SEC Filing | ATN International, Inc.

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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 June 30, 2024


☐	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 August 9, 2024, the registrant had outstanding 15,114,216 shares of its common stock ($.01 par value).

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ATN INTERNATIONAL, INC.

FORM 10-Q

Quarter Ended June 30, 2024


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 June 30, 2024 and December 31, 2023	4

	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2024 and 2023	5

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2024 and 2023	6

	Condensed Consolidated Statements of Equity for the Three and Six Months Ended June 30, 2024 and 2023	7

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023	9

	Notes to Unaudited Condensed Consolidated Financial Statements	10

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40-69

Item 3	Quantitative and Qualitative Disclosures About Market Risk	69

Item 4	Controls and Procedures	70

PART II—OTHER INFORMATION		70

Item 1	Legal Proceedings	70

Item 1A	Risk Factors	70

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	70

Item 5	Other Information	71

Item 6	Exhibits	72

SIGNATURES		73

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, the Company’s future financial performance, business goals and objectives, and results of operations, expectations regarding its strategic investment plan, its future revenues, operating income, operating margin, cash flows, network and operating costs, EBITDA, Adjusted EBITDA, Net Debt, Net Debt Ratio, cost management initiatives, and capital investments; demand for the Company’s services and industry trends; the timing of revenue, the Company’s liquidity; the expansion of the Company’s customer base and networks; receipt of certain government grants and management’s plans, expectations 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) the general performance of the Company’s operations, including operating margins, revenues, capital expenditures, the impact of cost savings initiatives, and the retention of and future growth of the Company’s subscriber base and ARPU; (2) the Company’s reliance on a limited number of key suppliers and vendors for timely supply of equipment and services relating to the Company’s network infrastructure; (3) the Company’s ability to satisfy the needs and demands of the Company’s major carrier customers; (4) the Company’s ability to realize expansion plans for its fiber markets; (5) the adequacy and expansion capabilities of the Company’s network capacity and customer service system to support the Company’s customer growth; (6) the Company’s ability to efficiently and cost-effectively upgrade the Company’s networks and information technology platforms to address rapid and significant technological changes in the telecommunications industry; (7) the Company’s continued access to capital and credit markets on terms it deems favorable; (8) government subsidy program availability and regulation of the Company’s businesses, which may impact the Company’s telecommunications licenses, the Company’s revenue and the Company’s operating costs; (9) the Company’s ability to successfully transition its US Telecom business away from wholesale mobility to other carrier and consumer-based services; (10) ongoing risk of an economic downturn, political, geopolitical and other risks and opportunities facing the Company’s operations, including those resulting from the continued inflation and other macroeconomic headwinds including increased costs and supply chain disruptions; (11) management transitions, and the loss of, or an inability to recruit skilled personnel in the Company’s various jurisdictions, including key members of management; (12) the Company’s ability to find investment or acquisition or disposition opportunities that fit the strategic goals of the Company; (13) the occurrence of weather events and natural catastrophes and the Company’s ability to secure the appropriate level of insurance coverage for these assets; and the impact of such events on the timing of project implementation and corresponding revenue, and (14) increased competition. 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” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 15, 2024, and the other reports the Company files from time to time with the SEC. The Company undertakes no obligation and has 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.

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)


	June 30,		December 31,
	2024		2023
ASSETS
Current Assets:
Cash and cash equivalents	$	58,932	$	49,225
Restricted cash		14,321		12,942
Short-term investments		300		300
Accounts receivable, net of allowances for credit losses of $16.4 million		98,324		88,030
Replace and remove program receivable		42,773		50,586
Customer receivable		7,746		7,249
Inventory, materials and supplies		15,067		19,133
Prepayments and other current assets		58,433		53,807
Total current assets		295,896		281,272

Fixed Assets, net		1,061,322		1,080,659
Telecommunication licenses, net		113,319		113,319
Goodwill		40,104		40,104
Intangible assets, net		15,788		19,585
Operating lease right-of-use assets		97,738		99,335
Customer receivable - long term		43,761		45,676
Other assets		104,413		103,764
Total assets	$	1,772,341	$	1,783,714
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current Liabilities:
Current portion of long-term debt	$	16,573	$	24,290
Current portion of customer receivable credit facility		7,659		7,110
Accounts payable and accrued liabilities		163,902		182,069
Dividends payable		3,626		3,701
Accrued taxes		11,994		10,876
Current portion of lease liabilities		15,074		15,164
Advance payments and deposits		50,057		49,984
Total current liabilities		268,885		293,194
Deferred income taxes		17,754		19,775
Lease liabilities, excluding current portion		75,592		76,936
Deferred revenue, long-term		59,373		64,035
Other liabilities		75,943		74,531
Customer receivable credit facility, net of current portion		38,442		38,943
Long-term debt, excluding current portion		524,262		492,580
Total liabilities		1,060,251		1,059,994
Redeemable noncontrolling interests:
Preferred redeemable noncontrolling interests		62,821		60,094
Common redeemable noncontrolling interests		20,504		25,823
Total redeemable noncontrolling interests		83,325		85,917
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; 17,879,110 and 17,702,476 shares issued, respectively, 15,114,216 and 15,421,481 shares outstanding, respectively		173		173
Treasury stock, at cost; 2,764,894 and 2,280,995 shares, respectively		(102,379)		(90,447)
Additional paid-in capital		209,944		205,797
Retained earnings		409,043		417,282
Accumulated other comprehensive income		9,990		8,268
Total ATN International, Inc. stockholders’ equity		526,771		541,073
Noncontrolling interests		101,994		96,730
Total equity		628,765		637,803
Total liabilities, redeemable noncontrolling interests and equity	$	1,772,341	$	1,783,714

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 AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023

(Unaudited)

(In Thousands, Except Per Share Data)


	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
REVENUE:
Communication services	$	177,365	$	181,576	$	358,633	$	362,883
Construction		820		1,020		2,406		1,610
Other		5,096		3,845		9,037		7,721
Total revenue		183,281		186,441		370,076		372,214
OPERATING EXPENSES (excluding depreciation and amortization unless otherwise indicated):
Cost of communication services and other		76,137		77,718		156,527		156,759
Cost of construction revenue		813		1,016		2,382		1,604
Selling, general and administrative		57,661		61,914		118,979		123,262
Stock-based compensation		2,781		2,739		4,690		4,517
Transaction-related charges		—		438		19		451
Restructuring expenses		—		370		1,190		3,257
Depreciation and amortization		35,558		36,217		69,897		72,621
Amortization of intangibles from acquisitions		1,945		3,144		3,924		6,391
(Gain) loss on disposition of assets		(15,930)		445		(16,422)		278
Total operating expenses		158,965		184,001		341,186		369,140
Income from operations		24,316		2,440		28,890		3,074
OTHER INCOME (EXPENSE)
Interest income		140		45		586		227
Interest expense		(12,337)		(10,449)		(23,857)		(19,256)
Other income (expense)		(578)		2,216		(406)		2,411
Other (expense)		(12,775)		(8,188)		(23,677)		(16,618)
INCOME (LOSS) BEFORE INCOME TAXES		11,541		(5,748)		5,213		(13,544)
Income tax expense (benefit)		204		(5,087)		1,822		(5,827)
NET INCOME (LOSS)		11,337		(661)		3,391		(7,717)
Net (income) loss attributable to noncontrolling interests, net of tax (benefit) expense of $(0.4) million, $(0.7) million, $(0.1) million and $(1.2) million respectively		(2,334)		1,428		(701)		2,599
NET INCOME (LOSS) ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS	$	9,003	$	767	$	2,690	$	(5,118)
NET INCOME (LOSS) PER WEIGHTED AVERAGE SHARE ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS:
Basic	$	0.50	$	(0.03)	$	(0.00)	$	(0.48)
Diluted	$	0.50	$	(0.03)	$	(0.00)	$	(0.48)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		15,254		15,719		15,346		15,726
Diluted		15,255		15,719		15,346		15,726
DIVIDENDS PER SHARE APPLICABLE TO COMMON STOCK	$	0.24	$	0.21	$	0.48	$	0.42

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 AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023

(Unaudited)

(In Thousands)


	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
Net Income (loss)	$	11,337	$	(661)	$	3,391	$	(7,717)
Other comprehensive income (loss):
Foreign currency translation adjustment, net of tax expense of $0 and $0 million		—		118		—		229
Reclassification of loss on pension settlement, net of $(0.1) and $(0.1) million of tax		—		(174)		—		195
Unrealized gain on derivatives, net of tax expense of $(0.1) million and $(0.6) million		290		—		1,722		—
Other comprehensive income (loss), net of tax		290		(56)		1,722		424
Comprehensive income (loss)		11,627		(717)		5,113		(7,293)
Less: Comprehensive income (loss) attributable to noncontrolling interests		(2,334)		1,428		(701)		2,599
Comprehensive income (loss) attributable to ATN International, Inc.	$	9,293	$	711	$	4,412	$	(4,694)

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 AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023

(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, March 31, 2024	$	173	$	(92,463)	$	207,551	$	405,031	$	9,700	$	529,992	$	98,724	$	628,716
Purchase of 420,959 shares of common stock		—		(9,916)		—		—		—		(9,916)		—		(9,916)
Stock-based compensation		—		—		2,393		—		—		2,393		388		2,781
Dividends declared on common stock ($0.24 per common share)		—		—		—		(3,626)		—		(3,626)		(2,115)		(5,741)
Accrued dividend - redeemable preferred units		—		—		—		(1,376)		—		(1,376)		—		(1,376)
Deemed dividend - redeemable common units		—		—		—		11		—		11		2,663		2,674
Comprehensive income:
Net income		—		—		—		9,003		—		9,003		2,334		11,337
Other comprehensive income		—		—		—		—		290		290		—		290
Total comprehensive income		—		—		—		9,003		290		9,293		2,334		11,627
Balance, June 30, 2024	$	173	$	(102,379)	$	209,944	$	409,043	$	9,990	$	526,771	$	101,994	$	628,765

Balance, March 31, 2023	$	173	$	(76,665)	$	200,015	$	437,030	$	6,690	$	567,243	$	97,283	$	664,526
Purchase of 146,134 shares of common stock		—		(5,421)		—		—		—		(5,421)		—		(5,421)
Stock-based compensation		—		—		2,621		—		—		2,621		118		2,739
Dividends declared on common stock ($0.21 per common share)		—		—		—		(3,273)		—		(3,273)		(1,448)		(4,721)
Repurchase of noncontrolling interests		—		—		(13)		—		—		(13)		(152)		(165)
Accrued dividend - redeemable preferred units		—		—		—		(1,260)		—		(1,260)		—		(1,260)
Deemed dividend - redeemable common units		—		—		—		(3,355)		—		(3,355)		3,350		(5)
Comprehensive income:
Net income (loss)		—		—		—		767		—		767		(1,428)		(661)
Other comprehensive loss		—		—		—		—		(56)		(56)		—		(56)
Total comprehensive income (loss)		—		—		—		767		(56)		711		(1,428)		(717)
Balance, June 30, 2023	$	173	$	(82,086)	$	202,623	$	429,909	$	6,634	$	557,253	$	97,723	$	654,976

Table of Contents


	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, 2023	$	173	$	(90,447)	$	205,797	$	417,282	$	8,268	$	541,073	$	96,730	$	637,803
Purchase of 483,899 shares of common stock		—		(11,932)		—		—		—		(11,932)		—		(11,932)
Stock-based compensation		—		—		4,147		—		—		4,147		543		4,690
Dividends declared on common stock ($0.48 per common share)		—		—		—		(7,345)		—		(7,345)		(2,156)		(9,501)
Accrued dividend - redeemable preferred units		—		—		—		(2,727)		—		(2,727)		—		(2,727)
Deemed dividend - redeemable common units		—		—		—		(857)		—		(857)		6,176		5,319
Comprehensive income:
Net income		—		—		—		2,690		—		2,690		701		3,391
Other comprehensive income		—		—		—		—		1,722		1,722		—		1,722
Total comprehensive income		—		—		—		2,690		1,722		4,412		701		5,113
Balance, June 30, 2024	$	173	$	(102,379)	$	209,944	$	409,043	$	9,990	$	526,771	$	101,994	$	628,765

Balance, December 31, 2022	$	173	$	(73,825)	$	198,449	$	449,806	$	6,210	$	580,813	$	96,016	$	676,829
Purchase of 217,697 shares of common stock		—		(8,261)		—		—		—		(8,261)		—		(8,261)
Stock-based compensation		—		—		4,255		—		—		4,255		262		4,517
Dividends declared on common stock ($0.42 per common share)		—		—		—		(6,588)		—		(6,588)		(1,447)		(8,035)
Repurchase of noncontrolling interests		—		—		(81)		—		—		(81)		(679)		(760)
Accrued dividend - redeemable preferred units		—		—		—		(2,306)		—		(2,306)		—		(2,306)
Deemed dividend - redeemable common units		—		—		—		(5,885)		—		(5,885)		6,170		285
Comprehensive income:
Net loss		—		—		—		(5,118)		—		(5,118)		(2,599)		(7,717)
Other comprehensive income		—		—		—		—		424		424		—		424
Total comprehensive income (loss)		—		—		—		(5,118)		424		(4,694)		(2,599)		(7,293)
Balance, June 30, 2023	$	173	$	(82,086)	$	202,623	$	429,909	$	6,634	$	557,253	$	97,723	$	654,976

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 THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023

(Unaudited)

(In Thousands)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net income (loss)	$	3,391	$	(7,717)
Adjustments to reconcile net loss to net cash flows provided by operating activities:
Depreciation and amortization		69,897		72,621
Amortization of intangibles from acquisitions		3,924		6,391
Provision for doubtful accounts		2,855		2,463
Amortization of debt discount and debt issuance costs		1,249		1,162
(Gain) loss on disposition of assets and contingent consideration		(16,422)		278
Stock-based compensation		4,690		4,517
Deferred income taxes		(2,550)		(6,616)
Loss on pension settlement		—		369
Gain on investments		(218)		(2,501)
Changes in operating assets and liabilities, excluding the effects of acquisitions and dispositions:
Accounts receivable and replace and remove program receivable		(8,751)		1,311
Customer receivable		1,418		1,186
Prepaid income taxes		23		739
Accrued taxes		250		2,563
Materials and supplies, prepayments, and other current assets		2,208		220
Accounts payable and accrued liabilities, advance payments and deposits and other current liabilities		(1,110)		(6,860)
Other assets		727		(4,552)
Other liabilities		(3,171)		(5,245)
Net cash provided by operating activities		58,410		60,329
Cash flows from investing activities:
Capital expenditures		(61,830)		(89,451)
Government capital programs
Amounts disbursed		(46,198)		(6,986)
Amounts received		43,686		593
Purchases of strategic investments		—		(1,055)
Acquisition of business		—		1,314
Purchase of intangible assets		(573)		—
Purchase of investments - employee benefit plan		(39)		—
Proceeds from investments - employee benefit plan		201		—
Proceeds from sale of assets		17,910		—
Net cash used in investing activities		(46,843)		(95,585)
Cash flows from financing activities:
Dividends paid on common stock		(7,421)		(6,633)
Distributions to noncontrolling interests		(2,116)		(1,447)
Payment of debt issuance costs		(974)		(159)
Finance lease payments		(915)		(481)
Term loan - repayments		(12,112)		(2,335)
Revolving credit facility – borrowings		75,000		88,273
Revolving credit facility – repayments		(40,002)		(26,500)
Proceeds from customer receivable credit facility		3,700		4,300
Repayment of customer receivable credit facility		(3,709)		(3,247)
Purchases of common stock – stock- based compensation		(1,932)		(1,433)
Purchases of common stock – share repurchase plan		(10,000)		(6,828)
Repurchases of noncontrolling interests		—		(760)
Net cash (used in) provided by financing activities		(481)		42,750
Net change in cash, cash equivalents, and restricted cash		11,086		7,494
Total cash, cash equivalents, and restricted cash, beginning of period		62,167		59,728
Total cash, cash equivalents, and restricted cash, end of period	$	73,253	$	67,222
Supplemental cash flow information:
Interest paid	$	22,589	$	18,299
Taxes paid	$	4,615	$	2,203
Dividends declared, not paid	$	3,626	$	3,273
Noncash investing activity:
Purchases of property, plant and equipment included in accounts payable and accrued expenses
Amounts accrued for reimbursable capital expenditures from government capital programs	$	27,418	$	11,296
Amounts accrued for non-reimbursable capital expenditures	$	12,928	$	20,433

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 is a leading provider of digital infrastructure and communications services with a focus on rural and remote markets in the United States, and internationally, including Bermuda and the Caribbean region.

The Company has developed significant operational expertise and resources that it uses to augment its capabilities in its local markets. With this support, the Company’s operating subsidiaries are able to improve their quality of service with greater economies of scale and expertise than would typically be available in the size markets they operate in. The Company provides management, technical, financial, regulatory, and marketing services to its operating subsidiaries and typically receives a management fee calculated as a percentage of their revenues, which is eliminated in consolidation. The Company also actively evaluates investment opportunities and other strategic transactions, both domestic and international, and generally looks for those that it believes fit the Company’s profile of telecommunications businesses and have the potential to complement the Company’s “First-to-Fiber” and “Glass & Steel™” approach in markets while keeping a focus on generating excess operating cash flows over extended periods of time. The Company uses the cash generated from its operations to maintain an appropriate ratio of debt and cash on hand and to fund growth and capital expenditures, to return cash to its stockholders through dividends or stock repurchases, and make strategic investments or acquisitions.

For further information about the Company’s financial segments and geographical information about its operating revenues and assets, see Notes 1 and 12 to the Consolidated Financial Statements included in this Report.

As of June 30, 2024, the Company offered the following types of services to its customers:

●

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

●

Fixed Telecommunications Services. The Company provides fixed data and voice telecommunications services and related equipment, such as modems, 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 including the leasing of critical network infrastructure such as tower and transport facilities, wholesale roaming and long distance voice services, 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.

Through June 30, 2024, the Company identified 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

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services to business customers and consumers in Alaska and the western United States. As of June 30, 2024 the Company provided mobility services to retail customers in 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 June 30, 2024:


International Telecom			US Telecom
Services	Markets	Tradenames	Services	Markets	Tradenames
Mobility Services	Bermuda, Guyana, US Virgin Islands	One, GTT, Viya, Brava	Mobility Services	United States (rural markets)	Choice, Choice NTUA Wireless
Fixed Services	Bermuda, Cayman Islands, Guyana, US Virgin Islands	One, Logic, GTT, Viya, Brava	Fixed Services	United States	Alaska Communications, Commnet, Choice, Choice NTUA Wireless, Sacred Wind Communications, Ethos, Deploycom
Carrier Services	Bermuda, Guyana, US Virgin Islands	One, Essextel, GTT, Viya	Carrier Services	United States	Alaska Communications, Commnet, Sacred Wind Communications
Managed Services	Bermuda, Cayman Islands, US Virgin Islands, Guyana	Fireminds, One, Logic, GTT, Viya, Brava	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 12 to the Unaudited Condensed Consolidated Financial Statements included in this Report.

Restructuring Expense

In order to reduce the Company’s US Telecom and International Telecom segments’ cost structure, the Company has incurred, since the first quarter of 2023, certain network termination and reduction in force costs totaling $12.4 million through June 30, 2024. No further expenses are currently expected under this restructuring plan. Of this amount, $1.2 million and $3.3 million were recorded during the six months ended June 30, 2024 and 2023, respectively. A summary of the costs, since the first quarter of 2023, is below (in thousands):


		US		International
		Telecom		Telecom		Total
Employee termination benefits	$	1,960	$	4,681	$	6,641
Contract termination costs		5,777		—		5,777
Total	$	7,737	$	4,681	$	12,418

The charge is recorded in Restructuring Expenses on the Company’s Consolidated Statements of Operations. During the six months ended June 30, 2024, the Company paid $4.8 million of the restructuring costs. In total, since the first quarter of 2023 and through June 30, 2024, the Company paid $10.5 million, recorded a gain of $0.3 million on lease termination, and $2.2 million of the restructuring costs remain accrued. In conjunction with the restructuring, the Company terminated certain leases and removed $5.6 million of lease right of use assets and $5.9 million of lease liabilities from its balance sheet.

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Asset Disposition

During the three months ended June 30, 2024, the Company’s International Telecom segment disposed of a non-core fixed asset recording a gain of $15.8 million on the transaction. The Company received cash proceeds of $17.8 million which was offset by the asset’s book value of $0.5 million and $1.5 million of transaction costs.

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, 2023, filed with the SEC on March 15, 2024.

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.

Recent Accounting Pronouncements

In December 2023, the FASB released ASU 2023-09, titled "Enhancements to Income Tax Disclosures," with the aim of improving the clarity and usefulness of income tax disclosures. The update focuses primarily on enhancing disclosures related to rate reconciliation and income taxes paid. ASU 2023-09 becomes effective for annual reporting periods starting after December 15, 2024, with early adoption permitted. While the changes prescribed by ASU 2023-09 are implemented prospectively, retrospective application is also allowed. The Company has chosen not to early adopt this standard and is currently assessing its potential impact on our consolidated financial statements and accompanying disclosures.

In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (ASU 2023-07), which requires that a public entity disclose, on an interim and annual basis, significant segment expense categories and amounts that are regularly provided to its chief operating decision maker (CODM) and included in each reported measure of segment profit or loss. An entity must also disclose, by reportable segment, the amount and composition of other expenses. The standard requires an entity to disclose the title and position of its CODM and explain how the CODM uses these reported measures in assessing segment performance and determining how to allocate resources. ASU 2023-07 will be effective for annual periods beginning after December 15, 2023, and interim periods beginning after December 31, 2024, with retrospective application. The standard allows early adoption of these requirements and we are currently evaluating the disclosure impacts of our adoption.

