ATN Reports Fourth Quarter and Full Year 2016 Results

Fourth Quarter Financial Highlights:

• Revenues: $128.5 million
• Adjusted EBITDA ¹ : $34.1 million
• Operating income: $10.9 million
• Net income attributable to ATN’s stockholders: $2.3 million, or $0.14 per diluted share  
• Cash flow from operating activities for full year 2016 was $111.7 million which includes the negative impact of funding a $22.5 million pension obligation in lieu of purchase consideration paid to the seller for our U.S. Virgin Islands acquisition

BEVERLY, Mass., Feb. 22, 2017 (GLOBE NEWSWIRE) -- ATN (NASDAQ: ATNI ) today reported results for the fourth quarter and year ended December 31, 2016. Unless otherwise indicated, the discussion of the Company’s results is focused on its continuing operations, and comparisons are to the same period in the prior year.  In the first quarter of 2016, the Company changed its segment reporting structure and an unaudited recast of financial information for the eight quarterly periods in the fiscal years ending December 31, 2014 and 2015 can be found in the Company’s Form 8-K filing dated April 12, 2016.

Business Review and Outlook

“Fourth quarter performance represented a solid finish to a year in which we significantly expanded the scope of ATN’s operations through synergistic acquisitions in telecom services and strategic and organic initiatives in renewable energy,” said Michael Prior, Chief Executive Officer.  “Revenue contributions in the fourth quarter from our 2016 telecom acquisitions in Bermuda and U.S. Virgin Islands were consistent with plan, and our first India renewable energy projects, while not generating revenue yet, are set to deliver electricity production in the 2017 first quarter.

“We are pleased with the market positioning of our international telecom operations. Revenues have remained steady during the integration of our Bermuda and USVI acquisitions, providing a solid platform for long term development and cash flows.  Our early efforts have been focused on improving network performance and delivering service upgrades to ensure a superior customer experience and further strengthen our leading market positions.  We will continue to make network investments in all our international markets in 2017, with a significant decline in those capital expenditures expected for 2018.     “U.S. wholesale wireless continued to face the effect of lower rates, offset in part by higher retail revenues.  The net result was a modest decline in revenues and EBITDA in the fourth quarter compared to last year. This quarter-over-quarter trend is likely to be a factor again in 2017, but the impact should be less pronounced, as rate reductions stabilize and we benefit from additional operating efficiencies.

“We were delayed on our build schedule in India due in large part to the government imposed currency reform, but we are moving forward with new construction and anticipate having 50MW operational in the second quarter and potentially twice that by year end.  We are exploring financing alternatives on completed projects, which will help determine the pace and extent of our construction of new solar facilities in India for the second half of the year.  At present, we still see an attractive opportunity to build more than 250MW of distributed generation projects in India over the next two years.   

“More broadly, we expect 2017 to be a year of continued progress for ATN.  We have a strong and growing base of operating cash flows, which reached approximately $112 million, inclusive of funding a $22 million pension obligation in lieu of purchase consideration paid to the seller for our U.S. Virgin Islands acquisition, for 2016, and significant remaining capacity on our balance sheet.  We have recently completed or expect to complete some smaller strategic acquisitions and dispositions which should improve both of those attributes.  Our telecom operations consist of a balanced and diversified portfolio of wireless and wireline assets, many of which are in markets where we have significant operating synergies that may be realized over time.  Our India solar projects do not rely on government subsidies for economic returns, and while pricing per kWh is lower than in the U.S., we expect our India operations to generate more than $2 million in very high incremental margin revenue in the 2017 fourth quarter and to grow steadily from there,” Mr. Prior concluded.

Fourth Quarter and Full Year 2016 Financial Results

Fourth quarter 2016 revenues were $128.5 million, a 55% increase from the $82.9 million reported for the fourth quarter of 2015. Revenue growth resulted primarily from a $46.5 million, or 122%, increase in our International Telecom segment revenues mostly due to the impact of our recent Bermuda and U.S. Virgin Islands acquisitions. Adjusted EBITDA ¹  for the fourth quarter was $34.1 million, 33% above the prior year period, primarily from the impact of the recent acquisitions and reduced operating expenses in Guyana and in U.S. Telecom, partially offset by a decline in Renewable Energy operating results. Operating income for the fourth quarter, which included a $10.0 million increase in depreciation and amortization expense primarily due to the recent acquisitions, was $10.9 million, an increase of 33% when compared to the prior year period.

Net income attributable to ATN’s stockholders for the fourth quarter was $2.3 million or $0.14 per diluted share, a decline of 44% compared with the prior year period of $4.2 million, or $0.26 per diluted share due to increased depreciation and amortization expense, and higher net interest expense related to the recent acquisitions and investments.   

