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, 2022~~March 31, 2023


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

For the transition period from to

Commission File Number 001-12593

ATN INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)


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

(978) 619-1300

(Registrant’s telephone number, including area code)

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


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

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

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

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


Large accelerated filer ◻		Accelerated filer ⌧

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

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

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

As of ~~August 8, 2022,~~May 10, 2023, the registrant had outstanding ~~15,763,341~~15,738,576 shares of its common stock ($.01 par value).

Table of Contents

ATN INTERNATIONAL, INC.

FORM 10-Q

Quarter Ended ~~June 30, 2022~~March 31, 2023


CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS		3

PART I—FINANCIAL INFORMATION		4

Item 1	Unaudited Condensed Consolidated Financial Statements	4

	Condensed Consolidated Balance Sheets at ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022	4

	Condensed Consolidated Statements of Operations for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~	5

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~	6

	Condensed Consolidated Statements of Equity for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~	7

	Condensed Consolidated Statements of Cash Flows for ~~Six~~Three Months Ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~	98

	Notes to Unaudited Condensed Consolidated Financial Statements	109-35

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	~~42-70~~36

Item 3	Quantitative and Qualitative Disclosures About Market Risk	7057

Item 4	Controls and Procedures	7058

PART II—OTHER INFORMATION		7058

Item 1	Legal Proceedings	7058

Item 1A	Risk Factors	7158

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	7259

Item 5	Other Information	7360

Item 6	Exhibits	7461

SIGNATURES		7562

CERTIFICATIONS

Table of Contents

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (or the “Report”) contains forward-looking statements relating to, among other matters, our future financial performance and results of operations, including our expectations regarding the benefits of our acquisition of Alaska Communications; the impact of federal support program revenues; expectations regarding future revenue, operating income, EBITDA and capital expenditures; expectations regarding our ability to refinance our existing debt and/or obtain additional financing on or before the maturity of our 2019 CoBank Credit Facility; the competitive environment in our key markets, demand for our services and industry trends; our expectations regarding construction progress under our agreement as part of the FirstNet Transaction and the effect such progress will have on our financial results; expectations regarding litigation; our liquidity; and management’s plans and strategy for the future. These forward-looking statements are based on estimates, projections, beliefs, and assumptions and are not guarantees of future events or results. Actual future events and results could differ materially from the events and results indicated in these statements as a result of many factors, including, among others, (1) our ability to successfully transition our U.S. Telecom business away from wholesale wireless to other carrier and consumer-based services; (2) our ability to replace and remove all ZTE equipment in our U.S. network, as required by the FCC in a timely and cost-effective manner; (3) the general performance of our operations, including operating margins, revenues, capital expenditures, and the retention of and future growth of our subscriber base and average revenue per user; (4) our ability to realize cost synergies and expansion plans for our newly acquired Alaska Communications business; (5) our ability to satisfy the needs and demands of our major carrier customers; (6) our ability to efficiently and cost-effectively upgrade our networks and IT platforms to address rapid and significant technological changes in the telecommunications industry; (7) government funding and subsidy program availability and regulation of our businesses, which may impact our revenue, expansion plans and operating costs; (8) our reliance on a limited number of key suppliers and vendors for timely supply of equipment and services relating to our network infrastructure; (9) economic, political and other risks and opportunities facing our operations, including those resulting from the pandemic, geopolitical tensions, including the invasion of Ukraine, and from inflation, including increased costs and supply chain disruptions; (10) the loss of or an inability to recruit skilled personnel in our various jurisdictions, including key members of management; (11) our ability to find investment or acquisition or disposition opportunities that fit our strategic goals; (12) the occurrence of weather events and natural catastrophes and our ability to secure the appropriate level of insurance coverage for ~~these~~our assets; (13) increased competition; (14) the adequacy and expansion capabilities of our network capacity and customer service system to support our customer growth; (15) our continued access to capital and credit ~~markets; and (16)~~markets, including our ability to ~~successfully complete~~extend or refinance our ~~pending acquisition of Sacred Wind Enterprises and~~current credit facility; 16) our ability to successfully recognize the expected benefits of ~~such acquisition.~~our acquisition of Sacred Wind Enterprises. These and other additional factors that may cause actual future events and results to differ materially from the events and results indicated in the forward-looking statements above are set forth more fully under Item 1A “Risk Factors” in each of our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, filed with the SEC on March ~~16, 2022,~~15, 2023, and the other reports we file from time to time with the SEC. ~~We undertake~~The Company undertakes no obligation and have no intention to update these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors that may affect such forward-looking statements, except as required by law.