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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 8.

Timing of Revenue Recognition

Revenue accounted for in accordance with ASC 606 consisted of the following for the periods presented below (in thousands):


	Three months ended June 30, 2024						Three months ended June 30, 2023
	International		US				International		US
	Telecom		Telecom		Total		Telecom		Telecom		Total
Services transferred over time	$	90,271	$	71,829	$	162,100	$	86,730	$	80,330	$	167,060
Goods and services transferred at a point in time		3,618		3,648		7,266		3,781		2,597		6,378
Total revenue accounted for under ASC 606	$	93,889	$	75,477	$	169,366	$	90,511	$	82,927	$	173,438
Operating lease income		75		2,036		2,111		73		1,887		1,960
Government grant revenue (1)		1,393		10,411		11,804		1,397		9,646		11,043
Total revenue	$	95,357	$	87,924	$	183,281	$	91,981	$	94,460	$	186,441


	Six months ended June 30, 2024						Six months ended June 30, 2023
	International		US				International		US
	Telecom		Telecom		Total		Telecom		Telecom		Total
Services transferred over time	$	178,831	$	149,872	$	328,703	$	172,409	$	161,403	$	333,812
Goods and services transferred at a point in time		6,652		6,919		13,571		7,040		5,144		12,184
Total revenue accounted for under ASC 606	$	185,483	$	156,791	$	342,274	$	179,449	$	166,547	$	345,996
Operating lease income		147		4,070		4,217		145		3,717		3,862
Government grant revenue (1)		2,786		20,799		23,585		2,795		19,561		22,356
Total revenue	$	188,416	$	181,660	$	370,076	$	182,389	$	189,825	$	372,214

(1)

Revenue recognized from CAF II, USF and RDOF programs. Refer to Note 8.

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. The current portion of contract liabilities are recorded in advanced payments and deposits and the noncurrent portion is included in deferred revenue, long-term on the Company’s balance sheets.

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In July 2019, the Company entered into a Network Build and Maintenance Agreement with AT&T Mobility, LLC (“AT&T”) that was subsequently amended through December 31, 2023 (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 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.

In May 2023, the Company amended its current roaming agreement and entered into a carrier management services agreement with Verizon Wireless (the “Verizon CMS Agreement”). The transaction includes service performance obligations under which revenue is recognized over time. The Company allocates the transaction price of these agreements 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.

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


	June 30, 2024		December 31, 2023			$ Change	% Change
Contract asset – current	$	3,701	$	3,616	$	85		2.4	%
Contract asset – noncurrent		5,149		5,509		(360)		(6.5)	%
Contract liability – current		(32,283)		(30,990)		(1,293)		4.2	%
Contract liability – noncurrent		(59,373)		(64,035)		4,662		(7.3)	%
Net contract liability	$	(82,806)	$	(85,900)	$	3,094		(3.6)	%

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 six months ended June 30, 2024, the Company recognized revenue of $22.2 million related to its December 31, 2023 contract liability and amortized $2.5 million of the December 31, 2023 contract asset to revenue.

Contract Acquisition Costs

The June 30, 2024 and 2023 balance sheets include contract acquisition costs of $10.9 million and $9.7 million, respectively, in other assets. During the three and six months ended June 30, 2024, the Company amortized $1.7 million and $3.3 million, respectively, of contract acquisition costs. During the three and six months ended June 30, 2023, the Company amortized $1.6 million and $2.7 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 and Fixed communication services contracts, Managed Services contracts, and the Company’s Carrier Services construction and service contracts. The transaction price allocated to unsatisfied performance obligations was $579 million at June 30, 2024. The Company expects to satisfy approximately 40% of the remaining performance obligations and recognize the transaction price within 24 months and approximately $60 million annually from 2026 through 2031.

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.

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Disaggregation

The Company's revenue is presented on a disaggregated basis in Note 12 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 are updated as additional information becomes available. The Company’s allowance for uncollectible accounts receivable is based on management’s assessment of the collectability of assets pooled together with similar risk characteristics.

The Company had gross accounts receivable of $114.8 million and an allowance for credit losses of $16.4 million as of June 30, 2024. In addition, the Company had receivables under the FirstNet Agreement totaling $51.5 million, of which $43.8 million was long-term. At December 31, 2023, the Company had gross accounts receivable of $104.4 million and an allowance for credit losses of $16.4 million and a receivable under the FirstNet Agreement totaling $52.9 million, of which $45.7 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 (in thousands):


	Six months ended
	June 30, 2024		June 30, 2023

Balance at beginning of period	$	16,362	$	15,171
Current period provision for expected losses		2,855		2,463
Write-offs charged against the allowance		(2,918)		(1,878)
Recoveries collected		133		188
Balance at end of period	$	16,432	$	15,944

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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				Six months ended
	June 30, 2024		June 30, 2023		June 30, 2024		June 30, 2023
Operating lease cost:
Operating lease cost	$	5,626	$	5,763	$	11,105	$	11,744
Short-term lease cost		757		625		1,448		1,303
Variable lease cost		1,695		1,383		3,124		2,045
Total operating lease cost	$	8,078	$	7,771	$	15,677	$	15,092

Finance lease cost:
Amortization of right-of-use asset	$	976	$	804	$	1,588	$	1,504
Variable costs		169		227		368		430
Interest costs		100		78		200		162
Total finance lease cost	$	1,245	$	1,109	$	2,156	$	2,096

During the six months ended June 30, 2024 and 2023, the Company paid $9.5 million and $9.7 million, respectively, for operating lease liabilities. During the six months ended June 30, 2024 and 2023, the Company recorded $5.7 million and $12.3 million, respectively, of operating lease liabilities arising from right of use assets. During the six months ended June 30, 2023, in conjunction with the restructuring activities the Company terminated certain leases and removed $5.6 million of lease right of use assets and $5.9 million of lease liabilities from its balance sheet, resulting in the recording of a gain of $0.3 million in the restructuring expense line of its statement of operations.

At June 30, 2024, finance leases with a cost of $32.2 million and accumulated amortization of $17.9 million were included in fixed assets, net. During the six months ended June 30, 2024, the Company paid $0.9 million of financing cash flows and $0.2 million of operating cash flows for finance lease liabilities. During the six months ended June 30, 2023, the Company paid $0.5 million of financing cash flows, $3.4 million of investing cash flows and $0.2 million of operating cash flows for finance lease liabilities. At June 30, 2024, finance leases had a lease liability of $5.2 million, of which $1.8 million was current.

At December 31, 2023, finance leases with a cost of $31.7 million and accumulated amortization of $16.4 million were included in fixed assets, net.

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The weighted average remaining lease terms and discount rates as of June 30, 2024 and December 31, 2023 are noted in the table below:


	June 30, 2024		December 31, 2023
Weighted-average remaining lease term
Operating leases		12.7 years		13.3 years
Financing leases		5.0 years		9.2 years

Weighted-average discount rate
Operating leases		6.7%		6.3%
Financing leases		7.2%		6.6%

Maturities of lease liabilities as of June 30, 2024 were as follows (in thousands):


	Operating Leases		Financing Leases
2024 (excluding the six months ended June 30, 2024)	$	9,353	$	1,077
2025		17,531		1,529
2026		13,288		746
2027		10,437		704
2028		8,263		551
Thereafter		83,250		2,145
Total lease payments		142,122		6,752
Less imputed interest		(56,683)		(1,525)
Total	$	85,439	$	5,227

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


	Operating Leases		Financing Leases
2024	$	18,048	$	2,030
2025		16,022		1,488
2026		11,755		601
2027		9,327		534
2028		7,807		505
Thereafter		80,637		2,145
Total lease payments		143,596		7,303
Less imputed interest		(57,133)		(1,662)
Total	$	86,463	$	5,641

As of June 30, 2024, the Company did not have any material operating or finance leases that have not yet commenced.

Lessor Disclosure

The Company is the lessor in agreements to lease the use of its network assets including its wireless cell sites and buildings. For the six months ended June 30, 2024 and 2023, the Company recorded $4.2 million and $3.9 million, respectively, of lease income from agreements in which the Company is the lessor For the three months ended June 30, 2024 and 2023, the Company recorded $2.1 million and $2.0 million, respectively, of lease income from agreements in which the Company is the lessor. Lease income is classified as Carrier Services revenue in the statement of operations

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The following table presents the maturities of future undiscounted lease payments for the periods indicated (in thousands):


2024 (excluding the six months ended June 30, 2024)	$	3,669
2025		7,062
2026		6,730
2027		5,538
2028		5,157
Thereafter		13,262
Total future lease payments	$	41,418

5. USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. The most significant estimates relate to the allowance for credit losses on trade receivables, useful lives of the Company’s fixed and finite-lived intangible assets, allocation of purchase price to assets acquired and liabilities assumed in business combinations, fair value of indefinite-lived intangible assets, goodwill and income taxes. Actual results could differ significantly from those estimates.

6. FAIR VALUE MEASUREMENTS AND INVESTMENTS

In accordance with the provisions of fair value accounting, a fair value measurement assumes that a transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability, and defines fair value based upon an exit price model.

The fair value measurement guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance describes three levels of inputs that may be used to measure fair value:


Level 1		Quoted prices in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset and liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 assets and liabilities include money market funds, debt and equity securities and derivative contracts that are traded in an active exchange market.

Level 2		Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes corporate obligations and non-exchange traded derivative contracts.

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Level 3

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments and intangible assets that have been impaired whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

Assets and liabilities of the Company measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023 are summarized as follows (in thousands):


	June 30, 2024
	Significant Other
	Quoted Prices in		Observable		Unobservable
	Active Markets		Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total
Short term investments	$	300	$	—	$	—	$	300
Other investments		—		—		931		931
Employee benefit plan investments		3,007		—		—		3,007
Interest rate swap		—		(28)		—		(28)
Alaska Communications redeemable common units		—		—		(5,744)		(5,744)
Alloy redeemable common units		—		—		(14,760)		(14,760)
Warrants on Alaska Communications redeemable common units		—		—		(249)		(249)
Total assets and liabilities measured at fair value	$	3,307	$	(28)	$	(19,822)	$	(16,543)


	December 31, 2023
	Significant Other
	Quoted Prices in		Observable		Unobservable
	Active Markets		Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total
Short term investments	$	300	$	—	$	—	$	300
Other investments		—		—		1,197		1,197
Employee benefit plan investments		3,014		—		—		3,014
Interest rate swap		—		(1,750)		—		(1,750)
Alaska Communications redeemable common units		—		—		(11,063)		(11,063)
Alloy redeemable common units		—		—		(14,760)		(14,760)
Warrants on Alaska Communications redeemable common units		—		—		(249)		(249)
Total assets and liabilities measured at fair value	$	3,314	$	(1,750)	$	(24,875)	$	(23,311)

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Other Investments

The Company holds investments in equity securities consisting of noncontrolling investments in privately held companies. The investments are accounted for using equity method accounting, the measurement alternative for investments without a readily determinable fair value, or fair value. The fair value investments are valued using Level 3 inputs and the Company used the income approach to fair value the investment. The inputs consisted of a discount rate and future cash flows calculated based on the investment attributes. A roll forward of the investments is below (in thousands):




	Investments without a readily determinable fair value		Fair value investments		Equity method investments		Total
Balance, December 31, 2023	$	41,710	$	1,197	$	—	$	42,907
Income recognized		—		64		—		64
Distributions		—		(330)		—		(330)
Balance, June 30, 2024	$	41,710	$	931	$	—	$	42,641

Balance, December 31, 2022	$	22,590	$	1,616	$	13,963	$	38,169
Income recognized		1,786		130		585		2,501
Contributions / (distributions)		425		(360)		630		695
Foreign currency gain		—		—		229		229
Balance, June 30, 2023	$	24,801	$	1,386	$	15,407	$	41,594

During the year ended December 31, 2023, the Company lost the ability to exert significant influence over its India solar investment. As a result, the Company transferred $16.3 million from equity method investments to investments without a readily determinable fair value and the accounting for the investment changed to the cost method from the equity method of accounting.

These investments are included with other assets on the consolidated balance sheets.

Redeemable Common Units and Warrants

The Company has issued redeemable common units, and warrants to purchase additional common units, in consolidated subsidiaries of the Company. The instruments are redeemable at the option of the holder. Both the common units and warrants to purchase common units are recorded at fair value in the Company’s financial statements. The common units are recorded in redeemable noncontrolling interest and the warrants are recorded in other liabilities on the Company’s balance sheets. The put options for the Alloy redeemable common units begin in November 2026. The put options for the Alaska Communications redeemable common units begin the earlier of a public offering or July 2028. The Company calculates the fair value of the instruments using a combination of market and discounted cash flows approaches with Level 3 inputs.

Other Fair Value Disclosures

The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximate their fair values because of the relatively short-term maturities of these financial instruments.

The fair value of long-term debt is estimated using Level 2 inputs. At June 30, 2024, the fair value of long-term debt, including the current portion, was $583.7 million and its book value was $586.9 million. At December 31, 2023, the fair value of long-term debt, including the current portion, was $571.6 million and its book value was $562.9 million.

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7. LONG-TERM DEBT

2023 CoBank Credit Facility

On July 13, 2023, the Company, along with certain of its subsidiaries as guarantors, entered into a new Credit Agreement with CoBank, ACB and a syndicate of other lenders (as may be amended from time to time, the “2023 CoBank Credit Facility”). On July 10, 2024, the Company amended its credit facility to add certain subsidiaries as guarantors and to provide further flexibility for the Company to take on certain grant and government program obligations. The amendment to the 2023 CoBank Credit Facility is filed herewith as Exhibit 10.1.

The 2023 CoBank Credit Facility provides for a five-year $170 million revolving credit facility (the “2023 CoBank Revolving Loan”) and a six-year $130 million term loan facility (the “2023 CoBank Term Loan”). The Company may use (i) up to $25 million under the 2023 CoBank Credit Facility for letters of credit, and (ii) up to $20 million under a swingline sub-facility. Upon the closing of the 2023 CoBank Credit Facility, the Company drew all of the 2023 CoBank Term Loan and approximately $13.6 million of the 2023 CoBank Revolving Loan. These borrowings were used to repay $139.5 million of debt outstanding under the 2019 CoBank Credit Facility at close.

The 2023 CoBank Term Loan must be repaid in quarterly principal payments in the amounts set forth below, with the outstanding principal balance maturing on July 13, 2029. The 2023 CoBank Revolving Loan may be repaid at any time on or prior to its maturity on July 13, 2028. All amounts outstanding under the 2023 CoBank Credit Facility will be due and payable upon the earlier of the maturity date or the acceleration of the loans and commitments upon an event of default.


2023 CoBank Term Loan Quarterly Payment Dates	2023 CoBank Term Loan Quarterly Repayments
December 31, 2023 – June 30, 2025	$812,500 (2.5% per annum)
September 30, 2025 – June 30, 2026	$1,625,000 (5% per annum)
September 30, 2026 – June 30, 2029	$2,437,500 (7.5% per annum)

Amounts borrowed under the 2023 CoBank Credit Facility bear interest at a rate equal to, at the Company’s option, either (i) the secured overnight financing rate as administered by the Federal Reserve Bank of New York (SOFR) plus an applicable margin ranging between 2.00% to 3.75% for the 2023 CoBank Term Loan or 1.75% to 3.50% for Revolving Loans or (ii) a base rate plus an applicable margin ranging from 1.00% to 2.75% for the Term Loan or 0.75% to 2.50% for the 2023 CoBank Revolving Loans. Swingline loans will bear interest at the base rate plus the applicable margin for base rate loans. The base rate is equal to the higher of (i) 1.00% plus the one-month SOFR rate (ii) the federal funds effective rate (as defined in the 2023 CoBank Credit Agreement) plus 0.50% per annum; and (iii) the prime rate (as defined in the 2023 CoBank Credit Agreement). The applicable margin is determined based on the ratio (as further defined in the 2023 CoBank Credit Agreement) of the Company’s maximum Total Net Leverage Ratio. Under the terms of the 2023 CoBank Credit Agreement, the Company must also pay a fee ranging from 0.25% to 0.50% on the average daily unused portion of the 2023 CoBank Credit Facility over each calendar quarter.

The 2023 CoBank Credit Agreement contains a financial covenant (as further defined in the 2023 CoBank Credit Agreement) that imposes a maximum Total Net Leverage Ratio, as well as customary representations, warranties and covenants, including covenants limiting additional indebtedness, liens, guaranties, mergers and consolidations, substantial asset sales, investments and loans, sale and leasebacks, transactions with affiliates and fundamental changes. The maximum Total Net Leverage Ratio is measured each fiscal quarter and is required to be less than or equal to 3.25 to 1.0. The 2023 CoBank Credit Agreement provides for events of default customary for credit facilities of this type, including but not limited to non-payment, defaults on other debt, misrepresentation, breach of covenants, representations and warranties, insolvency and bankruptcy.

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The Company capitalized $4.3 million of fees associated with the 2023 CoBank Credit Facility which are being amortized over the life of the debt and $3.5 million were unamortized as of June 30, 2024.

The Company had $127.6 million outstanding under the 2023 CoBank Term Loan as of June 30, 2024. Under the 2023 CoBank Revolving Loan, the Company had $58.6 million outstanding and $111.4 million of availability as of June 30, 2024. The Company was in compliance with all financial covenants as of June 30, 2024.

In October 2023, the Company entered into a two year, forward starting 1-month floating to fixed SOFR interest rate swap agreement. The swap was effective November 13, 2023 in a non-amortizing notional amount of $50.0 million, has a fixed SOFR rate of 4.896% and matures on November 13, 2025. The swap agreement had a fair value of $(0.1) million and $(0.5) million as of June 30, 2024 and December 31, 2023, respectively.

2019 CoBank Credit Facility

On April 10, 2019, the Company entered into a credit facility, with CoBank, ACB and a syndicate of other lenders (as amended, the “2019 CoBank Credit Facility”). The 2019 CoBank Credit Facility provided for a $200 million revolving credit facility that included (i) up to $75 million for standby or trade letters of credit and (ii) up to $10 million under a swingline sub-facility. In connection with the execution of the 2023 CoBank Credit Facility, as defined above, outstanding borrowings under the 2019 CoBank Credit Facility were repaid in full.

Amounts borrowed under the 2019 CoBank Credit Facility bore interest at a rate equal to, at the Company’s option, either (i) the London Interbank Offered Rate (“LIBOR”) plus an applicable margin ranging between 1.25% to 2.25% or (ii) a base rate plus an applicable margin ranging from 0.25% to 1.25%. Swingline loans bore interest at the base rate plus the applicable margin for base rate loans. The base rate was equal to the higher of (i) 1.00% plus the higher of (x) LIBOR for an interest period of one month and (y) LIBOR for an interest period of one week; (ii) the Federal Funds Effective Rate (as defined in the 2019 CoBank Credit Facility) plus 0.50% per annum; and (iii) the Prime Rate (as defined in the 2019 CoBank Credit Facility). The applicable margin was determined based on the Total Net Leverage Ratio (as defined in the 2019 CoBank Credit Facility). Under the terms of the 2019 CoBank Credit Facility, the Company also paid a commitment fee ranging from 0.150% to 0.375% of the average daily unused portion of the 2019 CoBank Credit Facility over each calendar quarter.

Letter of Credit Facility

On November 14, 2022, the Company entered into a General Agreement of Indemnity to issue performance Standby Letters of Credit on behalf of the Company and its subsidiaries. As of June 30, 2024, $30.9 million of Standby Letters of Credit had been issued under this agreement.

Alaska Credit Facility

On December 23, 2022, Alaska Communications entered into a Credit Agreement (the “Alaska Credit Facility”) with Fifth Third Bank, National Association, as Administrative Agent, and a syndicate of lenders to provide a Revolving Credit Commitment of $75.0 million (the “Alaska Revolving Facility”) and Term Loan Commitment of $230.0 million (the “Alaska Term Loan”).

As of June 30, 2024, Alaska Communications had drawn $49.5 million on the Alaska Revolving Facility and had $25.5 million available to draw. The Alaska Term Loan balance was $225.7 million and principal payments commenced in the fourth quarter of 2023. Both facilities mature on July 22, 2026.

Alaska Communications capitalized $7.3 million of fees associated with the Alaska Credit Facility which are being amortized over the life of the debt and $3.1 million were unamortized as of June 30, 2024.

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The Alaska Credit Facility also provides for incremental facilities up to an aggregate principal amount of the greater of $70.0 million and Alaska Communications’ trailing twelve-month Consolidated EBITDA (as defined in the Alaska Credit Facility).

The key terms and conditions of the Alaska Credit Facility include the following:

●

Amounts outstanding bear an interest rate of the forward-looking SOFR rate with a one-month interest period, plus the SOFR Spread Adjustment of 10 basis points, plus a margin ranging from 3.00% to 4.00% based on Alaska Communications’ Consolidated Total Net Leverage Ratio (as defined in the Credit Agreement) or an alternate base rate may be selected at a margin that is 1% lower than the counterpart SOFR margin;

●

Principal repayments are due quarterly and commenced in the fourth quarter of 2023 in amounts as follows: from the fourth quarter of 2023 through the third quarter of 2024, $1.4 million; and from the fourth quarter of 2024 through the third quarter of 2026, $2.9 million. The remaining unpaid balance is due on the final maturity date;

●

Alaska Communications is required to maintain financial ratios as defined in the Alaska Credit Facility, including (a) a maximum Consolidated Net Total Leverage Ratio of 4.00 to 1, stepping down to 3.75 to 1 beginning with the second quarter of 2024; and (b) a minimum Consolidated Fixed Charge Coverage Ratio of not less than 1.25 to 1. In addition to these financial ratios, Alaska Communications is subject to customary representations, warranties and covenants, including limitations on additional indebtedness, liens, consolidations, mergers, assets sales, advances, investments and loans, transactions with affiliates, sale and leaseback transactions, subordinated indebtedness, and changes in the nature of its business; and

●

The Alaska Credit Facility is non-recourse to the Company and is secured by substantially all of the personal property and certain material real property owned by Alaska Communications.

