ATN International, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• 2024 was a year of strategic execution and disciplined investments, marking the final year of a three-year investment cycle in First to Fiber and Glass and Steel, with expanded fiber route miles, increased broadband homes passed, and higher-speed capable customers.
• In the US, moving away from legacy technologies toward enterprise and carrier-driven fiber-based revenue streams, exiting lower-margin services, making key leadership changes, and expecting short-term revenue decline but long-term stability.
• International segment delivered steady revenue growth and margin expansion in 2024, supported by strong demand for high-speed broadband and business solutions, with business service revenue up 6% and business mobility revenue up 21%.
• Secured over $370 million in government grants in the US to accelerate fiber expansion, enabling network expansion with lower capital intensity.

Segment Performance

• International Segment: Q4 2024 revenues were $94.8 million, essentially flat year-over-year. Full-year 2024 international revenue was up nearly 2% to $377.5 million, driven by high-speed data subscriber and fixed revenue growth. Adjusted EBITDA for the international segment increased 4.8% quarter-over-quarter and 9.7% year-over-year. Demand for high-speed broadband services and operational improvements contributed to the quarter.
• Domestic Segment: Q4 2024 revenues were $85.8 million, down 18% year-over-year and 10% for the full year. Revenue was impacted by the conclusion of government programs like the Emergency Connectivity Fund and Affordable Connectivity Program, and lower construction revenue. EBITDA for the domestic segment decreased 29% quarter-over-quarter and 20% for the full year.

Guidance

• 2025 priority is to stabilize the US telecom segment and continue expanding margins in the international segment to enhance cash flow.
• Full-year revenue expected to be in line with 2024 excluding construction revenues. Adjusted EBITDA expected to be essentially flat with 2024.
• Capital expenditures projected in the range of $90 to $100 million, net of reimbursements.
• Net debt ratio target to bring down leverage closer to 2x over the medium term.
• First quarter 2025 expected to have adjusted EBITDA relatively flat to slightly down compared to prior year, with restructuring charges similar to the prior year.

Risks

• Near-term variability as the US business transitions from legacy to fiber-based revenue streams.
• Competition in international markets, such as the impact of a new 5G entrant in Guyana affecting prepaid subscribers.
• Impact of government program sunsets in the US, like the conclusion of the Emergency Connectivity Fund and Affordable Connectivity Program, affecting revenue.

Question and Answer

• Q: About the capital expenditure budget. Last year, target was 10% to 15% of revenue. This time around, higher on initial guidance. Any additional projects? A: Carlos Doglioli mentioned guidance is in line with expectations, scaling back CapEx as planned, with major dynamic being reimbursable CapEx related to grants.
• Q: Traction on enterprise and carrier in international segment? A: Brad Martin said international had 6.5% growth in business base, 2.7% quarter-over-quarter subscriber growth in business customers in Q4, with increasing pipeline demand for backhaul and spectrum in US markets.
• Q: International mobile prepaid subscribers drop off. Competition or consumer habits? A: Brad Martin said primarily competition, especially in Guyana due to a new 5G entrant, with data plan subscribers up 26% year-over-year.
• Q: Carrier managed services, specific services and spectrum monetization? A: Brad Martin said carrier managed services include lit services, dark services, tower lease, backhaul, and leveraging spectrum, with continuous evaluation of portfolio for enhanced shareholder value.
• Q: Restructuring charges in 2025? A: Carlos Doglioli said restructuring charges in Q1 2025 expected to be of similar size to prior year Q1.
• Q: US Telecom segment profitability next year, driver of EBITDA decline? A: Carlos Doglioli said revenue decline is a big driver of reduced profitability in the US Telecom segment.
• Q: Monetization of capital investments in US, accelerating fiber services? A: Brad Martin said focus on grant programs, commercial efforts on best returns, and continuing to grow enterprise and carrier revenue streams in US markets.
• Q: Visibility and predictability for 2025 and beyond in US segment? A: Brad Martin said seeing growing demand for high-speed data, fiber-fed services, and as fiber programs gain momentum, predictability improves; goal to stabilize US business in 2025 for growth in 2026 and beyond.
• Q: Shutting down copper, time frame for margin improvement? **A: Brad Martin said varies by markets, with about a third of copper exchangers shut down in Guyana and Alaska by end of 2024, targeting progress by 2030 depending on infrastructure investment programs.