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

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

Table of Contents

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,		March 31,		December 31,
	2022		2021		2023		2022
ASSETS
Current Assets:
Cash and cash equivalents	$	71,061	$	79,601	$	56,016	$	54,660
Restricted cash		1,099		1,096		4,961		5,068
Short-term investments		300		300		300		300
Accounts receivable, net of allowances for credit losses of $15.7 million and $13.9 million, respectively		70,627		73,701
Accounts receivable, net of allowances for credit losses of $16.0 million and $15.2 million, respectively						84,483		86,816
Customer receivable		6,239		4,145		6,083		5,803
Inventory, materials and supplies		9,238		10,177		18,485		17,902
Prepayments and other current assets		65,716		63,597		61,224		59,139
Total current assets		224,280		232,617		231,552		229,688
Fixed Assets:
Property, plant and equipment		1,801,867		1,748,092		2,001,455		1,977,978
Less accumulated depreciation		(861,594)		(804,883)		(945,092)		(922,024)
Net fixed assets		940,273		943,209		1,056,363		1,055,954
Telecommunication licenses, net		113,766		113,766		113,698		113,698
Goodwill		40,104		40,104		40,104		40,104
Intangible assets, net		37,847		44,294		28,823		31,992
Operating lease right-of-use assets		115,103		118,843		101,953		108,702
Customer receivable - long term		39,855		39,652		45,681		46,706
Other assets		84,526		76,119		81,841		81,025
Total assets	$	1,595,754	$	1,608,604	$	1,700,015	$	1,707,869
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current Liabilities:
Current portion of long-term debt	$	3,759	$	4,665	$	11,537	$	6,173
Current portion of customer receivable credit facility		5,326		4,620		6,574		6,073
Accounts payable and accrued liabilities		129,140		151,463		118,240		155,224
Dividends payable		2,680		2,672		3,323		3,310
Accrued taxes		9,261		5,681		13,611		7,335
Current portion of lease liabilities		16,779		16,201		13,785		15,457
Advance payments and deposits		36,839		35,642		38,314		39,608
Total current liabilities		203,784		220,944		205,384		233,180
Deferred income taxes		18,400		21,460		26,697		28,650
Lease liabilities, excluding current portion		88,828		91,719		78,360		83,319
Other liabilities		135,103		142,033		137,148		138,420
Customer receivable credit facility, net of current portion		35,243		30,148		41,533		39,275
Long-term debt, excluding current portion		352,319		327,111		453,144		415,727
Total liabilities		833,677		833,415		942,266		938,571
Commitments and contingencies (Note 14)
Redeemable noncontrolling interests:
Preferred redeemable noncontrolling interests		52,566		50,296		56,197		55,152
Common redeemable noncontrolling interests		22,640		22,640		37,026		37,317
Total redeemable noncontrolling interests		75,206		72,936		93,223		92,469
ATN International, Inc. Stockholders’ Equity:
Preferred stock, $0.01 par value per share; 10,000,000 shares authorized, NaN issued and outstanding		—		—
Common stock, $0.01 par value per share; 50,000,000 shares authorized; 17,584,058 and 17,476,542 shares issued, respectively, 15,763,341 and 15,712,941 shares outstanding, respectively		172		172
Treasury stock, at cost; 1,820,716 and 1,763,601 shares, respectively		(73,828)		(71,714)
Preferred stock, $0.01 par value per share; 10,000,000 shares authorized, none issued and outstanding						—		—
Common stock, $0.01 par value per share; 50,000,000 shares authorized; 17,679,616 and 17,584,057 shares issued, respectively, 15,787,337 and 15,763,341 shares outstanding, respectively						173		173
Treasury stock, at cost; 1,892,279 and 1,820,716 shares, respectively						(76,665)		(73,825)
Additional paid-in capital		195,432		192,132		200,015		198,449
Retained earnings		465,112		475,887		437,030		449,806
Accumulated other comprehensive income		4,231		4,773		6,690		6,210
Total ATN International, Inc. stockholders’ equity		591,119		601,250		567,243		580,813
Noncontrolling interests		95,752		101,003		97,283		96,016
Total equity		686,871		702,253		664,526		676,829
Total liabilities, redeemable noncontrolling interests and equity	$	1,595,754	$	1,608,604	$	1,700,015	$	1,707,869

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

Table of Contents

ATN INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE ~~AND SIX~~ MONTHS ENDED ~~JUNE 30, 2022~~MARCH 31, 2023 AND ~~2021~~2022

(Unaudited)

(In Thousands, Except Per Share Data)


	Three months ended June 30,				Six months ended June 30,				Three months ended March 31,
	2022		2021		2022		2021		2023		2022
REVENUE:
Communication services	$	171,795	$	112,964	$	338,338	$	223,599	$	181,308	$	166,543
Construction		3,297		9,325		5,283		21,632		590		1,987
Other		4,405		1,576		7,896		3,144		3,876		3,489
Total revenue		179,497		123,865		351,517		248,375		185,774		172,019
OPERATING EXPENSES (excluding depreciation and amortization unless otherwise indicated):
Cost of communication services and other		77,860		48,479		150,871		97,986		79,040		73,011
Cost of construction revenue		3,286		9,535		5,319		22,142		588		2,033
Selling, general and administrative		59,178		40,652		115,519		78,344		61,348		54,882
Stock-based compensation										1,778		1,461
Transaction-related charges		412		1,396		966		2,126		13		554
Restructuring expenses										2,887		—
Depreciation and amortization		33,817		19,739		67,109		39,849		36,404		33,292
Amortization of intangibles from acquisitions		3,250		416		6,508		813		3,247		3,258
(Gain) Loss on disposition of long-lived assets		(28)		743		3,392		861		(167)		3,420
Total operating expenses		177,775		120,960		349,684		242,121		185,138		171,911
Income from operations		1,722		2,905		1,833		6,254		636		108
OTHER INCOME (EXPENSE)
Interest income		—		46		3		40		182		51
Interest expense		(4,278)		(1,137)		(7,593)		(2,285)		(8,807)		(3,363)
Other income		(2,724)		(66)		1,474		2,309		194		4,199
Other income (expense), net		(7,002)		(1,157)		(6,116)		64
INCOME BEFORE INCOME TAXES		(5,280)		1,748		(4,283)		6,318
Income tax provision		(3,971)		(1,542)		(1,018)		(1,247)
NET INCOME (LOSS)		(1,309)		3,290		(3,265)		7,565
Net income (loss) attributable to noncontrolling interests, net of tax expense (benefit) of $0 million, $0.3 million, $(0.5) million, and $0.4 million, respectively.		784		(1,271)		1,794		(2,842)
NET INCOME (LOSS) ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS	$	(525)	$	2,019	$	(1,471)	$	4,723
NET INCOME (LOSS) PER WEIGHTED AVERAGE SHARE ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS:
Other income (expense)										(8,431)		887
INCOME (LOSS) BEFORE INCOME TAXES										(7,795)		995
Income tax (benefit) expense										(740)		2,952
NET LOSS										(7,055)		(1,957)
Net loss attributable to noncontrolling interests, net of tax benefit of $(0.6) million and $(0.5) million respectively										1,170		1,009
NET LOSS ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS									$	(5,885)	$	(948)
NET LOSS PER WEIGHTED AVERAGE SHARE ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS:
Basic	$	(0.11)	$	0.13	$	(0.24)	$	0.30	$	(0.44)	$	(0.13)
Diluted	$	(0.11)	$	0.13	$	(0.24)	$	0.30	$	(0.44)	$	(0.13)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		15,749		15,912		15,736		15,907		15,768		15,708
Diluted		15,749		15,921		15,736		15,930		15,768		15,708
DIVIDENDS PER SHARE APPLICABLE TO COMMON STOCK	$	0.17	$	0.17	$	0.34	$	0.34	$	0.21	$	0.17

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

Table of Contents

ATN INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE THREE ~~AND SIX~~ MONTHS ENDED ~~JUNE 30,~~MARCH 31, 2023 AND 2022 ~~AND 2021~~

(Unaudited)

(In Thousands)

Three months ended
June 30,

Six months ended
June 30,

2022

2021

2022

2021
Net income (loss)
$
(1,309)

$
3,290

$
(3,265)

$
7,565
Other comprehensive income (loss):

Foreign currency translation adjustment

(1,680)

(370)

(1,423)

(410)
Reclassification of loss on pension settlement, net of $(0.8) million of tax

915

—

915

—
Unrealized gain (loss) on derivatives

(199)

29

(34)

60
Other comprehensive income (loss), net of tax

(964)

(341)

(542)

(350)
Comprehensive income (loss)

(2,273)

2,949

(3,807)

7,215
Less: Comprehensive income (loss) attributable to noncontrolling interests

784

(1,271)