In November 2023, Alaska Communications entered into two forward starting 1-month floating to fixed SOFR interest rate swap agreements. The total non-amortizing notional amount of the agreements is $200.0 million, with fixed SOFR rates of 4.8695% and 4.8980% and both agreements mature on June 30, 2025. The swap agreements had a fair value of $0.1 million and $(1.2) million as of June 30, 2024 and December 31, 2023, respectively.

Alaska Term Facility

On June 15, 2022, Alaska Communications Systems Holdings, the parent company of Alaska Communications, entered into a secured lending arrangement with Bristol Bay Industrial, LLC (the “Alaska Term Facility”).

The Alaska Term Facility provided for a secured delayed draw term loan in an aggregate principal amount of up to $7.5 million and the proceeds were used to pay certain invoices from a contractor for work performed in connection with a fiber build. Interest on the Alaska Term Facility accrued at a fixed rate of 4.0% and scheduled quarterly payments of principal commenced on March 31, 2023. The Alaska Term Facility was repaid in full during the three months ended June 30, 2024.

FirstNet Receivables Credit Facility

On March 26, 2020, Commnet Finance, a wholly owned subsidiary of Commnet Wireless, entered into a receivables credit facility with the Company, Commnet Wireless, and CoBank, ACB (the “Receivables Credit Facility”).

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The Receivables Credit Facility provides for a senior secured delayed draw term loan in an aggregate principal amount of up to $75.0 million and the proceeds may be used to acquire certain receivables from Commnet Wireless. The receivables to be financed and sold under the Receivables Credit Facility, which provide the loan security, relate to the obligations of AT&T under the FirstNet Agreement.

On December 19, 2023, CoBank amended the Receivables Credit Facility and extended the delayed draw period to December 31, 2024.

The maturity date for each loan will be set by CoBank and will match the weighted average maturity of the certain receivables financed.

Interest on the loans accrue at a fixed annual interest rate to be quoted by CoBank.

The Receivables Credit Facility contains customary events of termination, representations and warranties, affirmative and negative covenants and events of default customary for facilities of this type.

As of June 30, 2024, Commnet Wireless had $46.5 million outstanding, of which $7.7 million was classified as being current on the Company’s balance sheet, and $11.3 million of availability under the Receivables Credit Facility. Commnet Wireless capitalized $0.8 million in fees associated with the Receivables Credit Facility which are being amortized over the life of the debt and $0.4 million were unamortized as of June 30, 2024.

GTT Credit Facilities

On October 12, 2022, GTT received approval from Republic Bank (Guyana) Limited for a $2.9 million term facility and a $5.7 million overdraft facility (the “GTT Credit Facilities”).

The GTT Credit Facilities are secured by real estate assets and carry a fixed interest rate of 7.5% which will be reviewed by the bank from time to time and subject to change at the bank’s discretion. The term facility is repayable over five years in equal monthly installments of principal and interest, commencing one month after funds are advanced. The overdraft facility will expire on October 31, 2024.

As of June 30, 2024, there were no outstanding amounts under the GTT Credit Facilities.

Sacred Wind Term Debt

In connection with the Sacred Wind acquisition completed on November 7, 2022, the Company assumed $31.6 million of term debt (the “Sacred Wind Term Debt”) with the United States of America acting through the Administrator of the Rural Utilities Service (“RUS”). The loan agreements are dated as of October 23, 2006 and March 17, 2016. RUS provides financial assistance in the form of loans under the Rural Electrification Act of 1936 to furnish or improve telecommunications and/or broadband services in rural areas.

The Sacred Wind Term Debt is secured by substantially all assets of Sacred Wind and an underlying mortgage to the United States of America. These mortgage notes are to be repaid in equal monthly installments covering principal and interest beginning after date of issue and expiring by 2035.

The Sacred Wind Term Debt contains certain restrictions on the declaration or payment of dividends, redemption of capital stock or investment in affiliated companies without the consent by the RUS noteholders. The agreements also contain a financial covenant which Sacred Wind was not in compliance with as of December 31, 2021. Sacred Wind submitted a corrective action plan to comply with the financial covenant as of December 31, 2025. On May 5, 2022, Sacred Wind’s corrective action plan was accepted by the RUS. As of June 30, 2024, the Company was in compliance with that corrective action plan.

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As of June 30, 2024, $26.6 million was outstanding under the Sacred Wind Term Debt. Of that amount, $3.3 million was current and $23.3 million was long term.

The mortgage notes carry fixed interest rates ranging from 0.88% to 5.0%.

Viya Debt

The Company, and certain of its subsidiaries, have entered into a $60.0 million loan agreement (the “Viya Debt”) with Rural Telephone Finance Cooperative (“RTFC”). The Viya Debt agreement contains customary representations, warranties, and affirmative and negative covenants (including limitations on additional debt, guaranties, sale of assets and liens) and a financial covenant that limits the maximum ratio of indebtedness to annual operating cash flow to 3.5 to 1.0 (the “Net Leverage Ratio”). This covenant is tested on an annual basis at the end of each fiscal year. Interest is paid quarterly at a fixed rate of 4.0% per annum and principal repayment is not required until maturity on July 1, 2026. Prepayment of the Viya Debt may be subject to a fee under certain circumstances. The debt is secured by certain assets of the Viya subsidiaries and is guaranteed by the Company.

The Company paid a fee of $0.9 million in 2016 to lock the interest rate at 4% per annum over the term of the Viya Debt. The fee was recorded as a reduction to the Viya Debt carrying amount and is being amortized over the life of the loan.

As of June 30, 2024, $60.0 million of the Viya Debt remained outstanding and $0.2 million of the rate lock fee was unamortized.

On May 5, 2022, RTFC agreed to amend the Net Leverage Ratio to 7.0 to 1.0 through the maturity date of July 1, 2026. The Ratio is tested annually, and the Company was in compliance with the Net Leverage Ratio as of December 31, 2023.

Debt Maturity

The table below summarizes the annual maturities of the Company’s debt instruments (amounts in thousands):


									Customer
	US		International		Corporate and		Total		Receivable
Amounts Maturing During	Telecom		Telecom		Other		Debt		Credit Facility
July 1, 2024 through December 31, 2024	$	6,050	$	—	$	1,625	$	7,675	$	3,786
Year ending December 31, 2025		14,969		—		4,875		19,844		7,833
Year ending December 31, 2026		262,969		60,000		8,125		331,094		8,195
Year ending December 31, 2027		3,723		—		9,750		13,473		8,576
Year ending December 31, 2028		3,858		—		68,370		72,228		8,978
Thereafter		10,192		—		93,438		103,630		9,160
Total		301,761		60,000		186,183		547,944		46,528
Debt Discounts		(3,386)		(199)		(3,524)		(7,109)		(427)
Book Value as of June 30, 2024	$	298,375	$	59,801	$	182,659	$	540,835	$	46,101

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8. GOVERNMENT SUPPORT AND SPECTRUM MATTERS

Universal Service Fund and Other Domestic Funding Programs

The Company recognizes revenue from several government funded programs including the Universal Service Fund (“USF”), a subsidy program managed by the Federal Communications Commission (“FCC”), and the Alaska Universal Service Fund (“AUSF”), a similar program managed by the Regulatory Commission of Alaska (the “RCA”). USF funds are disbursed to telecommunication providers through four programs the High Cost Program; the Low Income Program (“Lifeline Program”); the Schools and Libraries Program (“E-Rate Program”); and the Rural Health Care Support Program (“RHC”). The Company’s International Telecom segment receives $5.5 million of legacy frozen high cost support funding in the US Virgin Islands. This funding expires on December 31, 2025. Additionally, the Company recognizes revenue from the FCC’s Affordable Connectivity Program (“ACP”) and the Emergency Connectivity Fund (“ECF”). The ACP provides eligible low-income consumers with a monthly subsidy for broadband connectivity and the ECF provides schools and libraries with subsidies for broadband connectivity. Funding under the ACP and ECF programs expired in the second quarter of 2024.

The Company’s US Telecom segment also recognizes High Cost support revenue from the Connect America Fund Phase II program (“CAF II”) and the Enhanced Alternative Connect America Cost Model program (“E-ACAM”). These programs offer subsidies to carriers to expand broadband coverage in designated areas. Under CAF II, the Company expects to receive an aggregate of $27.7 million annually through December 2025 and an aggregate of $8.0 million annually from January 2026 through July 2028. Under E-ACAM, the Company expects to receive a total of $118.2 million over a 15 year period beginning in 2024. The annual E-ACAM funding is approximately $9 million from 2024 through 2030 and ultimately decreasing over time to $6 million in 2038.

The Company was awarded approximately $22.7 million over 10 years to provide broadband and voice coverage to over 10,000 households in the United States (not including Alaska) under the 2020 Rural Digital Opportunity Fund Phase I Auction (“RDOF”). Revenue recognized from the RDOF program is recognized as revenue from government grants. During the six months ended June 30, 2024, the Company entered into agreements to transfer $13.0 million of RDOF obligations. The transfer applications are pending regulatory approval.

All of the programs are subject to certain operational and reporting compliance requirements. The Company believes it is in compliance with these requirements as of June 30, 2024. Revenue recognized from the USF High Cost Program, including the CAF II and E-ACAM programs, is recognized as revenue from government grants. Revenue from other programs is recognized in accordance with ASC 606.

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The Company recorded the amounts below as communication services revenue for the reported periods (in thousands):


	Three months ended						Three months ended
	June 30, 2024						June 30, 2023

	US Telecom		International Telecom		Total		US Telecom		International Telecom		Total

High cost support	$	3,483	$	1,393	$	4,876	$	2,222	$	1,397	$	3,619
CAF II		6,784		—		6,784		6,815		—		6,815
RDOF		145		—		145		608		—		608
ECF		498		—		498		6,813		—		6,813
RHC		3,682		—		3,682		2,887		—		2,887
Other		1,707		155		1,862		4,668		5		4,673
Total	$	16,299	$	1,548	$	17,847	$	24,013	$	1,402	$	25,415


	Six months ended						Six months ended
	June 30, 2024						June 30, 2023

	US Telecom		International Telecom		Total		US Telecom		International Telecom		Total

High cost support	$	6,937	$	2,786	$	9,723	$	4,716	$	2,795	$	7,511
CAF II		13,571		—		13,571		13,630		—		13,630
RDOF		290		—		290		1,216		—		1,216
ECF		7,312		—		7,312		14,880		—		14,880
RHC		7,119		—		7,119		5,787		—		5,787
Other		8,407		470		8,877		9,361		9		9,370
Total	$	43,636	$	3,256	$	46,892	$	49,590	$	2,804	$	52,394

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Construction Grants

The Company has also been awarded construction grants to build network connectivity for eligible communities. The funding of these grants, used to reimburse the Company for its construction costs, is generally distributed after the Company incurs reimbursable costs. Completion deadlines begin in 2024 and once these projects are constructed, the Company is obligated to provide service to the participants. The Company expects to meet all requirements associated with these grants. A roll forward of the Company’s grant awards is below (in thousands).


	Amount
Grants awarded, December 31, 2023	$	100,149
New grants		—
Construction complete		—
Transferred grants		—
Grants awarded, June 30, 2024	$	100,149

During the six months ended June 30, 2024, the Company disbursed capital expenditures of $3.6 million under these programs and received reimbursement of $2.3 million. These cash flows are classified as investing activities in the Company’s statement of cash flows.

In addition, the Company partners with tribal governments to obtain grants under various government programs including the Tribal Broadband Connectivity Program (“TBCP”) and the Rural Development Broadband ReConnect Program (“ReConnect”). The TBCP and ReConnect programs are administered by United States government agencies to deploy broadband connectivity in certain underserved areas. The Company was identified as a sub recipient of grants under these programs totaling $192.6 million as of June 30, 2024. Through June 30, 2024, the Company has received $11.3 million of funding under these programs and spent $11.4 million on construction obligations. These amounts are recorded as operating cash flows in the company’s statement of cash flows.

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Replace and Remove Program

On July 15, 2022, the Company was notified that it was an approved participant in the Federal Communication Commission’s Secure and Trusted Communications Networks Reimbursement Program (the “Replace and Remove Program”), designed to reimburse providers of communications services for reasonable costs incurred in the required removal, replacement, and disposal of covered communications equipment or services, that have been deemed to pose a national security risk, from their networks. Pursuant to the Replace and Remove Program, the Company was allocated up to approximately $207 million in reimbursement amounts to cover documented and approved costs to remove and securely destroy all ZTE communications equipment and services in its U.S. networks and replace such equipment. The Replace and Remove Program requires that the Company complete the project no later than one year from submitting its initial reimbursement request, or by July 2024. In April 2024, the FCC granted the Company’s request to extend the program’s completion deadlines to the first quarter of 2025. At this time, the Company anticipates that it will be able to meet the deadlines and requirements of the program.

A summary of the amounts spent and reimbursed under the Replace and Remove Program is below (in thousands):


	Capital		Operating		Total

Total spend, December 31, 2023	$	49,262	$	15,126	$	64,388
Amounts spent		38,126		9,528		47,654
Total spend, June 30, 2024	$	87,388	$	24,654	$	112,042

Total reimbursements, December 31, 2023	$	(12,773)	$	(4,354)	$	(17,127)
Reimbursements received		(41,421)		(10,721)		(52,142)
Total reimbursements, June 30, 2024	$	(54,194)	$	(15,075)	$	(69,269)

Amount pending reimbursement	$	33,194	$	9,579	$	42,773


	Capital		Operating		Total

Total spend, December 31, 2022	$	1,836	$	1,489	$	3,325
Amounts spent		12,739		4,966		17,705
Total spend, June 30, 2023	$	14,575	$	6,455	$	21,030

Amount pending reimbursement	$	14,575	$	6,455	$	21,030

At June 30, 2024, $27.3 million of the capital expenditures were accrued and unpaid. The Company expects to be reimbursed, within the next twelve months, for all amounts spent to date. Amounts identified as capital are recorded as investing cash flows and amounts identified as operating are recorded as operating cash flows in the Company’s statement of cash flows.

9. RETIREMENT PLANS

Multi-employer Defined Benefit Plan

Pension benefits for substantially all of the Company’s Alaska-based employees are provided through the Alaska Electrical Pension Fund (“AEPF”). The Company pays a contractual hourly amount based on employee classification or base compensation to the AEPF. As a multi-employer defined benefit plan, the accumulated benefits

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and plan assets are not determined for, or allocated separately to, the individual employer. This plan was not in endangered or critical status during the plan year.

Defined Benefit Plan

The Company has noncontributory defined benefit pension and noncontributory defined medical, dental, vision, and life benefit plans for eligible employees who meet certain eligibility criteria. The majority of benefits under the plans are frozen and the plans no longer allow new participants to join.

The Company recorded the net periodic benefit cost identified below (in thousands):


	Three months ended								Six months ended
	June 30, 2024				June 30, 2023				June 30, 2024				June 30, 2023
	Pension benefits		Postretirement benefits		Pension benefits		Postretirement benefits		Pension benefits		Postretirement benefits		Pension benefits		Postretirement benefits
Operating expense
Service cost	$	22	$	16	$	38	$	31	$	45	$	33	$	76	$	62
Non-operating expense
Interest cost		824		45		593		35		1,649		90		1,187		70
Expected return on plan assets		(729)		—		(953)		—		(1,459)		—		(1,905)		—
Amortization of unrecognized actuarial gain		(11)		(28)		—		—		(21)		(56)		—		—
Settlements		—		—		—		—		—		—		369		—
Net periodic pension expense (benefit)	$	106	$	33	$	(322)	$	66	$	214	$	67	$	(273)	$	132

The Company was not required to make contributions to its pension plans during the six months ended June 30, 2024 and 2023. However, the Company periodically evaluates whether to make discretionary contributions. The Company funds its postretirement benefit plans as claims are made and did not make contributions to its pension plans during the six months ended June 30, 2024 and 2023.

10. INCOME TAXES

The Company’s effective tax rate for the three months ended June 30, 2024 and 2023 was 1.8% and 88.5% respectively.

The Company recorded an income tax expense of $0.2 million in relation to a pretax income of $11.5 million for the three months ended June 30, 2024. The effective tax rate for the three months ended June 30, 2024 was primarily impacted by the following items (i) the mix of income generated among the jurisdictions in which the Company operates, (ii) net expense related to valuation allowances placed on certain deferred tax assets that are not expected to be realizable based on the weight of positive and negative evidence and (iii) discrete items including a $2.4 million expense associated with the gain on sale of land in a foreign jurisdiction, a $3.7 million benefit from the reversal of an unrecognized tax position due to a statute of limitations expiration and a $0.8 million expense for interest on unrecognized tax positions.

The Company recorded an income tax benefit of $5.1 million in relation to a pretax loss of $5.7 million for the three months ended June 30, 2023. The effective tax rate for the three months ended June 30, 2023 was primarily impacted by the following items (i) the mix of income generated among the jurisdictions in which the Company operates, (ii) net expense related to valuation allowances placed on certain deferred tax assets that are not expected to be realizable based on the weight of positive and negative evidence and (iii) discrete items including a $4.0 million benefit

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from the reversal of an unrecognized tax position due to a statute of limitations expiration and a $0.7 million expense for interest on unrecognized tax positions.

The Company’s effective tax rate for the six months ended June 30, 2024 and 2023 was 35.0% and 43.0%, respectively.

The Company recorded an income tax expense of $1.8 million in relation to a pretax income of $5.2 million for the six months ended June 30, 2024. The effective tax rate for the six months ended June 30, 2024 was primarily impacted by the following items (i) the mix of income generated among the jurisdictions in which the Company operates, (ii) net expense related to valuation allowances placed on certain deferred tax assets that are not expected to be realizable based on the weight of positive and negative evidence and (iii) discrete items including a $2.4 million expense associated with the gain on sale of land in a foreign jurisdiction, a $3.7 million benefit from the reversal of an unrecognized tax position due to a statute of limitations expiration, a $1.5 million expense to record an unrecognized tax position for the current year, and a $1.5 million expense for interest on unrecognized tax positions.

The Company recorded an income tax benefit of $5.8 million in relation to a pretax loss of $13.5 million for the six months ended June 30, 2023. The effective tax rate for the six months ended June 30, 2023 was primarily impacted by the following items (i) the mix of income generated among the jurisdictions in which the Company operates, (ii)net expense related to valuation allowances placed on certain deferred tax assets that are not expected to be realizable based on the weight of positive and negative evidence and (iii) discrete items including a $4.0 million benefit from the reversal of an unrecognized tax position due to a statute of limitations expiration, and a $1.3 million expense for interest on unrecognized tax positions.

The Company’s effective tax rate is based upon estimated income before provision for income taxes for the year, composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for potential tax consequences, benefits and/or resolutions of tax contingencies. The Company’s consolidated tax rate will continue to be impacted by any transactional or one-time items in the future and the mix of income in any given year generated among the jurisdictions in which the Company operates. While the Company believes it has adequately provided for all tax positions, amounts asserted by taxing authorities could materially differ from the Company’s accrued positions as a result of uncertain and complex applications of tax law and regulations. Additionally, the recognition and measurement of certain tax benefits include estimates and judgments by management. Accordingly, the Company could record additional provisions or benefits for US federal, state, and foreign tax matters in future periods as new information becomes available.

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11. EARNINGS PER SHARE AND REDEEMABLE NONCONTROLLING INTERESTS

Earnings Per Share

The following table reconciles the numerator and denominator in the computations of basic and diluted earnings per share (in thousands):


	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
Numerator:
Net income (loss) attributable to ATN International, Inc. stockholders- Basic		9,003		767		2,690		(5,118)
Less: Preferred dividends		(1,376)		(1,260)		(2,727)		(2,306)
Net income (loss) attributable to ATN International, Inc. common stockholders- Diluted	$	7,627	$	(493)	$	(37)	$	(7,424)

Denominator:
Weighted-average shares outstanding- Basic		15,254		15,719		15,346		15,726
Weighted-average shares outstanding- Diluted		15,255		15,719		15,346		15,726

Redeemable Noncontrolling Interests

In connection with certain acquisitions, the Company accounts for third-party non-controlling minority investments as redeemable noncontrolling interests, which consist of both redeemable common and, in some instances, preferred units, in its consolidated financial statements.

The common units contain put options allowing the holder to sell at a future date, the common units to a subsidiary of the Company at the then fair market value. The common units participate in the earnings and losses of the subsidiaries and are allocated their applicable share of earnings and losses. After the allocation of earnings and losses, the Company estimates the fair value of the common units and adjusts the book value of the common units to that estimated fair value.

The preferred units contain put options allowing the holder to sell at a future date, the preferred units to a subsidiary of the Company at a fixed price equal to face value of the units plus unpaid dividends. The preferred units hold a distribution preference over common units and carry a fixed dividend rate.

The put options for both the common and preferred units, if any, are nonrecourse to the Company. The put options for the Alloy common units are exercisable beginning in 2026 and the put options for the Alaska Communications common and preferred units are exercisable at the earlier of a future initial public offering of the subsidiary or 2028.

