the Company recognized revenue of $14.8 million related to its December 31, 2022 contract liability and amortized $0.7 million of the December 31, 2022 contract asset to revenue.

Contract Acquisition Costs

The March 31, 2023 balance sheet includes contract acquisition costs of $9.0 million in other assets. During the three months ended March 31, 2023 and 2022, the Company amortized $1.1 million and $0.8 million, respectively, of contract acquisition costs.

Remaining Performance Obligations

Remaining performance obligations represent the transaction price allocated to unsatisfied performance obligations of certain multiyear Mobility contracts, which include a promotional discount, Managed Services contracts, and the Company’s Carrier Services construction and service contracts. The transaction price allocated to unsatisfied performance obligations was $286 million and $312 million at March 31, 2023 and December 31, 2022, respectively. The Company expects to satisfy approximately 50% of the remaining performance obligations and recognize the transaction price within 24 months and the remainder thereafter.

The Company has certain Mobility, Fixed, and Carrier Services contracts where the transaction price is allocated to remaining performance obligations. However, the Company omits these contracts from its disclosure by applying the right to invoice, one year or less, and wholly unsatisfied performance obligation practical expedients.

Disaggregation

The Company's revenue is presented on a disaggregated basis in Note 13 based on an evaluation of disclosures outside the financial statements, information regularly reviewed by the chief operating decision makers for evaluating the financial performance of operating segments and other information that is used for performance evaluation and resource allocations. This includes revenue from Communication Services, Construction, and Other revenue. Communication Services revenue is further disaggregated into business and consumer Mobility, business and consumer Fixed, Carrier Services, and Other services. Other revenue is further disaggregated into Managed Services revenue.

Receivables

The Company records an estimate of future credit losses in conjunction with the revenue transaction based on the information available including historical experience and management’s expectations of future conditions. Those estimates will be updated as additional information becomes available. The Company’s allowance for uncollectible

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accounts receivable is based on management’s assessment of the collectability of assets pooled together with similar risk characteristics.

At March 31, 2023, the Company had gross accounts receivable of $152.3 million, an allowance for credit losses of $16.0 million and a receivable under the FirstNet Agreement totaling $51.8 million of which $6.1 million was current and $45.7 million was long-term. At December 31, 2022, the Company had gross accounts receivable of $154.5 million, an allowance for credit losses of $15.2 million and a receivable under the FirstNet Agreement totaling $52.5 million, of which $5.8 million was current and $46.7 million was long-term. The Company monitors receivables through the use of historical operating data adjusted for the expectation of future performance as appropriate. Activity in the allowance for credit losses is below:


	Three months ended
	March 31, 2023		March 31, 2022

Balance at beginning of period	$	15,171	$	13,885
Current period provision for expected losses		1,378		1,913
Write-offs charged against the allowance		(591)		(862)
Recoveries collected		74		108
Balance at end of period	$	16,032	$	15,044

4. LEASES

Lessee Disclosure

The Company has operating and financing leases for towers, land, corporate offices, retail facilities, and data transport capacity. The lease terms are generally between three and 10 years, some of which include additional renewal options.

Supplemental lease information

The components of lease expense were as follows (in thousands):


	Three months ended
	March 31, 2023		March 31, 2022
Operating lease cost:
Operating lease cost	$	5,981	$	6,142
Short-term lease cost		677		509
Variable lease cost		662		804
Total operating lease cost	$	7,320	$	7,455

Finance lease cost:
Amortization of right-of-use asset	$	699	$	797
Variable costs		203		248
Interest costs		84		102
Total finance lease cost	$	986	$	1,147

During the three months ended March 31, 2023 and 2022, the Company paid $5.0 million and $5.6 million, respectively, for operating lease liabilities. During the three months ended March 31, 2023 and 2022, the Company recorded $2.9 million and $3.7 million, respectively, of operating lease liabilities arising from ROU assets. During the three months ended March 31, 2023, in conjunction with the restructuring activities the Company terminated $5.0

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million of lease right of use assets, $5.3 million of lease liabilities from its balance sheet, and recorded a gain of $0.3 million in the restructuring expense line of its statement of operations.

At March 31, 2023, finance leases with a cost of $27.5 million and accumulated amortization of $14.1 million were included in property, plant and equipment. During the three months ended March 31, 2023, the Company paid $0.2 million of financing cash flows, $0.9 million of investing cash flows and $0.1 million of operating cash flows for finance lease liabilities. At March 31, 2023, finance leases had a lease liability of $5.1 million, of which $1.0 million was current.

At December 31, 2022, finance leases with a cost of $26.6 million and accumulated amortization of $13.5 million were included in property, plant and equipment.

The weighted average remaining lease terms and discount rates as of March 31, 2023 and December 31, 2022 are noted in the table below:


	March 31, 2023		December 31, 2022
Weighted-average remaining lease term
Operating leases		13.1 years		12.4 years
Financing leases		9.3 years		9.3 years

Weighted-average discount rate
Operating leases		6.1%		6.0%
Financing leases		6.9%		6.7%

Maturities of lease liabilities as of March 31, 2023 were as follows (in thousands):


	Operating Leases		Financing Leases
2023 (excluding the three months ended March 31, 2023)		12,977		1,045
2024		17,023		1,240
2025		13,897		972
2026		9,771		504
2027		7,708		495
Thereafter		79,134		2,651
Total lease payments		140,510		6,907
Less imputed interest		(53,450)		(1,822)
Total	$	87,060	$	5,085

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Maturities of lease liabilities as of December 31, 2022 were as follows (in thousands):


	Operating Leases		Financing Leases
2023	$	19,417	$	1,403
2024		17,836		1,342
2025		14,805		978
2026		10,505		504
2027		8,096