1,794

(2,842)
Comprehensive income (loss) attributable to ATN International, Inc.
$
(1,489)

$
1,678

$
(2,013)

$
4,373


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

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

Table of Contents

ATN INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

FOR THE THREE MONTHS ENDED ~~JUNE 30,~~MARCH 31 2023 AND 2022 ~~AND 2021~~

(Unaudited)

(In Thousands, Except Per Share Data)


	Total Redeemable Noncontrolling Interests						Total Equity																		Total Equity
		Redeemable		Redeemable		Total				Treasury		Additional				Redeemable		Other		ATNI		Non-						Treasury		Additional				Other		ATNI		Non-
		Preferred		Common		Redeemable		Common		Stock,		Paid In		Retained		Common		Comprehensive		Stockholders’		Controlling		Total		Common		Stock,		Paid In		Retained		Comprehensive		Stockholders’		Controlling		Total
		Units		Units		Noncontrolling Interests		Stock		at cost		Capital		Earnings		Units		Income/(Loss)		Equity		Interests		Equity		Stock		at cost		Capital		Earnings		Income/(Loss)		Equity		Interests		Equity
Balance, March 31, 2022	$	51,412	$	22,640	$	74,052	$	172	$	(73,795)	$	193,164	$	470,056	$	—	$	5,195	$	594,792	$	98,768	$	693,560
Purchase of 831 shares of common stock		—		—		—		—		(33)		—		—		—		—		(33)		—		(33)
Balance, December 31, 2022																									$	173	$	(73,825)	$	198,449	$	449,806	$	6,210	$	580,813	$	96,016	$	676,829
Purchase of 71,563 shares of common stock																										—		(2,840)		—		—		—		(2,840)		—		(2,840)
Stock-based compensation																										—		—		1,634		—		—		1,634		144		1,778
Dividends declared on common stock ($0.21 per common share)																										—		—		—		(3,315)		—		(3,315)		—		(3,315)
Repurchase of noncontrolling interests																										—		—		(68)		—		—		(68)		(527)		(595)
Deemed dividend - redeemable preferred units																										—		—		—		(1,045)		—		(1,045)		—		(1,045)
Deemed dividend - redeemable common units																										—		—		—		(2,531)		—		(2,531)		2,820		289
Comprehensive income:
Net loss																										—		—		—		(5,885)		—		(5,885)		(1,170)		(7,055)
Other comprehensive income																										—		—		—		—		480		480		—		480
Total comprehensive income (loss)																										—		—		—		(5,885)		480		(5,405)		(1,170)		(6,575)
Balance, March 31, 2023																									$	173	$	(76,665)	$	200,015	$	437,030	$	6,690	$	567,243	$	97,283	$	664,526

Balance, December 31, 2021																									$	172	$	(71,714)	$	192,132	$	475,887	$	4,773	$	601,250	$	101,003	$	702,253
Purchase of 56,284 shares of common stock																										—		(2,081)		—		—		—		(2,081)		—		(2,081)
Stock-based compensation		—		—		—		—		—		2,435		—		—		—		2,435		133		2,568		—		—		1,310		—		—		1,310		150		1,460
Dividends declared on common stock ($0.17 per common share)		—		—		—		—		—		—		(2,678)		—		—		(2,678)		(1,113)		(3,791)		—		—		—		(2,675)		—		(2,675)		(263)		(2,938)
Investments made by minority shareholders in consolidated affiliates		—		—		—		—		—		—		—		—		—		—		11		11
Repurchase of noncontrolling interests		—		—		—		—		—		(167)		—		—		—		(167)		(1,850)		(2,017)		—		—		(278)		—		—		(278)		(2,205)		(2,483)
Accrued dividend - redeemable preferred units		1,154		—		1,154		—		—		—		(1,154)		—		—		(1,154)		—		(1,154)		—		—		—		(1,116)		—		(1,116)		—		(1,116)
Deemed dividend - redeemable common units		—		587		587		—		—		—		(587)		587		—		—		—		—		—		—		—		—		—		—		—		—
Comprehensive income:
Net income (loss)		—		(587)		(587)		—		—		—		(525)		(587)		—		(1,112)		(197)		(1,309)		—		—		—		(2,040)		—		(2,040)		83		(1,957)
Other comprehensive income		—		—		—		—		—		—		—		—		(964)		(964)		—		(964)
Total comprehensive income (loss)		—		(587)		(587)		—		—		—		(525)		(587)		(964)		(2,076)		(197)		(2,273)
Balance, June 30, 2022	$	52,566	$	22,640	$	75,206	$	172	$	(73,828)	$	195,432	$	465,112	$	—	$	4,231	$	591,119	$	95,752	$	686,871

Balance, March 31, 2021	$	—	$	—	$	—	$	172	$	(61,677)	$	186,930	$	516,897	$	—	$	269	$	642,591	$	99,678	$	742,269
Purchase of 37,428 shares of common stock		—		—		—		—		(1,711)		—		—		—		—		(1,711)		—		(1,711)
Stock-based compensation		—		—		—		—		—		2,150		—		—		—		2,150		25		2,175
Dividends declared on common stock ($0.17 per common share)		—		—		—		—		—		—		(2,708)		—		—		(2,708)		(958)		(3,666)
Investments made by minority shareholders in consolidated affiliates		—		—		—		—		—		—		—		—		—		—		329		329
Repurchase of noncontrolling interests		—		—		—		—		—		(74)		—		—		—		(74)		(1,085)		(1,159)
Comprehensive income:
Net income		—		—		—		—		—		—		2,019		—		—		2,019		1,271		3,290
Other comprehensive income (loss)		—		—		—		—		—		—		—		—		(341)		(341)		—		(341)		—		—		—		—		422		422		—		422
Total comprehensive income (loss)		—		—		—		—		—		—		2,019		—		(341)		1,678		1,271		2,949		—		—		—		(2,040)		422		(1,618)		83		(1,535)
Balance, June 30, 2021	$	—	$	—	$	—	$	172	$	(63,388)	$	189,006	$	516,208	$	—	$	(72)	$	641,926	$	99,260	$	741,186
Balance, March 31, 2022																									$	172	$	(73,795)	$	193,164	$	470,056	$	5,195	$	594,792	$	98,768	$	693,560

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

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~~ATN INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF EQUITY~~

~~FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021~~

Total Redeemable Noncontrolling Interests
Total Equity

Redeemable

Redeemable

Total

Treasury

Additional

Redeemable

Other

ATNI

Non-

Preferred

Common

Redeemable

Common

Stock,

Paid In

Retained

Common

Comprehensive

Stockholders’