For the three months ended June 30, 2024 and 2023, the Company allocated losses of $2.7 million and $3.4 million, respectively, to the redeemable common units representing their proportionate share of operating losses. For each of the six month periods ended June 30, 2024 and 2023, the Company allocated losses of $6.2 million to the redeemable common units representing their proportionate share of operating losses. The Company then compared the book value of the common units to the fair value and the fair value exceeded the book value. As a result, the book value was increased by $0.9 million and $5.9 million during the six months ended June 30, 2024 and 2023, respectively.

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The following table provides a roll forward of the activity related to the Company’s redeemable noncontrolling interests for the six months ended June 30, 2024 and 2023 (in thousands):


	Redeemable Preferred Units		Redeemable Common Units		Total Redeemable Noncontrolling Interests
Balance, December 31, 2023	$	60,094	$	25,823	$	85,917
Accrued preferred dividend		2,727		—		2,727
Allocated net loss		—		(6,176)		(6,176)
Change in fair value		—		857		857
Balance, June 30, 2024	$	62,821	$	20,504	$	83,325


	Redeemable Preferred Units		Redeemable Common Units		Total Redeemable Noncontrolling Interests
Balance, December 31, 2022	$	55,152	$	37,317	$	92,469
Accrued preferred dividend		2,306		—		2,306
Allocated net loss		—		(6,170)		(6,170)
Change in fair value		—		5,879		5,879
Balance, June 30, 2023	$	57,458	$	37,026	$	94,484

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12. SEGMENT REPORTING

The Company has the following two reportable and operating segments: i) International Telecom and ii) US Telecom.

The following tables provide information for each operating segment (in thousands):


For the Three Months Ended June 30, 2024

	International		US		Corporate and
	Telecom		Telecom		Other (1)		Consolidated
Revenue
Communication Services
Mobility - Business	$	4,932	$	68	$	—	$	5,000
Mobility - Consumer		21,879		701		—		22,580
Total Mobility		26,811		769		—		27,580
Fixed - Business		18,715		30,817		—		49,532
Fixed - Consumer		43,500		21,674		—		65,174
Total Fixed		62,215		52,491		—		114,706
Carrier Services		3,636		30,056		—		33,692
Other		1,045		342		—		1,387
Total Communication Services Revenue		93,707		83,658		—		177,365
Construction		—		820		—		820
Other
Managed Services		1,650		3,446		—		5,096
Total other revenue		1,650		3,446		—		5,096
Total Revenue		95,357		87,924		—		183,281
Depreciation and amortization		16,277		19,234		47		35,558
Amortization of intangibles from acquisitions		252		1,693		—		1,945
Stock-based compensation		193		196		2,392		2,781
Operating income (loss)		32,405		884		(8,973)		24,316

(1)

Corporate and other items refer to corporate overhead costs and consolidating adjustments.

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For the Three Months Ended June 30, 2023

	International		US		Corporate and
	Telecom		Telecom		Other (1)		Consolidated
Revenue
Communication Services
Mobility - Business	$	3,507	$	114	$	—	$	3,621
Mobility - Consumer		23,349		863		—		24,212
Total Mobility		26,856		977		—		27,833
Fixed - Business		17,214		35,495		—		52,709
Fixed - Consumer		42,459		22,608		—		65,067
Total Fixed		59,673		58,103		—		117,776
Carrier Services		3,879		31,576		—		35,455
Other		448		64		—		512
Total Communication Services Revenue		90,856		90,720		—		181,576
Construction		—		1,020		—		1,020
Other
Managed Services		1,125		2,720		—		3,845
Total Other Revenue		1,125		2,720		—		3,845
Total Revenue		91,981		94,460		—		186,441
Depreciation and amortization		14,106		21,430		681		36,217
Amortization of intangibles from acquisitions		364		2,780		—		3,144
Stock-based compensation		109		9		2,621		2,739
Operating income (loss)		14,552		(2,394)		(9,718)		2,440

(1)

Corporate and other items refer to corporate overhead costs and consolidating adjustments.

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For the Six Months Ended June 30, 2024

	International		US		Corporate and
	Telecom		Telecom		Other (1)		Consolidated
Revenue
Communication Services
Mobility - Business	$	9,740	$	141	$	—	$	9,881
Mobility - Consumer		43,108		1,465		—		44,573
Total Mobility		52,848		1,606		—		54,454
Fixed - Business		37,247		65,783		—		103,030
Fixed - Consumer		86,289		44,593		—		130,882
Total Fixed		123,536		110,376		—		233,912
Carrier Services		7,209		60,109		—		67,318
Other		1,863		1,086		—		2,949
Total Communication Services Revenue		185,456		173,177		—		358,633
Construction		—		2,406		—		2,406
Other
Managed Services		2,960		6,077		—		9,037
Total Other Revenue		2,960		6,077		—		9,037
Total Revenue		188,416		181,660		—		370,076
Depreciation and amortization		32,400		37,372		125		69,897
Amortization of intangibles from acquisitions		503		3,421		—		3,924
Stock-based compensation		217		327		4,146		4,690
Operating income (loss)		44,090		1,482		(16,682)		28,890

(1)

Corporate and other items refer to corporate overhead costs and consolidating adjustments.

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For the Six Months Ended June 30, 2023

	International		US		Corporate and
	Telecom		Telecom		Other (1)		Consolidated
Revenue
Communication Services
Mobility - Business	$	7,083	$	286	$	—	$	7,369
Mobility - Consumer		45,880		1,850		—		47,730
Total Mobility		52,963		2,136		—		55,099
Fixed - Business		34,327		71,814		—		106,141
Fixed - Consumer		84,236		45,190		—		129,426
Total Fixed		118,563		117,004		—		235,567
Carrier Services		7,570		63,660		—		71,230
Other		848		139		—		987
Total Communication Services Revenue		179,944		182,939		—		362,883
Construction		—		1,610		—		1,610
Other
Managed Services		2,445		5,276		—		7,721
Total other revenue		2,445		5,276		—		7,721
Total Revenue		182,389		189,825		—		372,214
Depreciation and amortization		28,292		42,917		1,412		72,621
Amortization of intangibles from acquisitions		744		5,647		—		6,391
Stock-based compensation		176		86		4,255		4,517
Operating income (loss)		28,377		(6,737)		(18,566)		3,074

(1)

Corporate and other items refer to corporate overhead costs and consolidating adjustments.

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Selected balance sheet data for each of the Company’s segments as of June 30, 2024 and December 31, 2023 consists of the following (in thousands):


	International		US		Corporate and
	Telecom		Telecom		Other		Consolidated
June 30, 2024
Cash, cash equivalents, and restricted cash	$	33,563	$	36,448	$	3,242	$	73,253
Total current assets		130,572		155,822		9,502		295,896
Fixed assets, net		475,862		579,092		6,368		1,061,322
Goodwill		4,835		35,269		—		40,104
Total assets		683,111		997,592		91,638		1,772,341
Total current liabilities		91,529		145,856		31,500		268,885
Total debt, including current portion		59,801		298,375		182,659		540,835
December 31, 2023
Cash, cash equivalents, and restricted cash	$	26,354	$	33,574	$	2,239	$	62,167
Total current assets		107,469		162,768		11,035		281,272
Fixed assets, net		481,911		593,833		4,915		1,080,659
Goodwill		4,836		35,268		—		40,104
Total assets		672,171		1,019,924		91,619		1,783,714
Total current liabilities		86,540		169,297		37,357		293,194
Total debt, including current portion		64,254		293,607		159,009		516,870

For the six months ended June 30, 2024 and 2023, the Company spent $108.0 million and $96.4 million, respectively, on capital expenditures relating to its telecommunications networks and business support systems of which $46.2 million and $7.0 million, respectively, are reimbursable under various government programs. The following notes the Company’s capital expenditures, by operating segment, for these periods (in thousands).


	Capital Expenditures

		International		US		Corporate and
Six months ended June 30,		Telecom		Telecom		Other (1)		Consolidated
2024	$	28,951	$	77,498	$	1,579	$	108,028
2023		38,906		57,531		—		96,437

(1)

Corporate and other items refer to corporate overhead costs and consolidating adjustments.

13. COMMITMENTS AND CONTINGENCIES

Regulatory and Litigation Matters

The Company and its subsidiaries are subject to certain regulatory and legal proceedings and other claims arising in the ordinary course of business, some of which involve claims for damages and taxes that are substantial in amount. Historically, the Company’s subsidiary, GTT, has been subject to other long-standing litigation proceedings and disputes in Guyana that have not yet been resolved. The Company believes that, except for the items discussed below, for which the Company is currently unable to predict the final outcome, the disposition of matters currently pending will not have a material adverse effect on the Company’s financial position or results of operations.

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Beginning in 2006, the National Frequency Management Unit (now the Telecommunications Agency, or the “NFMU/TA”) and GTT have been engaged in discussions regarding the amount of and methodology for calculation of spectrum fees payable by GTT in Guyana. Since that time, GTT has made payments of undisputed spectrum fees as amounts invoiced by the NFMU, and to its successor, the Telecommunications Authority (“TA”). There have been limited further discussions on the subject of a revised spectrum fee methodology with the TA.

GTT has filed several lawsuits in the High Court of Guyana asserting that, despite its denials, Digicel is engaged in international bypass in violation of GTT’s exclusive license rights, the interconnection agreement between the parties, and the laws of Guyana. Digicel filed counterclaims alleging that GTT has violated the terms of the interconnection agreement and Guyana laws. These suits, filed in 2010 and 2012, are currently pending in the Court of Appeals in Guyana, however, the Company cannot accurately predict at this time when the consolidated suit will reach a court of final determination.

GTT is also involved in several legal claims regarding its tax filings with the Guyana Revenue Authority (the “GRA”) dating back to 1991 regarding the deductibility of intercompany advisory fees as well as other tax assessments. GTT has maintained that it has no unpaid corporation tax due to the GRA and that any liability GTT might be found to have with respect to the disputed tax assessments would be offset in part by the amounts claimed with respect to rights ATN has pursuant to its agreement with the government of Guyana. GTT’s position has been upheld by various High Court rulings made in its favor including most recently in February 2024, and while all matters have been appealed by the GRA, only one remains pending for determination by the High Court.

In February 2020, the Company’s Alaska Communications subsidiary received a draft audit report from USAC in connection with USAC’s inquiry into Alaska Communications’ funding requests under the Rural Health Care Support Program for certain customers for the time period of July 2012 through June 2017. Alaska Communications also received a Letter of Inquiry on March 18, 2018, and subsequent follow up information requests, from the FCC Enforcement Bureau requesting historical information regarding Alaska Communications’ participation in the FCC’s Rural Health Care Support Program.

On May 8, 2024, we entered into a Consent Decree with the FCC Enforcement Bureau, regarding both the USAC and FCC Enforcement Bureau’s investigation and agreed to (i) pay a settlement amount of approximately $6.3 million, and (ii) enter into a three-year compliance agreement in connection with Alaska Communication’s continued participation in the RHC Program. At this time, we believe that we can comply with all of the terms of the compliance agreement.

The settlement amount of $6.3 million consists of a $5.3 million cash payment and the $1.0 million forgiveness of certain receivables, both of which have been accrued on the Company’s balance sheet as of June 30, 2024. As such, this settlement will not impact the statement of operations in future periods.

With respect to all of the foregoing unresolved matters, the Company believes that some adverse outcome is probable and has accordingly accrued $12.5 million as of June 30, 2024 for these and other potential liabilities arising in various claims, legal actions and regulatory proceedings arising in the ordinary course of business. The Company also faces contingencies that are reasonably possible to occur that cannot currently be estimated. It is the Company’s policy to expense costs associated with loss contingencies, including any related legal fees, as they are incurred.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We are a leading provider of digital infrastructure and communications services with a focus on rural and remote markets in the United States, and internationally, including Bermuda and the Caribbean region.

We have developed significant operational expertise and resources that we use to augment our capabilities in our local markets. With this support, our operating subsidiaries are able to improve their quality of service with greater economies of scale and expertise than would typically be available in the size markets we operate in. We provide management, technical, financial, regulatory, and marketing services to our operating subsidiaries and typically receive a management fee calculated as a percentage of their revenues, which is eliminated in consolidation. We also actively evaluate investment opportunities and other strategic transactions, both domestic and international, and generally look for those that we believe fit our profile of telecommunications businesses and have the potential to complement our “First-to-Fiber” and “Glass & Steel™” approach in markets while keeping a focus on generating excess operating cash flows over extended periods of time. We use the cash generated from our operations to maintain an appropriate ratio of debt and cash on hand and to fund growth and to fund capital expenditures, to return cash to our stockholders through dividends or stock repurchases, and make strategic investments or acquisitions.

For further information about our financial segments and geographical information about our operating revenues and assets, see Notes 1 and 12 to the Consolidated Financial Statements included in this Report.

As of June 30, 2024, we offered the following types of services to our customers:

●

Mobile Telecommunications Services. We offer mobile communications services over our wireless networks and related equipment, such as handsets, to both business and consumer customers.

●

Fixed Telecommunications Services. We provide fixed data and voice telecommunications services and related equipment, such as modems, 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. We deliver services to other telecommunications providers including the leasing of critical network infrastructure such as tower and transport facilities, wholesale roaming and long distance voice services, site maintenance and international long-distance services.

●

Managed Services. We provide information technology services such as network, application, infrastructure and hosting services to both our business and consumer customers to complement our fixed services in our existing markets.

Through June 30, 2024, we identified two operating segments to manage and review our operations and to facilitate investor presentations of our results. These operating segments are as follows:

●

International Telecom. In our international markets, we offer 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, we offer fixed services, carrier services, and managed services to business customers and consumers in Alaska and the western United States. As of June 30, 2024 we provided mobility services to retail customers in the western United States.

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The following chart summarizes the operating activities of our principal subsidiaries, the segments in which we reported our revenue and the markets we served as of June 30, 2024:


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

Carrier Managed Services

In July 2019, we entered into a Network Build and Maintenance Agreement with AT&T Mobility, LLC (“AT&T”) that we subsequently amended through December 31, 2023 (the “FirstNet Agreement”). In connection with the FirstNet Agreement, we are building a portion of AT&T’s network for the First Responder Network Authority (“FirstNet”) in or near our current operating areas in the western United States. Pursuant to the FirstNet Agreement and subject to certain limitations contained therein, all cell sites must be completed and accepted within a specified period of time. Since the inception of the project through June 30, 2024, we have recorded $75.6 million in construction revenue and expect to record approximately $8.0 million in additional construction revenue and related costs as sites are completed. We expect to substantially complete the build by the end of 2024 with the remainder to be completed in early 2025. Revenues from construction are expected to have minimal impact on operating income.

Following acceptance of a cell site, AT&T will own the cell site and we will assign to AT&T any third-party tower lease applicable to such cell site. If the cell site is located on a communications tower we own, AT&T will pay us pursuant to a separate lease agreement for an initial term of eight years. In addition to building the network, we will provide ongoing equipment and site maintenance and high-capacity transport to and from these cell sites for an initial term ending in 2031.

On May 10, 2023, we entered into a Carrier Managed Services Master Agreement (the “Agreement”) with Cellco Partnership d/b/a Verizon Wireless (“Verizon”), pursuant to which we will provide a variety of network, infrastructure and technical services that will help deliver next generation wireless services to Verizon’s subscribers in our current operating area in the southwestern United States.

Pursuant to the Agreement and subject to certain limitations contained therein, we will upgrade our wireless service in specific areas and provide services to Verizon for an initial term ending in 2030.

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Following acceptance of a cell site, we will continue to own the cell site. In addition to building the network, we will provide ongoing equipment and site maintenance and high-capacity transport to and from these cell sites for an initial term ending in 2030.

With respect to each of our FirstNet and Verizon agreements, our carrier partners will continue to use our wholesale domestic mobility network for roaming services at a fixed rate per site during the construction period until such time as the cell site is completed. Thereafter, revenue from the maintenance, leasing and transport services provided is expected to generally offset revenue from wholesale mobility roaming services.

Universal Service Fund and Other Domestic Funding Programs

We recognize revenue from several government funded programs including the USF, a subsidy program managed by the Federal Communications Commission (“FCC”), and the Alaska Universal Service Fund (“AUSF”), a similar program managed by the Regulatory Commission of Alaska (the “RCA”). USF funds are disbursed to telecommunication providers through four programs: the High Cost Program; the Low Income Program (“Lifeline Program”); the Schools and Libraries Program (“E-Rate Program”); and the Rural Health Care Support Program. Our International Telecom segment receives $5.5 million of legacy frozen high cost support funding in the US Virgin Islands. This funding expires on December 31, 2025. Additionally, we recognize revenue from the FCC’s Affordable Connectivity Program (“ACP”) and the Emergency Connectivity Fund (“ECF”). The ACP provides eligible low-income consumers with a monthly subsidy for broadband connectivity and the ECF provides schools and libraries with subsidies for broadband connectivity. Funding under the ACP and ECF programs expired in the second quarter of 2024.

We also recognize High Cost support revenue from the Connect America Fund Phase II program (“CAF II”) and the Enhanced Alternative Connect America Cost Model program (“E-ACAM”). These programs offer subsidies to carriers to expand broadband coverage in designated areas. Under CAF II, we expect to receive an aggregate of $27.7 million annually through December 2025 and an aggregate of $8.0 million annually from January 2026 through July 2028. Under E-ACAM, we expect to receive a total of $118.2 million over a 15 year period beginning in 2024. The annual E-ACAM funding is approximately $9 million from 2024 through 2030 and ultimately decreasing to over time $6 million in 2038.

We were awarded approximately $22.7 million over 10 years to provide broadband and voice coverage to over 10,000 households in the United States (not including Alaska) under the 2020 Rural Digital Opportunity Fund Phase I Auction (“RDOF”). During the six months ended June 30, 2024, we entered into agreements to transfer $13.0 million of RDOF obligations. The transfer applications are pending regulatory approval.

All of the programs are subject to certain operational and reporting compliance requirements. We believe we are in compliance with these requirements as of June 30, 2024.

Construction Grants

We have also been awarded construction grants to build network connectivity for eligible communities. The funding of these grants, used to reimburse us for our construction costs, is generally distributed after we incur reimbursable costs. Completion deadlines begin in 2024 and once these projects are constructed, we are obligated to provide service to the participants. We expect to meet all requirements associated with these grants. As of June 30, 2024, we were awarded $100.1 million of construction grants.

During the three months ended June 30, 2024, we disbursed capital expenditures of $3.6 million under these programs and received reimbursement of $2.3 million. These cash flows are classified as investing activities in our statement of cash flows.

In addition, we partner with tribal governments to obtain grants under various government grant programs including, but not limited to, the Tribal Broadband Connectivity Program (“TBCP”) and the Rural Development Broadband ReConnect Program (“ReConnect”). These programs are administered by United States government agencies

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to deploy broadband connectivity in certain underserved areas. We were identified as a sub recipient of grants under these programs totaling $192.6 million as of June 30, 2024. Through June 30, 2024, we have received $11.3 million of funding under these programs and spent $11.4 million on construction obligations. These amounts are recorded as operating cash flows in the company’s statement of cash flows.

Replace and Remove Program

On July 15, 2022, we were notified that we were an approved participant in the Federal Communication Commission’s Secure and Trusted Communications Networks Reimbursement Program (the “Replace and Remove Program”), designed to reimburse providers of communications services for reasonable costs incurred in the required removal, replacement, and disposal of covered communications equipment or services, that have been deemed to pose a national security risk, from their networks. Pursuant to the Replace and Remove Program, we were allocated up to approximately $207 million in reimbursement amounts to cover documented and approved costs to remove and securely destroy all prohibited communications equipment and services in our U.S. networks and replace such equipment. The Replace and Remove Program requires that we complete the project no later than one year from submitting our initial reimbursement request, or by July 2024. In April 2024, the FCC granted our request to extend the program’s completion deadline to the first quarter of 2025. At this time, we anticipate that we will be able to meet the deadlines and requirements of the program.

We have incurred total expenditures of $112.0 million related to this project, of which $47.7 million were incurred in 2024. Of these total expenditures, $87.4 million were classified as capital.

At June 30, 2024, $27.3 million of capital expenditures were accrued and unpaid. We expect to be reimbursed, within the next twelve months, for all amounts spent to date. During the six months ended June 30, 2024 we have received $52.1 million of reimbursement under the program, of which $10.7 million was classified as operating cash inflows and $41.4 million was classified as investing cash inflows in our statement of cash flows.

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Selected Segment Financial Information

The following represents selected segment information for the three months ended June 30, 2024 and 2023 (in thousands):


For the Three Months Ended June 30, 2024

	International		US		Corporate and
	Telecom		Telecom		Other (1)		Consolidated
Revenue
Communication Services
Mobility - Business	$	4,932	$	68	$	—	$	5,000
Mobility - Consumer		21,879		701		—		22,580
Total Mobility		26,811		769		—		27,580
Fixed - Business		18,715		30,817		—		49,532
Fixed - Consumer		43,500		21,674		—		65,174
Total Fixed		62,215		52,491		—		114,706
Carrier Services		3,636		30,056		—		33,692
Other		1,045		342		—		1,387
Total Communication Services Revenue		93,707		83,658		—		177,365
Construction		—		820		—		820
Other
Managed Services		1,650		3,446		—		5,096
Total Other Revenue		1,650		3,446		—		5,096
Total Revenue		95,357		87,924		—		183,281

Operating income (loss)		32,405		884		(8,973)		24,316

(1)

Corporate and other items refer to corporate overhead costs and consolidating adjustments.