Revenues for the full year 2016 were $457.0 million, a 29% increase from the $355.4 million reported for the same period of 2015.   Adjusted EBITDA ¹ for the full year 2016 was $149.0 million, up 7% from the prior year.  Operating income of $50.8 million for the full year 2016 declined from the prior year’s $78.6 million due in large part to a $19.1 million increase in depreciation and amortization, a $9.1 million increase in transaction-related expenses associated with the acquisitions in 2016, and an $11.4 million impairment charge in the year.  Net income attributable to ATN’s stockholders for the full year 2016 was $12.5 million or $0.77 per diluted share, compared with the prior year $16.9 million, or $1.05 per diluted share.  

Fourth Quarter 2016 Operating Highlights

The Company has three reportable segments: (i) U.S. Telecom; (ii) International Telecom; and (iii) Renewable Energy. 

U.S. Telecom

U.S. Telecom revenues consist of wireless revenues from our voice and data wholesale roaming operations and our smaller retail operations in the Southwestern United States and wireline revenues from our wholesale transport and enterprise business in the Northeastern United States.  Total U.S. Telecom segment revenues were $39.0 million in the fourth quarter of 2016, a 1% decrease from the $39.3 million reported in the fourth quarter of 2015.  U.S. Wireless revenues declined 5% to $30.9 million compared with $32.4 million in the prior year quarter, due mostly to lower wholesale roaming rates, partially offset by growth in data traffic volumes and low margin retail wireless revenues.   U.S. Wireline revenues were $7.7 million, up from $6.3 million in the prior year. The Company ended the fourth quarter of 2016 with 1,006 domestic base stations in service compared to 877 at the end of last year’s fourth quarter. 

U.S. Telecom Adjusted EBITDA ¹ of $16.4 million in the fourth quarter of 2016 increased 5% compared to the prior year’s $15.7 million.  The increase was primarily due to a reduction in segment operating expenses which offset lower wholesale wireless revenues in the current year quarter.   

International Telecom

International Telecom consists of a broad range of information and communications services including wireline and wireless data, internet, voice and video service revenues from our operations in Bermuda and the Caribbean including the U.S. Virgin Islands. International Telecom revenues were $84.7 million in the fourth quarter of 2016, a 122% increase from the $38.2 million reported in the fourth quarter of 2015.  Our recent acquisitions in Bermuda and the U.S. Virgin Islands added $47.3 million of incremental revenues during the current year quarter and were responsible for this increase.

International Telecom Adjusted EBITDA ¹ of $21.1 million in the fourth quarter increased 77% from $11.9 million in the prior year period.  The increase is the result of the 2016 acquisitions and lower year over year operating expenses in Guyana.    

Renewable Energy

Renewable Energy segment revenues are generated principally by the sale of energy and solar renewable energy credits from our 28 commercial solar projects in the United States.  For the fourth quarter of 2016, revenues from our renewable energy business were $4.8 million, down 11% from the $5.4 million in the prior year mostly due to the expiration of certain renewable energy credits in California.  Adjusted EBITDA ¹ for the Renewable Energy segment was $2.8 million in the fourth quarter, a decrease of 27% from the prior year quarter due to the expiration of those credits and increased operating expenses from our new solar business in India prior to generating revenue. The expiry of that credit revenue will lower domestic renewable energy revenue in the coming quarters but both revenue and EBITDA for this segment will benefit as we begin generating revenue from the facilities under construction in India.  The construction delays in the fourth quarter of 2016 have pushed back the timeline on the revenue and EBITDA contribution of the new solar facilities in India

Balance Sheet and Cash Flow Highlights

Cash and cash equivalents at December 31, 2016 were $269.7 million.  In addition, the Company held $9.2 million of short-term investments and $18.6 million of restricted cash.  Net cash provided by operating activities was $111.7 million for the full year of 2016, compared with $139.2 million for the full year of 2015.  The decrease in net cash provided by operating activities is due to lower net income in 2016, including the impact of transaction and restructuring charges, the funding of a $22.5 million pension obligation in lieu of purchase consideration paid to the seller for our U.S. Virgin Islands acquisition, and changes in deferred income taxes.  Capital expenditures were $124.3 million for the full year 2016, which included $22.6 million spent on renewable energy projects. The Company expects full year 2017 capital expenditures for its Telecom businesses, including the recent Bermuda and USVI acquisitions, to be in the range of $95 million to $115 million.  Capital expenditures in the domestic and international telecom segments are higher than what we would expect in the ordinary course due to concurrent network expansions and upgrades in multiple markets. These projects include extensive fiber builds and upgrades and market-wide mobile data network upgrades.  Once complete, we expect aggregate capital expenditures in existing telecom markets to decline significantly in 2018. In addition, capital expenditures for our Renewable Energy business are expected to be in the range of $40 million to $60 million for the full year 2017, primarily related to ongoing construction of our solar projects in India.