Controlling

Total

Units

Units

Noncontrolling Interests

Stock

at cost

Capital

Earnings

Units

Income/(Loss)

Equity

Interests

Equity
Balance, December 31, 2021
$
50,296
$
22,640
$
72,936
$
172
$
(71,714)
$
192,132
$
475,887
$
—
$
4,773
$
601,250
$
101,003
$
702,253
Purchase of 57,115 shares of common stock

—

—

—

—

(2,114)

—

—

—

—

(2,114)

—

(2,114)
Stock-based compensation

—

—

—

—

—

3,743

—

—

—

3,743

285

4,028
Dividends declared on common stock ($0.34 per common share)

—

—

—

—

—

—

(5,356)

—

—

(5,356)

(1,374)

(6,730)
Investments made by minority shareholders in consolidated affiliates

—

—

—

—

—

—

—

—

—

—

11

11
Repurchase of noncontrolling interests

—

—

—

—

—

(443)

—

—

—

(443)

(4,057)

(4,500)
Accrued dividend - redeemable preferred units

2,270

—

2,270

—

—

—

(2,270)

—

—

(2,270)

—

(2,270)
Deemed dividend - redeemable common units

1,678

1,678

—

—

—

(1,678)

1,678

—

—

—

—
Comprehensive income:

Net income (loss)

—

(1,678)

(1,678)

—

—

—

(1,471)

(1,678)

—

(3,149)

(116)

(3,265)
Other comprehensive income (loss)

—

—

—

—

—

—

—

—

(542)

(542)

—

(542)
Total comprehensive income

—

(1,678)

(1,678)

—

—

—

(1,471)

(1,678)

(542)

(3,691)

(116)

(3,807)
Balance, June 30, 2022
$
52,566
$
22,640
$
75,206
$
172
$
(73,828)
$
195,432
$
465,112
$
—
$
4,231
$
591,119
$
95,752
$
686,871

Balance, December 31, 2020
$
—
$
—
$
—
$
172
$
(59,456)
$
187,754
$
516,901
$
—
$
278
$
645,649
$
108,687
$
754,336
Purchase of 81,406 shares of common stock

—

—

—

—

(3,932)

—

—

—

—

(3,932)

—

(3,932)
Stock-based compensation

—

—

—

—

—

3,413

—

—

—

3,413

98

3,511
Investments made by minority shareholders

—

—

—

—

—

—

—

—

—

—

329

329
Dividends declared on common stock ($0.34 per common share)

—

—

—

—

—

—

(5,416)

—

—

(5,416)

(2,488)

(7,904)
Repurchase of noncontrolling interests

—

—

—

—

—

(2,161)

—

—

—

(2,161)

(10,208)

(12,369)
Comprehensive income:

Net income

—

—

—

—

—

—

4,723

—

—

4,723

2,842

7,565
Other comprehensive income

—

—

—

—

—

—

—

—

(350)

(350)

—

(350)
Total comprehensive income

—

—

—

—

—

—

4,723

—

(350)

4,373

2,842

7,215
Balance, June 30, 2021
$
—
$
—
$
—
$
172
$
(63,388)
$
189,006
$
516,208
$
—
$
(72)
$
641,926
$
99,260
$
741,186

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ATN INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR ~~SIX~~THREE MONTHS ENDED ~~JUNE 30,~~MARCH 31, 2023 AND 2022 ~~AND 2021~~

(In Thousands)


	Six Months Ended June 30,				Three Months Ended March 31,
	2022		2021		2023		2022
Cash flows from operating activities:
Net income	$	(3,265)	$	7,565
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation		67,109		39,849
Amortization of acquisition intangibles		6,508		813
Net loss					$	(7,055)	$	(1,957)
Adjustments to reconcile net loss to net cash flows provided by operating activities:
Depreciation and amortization						36,404		33,292
Amortization of intangibles from acquisitions						3,247		3,258
Provision for doubtful accounts		3,153		2,299		1,378		1,913
Amortization of debt discount and debt issuance costs		1,004		337		569		501
Loss on disposition of long-lived assets		3,392		861
(Gain) loss on disposition of long-lived assets						(167)		3,420
Stock-based compensation		4,028		3,511		1,778		1,461
Deferred income taxes		(3,871)		(3,236)		(1,953)		191
Loss on pension settlement						369		—
Gain on equity investments		(3,401)		(1,793)		(315)		(4,222)
Loss on pension settlement		1,725		—
Unrealized gain on foreign currency		—		(81)
Changes in operating assets and liabilities, excluding the effects of acquisitions and dispositions:
Accounts receivable		(81)		1,226		3,573		1,677
Customer receivable		(2,298)		(21,586)		745		(746)
Prepaid income taxes		6,206		—		679		6,206
Accrued taxes		3,227		(1,360)		6,953		2,763
Materials and supplies, prepayments, and other current assets		(12,868)		(73)		(3,503)		(5,330)
Accounts payable and accrued liabilities, advance payments and deposits and other current liabilities		(9,970)		(1,745)		(24,548)		(27,465)
Other assets		(3,291)		782		141		(325)
Other liabilities		(6,587)		91		(2,283)		(3,249)
Net cash provided by operating activities		50,720		27,460		16,012		11,388
Cash flows from investing activities:
Capital expenditures		(71,204)		(35,424)		(50,598)		(34,220)
Reimbursable capital expenditures		(3,894)		(6,508)
Government capital programs
Amounts disbursed						(2,127)		(248)
Amounts received						593		—
Purchases of strategic investments		(1,400)		(5,242)		(630)		—
Receipt of capital government grants		—		3,292
Sale of businesses, net of transferred cash of $0 and $0.9 million, respectively		1,835		18,597
Net cash used in investing activities		(74,663)		(25,285)		(52,762)		(34,468)
Cash flows from financing activities:
Dividends paid on common stock		(5,348)		(5,411)		(3,310)		(2,672)
Distributions to noncontrolling interests		(1,375)		(4,488)		—		(263)
Payment of debt issuance costs						(119)		—
Finance lease payment		(574)		—		(249)		(338)
Term loan - repayments		(938)		(1,883)		(1,171)		(938)
Revolving credit facility – borrowings		49,000		—		57,553		36,500
Revolving credit facility – repayments		(24,500)		—		(14,000)		(15,500)
Proceeds from customer receivable credit facility		8,000		17,582		4,300		8,000
Repayment of customer receivable credit facility		(2,258)		(384)		(1,570)		(1,003)
Purchases of common stock – stock- based compensation		(1,169)		(1,713)		(1,433)		(1,136)
Purchases of common stock – share repurchase plan		(941)		(2,219)		(1,407)		(941)
Investments made by minority shareholders in consolidated affiliates		11		—
Repurchases of noncontrolling interests		(4,502)		(12,699)		(595)		(2,481)
Net cash provided by (used in) financing activities		15,406		(11,215)
Net cash provided by financing activities						37,999		19,228
Net change in cash, cash equivalents, and restricted cash		(8,537)		(9,040)		1,249		(3,852)
Total cash, cash equivalents, and restricted cash, beginning of period		80,697		104,997		59,728		80,697
Total cash, cash equivalents, and restricted cash, end of period	$	72,160	$	95,957	$	60,977	$	76,845
Noncash investing activity:
Purchases of property, plant and equipment included in accounts payable and accrued expenses	$	13,303	$	11,990	$	16,208	$	13,221

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

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ATN INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.ORGANIZATION AND BUSINESS OPERATIONS

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

facilities; and (ii) fixed and mobile telecommunications connectivity to residential, business and government customers, including a range of high-speed internet and data services, fixed and mobile wireless solutions, and video and voice services.