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For the Three Months Ended June 30, 2023

	International		US		Corporate and
	Telecom		Telecom		Other (1)		Consolidated
Revenue
Communication Services
Mobility - Business	$	3,507	$	114	$	—	$	3,621
Mobility - Consumer		23,349		863		—		24,212
Total Mobility		26,856		977		—		27,833
Fixed - Business		17,214		35,495		—		52,709
Fixed - Consumer		42,459		22,608		—		65,067
Total Fixed		59,673		58,103		—		117,776
Carrier Services		3,879		31,576		—		35,455
Other		448		64		—		512
Total Communication Services Revenue		90,856		90,720		—		181,576
Construction		—		1,020		—		1,020
Other
Managed Services		1,125		2,720		—		3,845
Total Other Revenue		1,125		2,720		—		3,845
Total Revenue		91,981		94,460		—		186,441

Operating income (loss)		14,552		(2,394)		(9,718)		2,440

(1) Corporate and other items refer to corporate overhead costs and consolidating adjustments.

A comparison of our segment results for the three months ended June 30, 2024 and 2023 is as follows:

International Telecom. Revenues within our International Telecom segment increased $3.4 million, or 3.7%, to $95.4 million from $92.0 million for the three months ended June 30, 2024 and 2023, respectively, primarily as a result of an increase in Fixed Revenues which increased $2.5 million, or 4.2%, to $62.2 million from $59.7 million for the three months ended June 30, 2024 and 2023, respectively. This increase in Fixed Revenues was primarily the result of network upgrades and expansions as well as improved customer care and marketing strategies which led to an increase in both business and consumer subscribers. In addition, an increase in the number of homes passed by high-speed data solutions allowed us to migrate legacy copper customers to more durable fiber services.

Operating expenses within our International Telecom segment decreased by $14.4 million, or 18.6%, to $63.0 million from $77.4 million for the three months ended June 30, 2024 and 2023, respectively. The net decrease was the result of a $15.8 million gain on the disposition of long-lived assets, primarily real estate, and certain cost savings initiatives that commenced in previous periods partially offset by an increase in other operating expenses to support this segment’s revenue growth.

As a result, our International Telecom segment’s operating income increased $17.8 million, or 121.9%, to $32.4 million from $14.6 million for the three months ended June 30, 2024 and 2023, respectively.

US Telecom. Revenue within our US Telecom segment decreased by $6.6 million, or 7.0%, to $87.9 million from $94.5 million for the three months ended June 30, 2024 and 2023, respectively, primarily as a result of the conclusion of the Emergency Connectivity Fund during the second quarter of 2024.

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Operating expenses within our US Telecom segment decreased $9.9 million, or 10.2%, to $87.0 million from $96.9 million for the three months ended June 30, 2024 and 2023, respectively, as a result of certain cost savings initiatives that were implemented in previous periods.

As a result of the above, our US Telecom segment’s operating income (loss) increased by $3.3 million to income of $0.9 million from a loss of $2.4 million for the three months ended June 30, 2024 and 2023, respectively.

The following represents a year over year discussion and analysis of our results of operations for the three months ended June 30, 2024 and 2023 (in thousands):



	Three Months Ended				Amount of		Percent
	June 30,				Increase		Increase
	2024		2023		(Decrease)		(Decrease)
REVENUE:
Communication services	$	177,365	$	181,576	$	(4,211)	(2.3)	%
Construction		820		1,020		(200)	(19.6)
Other		5,096		3,845		1,251	32.5
Total revenue		183,281		186,441		(3,160)	(1.7)
OPERATING EXPENSES (excluding depreciation and amortization unless otherwise indicated):
Cost of communications services and other		76,137		77,718		(1,581)	(2.0)
Cost of construction revenue		813		1,016		(203)	(20.0)
Selling, general and administrative		57,661		61,914		(4,253)	(6.9)
Stock-based compensation		2,781		2,739		42	1.5
Transaction-related charges		—		438		(438)	(100.0)
Restructuring charges		—		370		(370)	(100.0)
Depreciation and amortization		35,558		36,217		(659)	(1.8)
Amortization of intangibles from acquisitions		1,945		3,144		(1,199)	(38.1)
(Gain) loss on disposition of long-lived assets		(15,930)		445		(16,375)	(3,679.8)
Total operating expenses		158,965		184,001		(25,036)	(13.6)
Income from operations		24,316		2,440		21,876	896.6
OTHER INCOME (EXPENSE):
Interest income		140		45		95	211.1
Interest expense		(12,337)		(10,449)		(1,888)	18.1
Other income		(578)		2,216		(2,794)	(126.1)
Other income (expense), net		(12,775)		(8,188)		(4,587)	56.0
INCOME (LOSS) BEFORE INCOME TAXES		11,541		(5,748)		17,289	(300.8)
Income tax expense (benefit)		204		(5,087)		5,291	(104.0)
NET INCOME (LOSS)		11,337		(661)		11,998	(1,815.1)
Net (income) loss attributable to noncontrolling interests, net of tax:		(2,334)		1,428		(3,762)	(263.4)
NET INCOME ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS	$	9,003	$	767	$	8,236	1,073.8	%

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Communications Services Revenue

Mobility Revenue. Our Mobility revenue consists of retail revenue generated within both our International Telecom and US Telecom segments by providing retail mobile voice and data services over our wireless networks as well as through the sale and repair services of related equipment, such as handsets and other accessories, to our retail subscribers.

Mobility revenue decreased by $0.2 million, or 0.7%, to $27.6 million for the three months ended June 30, 2024 from $27.8 million for the three months ended June 30, 2023. Mobility revenue from consumer customers decreased by $1.6 million partially offset by an increase in Mobility revenue from business customers of $1.4 million.

The net decrease in Mobility revenue, within our segments, consisted of the following:

●

International Telecom. Within our International Telecom segment, Mobility revenue decreased by $0.1 million, or 0.4%, to $26.8 million for the three months ended June 30, 2024 from $26.9 million for the three months ended June 30, 2023. This decrease was primarily related to a decrease in the demand for voice services partially offset by an increase in the demand for data services. Mobility revenue from consumer customers decreased $1.5 million partially offset by an increase in Mobility revenue from business customers of $1.4 million.

●

US Telecom. Mobility revenue within our US Telecom segment decreased by $0.2 million, or 20.0%, to $0.8 million from $1.0 million for the three months ended June 30, 2024 and 2023, respectively. Substantially all of the decrease related to a decrease in revenue from consumers within our retail operations due to a reduction in subscribers as we continue to put more emphasis on other revenue sources within this segment.

Mobility revenue within our International Telecom segment may increase as a result of continued network upgrades and our marketing efforts to increase the number of our subscribers, data usage, and to convert our current subscriber base to higher margin prepaid and postpaid plans. However, we believe that increased competition and regulatory changes within our international markets may limit that revenue growth. We expect that Mobility revenue within our US Telecom segment will decrease over time as we put more emphasis on other revenue sources within that segment.

Fixed Revenue. Fixed revenue is primarily generated by broadband, voice, and video service revenues provided to retail and business customers over our wireline networks. Fixed revenue within our US Telecom segment also includes awards from the Connect America Fund Phase II program and, through early April 2024, the Emergency Connectivity Fund program in the western United States and Alaska, as well as revenue from the Alaska Universal Service Fund. Within our International Telecom segment, Fixed revenue also includes funding under the FCC’s High Cost Program in the US Virgin Islands.

Fixed revenue decreased by $3.1 million, or 2.6%, to $114.7 million from $117.8 million for the three months ended June 30, 2024 and 2023, respectively. Of this net decrease of $3.1 million, revenue from business customers decreased by $3.2 million, partially offset by an increase in revenue from consumer customers of $0.1 million. The increase in Fixed revenue, within our segments, consisted of the following:

●

International Telecom. Within our International Telecom segment, Fixed revenue increased by $2.5 million, or 4.2%, to $62.2 million from $59.7 million for the three months ended June 30, 2024 and 2023, respectively. Of this increase, $1.0 million and $1.5 million relate to increases in revenue from business and consumer customers, respectively. This increase was a result of network upgrades and expansions which led to an increase in subscribers and the number of homes passed by high-speed data solutions which allowed us to migrate legacy copper customers to more durable and higher revenue generating fiber services.

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●

US Telecom. Fixed revenue within our US Telecom segment decreased by $5.6 million, or 9.6%, to $52.5 million from $58.1 million for the three months ended June 30, 2024 and 2023, respectively. Revenue from business and consumer customers decreased by $4.7 million and $0.9 million, respectively, primarily as a result of the expiration of the Emergency Connectivity Fund.

Fixed revenue within our International Telecom segment may continue to increase as we continue to add subscribers to our fiber and fiber-fed data solutions deployed to expand and enhance our network reach. We expect the popularity of video and audio streaming, the demand for cloud services and smart home, business and city solutions to increase the demand for broadband and other data services from consumers, businesses and governments. However, such increases may be offset by a decrease in demand for our services due to subscribers using alternative methods to receive video and audio content.

Within our US Telecom segment, we expect Fixed revenue to decrease in the short term as a result of the impact of the expiration of the Emergency Connectivity Fund. Over time, we expect these decreases to be partially offset by increases in other business revenue in Alaska and our western United States operations, as we further deploy fiber and fiber-fed broadband access to both consumers and businesses.

Carrier Services Revenue. Carrier Services revenue is generated by both our International Telecom and US Telecom segments. Within our International Telecom segment, Carrier Services revenue includes international long-distance services, roaming revenues generated by other carriers’ customers roaming into our retail markets, transport services and access services provided to other telecommunications carriers. Within our US Telecom segment, Carrier Services revenue includes services provided under the FirstNet Agreement and Verizon Carrier Managed Services Agreement, wholesale roaming revenues, the provision of network switching services, tower lease revenue and other services provided to other carriers.

Carrier Services revenue decreased by $1.8 million, or 5.1%, to $33.7 million from $35.5 million for the three months ended June 30, 2024 and 2023, respectively. The decrease, within our segments, consisted of the following:

●

International Telecom. Within our International Telecom segment, Carrier Services revenue decreased by $0.3 million, or 7.7%, to $3.6 million, from $3.9 million for the three months ended June 30, 2024 and 2023, respectively, primarily as a result of a decrease in roaming revenues in some of our international markets.

●

US Telecom. Carrier Services revenue within our US Telecom segment decreased by $1.5 million, or 4.7%, to $30.1 million from $31.6 million, for the three months ended June 30, 2024 and 2023, respectively, as a result of the transition of legacy roaming arrangements to carrier service management contracts.

Within our International Telecom segment, Carrier Services revenue may increase if international travel increases. Such increases, however, may be partially offset by a decrease within our international long-distance business in Guyana as consumers seek to use alternative technology services to place long-distance calls.

Within our US Telecom segment, Carrier Services revenue may increase as a result of recent carrier service management contracts.

Other Communications Services Revenue. Other Communications Services revenue includes miscellaneous services that the operations within our International Telecom segment provide to retail subscribers and project-related revenue generated within both our International and US Telecom segments. Other Communications Services revenue increased by $0.9 million to $1.4 million from $0.5 million for the three months ended June 30, 2024 and 2023, respectively, primarily as a result of non-recurring project-related revenue being recognized within both our International Telecom and US Telecom segments, respectively, during the three months ended June 30, 2024.

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We expect that other communications services revenue will decline to previously reported levels as the project-related fiber deployment engineering services revenue, reported during the quarter ended June 30, 2024, is not expected to continue subsequent to the completion of that project.

Construction Revenue

Construction revenue represents revenue generated within our US Telecom segment for the construction of network cell sites related to the FirstNet Agreement. During the three months ended June 30, 2024 and 2023, Construction revenue decreased to $0.8 million from $1.0 million, respectively, as a result of a decrease in the number of sites completed during 2024 as compared to 2023. We expect to substantially complete the build by the end of 2024 with the remainder to be completed in early 2025.

Other Revenue

Managed Services Revenue. Managed Services revenue is generated within both our International and US Telecom segments and includes network, application, infrastructure, and hosting services. Managed Services revenue increased $1.3 million, or 34.2%, to $5.1 million from $3.8 million during the three months ended June 30, 2024 and 2023, respectively. The net increase in Managed Services revenue, within our segments, consisted of the following:

Within our International Telecom segment, Managed Services revenue increased $0.5 million, or 41.7%, to $1.7 million from $1.2 million for the three months ended June 30, 2024 and 2023, respectively, as a result of our continued efforts to sell Managed Services solutions across all of our international markets.

Within our US Telecom segment, Managed Services revenue increased $0.7 million, or 25.9%, to $3.4 million from $2.7 million for the three months ended June 30, 2024 and 2023, respectively, as a result of our continued efforts to sell Managed Services solutions to all of our US markets.

Managed Services revenue may increase in both our US and International Telecom segments as a result of our continued effort to sell certain Managed Services solutions to both our consumer and business customers in all of our markets.

Operating Expenses

Cost of communication services and other. Cost of communication services and other are charges that we incur for voice and data transport circuits (in particular, the circuits between our Mobility sites and our switches), internet capacity, video programming costs, access fees we pay to terminate our calls, telecommunication spectrum fees and direct costs associated within our managed services businesses. These costs also include expenses associated with developing, operating, upgrading and supporting our telecommunications networks, including the salaries and benefits paid to employees directly involved in the development and operation of those businesses, as well as credit loss allowances and the cost of handsets and customer resale equipment incurred by our retail businesses.

Cost of communication services and other decreased by $1.6 million, or 2.1%, to $76.1 million from $77.7 million for the three months ended June 30, 2024 and 2023, respectively. The net decrease in cost of communication services and other, within our segments, consisted of the following:

●

International Telecom. Within our International Telecom segment, cost of communication services and other decreased $0.7 million, or 2.0%, to $33.8 million from $34.5 million for the three months ended June 30, 2024 and 2023, respectively. This segment incurred a decrease in its cost of communication services and other expenses as a result of the impact of certain cost savings initiatives that commenced in previous periods partially offset by an increase in these costs to support this segment’s revenue growth.

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●

US Telecom. Cost of communication services and other within our US Telecom segment decreased by $1.0 million, or 2.3%, to $42.3 million from $43.3 million for the three months ended June 30, 2024 and 2023, respectively. Such decrease was a result of the beneficial impact of certain cost savings initiatives that commenced during previous periods as well as a reduction in the costs associated with the Emergency Connectivity Fund which was terminated during the second quarter of 2024. Such decreases were partially offset by an increase in costs associated with the increase in project-related revenues.

Cost of communication services in both our International and US Telecom segments may continue to decrease as a result of the ongoing cost reduction initiatives that commenced in previous periods but may be partially offset by future inflationary pressure.

Cost of construction revenue. Cost of construction revenue includes the expenses incurred in connection with the construction of and the delivery to AT&T of cell sites in accordance with our FirstNet Agreement. During the three months ended June 30, 2024 and 2023, cost of construction revenue decreased to $0.8 million from $1.0 million as a result of a decrease in the number of sites completed during 2024 as compared to 2023. We expect to substantially complete the build by the end of 2024 with the remainder to be completed in early 2025.

Selling, general and administrative expenses. Selling, general and administrative expenses include salaries and benefits we pay to sales personnel, customer service expenses and the costs associated with the development and implementation of our promotional and marketing campaigns. Selling, general and administrative expenses also include salaries, benefits and related costs for general corporate functions including executive management, finance and administration, legal and regulatory, facilities, information technology and human resources as well as internal costs associated with our performance of due-diligence and integration related costs associated with acquisition activities.

Selling, general and administrative expenses decreased $4.2 million, or 6.8%, to $57.7 million from $61.9 million for the three months ended June 30, 2024 and 2023, respectively. The changes in selling, general and administrative expenses, within our segments, consisted of the following:

●

International Telecom. Within our International Telecom segment, our selling, general and administrative expenses decreased by $0.1 million, or 0.4%, to $28.3 million from $28.4 million for the three months ended June 30, 2024 and 2023, respectively. This decrease was the result of the beneficial impact of certain cost savings initiatives within most of our international markets that commenced during previous periods partially offset by an increase in costs needed to support the expansion of our subscriber base.

●

US Telecom. Selling, general and administrative expenses decreased within our US Telecom segment by $4.5 million, or 16.4%, to $22.9 million from $27.4 million, for the three months ended June 30, 2024 and 2023, respectively. This decrease, which was incurred in all of our US markets, was primarily related to certain cost savings initiatives that commenced in previous periods.

●

Corporate Overhead. Selling, general and administrative expenses within our corporate overhead increased by $0.3 million, or 4.8%, to $6.5 million from $6.2 million, for the three months ended June 30, 2024 and 2023, respectively, primarily related to an increase in professional fees.

Selling, general and administrative expenses in both our International and US Telecom segments, as well as our Corporate Overhead, may decrease as a result of the ongoing cost reduction initiatives that commenced in previous periods but may be partially offset by future inflationary pressure.

Stock-based compensation. Stock-based compensation represents a non-cash expense related to the amortization of grants of equity awards to employees and directors.

Stock-based compensation for the three months ended June 30, 2024 and 2023 was $2.8 million and $2.7 million, respectively.

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Transaction-related charges. Transaction-related charges include the external costs, such as legal, tax, accounting and consulting fees directly associated with acquisition and disposition-related activities, which are expensed as incurred. Transaction-related charges also include certain internal personnel costs incurred as a result of the completion of an acquisition or disposition. Transaction-related charges do not include employee salary and travel-related expenses, incurred in connection with acquisitions or dispositions or any integration-related costs.

We incurred a nominal amount of transaction-related charges during the three months ended June 30, 2024 and $0.4 million during the three months ended June 30, 2023.

Restructuring expenses. We did not record any restructuring expenses during the three months ended June 30, 2024. In connection with our repositioning of our legacy wholesale roaming operations in our US Telecom segment, we recorded a $0.4 million restructuring charge during the three months ended June 30, 2023 primarily related to the decommissioning of certain cell sites.

Depreciation and amortization expenses. Depreciation and amortization expenses represent the depreciation and amortization charges we record on our property and equipment.

Depreciation and amortization expenses decreased by $0.6 million, or 1.7%, to $35.6 million from $36.2 million for the three months ended June 30, 2024 and 2023, respectively. The net decrease in depreciation and amortization expenses, within our segments, consisted primarily of the following:

●

International Telecom. Depreciation and amortization expenses increased within our International Telecom segment by $2.2 million, or 15.6%, to $16.3 million from $14.1 million, for three months ended June 30, 2024 and 2023, respectively. Increases were incurred in all of our international markets as a result of recent capital expenditures used to expand and upgrade our network operations.

●

US Telecom. Depreciation and amortization expenses decreased within our US Telecom segment by $2.2 million, or 10.3%, to $19.2 million from $21.4 million, for the three months ended June 30, 2024 and 2023, respectively, primarily as a result of certain assets becoming fully depreciated in recent periods.

●

Corporate Overhead. Depreciation and amortization expenses decreased within our corporate overhead by $0.6 million to a nominal amount from $0.7 million, for the three months ended June 30, 2024 and 2023, respectively, primarily as a result of certain assets becoming fully depreciated in recent periods.

We expect depreciation and amortization expenses to increase in our International Telecom segment as a result of recent capital expenditures and decrease within our US Telecom segments as some of our tangible and intangible assets we acquired are now fully depreciated.

Amortization of intangibles from acquisitions. Amortization of intangibles from acquisitions include the amortization of customer relationships and trade names related to our completed acquisitions.

Amortization of intangibles from acquisitions decreased by $1.2 million to $1.9 million from $3.1 million for the three months ended June 30, 2024 and 2023, respectively, as a result of certain intangible assets becoming fully amortized in recent periods.

We expect that amortization of intangibles from acquisitions will decrease as such costs continue to amortize.

Gain (loss) on disposition of assets. During the three months ended June 30, 2024, we recorded a gain on the disposition of assets of $15.9 million primarily relating to the sale of real estate in our International Telecom segment.

During the three months ended June 30, 2023, we recorded a loss on the disposition of long-lived assets of $0.4 million within our US Telecom segment.

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Interest income. Interest income represents interest earned on our cash, cash equivalents, restricted cash and short-term investment balances. Interest income was $0.1 million and a nominal amount for the three months ended June 30, 2024 and 2023, respectively.

Interest expense. We incur interest expense on the 2023 CoBank Credit Facility, the Alaska Credit and Term Facilities, the FirstNet Receivables Credit Facility, the GTT Credit Facilities, the Sacred Wind Term Debt and the Viya Debt. In addition, interest expense includes commitment fees, letter of credit fees and the amortization of debt issuance costs.

Interest expense increased to $12.3 million from $10.4 million for the three months ended June 30, 2024 and 2023, respectively, as additional interest expense was incurred as a result of an increase in borrowings under our credit facilities and a year-over-year increase in the term SOFR rate on all floating-rate borrowings under those facilities.

Interest expense may increase in future periods as a result of additional borrowings or an increase in interest rates.

Other income (expense). For the three months ended June 30, 2024, other income (expense) was $0.6 million of expense primarily related to expenses for certain employee benefit plans and losses on foreign currency transactions.

For the three months ended June 30, 2023, other income (expense) was $2.2 million of income primarily related to gains from our noncontrolling investments.

Income taxes. Our effective tax rate for the three months ended June 30, 2024 and 2023 was 1.8% and 88.5% respectively.

We recorded an income tax expense of $0.2 million in relation to a pretax income of $11.5 million for the three months ended June 30, 2024. The effective tax rate for the three months ended June 30, 2024 was primarily impacted by the following items (i) the mix of income generated among the jurisdictions in which we operate, (ii) net expense related to valuation allowances placed on certain deferred tax assets that are not expected to be realizable based on the weight of positive and negative evidence and (iii) discrete items including a $2.4 million expense associated with the gain on sale of land in a foreign jurisdiction, a $3.7 million benefit from the reversal of an unrecognized tax position due to a statute of limitations expiration and a $0.8 million expense for interest on unrecognized tax positions.