Conference Call Information

ATN will host a conference call on Thursday, February 23, 2017 at 9:30 a.m. Eastern Time (ET) to discuss its fourth quarter and year ended 2016 results. The call will be hosted by Michael Prior, President and Chief Executive Officer, and Justin Benincasa, Chief Financial Officer. The dial-in numbers are US/Canada: (877) 734-4582 and International: (678) 905-9376, conference ID 70892859. A replay of the call will be available at ir.atni.com beginning at 1:00 p.m. (ET) on Thursday, February 23, 2017.

About ATN

ATN International, Inc. (Nasdaq: ATNI ), headquartered in Beverly, Massachusetts, provides telecommunications services to rural, niche and other under-served markets and geographies in the United States, Bermuda and the Caribbean and owns and operates solar power systems in various locations in the United States and India. Through our operating subsidiaries, we (i) provide both wireless and wireline connectivity to residential and business customers, including a range of mobile wireless solutions, high speed internet services, video services and local exchange services, (ii) provide distributed solar electric power to corporate, utility and municipal customers and (iii) are the owner and operator of terrestrial and submarine fiber optic transport systems. For more information, please visit www.atni.com .

Cautionary Language Concerning Forward Looking Statements

This press release contains forward-looking statements relating to, among other matters, our future financial performance and results of operations; the competitive environment in our key markets, demand for our services and industry trends; the pace of expansion and improvement of our telecommunications network and renewable energy operations including our level of estimated future capital expenditures and our realization of the benefits of these investments; the anticipated timing of the closing of the sale of our wireline business in the Northeastern United States; the anticipated timing of our build schedule and the commencement of energy production of our India renewable energy projects; and management’s plans and strategy for the future. These forward-looking statements are based on estimates, projections, beliefs, and assumptions and are not guarantees of future events or results.  Actual future events and results could differ materially from the events and results indicated in these statements as a result of many factors, including, among others, (1)  our ability to operate our newly acquired businesses in Bermuda and the U.S. Virgin Islands and integrate these operations into our existing operations; (2) the general performance of our operations, including operating margins, revenues, and the future growth and retention of our major customers and subscriber base and consumer demand for solar power; (3) government regulation of our businesses, which may impact our FCC and other telecommunications licenses or our renewables business; (4) economic, political and other risks facing our operations; (5) our ability to maintain favorable roaming arrangements; (6) our ability to efficiently and cost-effectively upgrade our networks and IT platforms to address  rapid and significant technological changes in the telecommunications industry; (7) the loss of or an inability to recruit skilled personnel in our various jurisdictions, including key members of management; (8) our ability to find investment or acquisition or disposition opportunities that fit our strategic goals for the Company; (9) increased competition; (10) our ability to expand our renewable energy business; (11) our reliance on a limited number of key suppliers and vendors for timely supply of equipment and services relating to our network infrastructure; (12) the adequacy and expansion capabilities of our network capacity and customer service system to support our customer growth; (13) the occurrence of weather events and natural catastrophes; (14) our continued access to capital and credit markets; (15) the risk of currency fluctuation for those markets in which we operate: (16) our ability to realize the value that we believe exists in our businesses; and (17) our ability to receive requisite regulatory consents and approvals and satisfy other conditions needed to complete the pending sale of our wireline business in the Northeastern United States. 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, 2015, filed with the SEC on February 29, 2016 and the Company’s Quarterly Report on Form 10-Q for the quarters ended March 31, 2016, June 30, 2016, and September 30, 2016 filed with the SEC on May 10, 2016, August 9, 2016, and November 10, 2016, respectively, and other reports we file 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.

Use of Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with generally accepted accounting principles (GAAP), this press release also contains non-GAAP financial measures. Specifically, ATN has presented an Adjusted EBITDA measure. Adjusted EBITDA is defined as net income attributable to ATN stockholders before income from discontinued operations, bargain purchase gain, impairment of long-lived assets, restructuring charges, interest, taxes, depreciation and amortization, transaction-related charges, other income or expense, and net income attributable to non-controlling interests. The Company believes that the inclusion of these non-GAAP financial measures helps investors gain a meaningful understanding of the Company's core operating results and enhances comparing such performance with prior periods. ATN’s management uses these non-GAAP measures, in addition to GAAP financial measures, as the basis for measuring our core operating performance and comparing such performance to that of prior periods. The non-GAAP financial measures included in this press release are not meant to be considered superior to or a substitute for results of operations prepared in accordance with GAAP. Reconciliations of these non-GAAP financial measures used in this press release to the most directly comparable GAAP financial measure is set forth in the text of, and the accompanying tables to, this press release.

¹  See Table 5 for reconciliation of Net Income (Loss) to Adjusted EBITDA.

CONTACT: 978-619-1300 Michael T. Prior Chief Executive Officer Justin D. Benincasa Chief Financial Officer