At the holding company level, the Company oversees the allocation of capital within and among its subsidiaries, affiliates, new investments, and stockholders. The Company ~~also~~ has developed significant operational expertise and resources that it uses to augment the capabilities of its individual operating subsidiaries in its local markets. ~~Over the past 10 years, the~~The Company has built a platform of resources and expertise to support its operating subsidiaries and to improve their quality of service with greater economies of scale and expertise than would typically be available at the operating subsidiary level. The Company ~~also~~ provides management, technical, financial, regulatory, and marketing services to its operating subsidiaries and typically ~~receives~~receive a management fee calculated as a percentage of their revenues, which is eliminated in consolidation. The Company also actively evaluates potential acquisitions, investment opportunities and other strategic transactions, both domestic and international, and generally ~~looks~~look for those that it believes fit the Company’s profile of telecommunications businesses and have the potential to complement its ~~“Glass~~“glass and ~~Steel”~~steel” and ~~“fiber first”~~“first to fiber” approach in markets while generating steady excess cash flows over extended periods of time. The Company uses the cash generated from its operations to re-invest in organic growth in its existing businesses, to make strategic investments in additional businesses, and to return cash to its investors through dividends or stock repurchases.

As of ~~June 30, 2022,~~March 31, 2023, the Company offered the following types of services to its customers:

●

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

●

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

●

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

●

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

~~Through June 30, 2022,~~As was previously disclosed, and effective January 27, 2021, the Company no longer provides distributed generation solar power to commercial and industrial customers. These operations were the only operations within the Company’s Renewable Energy segment. As such, the Company no longer identifies the Renewable Energy segment as

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an operating segment and now has ~~identified 3~~only two operating segments to manage and review its operations and to facilitate investor presentations of its results. These 3two operating segments are as follows:

●

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

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~~United States, the Company also provides mobility services to enterprise and consumer customers.~~

●

~~Renewable Energy.~~ ~~In India, the Company provided distributed generation solar power to commercial and industrial customers through January 27, 2021. See~~ ~~Disposition of International Solar Business~~ ~~for further details.~~

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, 2022:~~March 31, 2023:


Segment	Services	Markets	Tradenames
International Telecom	Mobility Services	Bermuda, Guyana, US Virgin Islands	One, ~~GTT+,~~GTT, Viya
	Fixed Services	Bermuda, Cayman Islands, Guyana, US Virgin Islands	One, Logic, GTT, Viya
	Carrier Services	Bermuda, Guyana, US Virgin Islands	One, ~~GTT+,~~GTT, Viya
	Managed Services	Bermuda, Cayman Islands, US Virgin Islands, Guyana	Fireminds, One, Logic, GTT, Viya
US Telecom	Mobility Services	United States (rural markets)	Choice, Choice NTUA Wireless ~~Geoverse~~
	Fixed Services	United States	Alaska Communications, Commnet, Choice, Choice NTUA Wireless, Sacred Wind Communications, Ethos
	Carrier Services	United States	Alaska Communications, Commnet, Essextel, Sacred Wind Communications
	Managed Services	United States	Alaska Communications, Choice
~~Renewable Energy (1)~~	~~Solar~~	~~India~~	~~Vibrant Energy~~

~~(1)~~

~~See~~ ~~Disposition of International Solar Business~~ ~~for further details.~~

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

Liquidity

~~COVID-19~~

The ~~Company continues to monitor and assess the effects~~Company’s 2019 CoBank Credit Facility matures on April 10, 2024, which is within twelve months of the ~~ongoing COVID-19 pandemic on its commercial operations, the safety~~issuance of ~~its employees and their families, its sales force and customers.~~

~~The preparation of the condensed~~these consolidated financial ~~statements requires~~statements. At March 31, 2023, the Company ~~to make estimates, judgments and assumptions, which are evaluated on an ongoing basis, which may affect~~owed $122.0 million for amounts drawn under the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. The Company assessed certain accounting matters and estimates that generally require consideration of forecasted financial information in context withcredit facility. For the ~~information and estimates reasonably available to~~year ended December 31, 2022, the Company ~~and~~generated positive cash flows from operating activities of $102.9 million. At March 31, 2023, the ~~unknown future impacts~~Company had $56.0 million of ~~COVID-19 as of June 30, 2022~~unrestricted cash and through the date of this report. The accounting matters assessed included, but were not limited to, the allowance for credit losses, the carrying value of goodwill and other long-lived assets, financial assets, valuation allowances for tax assets and revenue recognition.

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cash equivalents and $5.0~~The Company’s assessment~~ million of restricted cash. If the Company is unable to refinance its existing debt or obtain additional financing on or before the maturity of the 2019 CoBank Credit Facility, this could impact the Company’s ability to meet its obligations coming due within one year after issuance of ~~COVID-19 on~~these consolidated financial statements. Management is actively pursuing debt financing options which would extend the maturity date of the 2019 CoBank Credit Facility and may increase its capacity, and management expects to complete this financing process during 2023. In the event the Company is unable to refinance or replace its 2019 CoBank Credit Facility, the Company has additional actions at its discretion, including reducing capital expenditures not required to sustain current network operations, ~~did~~reducing operating cash outflows such as marketing and general and administrative expenses, and pursuing equity financing through issuance of equity securities in public markets. However, management does not ~~indicate that~~currently believe these additional actions will be required to be implemented due to its debt refinancing plans.