We recorded an income tax benefit of $5.1 million in relation to a pretax loss of $5.7 million for the three months ended June 30, 2023. The effective tax rate for the three months ended June 30, 2023 was primarily impacted by the following items (i) the mix of income generated among the jurisdictions in which we operate, (ii) net expense related to valuation allowances placed on certain deferred tax assets that are not expected to be realizable based on the weight of positive and negative evidence and (iii) discrete items including a $4.0 million benefit from the reversal of an unrecognized tax position due to a statute of limitations expiration and a $0.7 million expense for interest on unrecognized tax positions.

Our effective tax rate is based upon estimated income before provision for income taxes for the year, composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for potential tax consequences, benefits and/or resolutions of tax contingencies. Our consolidated tax rate will continue to be impacted by any transactional or one-time items in the future and the mix of income in any given year generated among the jurisdictions in which we operate. While we believe we have adequately provided for all tax positions, amounts asserted by taxing authorities could materially differ from our accrued positions as a result of uncertain and complex applications of tax law and regulations. Additionally, the recognition and measurement of certain tax benefits include estimates and judgments by management. Accordingly, we could record additional provisions or benefits for US federal, state, and foreign tax matters in future periods as new information becomes available.

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Net income (loss) attributable to noncontrolling interests, net of tax. Net income (loss) attributable to noncontrolling interests, net of tax reflected an allocation of $2.3 million of income and $1.4 million of losses generated by our less than wholly owned subsidiaries for the three months ended June 30, 2024 and 2023, respectively. Changes in net income (loss) attributable to noncontrolling interests, net of tax, within our segments, consisted of the following:

●

International Telecom. Within our International Telecom segment, net income (loss) attributable to noncontrolling interests, net of tax increased by $3.1 million, or 155.0%, to an allocation of $5.1 million of income from an allocation of $2.0 million of income for the three months ended June 30, 2024 and 2023, respectively, largely as a result of the $15.9 million gain we recorded on the disposition of assets, primarily real estate, and increased profitability at certain less than wholly owned subsidiaries.

●

US Telecom. Within our US Telecom segment, net income (loss) attributable to noncontrolling interests, net of tax decreased by $0.7 million, or 20.0%, to an allocation of losses of $2.8 million from an allocation of losses of $3.5 million for the three months ended June 30, 2024 and 2023, respectively, as a result of decreased losses at our less than wholly owned subsidiaries within this segment.

Net income (loss) attributable to ATN International, Inc. stockholders. Net income (loss) attributable to ATN International, Inc. stockholders was $9.0 million of income for the three months ended June 30, 2024 as compared to $0.8 million of income for the three months ended June 30, 2023.

On a per diluted share basis, net income was $0.50 per diluted share for the three months ended June 30, 2024 as compared to a loss of $0.03 per diluted share for the three months ended June 30, 2023. Such per share amounts were negatively impacted by accrued preferred dividends of $1.4 million and $1.3 million for the three months ended June 30, 2024 and 2023, respectively.

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Selected Segment Financial Information

The following represents selected segment information for the six months ended June 30, 2024 and 2023 (in thousands):



For the Six Months Ended June 30, 2024

	International		US		Corporate and
	Telecom		Telecom		Other (1)		Consolidated
Revenue
Communication Services
Mobility - Business	$	9,740	$	141	$	—	$	9,881
Mobility - Consumer		43,108		1,465		—		44,573
Total Mobility		52,848		1,606		—		54,454
Fixed - Business		37,247		65,783		—		103,030
Fixed - Consumer		86,289		44,593		—		130,882
Total Fixed		123,536		110,376		—		233,912
Carrier Services		7,209		60,109		—		67,318
Other		1,863		1,086		—		2,949
Total Communication Services Revenue		185,456		173,177		—		358,633
Construction		—		2,406		—		2,406
Other
Managed Services		2,960		6,077		—		9,037
Total Other Revenue		2,960		6,077		—		9,037
Total Revenue		188,416		181,660		—		370,076

Operating income (loss)		44,090		1,482		(16,682)		28,890

(1)

Corporate and other items refer to corporate overhead costs and consolidating adjustments.

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For the Six Months Ended June 30, 2023

	International		US		Corporate and
	Telecom		Telecom		Other (1)		Consolidated
Revenue
Communication Services
Mobility - Business	$	7,083	$	286	$	—	$	7,369
Mobility - Consumer		45,880		1,850		—		47,730
Total Mobility		52,963		2,136		—		55,099
Fixed - Business		34,327		71,814		—		106,141
Fixed - Consumer		84,236		45,190		—		129,426
Total Fixed		118,563		117,004		—		235,567
Carrier Services		7,570		63,660		—		71,230
Other		848		139		—		987
Total Communication Services Revenue		179,944		182,939		—		362,883
Construction		—		1,610		—		1,610
Other
Managed Services		2,445		5,276		—		7,721
Total Other Revenue		2,445		5,276		—		7,721
Total Revenue		182,389		189,825		—		372,214

Operating income (loss)		28,377		(6,737)		(18,566)		3,074

(1)

Corporate and other items refer to corporate overhead costs and consolidating adjustments.

A comparison of our segment results for the six months ended June 30, 2024, and 2023 is as follows:

International Telecom. Revenues within our International Telecom segment increased $6.0 million, or 3.3%, to $188.4 million from $182.4 million for the six months ended June 30, 2024 and 2023, respectively, primarily as a result of an increase in Fixed Revenues which increased $4.9 million, or 4.1%, to $123.5 million from $118.6 million for the six months ended June 30, 2024 and 2023, respectively. This increase in Fixed Revenues was primarily the result of network upgrades and expansions as well as improved customer care and marketing strategies which led to an increase in both business and consumer subscribers. In addition, an increase in the number of homes passed by high-speed data solutions allowed us to migrate legacy copper customers to more durable fiber services.

Operating expenses within our International Telecom segment decreased by $9.7 million, or 6.3%, to $144.3 million from $154.0 million for the six months ended June 30, 2024 and 2023, respectively. The net decrease was the result of a $15.8 million gain on the disposition of long-lived assets, primarily real estate, and certain cost savings initiatives that commenced in previous periods partially offset by an increase in other operating expenses to support this segment’s revenue growth.

As a result, our International Telecom segment’s operating income increased $15.7 million, or 55.3%, to $44.1 million from $28.4 million for the six months ended June 30, 2024 and 2023, respectively.

US Telecom. Revenue within our US Telecom segment decreased by $8.1 million, or 4.3%, to $181.7 million from $189.8 million for the six months ended June 30, 2024 and 2023, respectively, primarily as a result of the conclusion of the Emergency Connectivity Fund during the second quarter of 2024.

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Operating expenses within our US Telecom segment decreased $16.3 million, or 8.3%, to $180.2 million from $196.5 million for the six months ended June 30, 2024 and 2023, respectively, as a result of certain cost savings initiatives that commenced in previous periods.

As a result of the above, our US Telecom segment’s operating income (loss) increased by $8.2 million to income of $1.5 million from a loss of $6.7 million for the six months ended June 30, 2024 and 2023, respectively.

The following represents a year over year discussion and analysis of our results of operations for the six months ended June 30, 2024 and 2023 (in thousands):


	Six Months Ended				Amount of		Percent
	June 30,				Increase		Increase
	2024		2023		(Decrease)		(Decrease)

REVENUE:
Communication services	$	358,633	$	362,883	$	(4,250)	(1.2)	%
Construction		2,406		1,610		796	49.4
Other		9,037		7,721		1,316	17.0
Total revenue		370,076		372,214		(2,138)	(0.6)
OPERATING EXPENSES (excluding depreciation and amortization unless otherwise indicated):
Cost of communication services and other		156,527		156,759		(232)	(0.1)
Cost of construction revenue		2,382		1,604		778	48.5
Selling, general and administrative		118,979		123,262		(4,283)	(3.5)
Stock-based compensation		4,690		4,517		173	3.8
Transaction-related charges		19		451		(432)	(95.8)
Restructuring charges		1,190		3,257		(2,067)	(63.5)
Depreciation and amortization		69,897		72,621		(2,724)	(3.8)
Amortization of intangibles from acquisitions		3,924		6,391		(2,467)	(38.6)
(Gain) loss on disposition of long-lived assets		(16,422)		278		(16,700)	(6,007.2)
Total operating expenses		341,186		369,140		(27,954)	(7.6)
Income (loss) from operations		28,890		3,074		25,816	839.8
OTHER INCOME (EXPENSE):
Interest income		586		227		359	158.1
Interest expense		(23,857)		(19,256)		(4,601)	23.9
Other income		(406)		2,411		(2,817)	(116.8)
Other expense, net		(23,677)		(16,618)		(7,059)	42.5
INCOME (LOSS) BEFORE INCOME TAXES		5,213		(13,544)		18,757	(138.5)
Income tax expense (benefit)		1,822		(5,827)		7,649	(131.3)
NET INCOME (LOSS)		3,391		(7,717)		11,108	(143.9)
Net (income) loss attributable to noncontrolling interests, net of tax:		(701)		2,599		(3,300)	(127.0)
NET INCOME (LOSS) ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS	$	2,690	$	(5,118)	$	7,808	(152.6)	%

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Communications Services Revenue

Mobility Revenue. Mobility revenue decreased by $0.6 million, or 1.1%, to $54.5 million for the six months ended June 30, 2024 from $55.1 million for the six months ended June 30, 2023. Mobility revenue from consumer customers decreased by $3.1 million partially offset by an increase in Mobility revenue from business customers of $2.5 million.

The net decrease in Mobility revenue, within our segments, consisted of the following:

●

International Telecom. Within our International Telecom segment, Mobility revenue decreased by $0.1 million, or 0.2%, to $52.8 million for the six months ended June 30, 2024 from $52.9 million for the six months ended June 30, 2023. This decrease was primarily related to a decrease in the demand for voice services partially offset by an increase in the demand for data services. Mobility revenue from consumer customers decreased $2.8 million partially offset by an increase in Mobility revenue from business customers of $2.7 million.

●

US Telecom. Mobility revenue within our US Telecom segment decreased by $0.5 million, or 23.8%, to $1.6 million from $2.1 million for the six months ended June 30, 2024 and 2023, respectively. Substantially all of the decrease related to a decrease in revenue from consumers within our retail operations due to a reduction in subscribers as we continue to put more emphasis on other revenue sources within this segment.

Fixed Revenue. Fixed revenue decreased by $1.7 million, or 0.7%, to $233.9 million from $235.6 million for the six months ended June 30, 2024 and 2023, respectively. Revenue from business customers decreased by $3.1 million, partially offset by an increase in revenue from consumer customers of $1.5 million. The increase in Fixed revenue, within our segments, consisted of the following:

●

International Telecom. Within our International Telecom segment, Fixed revenue increased by $4.9 million, or 4.1%, to $123.5 million from $118.6 million for the six months ended June 30, 2024 and 2023, respectively. Of this increase, $2.9 million and $2.0 million relate to increases in revenue from business and consumer customers, respectively. This increase was a result of network upgrades and expansions which led to an increase in subscribers and the number of homes passed by high-speed data solutions which allowed us to migrate legacy copper customers to more durable and higher revenue generating fiber services.

●

US Telecom. Fixed revenue within our US Telecom segment decreased by $6.6 million, or 5.6%, to $110.4 million from $117.0 million for the three months ended June 30, 2024 and 2023, respectively. Revenue from business and consumer customers decreased by $6.0 million and $0.6 million, respectively, primarily as a result of the expiration of the Emergency Connectivity Fund during the second quarter of 2024.

Carrier Services Revenue. Carrier Services revenue decreased by $3.9 million, or 5.5%, to $67.3 million from $71.2 million for the six months ended June 30, 2024 and 2023, respectively. The decrease, within our segments, consisted of the following:

●

International Telecom. Within our International Telecom segment, Carrier Services revenue decreased by $0.4 million, or 5.3%, to $7.2 million, from $7.6 million for the three months ended June 30, 2024 and 2023, respectively, primarily as a result of a decrease in roaming revenues in some of our international markets.

●

US Telecom. Carrier Services revenue within our US Telecom segment decreased by $3.6 million, or 5.7%, to $60.1 million from $63.7 million, for the six months ended June 30, 2024 and 2023, respectively, as a result of the transition of legacy roaming arrangements to carrier service management contracts.

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Other Communications Services Revenue. Other Communications Services revenue increased by $1.9 million to $2.9 million from $1.0 million for the six months ended June 30, 2024 and 2023, respectively, primarily as a result of non-recurring project-related revenue being recognized within our International Telecom and US Telecom segments, respectively, during the six months ended June 30, 2024.

Construction Revenue

During the six months ended June 30, 2024 and 2023, Construction revenue increased to $2.4 million from $1.6 million, respectively, as a result of an increase in the number of sites completed during 2024 as compared to 2023.

Other Revenue

Managed Services Revenue. Managed Services revenue increased $1.3 million, or 16.9%, to $9.0 million from $7.7 million during the six months ended June 30, 2024 and 2023, respectively. The net increase in Managed Services revenue, within our segments, consisted of the following:

Within our International Telecom segment, Managed Services revenue increased $0.6 million, or 25.0%, to $3.0 million from $2.4 million for the six months ended June 30, 2024 and 2023, respectively, as a result of our continued efforts to sell Managed Services solutions across all of our international markets.

Within our US Telecom segment, Managed Services revenue increased $0.8 million, or 15.1%, to $6.1 million from $5.3 million for the six months ended June 30, 2024 and 2023, respectively, as a result of our continued efforts to sell Managed Services solutions to all of our US markets.

Operating Expenses

Cost of communication services and other. Cost of communication services and other decreased by $0.3 million, or 0.2%, to $156.5 million from $156.8 million for the six months ended June 30, 2024 and 2023, respectively. The net increase in cost of communication services and other, within our segments, consisted of the following:

●

International Telecom. Within our International Telecom segment, cost of communication services and other decreased $0.7 million, or 1.0%, to $68.0 million from $68.7 million for the six months ended June 30, 2024 and 2023. This segment incurred a decrease in its cost of communication services and other expenses as a result of the impact of certain cost savings initiatives that commenced in previous periods partially offset by an increase in these costs to support this segment’s revenue growth.

●

US Telecom. Cost of communication services and other within our US Telecom segment increased by $0.4 million, or 0.5%, to $88.7 million from $88.3 million for the six months ended June 30, 2024 and 2023, respectively. Such increase was primarily related to increases in transport costs as well as costs associated with the increase in project-related revenues. These increases, however, were partially offset by the beneficial impact of certain cost savings initiatives that commenced during previous periods as well as a reduction in the costs associated with the Emergency Connectivity Fund which was terminated during the second quarter of 2024.

Cost of construction revenue. During the six months ended June 30, 2024 and 2023, cost of construction revenue increased to $2.4 million from $1.6 million as a result of an increase in the number of sites completed during 2024 as compared to 2023.

Selling, general and administrative expenses. Selling, general and administrative expenses decreased $4.3 million, or 3.5%, to $119.0 million from $123.3 million during the six months ended June 30, 2024 and 2023, respectively. The changes in selling, general and administrative expenses, within our segments, consisted of the following:

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●

International Telecom. Within our International Telecom segment, our selling, general and administrative expenses increased by $1.8 million, or 3.2%, to $57.9 million from $56.1 million for the six months ended June 30, 2024 and 2023, respectively. This increase was primarily as a result of an increase in our sales and marketing costs needed to support the expansion of our subscriber base partially offset by the beneficial impact of certain cost savings initiatives that commenced in previous periods.

●

US Telecom. Selling, general and administrative expenses decreased within our US Telecom segment by $6.4 million, or 11.8%, to $47.9 million from $54.3 million, for the six months ended June 30, 2024 and 2023, respectively. This decrease was primarily related to certain cost savings initiatives that commenced in previous periods.

●

Corporate Overhead. Selling, general and administrative expenses within our corporate overhead increased by $0.2 million, or 1.6%, to $13.1 million from $12.9 million, for the six months ended June 30, 2024 and 2023, respectively, primarily related to an increase in professional fees.

Stock-based compensation. Stock-based compensation for the six months ended June 30, 2024 and 2023 was $4.7 million and $4.5 million, respectively.

Transaction-related charges. We incurred a nominal amount of transaction-related charges during the six months ended June 30, 2024 and $0.5 million during the six months ended June 30, 2023.

Restructuring expenses. In order to reduce costs to improve our cost structures and profitability, we incurred certain reduction in force costs totaling $1.2 million within our International Telecom segment during the six months ended June 30, 2024.

In connection with our repositioning of our legacy wholesale roaming operations in our US Telecom segment, we recorded a $3.3 million restructuring charge during the six months ended June 30, 2023 primarily related to the decommissioning of certain cell sites.

Depreciation and amortization expenses. Depreciation and amortization expenses decreased by $2.7 million, or 3.7%, to $69.9 million from $72.6 million for the six months ended June 30, 2024 and 2023, respectively. The net decrease in depreciation and amortization expenses, within our segments, consisted primarily of the following:

●

International Telecom. Depreciation and amortization expenses increased within our International Telecom segment by $4.1 million, or 14.5%, to $32.4 million from $28.3 million, for six months ended June 30, 2024 and 2023, respectively. Increases were incurred in all of our international markets as a result of recent capital expenditures used to expand and upgrade our network operations.

●

US Telecom. Depreciation and amortization expenses decreased within our US Telecom segment by $5.5 million, or 12.8%, to $37.4 million from $42.9 million, for the six months ended June 30, 2024 and 2023, respectively, primarily as a result of certain assets becoming fully depreciated in recent periods.

●

Corporate Overhead. Depreciation and amortization expenses decreased within our corporate overhead by $1.3 million to $0.1 million from $1.4 million, for the six months ended June 30, 2024 and 2023, respectively, primarily as a result of certain assets becoming fully depreciated in recent periods.

Amortization of intangibles from acquisitions. Amortization of intangibles from acquisitions decreased by $2.5 million to $3.9 million from $6.4 million for the six months ended June 30, 2024 and 2023, respectively, as a result of certain intangible assets becoming fully amortized in recent periods.

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Gain on disposition of assets. During the six months ended June 30, 2024, we recorded a gain on the disposition of assets of $16.4 million. This gain is comprised primarily of a $15.9 million gain related to the sale of real estate within our International Telecom segment and a $0.5 million gain pertaining to the previously completed disposition of our renewable energy assets.

During the six months ended June 30, 2023, we recorded a loss on the disposition of long-lived assets of $0.3 million within our US Telecom segment.

Interest income. Interest income was $0.6 million and a nominal amount for the six months ended June 30, 2024 and 2023, respectively.

Interest expense. Interest expense increased to $23.9 million from $19.3 million for the six months ended June 30, 2024 and 2023, respectively, as additional interest expense was incurred as a result of an increase in borrowings under our credit facilities and a year-over-year increase in the term SOFR rate on all floating-rate borrowings under those facilities.

Other income (expense). For the six months ended June 30, 2024, other income (expense) was $0.4 million of expense primarily related to certain employee benefit plans and by losses on foreign currency transactions.

For the six months ended June 30, 2023, other income (expenses) was $2.4 million of income primarily related to gains from our noncontrolling investments.

Income taxes. Our effective tax rate for the six months ended June 30, 2024 and 2023 was 35.0% and 43.0%, respectively.

We recorded an income tax expense of $1.8 million in relation to a pretax income of $5.2 million for the six months ended June 30, 2024. The effective tax rate for the six months ended June 30, 2024 was primarily impacted by the following items (i) the mix of income generated among the jurisdictions in which we operate, (ii) net expense related to valuation allowances placed on certain deferred tax assets that are not expected to be realizable based on the weight of positive and negative evidence and (iii) discrete items including a $2.4 million expense associated with the gain on sale of land in a foreign jurisdiction, a $3.7 million benefit from the reversal of an unrecognized tax position due to a statute of limitations expiration, a $1.5 million expense to record an unrecognized tax position for the current year, and a $1.5 million expense for interest on unrecognized tax positions.

We recorded an income tax benefit of $5.8 million in relation to a pretax loss of $13.5 million for the six months ended June 30, 2023. The effective tax rate for the six months ended June 30, 2023 was primarily impacted by the following items (i) the mix of income generated among the jurisdictions in which we operate, (ii) net expense related to valuation allowances placed on certain deferred tax assets that are not expected to be realizable based on the weight of positive and negative evidence and (iii) discrete items including a $4.0 million benefit from the reversal of an unrecognized tax position due to a statute of limitations expiration, and a $1.3 million expense for interest on unrecognized tax positions.

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Net income (loss) attributable to noncontrolling interests, net of tax. Net income (loss) attributable to noncontrolling interests, net of tax reflected an allocation of $0.7 million of income and $2.6 million of losses generated by our less than wholly owned subsidiaries for the six months ended June 30, 2024 and 2023, respectively. Changes in net income (loss) attributable to noncontrolling interests, net of tax, within our segments, consisted of the following:

●

International Telecom. Within our International Telecom segment, net income (loss) attributable to noncontrolling interests, net of tax increased by $2.7 million, or 69.2%, to an allocation of $6.6 million of income from an allocation of $3.9 million of income for the six months ended June 30, 2024 and 2023, respectively, largely as a result of the $15.9 million gain we recorded on the disposition of assets, primarily real estate, and increased profitability at certain less than wholly owned subsidiaries.

●

US Telecom. Within our US Telecom segment, net income (loss) attributable to noncontrolling interests, net of tax decreased by $0.6 million, or 9.2%, to an allocation of losses of $5.9 million from an allocation of losses of $6.5 million for the six months ended June 30, 2024 and 2023, respectively, as a result of decreased losses at our less than wholly owned subsidiaries within this segment.

Net income (loss) attributable to ATN International, Inc. stockholders. Net income (loss) attributable to ATN International, Inc. stockholders was $2.7 million of income for the six months ended June 30, 2024 as compared to $5.1 million of loss for the six months ended June 30, 2023.

On a per diluted share basis, net income was break even per diluted share for the six months ended June 30, 2024 as compared to a loss of $0.48 per diluted share for the six months ended June 30, 2023. Such per share amounts were negatively impacted by accrued preferred dividends of $2.7 million and $2.3 million for the six months ended June 30, 2024 and 2023, respectively.

Regulatory and Tax Issues

We are involved in a number of regulatory and tax proceedings. A material and adverse outcome in one or more of these proceedings could have a material adverse impact on our financial condition and future operations. For discussion of ongoing proceedings, see Note 13 to the Consolidated Financial Statements in this Report.

Liquidity and Capital Resources

Historically, we have met our operational liquidity needs and have funded our capital expenditures and acquisitions through a combination of cash-on-hand, internally generated funds, borrowings under our credit facilities, proceeds from dispositions, and seller financings. We believe our current cash, cash equivalents, short term investments and availability under our current credit facilities will be sufficient to meet our cash needs for at least the next twelve months for working capital needs and capital expenditures.

Total liquidity. As of June 30, 2024, we had approximately $73.3 million in cash, cash equivalents, and restricted cash. Of this amount, $30.1 million was held by our foreign subsidiaries and is indefinitely invested outside the United States. In addition, we had approximately $540.8 million of debt, net of unamortized deferred financing costs, as of June 30, 2024. How and when we deploy our balance sheet capacity, including the availability under our various credit facilities (as further described below), will figure prominently in our longer-term growth prospects and stockholder returns.

Uses of Cash

Acquisitions and investments. We have historically funded our acquisitions with a combination of cash-on-hand, borrowings under our credit facilities as well as equity investor and seller financings.

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We continue to explore opportunities to expand our telecommunications business or acquire new businesses in the United States, the Caribbean and elsewhere. Such acquisitions may require external financing. While there can be no assurance as to whether, when or on what terms we will be able to acquire any such businesses or make such investments, such acquisitions may be completed through the issuance of shares of our capital stock, payment of cash or incurrence of additional debt. From time to time, we may raise capital ahead of any definitive use of proceeds to allow us to move more quickly and opportunistically if an attractive investment materializes.

Cash used in investing activities. Cash used in investing activities decreased by $48.8 million to $46.8 million from $95.6 million for the six months ended June 30, 2024 and 2023, respectively. This year-over-year decrease was the result of an increase in the reimbursements of capital expenditures of $43.1 million and $17.9 million in proceeds from the sale of certain assets within our International Telecom segment which was completed during 2024. These amounts were partially offset by an increase in capital expenditures, including reimbursable amounts, of $11.6 million.

Cash provided by (used in) financing activities. Cash provided by (used in) financing activities was $0.5 million of cash used in financing activities during the six months ended June 30, 2024 and $42.8 million of cash provided by financing activities during the six months ended June 30, 2023. The change of $43.3 million was primarily the result of a reduction in borrowings, net of repayments, of $38.0 million, and increase in cash used to repurchase our common stock (including shares repurchased from employees and directors to satisfy certain tax withholding obligations) of $3.7 million and an increase in cash used for the payment of dividends to our common stockholders of $0.8 million.

Working Capital. Historically, we have internally funded our working capital needs. Pursuant to the FirstNet Agreement, AT&T has the option to repay construction costs, with interest, over an eight-year period. To fund the working capital needs created by AT&T’s option to extend its payment terms, we completed the Receivables Credit Facility, as discussed below, on March 26, 2020.

For the six months ended June 30, 2024 and 2023, we spent approximately $108.0 million and $96.4 million, respectively, on capital expenditures relating to our telecommunications networks and business support systems of which $46.2 million and $7.0 million, respectively, are reimbursable under various government programs. The following notes our capital expenditures, by operating segment, for these periods (in thousands):


	Capital Expenditures

		International		US		Corporate and
Six months ended June 30,		Telecom		Telecom		Other (1)		Consolidated
2024	$	28,951	$	77,498	$	1,579	$	108,028
2023		38,906		57,531		—		96,437

(1)

Corporate and other items refer to corporate overhead costs and consolidating adjustments.

We are continuing to invest in our telecommunication networks along with our operating and business support systems in many of our markets. For the year ended December 31, 2024, such investments are expected to total approximately $100 million to $110 million, net of reimbursable amounts, and will primarily relate to network expansion and upgrades which are expected to further drive subscriber and revenue growth in future periods.

Income taxes. We have historically used cash-on-hand to make payments for income taxes. Our policy is to allocate capital where we believe we will get the best returns and to date has been to indefinitely reinvest the undistributed earnings of our foreign subsidiaries. As we continue to reinvest our remaining foreign earnings, no additional provision for income taxes has been made on the accumulated earnings of foreign subsidiaries.

Dividends. For the six months ended June 30, 2024, our Board of Directors declared $7.3 million of dividends to our stockholders which includes a $0.24 per share dividend declared on June 20, 2024 and paid on July 10, 2024. We have declared quarterly dividends since the fourth quarter of 1998.

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Stock Repurchase Plan. On December 14, 2023, our Board of Directors authorized the repurchase of up to $25.0 million of our common stock, from time to time, on the open market or in privately negotiated transactions (the “2023 Repurchase Plan”). As of June 30, 2024, we had $15.0 million available to repurchase shares of our common stock under the 2023 Repurchase Plan. We repurchased $10.0 million and $6.8 million of our common stock during the six months ended June 30, 2024 and 2023, respectively.

Sources of Cash

Cash provided by operations. Cash provided by operating activities was $58.4 million for the six months ended June 30, 2024 as compared to $60.3 million for the six months ended June 30, 2023. The decrease of $1.9 million was primarily related to an increase in net income of $11.1 million offset by an increase in gain on the sale of certain assets within our International Telecom segment of $16.7 million and a change in working capital.

2023 CoBank Credit Facility

On July 13, 2023, we, along with certain of our subsidiaries as guarantors, entered into a new Credit Agreement with CoBank, ACB and a syndicate of other lenders (as may be amended from time to time, the “2023 CoBank Credit Facility”). On July 10, 2024, we amended our credit facility to add certain subsidiaries as guarantors and to provide further flexibility to take on certain grant and government program obligations. The amendment to the 2023 CoBank Credit Facility is filed herewith as Exhibit 10.1.

The 2023 CoBank Credit Facility provides for a five-year $170 million revolving credit facility (the “2023 CoBank Revolving Loan”) and a six-year $130 million term loan facility (the “2023 CoBank Term Loan”). We may use (i) up to $25 million under the 2023 CoBank Credit Facility for letters of credit, and (ii) up to $20 million under a swingline sub-facility. Upon the closing of the 2023 CoBank Credit Facility, we drew all of the 2023 CoBank Term Loan and approximately $13.6 million of the 2023 CoBank Revolving Loan. These borrowings were used to repay $139.5 million of debt outstanding under the 2019 CoBank Credit Facility at close.


2023 CoBank Term Loan Quarterly Payment Dates	2023 CoBank Term Loan Quarterly Repayments
December 31, 2023 – June 30, 2025	$812,500 (2.5% per annum)
September 30, 2025 – June 30, 2026	$1,625,000 (5% per annum)
September 30, 2026 – June 30, 2029	$2,437,500 (7.5% per annum)

Amounts borrowed under the 2023 CoBank Credit Facility bear interest at a rate equal to, at our option, either (i) the secured overnight financing rate as administered by the Federal Reserve Bank of New York (SOFR) plus an applicable margin ranging between 2.00% to 3.75% for the 2023 CoBank Term Loan or 1.75% to 3.50% for Revolving Loans or (ii) a base rate plus an applicable margin ranging from 1.00% to 2.75% for the Term Loan or 0.75% to 2.50% for the 2023 CoBank Revolving Loans. Swingline loans will bear interest at the base rate plus the applicable margin for base rate loans. The base rate is equal to the higher of (i) 1.00% plus the one-month SOFR rate (ii) the federal funds effective rate (as defined in the 2023 CoBank Credit Agreement) plus 0.50% per annum; and (iii) the prime rate (as defined in the 2023 CoBank Credit Agreement). The applicable margin is determined based on the ratio (as further defined in the 2023 CoBank Credit Agreement) of our maximum Total Net Leverage Ratio. Under the terms of the 2023 CoBank Credit Agreement, we must also pay a fee ranging from 0.25% to 0.50% on the average daily unused portion of the 2023 CoBank Credit Facility over each calendar quarter.

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We capitalized $4.3 million of fees associated with the 2023 CoBank Credit Facility which are being amortized over the life of the debt and $3.5 million were unamortized as of June 30, 2024.

We had $127.6 million outstanding under the 2023 CoBank Term Loan as of June 30, 2024. Under the 2023 CoBank Revolving Loan, we had $58.6 million outstanding and $111.4 million of availability as of June 30, 2024. We were in compliance with all financial covenants as of June 30, 2024.

In October 2023, we entered into a two year, forward starting 1-month floating to fixed SOFR interest rate swap agreement. The swap was effective November 13, 2023 in a non-amortizing notional amount of $50.0 million, has a fixed SOFR rate of 4.896% and matures on November 13, 2025. The swap agreement had a fair value of $(0.1) million and $(0.5) million as of June 30, 2024 and December 31, 2023, respectively.

2019 CoBank Credit Facility

On April 10, 2019, we entered into a credit facility, with CoBank, ACB and a syndicate of other lenders (as amended, the “2019 CoBank Credit Facility”). The 2019 CoBank Credit Facility provided for a $200 million revolving credit facility that included (i) up to $75 million for standby or trade letters of credit and (ii) up to $10 million under a swingline sub-facility. In connection with the execution of the 2023 CoBank Credit Facility, as defined above, outstanding borrowings under the 2019 CoBank Credit Facility were repaid in full.

Amounts borrowed under the 2019 CoBank Credit Facility bore interest at a rate equal to, at our option, either (i) the London Interbank Offered Rate (“LIBOR”) plus an applicable margin ranging between 1.25% to 2.25% or (ii) a base rate plus an applicable margin ranging from 0.25% to 1.25%. Swingline loans bore interest at the base rate plus the applicable margin for base rate loans. The base rate was equal to the higher of (i) 1.00% plus the higher of (x) LIBOR for an interest period of one month and (y) LIBOR for an interest period of one week; (ii) the Federal Funds Effective Rate (as defined in the 2019 CoBank Credit Facility) plus 0.50% per annum; and (iii) the Prime Rate (as defined in the 2019 CoBank Credit Facility). The applicable margin was determined based on the Total Net Leverage Ratio (as defined in the 2019 CoBank Credit Facility). Under the terms of the 2019 CoBank Credit Facility, we also paid a commitment fee ranging from 0.150% to 0.375% of the average daily unused portion of the 2019 CoBank Credit Facility over each calendar quarter.

Letter of Credit Facility

On November 14, 2022, we entered into a General Agreement of Indemnity to issue performance Standby Letters of Credit on behalf of us and our subsidiaries. As of June 30, 2024, $30.9 million of Standby Letters of Credit had been issued under this agreement.

Alaska Credit Facility

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The key terms and conditions of the Alaska Credit Facility include the following:

●

The Alaska Credit Facility is non-recourse to us and is secured by substantially all of the personal property and certain material real property owned by Alaska Communications.

Alaska Term Facility

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of principal commenced on March 31, 2023. The Alaska Term Facility was repaid in full during the three months ended June 30, 2024.

FirstNet Receivables Credit Facility

On March 26, 2020, Commnet Finance, a wholly owned subsidiary of Commnet Wireless, entered into a receivables credit facility with us, Commnet Wireless, and CoBank, ACB (the “Receivables Credit Facility”).

On December 19, 2023, CoBank amended the Receivables Credit Facility and extended the delayed draw period to December 31, 2024.

The maturity date for each loan will be set by CoBank and will match the weighted average maturity of the certain receivables financed.

Interest on the loans accrue at a fixed annual interest rate to be quoted by CoBank.

As of June 30, 2024, Commnet Wireless had $46.5 million outstanding, of which $7.7 million was classified as being current on our balance sheet, and $11.3 million of availability under the Receivables Credit Facility. Commnet Wireless capitalized $0.8 million in fees associated with the Receivables Credit Facility which are being amortized over the life of the debt and $0.4 million were unamortized as of June 30, 2024.

GTT Credit Facilities

On October 12, 2022, GTT received approval from Republic Bank (Guyana) Limited for a $2.9 million term facility and a $5.7 million overdraft facility (the “GTT Credit Facilities”).

As of June 30, 2024, there were no outstanding amounts under the GTT Credit Facilities.

Sacred Wind Term Debt

In connection with the Sacred Wind acquisition completed on November 7, 2022, we assumed $31.6 million of term debt (the “Sacred Wind Term Debt”) with the United States of America acting through the Administrator of the Rural Utilities Service (“RUS”). The loan agreements are dated as of October 23, 2006 and March 17, 2016. RUS

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provides financial assistance in the form of loans under the Rural Electrification Act of 1936 to furnish or improve telecommunications and/or broadband services in rural areas.

The Sacred Wind Term Debt contains certain restrictions on the declaration or payment of dividends, redemption of capital stock or investment in affiliated companies without the consent by the RUS noteholders. The agreements also contain a financial covenant which Sacred Wind was not in compliance with as of December 31, 2021. Sacred Wind submitted a corrective action plan to comply with the financial covenant as of December 31, 2025. On May 5, 2022, Sacred Wind’s corrective action plan was accepted by the RUS. As of June 30, 2024, we were in compliance with that corrective action plan.

As of June 30, 2024, $26.6 million was outstanding under the Sacred Wind Term Debt. Of that amount, $3.3 million was current and $23.3 million was long term.

The mortgage notes carry fixed interest rates ranging from 0.88% to 5.0%.

Viya Debt

We, and certain of our subsidiaries, have entered into a $60.0 million loan agreement (the “Viya Debt”) with Rural Telephone Finance Cooperative (“RTFC”). The Viya Debt agreement contains customary representations, warranties, and affirmative and negative covenants (including limitations on additional debt, guaranties, sale of assets and liens) and a financial covenant that limits the maximum ratio of indebtedness to annual operating cash flow to 3.5 to 1.0 (the “Net Leverage Ratio”). This covenant is tested on an annual basis at the end of each fiscal year. Interest is paid quarterly at a fixed rate of 4.0% per annum and principal repayment is not required until maturity on July 1, 2026. Prepayment of the Viya Debt may be subject to a fee under certain circumstances. The debt is secured by certain assets of the Viya subsidiaries and is guaranteed by us.

We paid a fee of $0.9 million in 2016 to lock the interest rate at 4% per annum over the term of the Viya Debt. The fee was recorded as a reduction to the Viya Debt carrying amount and is being amortized over the life of the loan.

As of June 30, 2024, $60.0 million of the Viya Debt remained outstanding and $0.2 million of the rate lock fee was unamortized.

On May 5, 2022, RTFC agreed to amend the Net Leverage Ratio to 7.0 to 1.0 through the maturity date of July 1, 2026. The Ratio is tested annually, and we were in compliance with the Net Leverage Ratio as of December 31, 2023.

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Debt Maturity

The table below summarizes the annual maturities of our debt instruments (amounts in thousands):


									Customer
	US		International		Corporate and		Total		Receivable
Amounts Maturing During	Telecom		Telecom		Other		Debt		Credit Facility
July 1, 2024 through December 31, 2024	$	6,050	$	—	$	1,625	$	7,675	$	3,786
Year ending December 31, 2025		14,969		—		4,875		19,844		7,833
Year ending December 31, 2026		262,969		60,000		8,125		331,094		8,195
Year ending December 31, 2027		3,723		—		9,750		13,473		8,576
Year ending December 31, 2028		3,858		—		68,370		72,228		8,978
Thereafter		10,192		—		93,438		103,630		9,160
Total		301,761		60,000		186,183		547,944		46,528
Debt Discounts		(3,386)		(199)		(3,524)		(7,109)		(427)
Book Value as of June 30, 2024	$	298,375	$	59,801	$	182,659	$	540,835	$	46,101

Factors Affecting Sources of Liquidity

Internally generated funds. The key factors affecting our internally generated funds are demand for our services, competition, regulatory developments, economic conditions in the markets where we operate our businesses and industry trends within the telecommunications industry.

Restrictions under Credit Facility. Our 2023 CoBank Credit Facility contains customary representations, warranties and covenants, including covenants limiting additional indebtedness, liens, guaranties, mergers and consolidations, substantial asset sales, investments and loans, sale and leasebacks, transactions with affiliates and fundamental changes.

In addition, the 2023 CoBank Credit Facility contains a financial covenant that imposes a maximum ratio of indebtedness to EBITDA. As of June 30, 2024, we were in compliance with all of the financial covenants of the 2023 CoBank Credit Facility.

Capital markets. Our ability to raise funds in the capital markets depends on, among other things, general economic conditions, the conditions of the telecommunications industry, our financial performance, the state of the capital markets and our compliance with SEC requirements for the offering of securities. In August 2022, we filed a new “universal” shelf registration statement with the SEC, to register potential future offerings of up to $300 million of our securities.

Foreign Currency

We translate the assets and liabilities of our foreign subsidiaries from their respective functional currencies, primarily the Guyana Dollar, to US Dollars at the appropriate rates as of the balance sheet date. Changes in the carrying value of these assets and liabilities attributable to fluctuations in rates are recognized in foreign currency translation adjustment, a component of accumulated other comprehensive income on our balance sheet. Income statement accounts are translated using the monthly average exchange rates during the year. Monetary assets and liabilities denominated in a currency that is different from a reporting entity’s functional currency must first be remeasured from the applicable currency to the legal entity’s functional currency. The effect of this remeasurement process is reported in other income within our income statement. During each of the three months ended June 30, 2024 and 2023, we recorded $0.3 million and $0.4 million, respectively, in losses on foreign currency transactions. During each of the six months ended June 30,

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2024 and 2023, we recorded $0.5 million and $0.6 million, respectively, in losses on foreign currency transactions. We will continue to assess the impact of our exposure to the Guyana Dollar.

Inflation

Several of our markets have experienced an increase in operating costs, some of which we believe, is attributable to inflation. If inflation continues or worsens, it could negatively impact our Company by increasing our operating expenses. Inflation may lead to cost increases in multiple areas across our business, for example, rises in the prices of raw materials and manufactured goods, increased energy rates, as well as increased wage pressures and other expenses related to our employees. In particular, where we have agreed to undertake infrastructure build-outs on a fixed budget for our carrier customers or by accepting government grants, inflation may result in build costs that exceed our original budget given the long delays experienced in procuring equipment and materials due to global supply chain delays. To the extent that we are unable to pass on these costs through increased prices, revised budget estimates, or offset them in other ways, they may impact our financial condition and cash flows.

Recent Accounting Pronouncements

Refer to Note 2.

Critical Accounting Estimates

There were no changes to critical accounting estimates from those disclosed in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” of our Annual Report on Form 10-K for the year ended December 31, 2023.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Translation and Remeasurement. We translate the assets and liabilities of our foreign subsidiaries from their respective functional currencies, primarily the Guyana Dollar, to US Dollars at the appropriate rates as of the balance sheet date. Changes in the carrying value of these assets and liabilities attributable to fluctuations in rates are recognized in foreign currency translation adjustment, a component of accumulated other comprehensive income on our balance sheet. Income statement accounts are translated using the monthly average exchange rates during the year.

Monetary assets and liabilities denominated in a currency that is different from a reporting entity’s functional currency must first be remeasured from the applicable currency to the legal entity’s functional currency. The effect of this remeasurement process is reported in other income on our consolidated statements of operations.

Employee Benefit Plans. We sponsor pension and other postretirement benefit plans for employees of certain subsidiaries. Net periodic pension expense is recognized in our consolidated statements of operations. We recognize a pension or other postretirement plan’s funded status as either an asset or liability in our consolidated balance sheets. Actuarial gains and losses are reported as a component of other comprehensive income and amortized through other income in subsequent periods.

Interest Rate Sensitivity. As of June 30, 2024, we had $211.4 million of variable rate debt outstanding, which is subject to fluctuations in interest rates. Our interest expense may be affected by changes in interest rates. We believe that a 100-basis-point change in the interest rates on our variable rate debt would result in a $2.1 million change in our annual interest expense. We may have additional exposure to fluctuations in interest rates if we again borrow amounts under our revolver loans within our credit facilities.

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Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2024. Disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), mean controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s (“SEC”) rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2024, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting.

There were no changes in our internal control over financial reporting that occurred during the three months ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

See Note 13 to the Unaudited Condensed Consolidated Financial Statements included in this Report.

Item 1A. Risk Factors

In addition to the other information set forth in this Report, you should carefully consider the factors discussed under Part I, Item 1A “Risk Factors” of our 2023 Annual Report on Form 10-K. The risks described herein and in our 2023 Annual Report on Form 10-K, as amended, are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

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

Purchases of Equity Securities by the Issuer

On December 14, 2023, our Board of Directors authorized the repurchase of up to $25.0 million of our common stock, from time to time, on the open market or in privately negotiated transactions (the “2023 Repurchase Plan”). We have $15.0 million available to be repurchased under the 2023 Repurchase Plan as of June 30, 2024.