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

Restructuring Expense

In connection with the repositioning of the Company’s legacy wholesale roaming operations in its ~~consolidated financial statements as of and for~~US Telecom segment, the Company recorded a $2.9 million restructuring charge during the three ~~and six~~ months ended ~~June 30, 2022. However, future assessments~~March 31, 2023 related to the decommissioning of certain cell sites. The charge is recorded in the Restructuring Expense on the Company’s statement of operations. As of March 31, 2023, the Company paid $0.5 million, recorded a gain of $0.3 million on lease termination, and accrued $2.7 million of the ~~impacts of COVID-19, as well as other factors, including~~restructuring expenses. In conjunction with the possible reinstatement of certain COVID-19 travel-related and stay-at-home restrictions, could result in material adverse impacts to its consolidated financial statements in future reporting periods. For example,restructuring the Company ~~may experience difficulty in procuring network or retail equipment, such as handsets for subscribers, as a result~~terminated $5.0 million of ~~COVID-19 restrictions~~lease right of use assets and ~~related supply chain challenges. In addition, there is increased uncertainty related to predicting subscribers’ procurement behavior for services.~~

$5.3 million of lease liabilities from its balance sheet.

2. BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The financial information included herein is unaudited; however, the Company believes such information and the disclosures herein are adequate to make the information presented not misleading and reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair statement of the Company’s financial position and results of operations for the periods described therein. The year-end condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. Results of interim periods may not be indicative of results for the full year. These condensed consolidated financial statements and related notes should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, filed with the SEC on March ~~16, 2022.~~

15, 2023.

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

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~~Presentation of Revenue~~

~~Effective October 1, 2021, the Company’s statement of operations separately reflects Construction revenue. All periods presented have been adjusted to conform to these presentation updates.~~

~~Presentation of Operating Expenses~~

Effective January 1, 2021, the Company changed its presentation of operating expenses in the Condensed Consolidated Statements of Operations by combining the previously disclosed Termination and Access Fees with Engineering and Operations as the newly represented Costs of Communication Services and Other. In addition, the previously disclosed Sales, Marketing and Customer Service expenses are now combined with the previously disclosed General and Administrative expenses within the newly represented Selling, General and Administrative expenses. The change in presentation was made to better align the Company’s results with industry standards. Cost of construction services continues to be broken out separately and all depreciation and amortization continues to be shown separately.

~~Recent Accounting Pronouncements~~

In October 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company prospectively adopted this accounting standard in 2021. The adoption of ASC 2021-08 will result in the recognition of larger deferred revenue balances in future acquisitions.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which required entities to make specific annual disclosures about transactions with a government. The new standard is effective for fiscal years beginning after December 15, 2021. The adoption of ASU 2021-10 did not have a material impact on the Company’s disclosures. Going forward the Company will evaluate the disclosure requirements based on its participation in government programs.

3. REVENUE RECOGNITION AND RECEIVABLES

Revenue Accounted for in Accordance with Other Guidance

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

Timing of Revenue Recognition

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


	Three months ended				Six months ended
	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021		Three months ended
										March 31, 2023		March 31, 2022
Services transferred over time	$	154,680	$	104,488	$	308,272	$	206,520
US Telecom									$	81,072	$	72,290
International Telecom										85,680		81,302
Total										166,752		153,592
Goods and services transferred at a point in time		11,867		11,876		18,188		27,272
US Telecom										2,546		3,597
International Telecom										3,259		2,723
Total										5,805		6,320
Total revenue accounted for under ASC 606		166,547		116,364		326,460		233,792		172,557		159,912

Contract Assets and Liabilities

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

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the contract asset is recorded in prepayments and other current assets and the noncurrent portion is included in other assets on the Company’s balance sheets.

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

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

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The Company has certain Carrier Services roaming agreements that contain stand-ready performance obligations and management allocates transaction value to performance obligations based on the standalone selling price. The standalone selling price is the estimated price the Company would charge for the good or service with similar customers in similar circumstances. Management determined the performance obligations were obligations to make the service continuously available and will recognize revenue evenly over the service period.

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


	June 30, 2022		December 31, 2021			$ Change	% Change		March 31, 2023		December 31, 2022			$ Change	% Change
Contract asset – current	$	3,502	$	4,805	$	(1,303)	(27)	%	$	3,010	$	2,932	$	78	3	%
Contract asset – noncurrent		906		900		6	1	%		3,734		3,775		(41)	(1)	%
Contract liability – current		(25,181)		(25,332)		151	1	%		(26,086)		(27,284)		1,198	4	%
Contract liability – noncurrent		(75,919)		(81,391)		5,472	7	%		(70,444)		(72,543)		2,099	3	%
Net contract liability	$	(96,692)	$	(101,018)	$	4,326	4	%	$	(89,786)	$	(93,120)	$	3,334	4	%

The contract asset – current is included in prepayments and other current assets and the contract asset – noncurrent is included in other assets on the Company’s balance sheet. The contract liability – current is included in advance payments and deposits and the contract liability – noncurrent is included in other liabilities on the Company’s balance sheet. The decrease in the Company’s net contract liability was due to the timing of customer prepayments, contract billings, and recognition of deferred revenue. During the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, the Company recognized revenue of $~~20.4~~14.8 million related to its December 31, ~~2021~~2022 contract liability and amortized ~~$1.4~~$0.7 million of the December 31, ~~2021~~2022 contract asset ~~into~~to revenue.

Contract Acquisition Costs

The ~~June 30, 2022~~March 31, 2023 balance sheet includes contract acquisition costs of ~~$5.9~~$9.0 million in other assets. During the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, the Company amortized $~~0.8~~1.1 million and ~~$1.6~~$0.8 million, respectively, of contract acquisition costs. ~~During the three and six months ended June 30, 2021, the Company amortized $0.6 million and $1.2~~ ~~million, respectively, of contract acquisition costs.~~

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Remaining Performance Obligations

Remaining performance obligations represent the transaction price allocated to unsatisfied performance obligations of certain multiyear Mobility contracts, which include a promotional discount, Managed Services contracts, and the Company’s Carrier Services construction and service contracts. The transaction price allocated to unsatisfied performance obligations was $~~332~~286 million and ~~$369~~$312 million at ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. The Company expects to satisfy approximately ~~51%~~50% of the remaining performance obligations and recognize the transaction price within 24 months and the remainder thereafter.