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The following table reflects the repurchases by us of our common stock during the quarter ended June 30, 2024:


						(d)
						Maximum
						Number (or
					(c)	Approximate
			(b)		Total Number of	Dollar Value) of
	(a)		Average		Shares Purchased	Shares that May
	Total Number		Price		as Part of Publicly	be Purchased
	of Shares		Paid per		Announced Plans	Under the Plans or
Period	Purchased		Share		or Programs	Programs
April 1, 2024 — April 30, 2024	92,102		$	25.11	92,102	$	22,566,380
May 1, 2024 — May 31, 2024	327,190	(1)		23.13	327,167		15,000,007
June 1, 2024 — June 30, 2024	1,667	(1)		21.55	—		15,000,007

(1)

Includes 23 shares purchased on May 3, 2024 and 1,667 shares purchased on June 18, 2024 from our executive officers, other employees and directors who tendered these shares to us to satisfy their tax withholding obligations incurred in connection with the vesting of restricted stock awards at such date. These shares were not purchased under the 2023 Repurchase Plan discussed above. The price paid per share was the closing price per share of our common stock on the Nasdaq Stock Market on the date those shares were purchased.

Item 5. Other Information

Rule 10b5-1 Trading Arrangements

While the Company does allow for its officers and directors to enter into trading arrangements intended to satisfy the affirmative defense conditions of Rule 10b5-1 with the Company’s prior approval, during the quarter ended June 30, 2024, none of the Company's directors or officers informed the Company of the adoption or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement”, as those terms are defined in Regulation S-K, Item 408.

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Item 6. Exhibits:



10.1*		Joinder, Consent, First Amendment and Reaffirmation Agreement, dated July 10, 2024, among ATN International, Inc as Borrower, SWC Telesolutions, Inc., ATN International Telecom Group, LLC, CoBank, ACB, as Administrative Agent, Fifth Third Bank, N.A., MUFG Bank, Ltd. and the Guarantors party thereto.
31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**		Certification of Chief Executive Officer pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**		Certification of Chief Financial Officer pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH*		Inline XBRL Taxonomy Extension Schema Document

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data file (formatted as Inline XBRL and embedded within Exhibit 101).

* Filed herewith.

** The certifications furnished in Exhibit 32.1 and Exhibit 32.2 hereto are deemed to accompany this Report and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates them by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	ATN International, Inc.

Date: August 9, 2024	/s/ Brad W. Martin
	Brad W. Martin
	Chief Executive Officer

Date: August 9, 2024	/s/ Carlos R. Doglioli
	Carlos R. Doglioli
	Chief Financial Officer

Exhibit 10.1

Execution Version

JOINDER, CONSENT, FIRST AMENDMENT AND REAFFIRMATION AGREEMENT

This JOINDER, CONSENT, FIRST AMENDMENT AND REAFFIRMATION AGREEMENT (this “Agreement”) is made, entered into and effective as of July 10, 2024, by and among ATN INTERNATIONAL, INC., a Delaware corporation (the “Borrower”), SWC TELESOLUTIONS, INC., a New Mexico corporation (“SWC”), ATN INTERNATIONAL TELECOM GROUP, LLC, a Delaware limited liability company (“Telecom Group”; and together with SWC, each a “New Guarantor” and collectively, the “New Guarantors”), each of the subsidiaries of Borrower identified as existing guarantors on the signature pages hereto (each individually, an “Existing Guarantor” and, collectively, the “Existing Guarantors”; and together with the Borrower, each individually an “Existing Loan Party” and, collectively, the “Existing Loan Parties”; the Existing Loan Parties, together with the New Guarantors, each individually a “Loan Party” and, collectively, the “Loan Parties”), COBANK, ACB, as Administrative Agent (the “Administrative Agent”), and the Lenders party hereto.

RECITALS

WHEREAS, the Existing Loan Parties, the Administrative Agent and the Lenders have entered into that certain Credit Agreement, dated as of July 13, 2023 (as amended, modified, supplemented, extended or restated from time to time, the “Credit Agreement”; the Credit Agreement, as amended by this Agreement, the “Amended Credit Agreement”);

WHEREAS, the Existing Loan Parties have entered into that certain Pledge and Security Agreement, dated as of July 13, 2023 (as amended, modified, supplemented, extended or restated from time to time, the “Security Agreement”; the Security Agreement, as amended by this Agreement, the “Amended Security Agreement”), in favor of the Administrative Agent;

WHEREAS, the Borrower has requested certain amendments to the Credit Agreement and Security Agreement as set forth herein, and the Lenders party hereto have agreed to such amendments; and

WHEREAS, each New Guarantor will obtain benefits as a result of the continued extension of credit to the Borrower under the Credit Agreement, which benefits are hereby acknowledged, and, accordingly, desires to be joined as a “Guarantor” and a “Loan Party” under the Credit Agreement and a “Grantor” under the Security Agreement, all pursuant to the terms of this Agreement.

NOW, THEREFORE, in consideration of the foregoing and the agreements set forth in this Agreement, each of the Loan Parties, the Administrative Agent, and the Lenders hereby agree as follows:

SECTION 1. Amendments. Subject to the conditions set forth below,

(A)The Credit Agreement is amended to delete the stricken text (indicated textually in the same manner as the following example: stricken text or stricken text) and to add the double-underlined text (indicated textually in the same manner as the following example: double-underlined text or double-underlined text) as set forth in the pages of the

conformed copy of the Credit Agreement attached as Exhibit A hereto; the Schedules to the Credit Agreement are hereby amended in the same manner as set forth on Exhibit B hereto; and the Annexes to the Security Agreement are hereby amended in the same manner as set forth on Exhibit C hereto;

(B)For the convenience of the Loan Parties, a clean copy of the conformed Credit Agreement is attached hereto as Exhibit D; and

(C)Section 2.3 of the Security Agreement is hereby amended and restated in its entirety as follows:

“2.3Excluded Collateral. Notwithstanding anything to the contrary contained herein, as and to the extent provided in this Section 2.3, the Collateral shall not include, and the Lien of this Agreement and any other Collateral Documents shall not attach to, the following:

(A)“intent to use” Trademark applications filed under U.S.C. 1051(b) to the extent assignment of the same is prohibited under U.S.C. 1060(a)(1), in each case, only until such time as such Grantor begins to use such Trademarks and the assignment thereof is no longer prohibited (the security interest provided herein in such Trademark shall be deemed granted by such Grantor at such time and will attach immediately without further action);

(B)the Equity Interests of any Grantor in (i) any Material Foreign Subsidiary that represents in excess of 65% of the outstanding voting stock of such Material Foreign Subsidiary, (ii) the CAH Holdco Subsidiaries, (iii) SW DinehNet, LLC, (iv) any Immaterial Subsidiary, (v) any Restricted Subsidiary with respect to which the Administrative Agent and the Borrower mutually agree in writing that the burden or cost or other tax consequences (including any material adverse tax consequences) of the applicable Grantor pledging the Equity Interests of such Restricted Subsidiary shall be excessive in view of the benefits obtained by the Lenders therefrom (for the avoidance of doubt, no such Subsidiaries have been designated as such as of the Closing Date), (vi) any Restricted Subsidiary that is a Specified CFC (other than a Material Foreign Subsidiary), (vii) any Restricted Subsidiary that is a Domestic Foreign Holdco, (viii) any Restricted Subsidiary that is a Domestic Subsidiary of a Specified CFC, (ix) any Restricted Subsidiary that is a Stimulus Recipient Subsidiary, or (x) any Unrestricted Subsidiary;

(C)any item of real or personal, tangible or intangible, property (including Licenses issued by the FCC and any applicable PUC) to the extent and only for so long as the creation, attachment or perfection of the security interest granted herein by any Grantor in its right, title and interest in such item of property is prohibited by applicable Law or is permitted only with the consent (that has not been obtained) of a Governmental Authority (including the FCC and any applicable PUC);

(D)any property subject to a Lien permitted under paragraph (l) of the definition of Permitted Liens to the extent and only for so long as the applicable purchase money security agreement, Capital Lease or other applicable documentation contains a term that

restricts, prohibits, or requires a consent (that has not been obtained) of a Person (other than such Grantor or any other Loan Party) to, the creation, attachment or perfection of the security interest granted herein and such restriction, prohibition and/or requirement of consent is not rendered ineffective by applicable Law (including pursuant to Sections 9- 406, 9-407, 9-408 or 9-409 of the UCC);

(E)any item of real or personal, tangible or intangible, property (other than any Equity Interests owned by any Grantor) to the extent and only for so long as the creation, attachment or perfection of the security interest granted herein by any Grantor in its right, title and interest in such item of property (i) would give any other Person (other than such Grantor or any other Loan Party or any Subsidiary of any Loan Party or any Person who has consented to such security interest) the right to terminate its obligations with respect to such item of property and such right is not rendered ineffective by applicable Law (including pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC), or (ii) would cause such property to become void or voidable if a security interest therein was created, attached or perfected;

(F)any item of real or personal, tangible or intangible, property (other than any Equity Interests owned by any Grantor) to the extent and only for so long as such property is subject to a Contract that contains a term that restricts, prohibits or requires a consent (that has not been obtained) of a Person (other than such Grantor or any other Loan Party) to, the creation, attachment or perfection of the security interest granted herein and any such restriction, prohibition and/or requirement of consent is not rendered ineffective by applicable Law (including pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC); and

(G)the Equity Interests in any Minority Investment to the extent that the governance or similar documents of such Minority Investment contain a term that restricts, prohibits, or requires a consent (that has not been obtained) of a Person (other than such Grantor or any other Loan Party) to, the creation, attachment or perfection of the security interest granted herein and such restriction, prohibition and/or requirement of consent is not rendered ineffective by applicable Law (including pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC); and

(H)any Funding Program Deposit Account, any Funding Program Assets, any Funding Program Award Funds, any Funding Program Matching Funds, any Funding Program In-kind Assets, any Funding Program Cash Assets and any rights with respect to any Funding Program Agreement, to the extent and only for so long as such property is subject to any Funding Program Agreement and contains a term that restricts, prohibits or requires a consent (that has not been obtained) of any Funding Agency to, the creation, attachment or perfection of the security interest granted herein and any such restriction, prohibition and/or requirement of consent is not rendered ineffective by the Law (including pursuant to Sections 9-406, 9-407, 9-408 or 9 409 of the UCC).

Further, notwithstanding anything to the contrary contained herein or in any other Loan Document, so long as no Event of Default has occurred and is continuing, (A) no Grantor shall be required to

take any action with respect to the perfection of security interests in (1) Commercial Tort Claims in the aggregate amount asserting damages of less than the greater of (i) $20,000,000 and (ii) 25% of EBITDA of the Borrower and the Restricted Subsidiary for the Test Period and (2) (i) fee-owned real property, or (ii) any leased real property, (B) leasehold or real property mortgages or estoppels, landlord, bailee or similar waivers shall not be required, and (C) no Collateral Assignment shall be required.

If at any time the creation, attachment or perfection of the security interest granted herein in any of property subject to clauses (C) through (H) of this Section 2.3 shall be permitted or consent in respect thereof shall have been obtained, then the applicable Grantor shall at such time be deemed to have granted a security interest in such property (and such security interest will attach immediately without further action). Notwithstanding anything to the contrary set forth above, the rights to receive, and any interest in, all Proceeds of, or monies or other consideration received or receivable from or attributable to the sale, transfer, lease, assignment or other disposition of, any of the property subject to this Section 2.3 (to the extent a direct security interest in such property or Proceeds from the sale, transfer, lease, assignment or other disposition of such property shall not have already been granted) shall attach immediately and be subject to the security interest granted pursuant to Section 2.1.”

SECTION 2. Joinder.

(A)Each New Guarantor hereby becomes a Guarantor under the terms of the Credit Agreement and in consideration of the value of the synergistic and other benefits received by each New Guarantor as a result of being or becoming affiliated with the Borrower and the other Guarantors, each New Guarantor hereby agrees that effective as of the date hereof it hereby is, and shall be deemed to be, and assumes the obligations of, (a) a “Guarantor” and a “Loan Party” under the Credit Agreement, including Article XII thereof, (b) a “Grantor” jointly and severally under the Security Agreement, and (c) a “Loan Party” or “Guarantor”, as the case may be, under each of the other Loan Documents to which the Loan Parties, the Guarantors or the Grantors are a party; and, as such, each New Guarantor hereby agrees that from the date hereof and until the occurrence of the Payment In Full, each New Guarantor shall perform, comply with, and be subject to and bound by each of the terms and provisions of the Credit Agreement, the Security Agreement and each of the other Loan Documents jointly and severally with the other Guarantors and Grantors party thereto. Without limiting the generality of the foregoing, each New Guarantor hereby represents and warrants that (i) each of the representations and warranties set forth in Article V of the Credit Agreement applicable to such New Guarantor as a Guarantor and a Loan Party, as modified by Exhibit B hereto, is true and correct, (ii) each of the representations and warranties set forth in Article III of the Security Agreement applicable to each New Guarantor as a Grantor and a Loan Party, as modified by Exhibit C hereto, is true and correct, and (iii) each New Guarantor has heretofore received a true and correct copy of the Credit Agreement, Security Agreement and each of the other Loan Documents (including any modifications thereof or supplements or waivers thereto) in effect on the date hereof.

(B)Each New Guarantor covenants and agrees that, from the date hereof and until the occurrence of the Payment In Full, such New Guarantor will perform and observe,

and cause each of its Subsidiaries to perform and observe, all of the terms, covenants and agreements set forth in the Loan Documents that are required to be, or that the Borrower has agreed to cause to be, performed or observed by such Guarantor, such Grantor, such Loan Party or such Subsidiary, including, without limitation, the covenants set forth in Articles VI and VII of the Credit Agreement, the Events of Default set forth in Article IX of the Credit Agreement, the rights of set off contained in Section 9.2(c) of the Credit Agreement and Articles IV and V of the Security Agreement.

(C)Each New Guarantor hereby makes, affirms and ratifies in favor of the Lenders and the Administrative Agent the Guaranty set forth in Article XII of the Credit Agreement and the grant of the security interest in its Collateral set forth in the Security Agreement.

(D)Each of the parties hereto acknowledges and agrees that the information on the schedules to the Credit Agreement and the annexes to the Security Agreement are hereby amended to provide the information shown on the attached Exhibit B and Exhibit C, respectively.

(E)Each of the parties hereto acknowledges and confirms that the Equity Interests described in Annex A to the attached Exhibit C are part of the Equity Interests within the meaning of the Security Agreement and are part of the Collateral and secure all of the Secured Obligations as provided in the Security Agreement.

(F)Each of the Borrower and the Existing Guarantors and Grantors confirms that all of its respective obligations under the Credit Agreement, the Security Agreement and the other Loan Documents are, and upon each New Guarantor becoming a Guarantor, a Grantor and a Loan Party, shall continue to be, in full force and effect. The parties hereto confirm and agree that immediately upon each New Guarantor becoming a Guarantor, a Grantor and a Loan Party, the terms “Obligations” and “Secured Obligations” as used in the Credit Agreement, the Security Agreement and the other Loan Documents, shall include all obligations of each New Guarantor under the Credit Agreement, the Security Agreement and under each other Loan Document.

(G)In furtherance of the foregoing, each New Guarantor shall execute and deliver or cause to be executed and delivered at any time and from time to time such further instruments and documents and do or cause to be done such further acts as may be reasonably necessary in the reasonable opinion of the Administrative Agent to carry out more effectively the provisions and purposes of this Agreement.

SECTION 3. Consent. Notwithstanding the Effective Date of the joinder of the New Guarantors pursuant to Section 2, the Administrative Agent and the Lenders party hereto hereby consent to the New Guarantors being included in the Credit Agreement financial covenant calculations as of March 31, 2024.

SECTION 4. Representations and Warranties of the Loan Parties. Each of the Loan Parties represents and warrants to the Administrative Agent and the Lenders that, as of the Effective Date: (A) the representations and warranties of such Loan Party and its Subsidiaries

contained in Article V of the Credit Agreement and the other Loan Documents are true and correct in all material respects (without duplication of any materiality or Material Adverse Change qualifier contained therein), in each case, after giving effect to this Agreement, as though made on and as of the date hereof (except for any such representation and warranty that by its terms is made only as of an earlier date, which representation and warranty remains true and correct in all material respects (without duplication of any materiality or Material Adverse Change qualifier contained therein) as of such earlier date); (B) each Loan Party has the full power to enter into, execute, deliver and carry out this Agreement and each of the other Loan Documents to which it is a party; (C) this Agreement is the legally valid and binding obligation of each Loan Party hereto, enforceable against such Person in accordance with its terms, subject only to limitations on enforceability imposed by (y) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally, and (z) general equitable principles; (D) the execution, delivery and performance of this Agreement in accordance with its terms do not and will not (i) conflict with, constitute a default under or result in any breach of the terms and conditions of the Organizational Documents of any Loan Party, (ii) require the approval of any Governmental Authority or violate any applicable Law relating to such Loan Party, or (iii) result in the creation or enforcement of any Lien, charge or encumbrance whatsoever upon any property (now or hereafter acquired) of any Loan Party or any Restricted Subsidiary (other than Liens granted under the Loan Documents); and (E) no event has occurred and is continuing, or would result after giving effect to the amendments set forth herein, that constitutes a Default or an Event of Default.

SECTION 5. Effectiveness of Agreement. This Agreement shall become effective only upon the satisfaction of each of the following conditions (the date such conditions are satisfied, the “Effective Date):

(A)The Administrative Agent’s receipt of an executed counterpart of this Agreement signed by each other party hereto;

(B)The Administrative Agent’s receipt of written opinions of counsel for the New Guarantors, in form and content reasonably acceptable to the Administrative Agent, dated as of the date hereof and covering such matters as may be reasonably requested by the Administrative Agent, including this Agreement, any security interest in collateral in favor of the Administrative Agent, regulatory, due authorization and other corporate matters and which are reasonably satisfactory in form and substance to the Administrative Agent; provided, however that no opinion of counsel shall be required for any New Guarantors that are incorporated outside of State of Delaware;

(C)The Administrative Agent’s receipt of copies of corporate and company documents and proceedings of the New Guarantors authorizing the execution, delivery, and performance of this Agreement, in each case, certified by appropriate officers of such entities;

(D)The Administrative Agent’s receipt of appropriate stock powers and certificates evidencing the Equity Interests of each New Guarantor;

(E)The representations and warranties of the Loan Parties in Section 4 are true and correct as of the date hereof;

(F)The Administrative Agent shall have received, prior to the Effective Date, all documentation and other information required and requested by regulatory authorities under applicable “Know Your Customer” and anti-money laundering rules and regulations, including, without limitation, the PATRIOT Act and other anti-corruption, anti-terrorism and sanctions laws (including beneficial ownership certification);

(G)no Default or Event of Default shall have occurred and be continuing; and

(H)The Administrative Agent’s receipt of all other fees and charges due and payable under any Loan Document.

SECTION 6. Reaffirmation of Security Interests. Each Loan Party hereby acknowledges its receipt of a copy of this Agreement and its review of the terms and conditions hereof and consents to the terms and conditions of this Agreement and the transactions contemplated thereby. Each Loan Party, as applicable, (a) affirms and confirms its guarantees, pledges, grants and other undertakings under the Amended Credit Agreement, the Amended Security Agreement, and the other Loan Documents to which it is a party and (b) agrees that (i) each Loan Document to which it is a party shall continue to be in full force and effect, (ii) all guarantees, pledges, grants and other undertakings thereunder shall continue to be in full force and effect and shall accrue to the benefit of the Secured Parties, including the Administrative Agent, and (iii) the obligations secured by the Amended Security Agreement include any and all obligations of each Loan Party to the Secured Parties under the Amended Credit Agreement.

SECTION 7. Expenses; Indemnity; Damage Waiver. Section 11.3 of the Credit Agreement is hereby incorporated, mutatis mutandis, by reference as if such section was set forth in full herein.

SECTION 8. Miscellaneous.

(A)Counterparts; Integrations; Electronic Execution. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Agreement. The words “execution,” “signed,” “signature,” and words of like import in this Agreement shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global

and National Commerce Act, or any similar state laws based on the Uniform Electronic Transactions Act.

(B)Definitions. Capitalized terms used, but not defined, in this Agreement shall have the meaning set forth in the Amended Credit Agreement.

(C)Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Loan Parties, the Lender, the Administrative Agent, and their respective permitted successors and assigns.

(D)Governing Law. This Agreement shall be governed by and shall be construed and enforced in accordance with all provisions of the Credit Agreement, including the governing law provisions thereof.

(E)Severability. The provisions of this Agreement are intended to be severable. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction.

(F)Headings. The headings of this Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.

(G)Reference to and Effect on the Credit Agreement and the Other Loan Documents. On and after the Effective Date, (i) each reference in the Credit Agreement to “this Agreement”, “hereunder”, “herein” or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to the “Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Credit Agreement; and (ii) each reference in the Security Agreement to “this Agreement”, “hereunder”, “herein” or words of like import referring to the Security Agreement, and each reference in the other Loan Documents to the “Security Agreement”, “thereunder”, “thereof” or words of like import referring to the Security Agreement shall mean and be a reference to the Amended Security Agreement. Except as specifically amended by this Agreement, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed and this Agreement shall not be considered a novation. The execution, delivery and performance of this Agreement shall not constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of the Administrative Agent or the Lender under the Credit Agreement or any of the other Loan Documents. This Agreement shall be deemed to be a Loan Document as defined in the Credit Agreement and is subject to the provisions thereof.

[Signatures commence on the following page.]

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by a duly authorized officer as of the date first above written.


	BORROWER:

	ATN INTERNATIONAL, INC., as the Borrower


	By:	/s/ Carlos Doglioli
	Name:	Carlos Doglioli
	Title:	Chief Financial Officer


	NEW GUARANTORS:

	ATN INTERNATIONAL TELECOM GROUP, LLC


	By:	/s/ Carlos Doglioli
	Name:	Carlos Doglioli
	Title	Treasurer


	SWC TELESOLUTIONS, INC.


	By:	/s/ Carlos Doglioli
	Name:	Carlos Doglioli
	Title	Treasurer

[Signatures continued on following page.]