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

Disaggregation

The Company's revenue is presented on a disaggregated basis in Note 13 based on an evaluation of disclosures outside the financial statements, information regularly reviewed by the chief operating decision makers for evaluating the financial performance of operating segments and other information that is used for performance evaluation and resource allocations. This includes revenue from Communication Services, Construction, and Other revenue. Communication Services revenue is further disaggregated into business and consumer Mobility, business and consumer Fixed, Carrier Services, and Other services. Other revenue is further disaggregated into ~~Renewable Energy and~~ Managed Services revenue. ~~This disaggregation of revenue depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.~~

Receivables

The Company records an estimate of future credit losses in conjunction with the revenue transaction based on the information available including historical experience and management’s expectations of future conditions. Those estimates will be updated as additional information becomes available. The Company’s allowance for uncollectible ~~accounts receivable is based on management’s assessment of the collectability of assets pooled together with similar risk characteristics.~~

At June 30, 2022, the Company had gross accounts receivable of $132.4 million, an allowance for credit losses of $15.7 million and a receivable under the FirstNet Agreement totaling $46.1 million of which $6.2 million was current and $39.9 ~~million was long-term. At December 31, 2021, the Company had gross accounts receivable of~~ ~~$131.4 million, an allowance for credit losses of $13.9 million and a receivable under the FirstNet Agreement totaling $43.8 million, of which $4.1 million was current and $39.7~~ million was long-term. The Company monitors receivables through the use of historical operating data adjusted for expectation of future performance as appropriate. Activity in the allowance for credit losses is below:

Six months ended June 30, 2022

Six months ended June 30, 2021

Balance at beginning of period

$
13,885

$
12,121
Current period provision for expected losses

3,153

2,299
Write-offs charged against the allowance

(1,497)

(1,196)
Recoveries collected

208

267
Balance at end of period

$
15,749

$
13,491

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

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


	Three months ended
	March 31, 2023		March 31, 2022

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

4. LEASES

Lessee Disclosure

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

Supplemental lease information

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


	Three months ended				Six months ended				Three months ended
	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021		March 31, 2023		March 31, 2022
Operating lease cost:
Operating lease cost	$	6,194	$	4,248	$	12,337	$	8,473	$	5,981	$	6,142
Short-term lease cost		645		729		1,154		1,137		677		509
Variable lease cost		642		1,016		1,446		2,080		662		804
Total operating lease cost	$	7,481	$	5,993	$	14,937	$	11,690	$	7,320	$	7,455

Finance lease cost:
Amortization of right-of-use asset	$	782	$	615	$	1,579	$	1,190	$	699	$	797
Variable costs		210		197		458		392		203		248
Interest costs		95		—		197		—		84		102
Total finance lease cost	$	1,087	$	812	$	2,234	$	1,582	$	986	$	1,147

During the ~~six month periods~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the Company paid ~~$10.8~~$5.0 million and ~~$7.6~~$5.6 million, respectively, for operating lease liabilities. During the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the Company recorded ~~$5.1~~$2.9 million and ~~$6.3~~$3.7 million, respectively, of operating lease liabilities arising from ROU assets. During the three months ended March 31, 2023, in conjunction with the restructuring activities the Company terminated $5.0

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

At ~~June 30, 2022,~~March 31, 2023, finance leases with a cost of ~~$27.2~~$27.5 million and accumulated amortization of ~~$12.0~~$14.1 million were included in property, plant and equipment. During the three months ended ~~June 30, 2022,~~March 31, 2023, the Company paid ~~$0.6~~$0.2 million of financing cash flows, $0.9 million of investing cash flows and $0.1 million of operating cash flows for finance lease ~~liabilities and recorded $0.2 million of additional finance lease~~ liabilities. ~~Additionally, during the six months ended June 30, 2022, the Company disposed of a finance lease with a net book value of $1.0~~ ~~million recording a loss for that amount.~~ At ~~June 30, 2022,~~March 31, 2023, finance leases had a lease liability of $~~5.8~~5.1 million, of which ~~$0.9~~$1.0 million was current.

~~During the six months ended June 30, 2021, the Company recorded $1.4 million of additional finance lease liabilities.~~ At December 31, ~~2021,~~2022, finance leases with a cost of ~~$30.8~~$26.6 million and accumulated amortization of ~~$12.1~~$13.5 million were included in property, plant and equipment.

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


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

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

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


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

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~~The weighted average remaining lease terms and discount rates as of June 30, 2022 and December 31, 2021 are noted in the table below:~~

June 30, 2022

December 31, 2021
Weighted-average remaining lease term

Operating leases

11.3 years

11.3 years
Financing leases

9.7 years

9.5 years

Weighted-average discount rate

Operating leases

5.4%

5.4%
Financing leases

6.5%

6.4%

Maturities of lease liabilities as of ~~June 30,~~December 31, 2022 were as follows (in thousands):

Operating Leases

Financing Leases
2022 (excluding the six months ended June 30, 2022)
$
11,451

$
651
2023

18,831

1,307
2024

17,294

1,198
2025

14,461

992
2026

10,349

547
Thereafter

69,233

3,145
Total lease payments

141,619

7,840
Less imputed interest

(41,765)

(2,085)
Total
$
99,854

$
5,755

~~Maturities of lease liabilities as of December 31, 2021 were as follows (in thousands):~~


	Operating Leases		Financing Leases		Operating Leases		Financing Leases
2022	$	20,474	$	1,269
2023		17,941		1,278	$	19,417	$	1,403
2024		16,634		1,169		17,836		1,342
2025		13,640		975		14,805		978
2026		9,610		484		10,505		504
2027						8,096		495
Thereafter		65,902		3,145		76,452		2,651
Total lease payments		144,201		8,320		147,111		7,373
Less imputed interest		(42,333)		(2,268)		(53,794)		(1,914)
Total	$	101,868	$	6,052	$	93,317	$	5,459

As of ~~June 30, 2022,~~March 31, 2023, the Company did not have any material operating or finance leases that have not yet commenced.

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Lessor Disclosure

The Company is the lessor in agreements to lease the use of its network assets including its cell sites and buildings. For the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, the Company recorded ~~$1.9~~$1.9 million and ~~$2.9~~$1.0 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.

The following table presents the maturities of future undiscounted lease payments for the periods indicated:


2022 (excluding the six months ended June 30, 2022)	$	2,776
2023		5,024
2023 (excluding the three months ended March 31, 2023)			$	4,609
2024		4,633		5,891
2025		4,518		5,716
2026		4,179		5,410
2027				4,267
Thereafter		10,758		14,360
Total future lease payments	$	31,888	$	40,253

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 ~~assessing the impairment of assets, revenue,~~ and income taxes. Actual results could differ significantly from those estimates. ~~See Note 1 to the Unaudited Condensed Consolidated Financial Statements included in this Report for a discussion of the impact of COVID-19 on the use of these estimates.~~

~~6. ACQUISITIONS AND DISPOSITIONS~~

~~US Telecom~~

~~Pending Acquisition of Sacred Wind Enterprises~~

On July 26, 2022, the Company, via its newly formed wholly owned subsidiary Alloy, Inc. (“Alloy”), entered into a stock purchase agreement (the “Purchase Agreement”) to acquire all of the issued and outstanding stock of Sacred Wind Enterprises, Inc. (“Sacred Wind”), a rural telecommunications provider in New Mexico. Under the Purchase Agreement, the Company will contribute all of its ownership interests in its Commnet Wireless business to Alloy, and issue Alloy equity to the Sacred Wind stockholders representing the combined ownership of Sacred Wind and Commnet. The acquisition is subject to certain closing conditions, including the receipt of required third party and regulatory approvals such as approval of the Federal Communications Commission . Under the Purchase Agreement, Sacred Wind will keep in place its approximately $32 million in debt and the Company will issue consideration of a combination of $24 million in cash, the issuance of $13 million of equity representing an approximate 6% in Alloy, Inc. In addition, the Purchase Agreement includes certain earn-outs, the accounting for which will be determined upon the Company’s completion of the acquisition, to be paid to the Sacred Wind stockholders.

The Company believes that the acquisition of Sacred Wind will expand the Company’s infrastructure reach and broadband services in the rural Southwest and increase its wholesale carrier, residential and business broadband services.

~~The acquisition of Sacred Wind is expected to close subject to Federal Communications Commission and other required approvals in the fourth quarter of 2022 or first quarter of 2023.~~

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~~Completed Acquisition of Alaska Communications~~

On July 22, 2021 (“Closing Date”), the Company completed the acquisition of Alaska Communications Systems Group, Inc. (“Alaska Communications”) pursuant to the terms of the Merger Agreement whereby Alaska Communications became a consolidated subsidiary of the Company (the “Alaska Transaction”). At completion of the acquisition, each Alaska Communications common share was converted into the right to receive $3.40 per share in cash representing a total value of $353.3 million of cash and consideration payable (“Merger Consideration”). The consideration transferred consists of $339.5 million of cash, net of $11.9 million of cash and restricted cash acquired and $1.9 million of accrued consideration representing amounts payable related to stock compensation payable within one year of the close date. The cash consideration was used to purchase $186.8 million of Alaska Communications equity and repay $164.6 million of existing Alaska Communications debt.

The Company funded the acquisition with cash on hand, debt, and a contribution from the Freedom 3 Investors. The Company borrowed, through multiple financing transactions, a net of $283 million. On the Closing Date, the lenders advanced (a) the full $210 million aggregate amount of the Alaska Term Loan (as defined below) in a single borrowing and (b) $10 million of the Alaska Revolving Facility (as defined below). The Company incurred $6.6 million of debt issuance and debt discount costs. Also, to fund the Merger Consideration in part, the Company drew a net $63.0 million under its revolving credit facility under the 2019 CoBank Credit Facility (as defined below). Lastly, the Freedom 3 Investors contributed $71.5 million in conjunction with the Merger. The Company has accounted for the Freedom 3 Investment as redeemable noncontrolling interests in its consolidated financial statements. On the Closing Date, the redeemable noncontrolling interests consisted of $22.6 million of redeemable common units, $48.3 million of redeemable preferred units, and $0.6 million of warrants to purchase common units. The common units contain a put option allowing the holder to sell the common units to a subsidiary of the Company at the then fair market value. The put option begins at the earlier of a future initial public offering of the Alaska Communications operations or July 2028. The redeemable preferred units carry a 9% preferred dividend which compounds quarterly. The preferred units contain a put option allowing the holder to sell the preferred units to a subsidiary of the Company at the unpaid issue price plus unpaid dividends. The put option begins at the earlier of a future initial public offering of the Alaska Communications operations or July 2028. Lastly, the Company issued warrants in the Alaska Communications operations allowing the holders to purchase an additional 3% of the common units at a fixed price.

The fair value of the common units remained at $22.6 million at June 30, 2022, unchanged from the value at July 22, 2021. The value of the preferred units was $52.6 million at June 30, 2022 which consists of the original issue price of $48.3 million and $4.3 ~~million of accrued preferred dividends. The value of the warrants was~~ ~~$0.6 million at June 30, 2022, unchanged from July 22, 2021.~~

~~As a result of the Alaska Transaction, the Company owns 52% of the common equity of Alaska Communications and controls its operations and management.~~

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6. ACQUISITIONS AND DISPOSITIONS

US Telecom

Acquisition of Sacred Wind Enterprises

On November 7, 2022, the Company’s newly formed wholly owned subsidiary Alloy, Inc. (Alloy”) acquired all of the issued and outstanding stock of Sacred Wind Enterprises, Inc. (“Sacred Wind”), Inc., a rural telecommunications provider in New Mexico for $44.6 million of consideration (“Sacred Wind Transaction”). The purchase price allocation was finalized during the three months ended March 31, 2023. As part of the Sacred Wind Transaction, the Company transferred consideration of $18.0 million of cash, net of $9.4 million of cash acquired, $14.8 million of redeemable noncontrolling interests, and $3.7 million of contingent consideration less $1.3 million of receivables related to working capital adjustments. Upon completion of the Sacred Wind Transaction, the former Sacred Wind shareholders own 6% of the Alloy equity. This equity is classified as redeemable noncontrolling interests in the Company’s financial statements because the holders have an option, beginning in 2026, to put the equity interest to a subsidiary of the Company at the then fair market value. The redeemable noncontrolling interests do not have preference relative to other equity units and participate in gains and losses in Alloy. The contingent consideration is earned based on certain operating metrics of Sacred Wind beginning in 2025 through 2027. The fair value of the contingent consideration was calculated using discounted cash flow analysis based on a range of probability weighted outcomes. The Company funded the acquisition with borrowings under its CoBank Credit Facility and assumed $31.6 million of Sacred Wind debt, to the United States of America administered through the Rural Utilities Service.

The table below represents the purchase price allocation of the total consideration transferred to the acquired assets and assumed liabilities based on management’s estimate of their acquisition date fair values (amounts in thousands):

Consideration Transferred
$
353,280
Noncontrolling interests

470
Total value to allocate

353,750
Purchase price allocation:

Cash and cash equivalents

10,553
Restricted cash

1,326
Short-term investments

434
Accounts receivable

30,453
Inventory, materials and supplies

1,374
Prepayments and other current assets

8,038
Fixed assets

408,694
Telecommunication licenses

683
Intangible assets

44,333
Operating lease right-of-use assets

60,402
Other assets

2,387
Accounts payable and accrued liabilities

(39,188)
Accrued taxes

(3,766)
Advance payments and deposits

(15,842)
Current portion of lease liabilities

(2,425)
Deferred income taxes

(17,040)
Lease liabilities, excluding current portion

(44,234)
Other liabilities

(92,432)
Net assets acquired
$
353,750


Consideration Transferred	$	44,560
Preliminary purchase price allocation:
Cash and cash equivalents		2,619
Restricted cash		6,747
Current assets		4,888
Operating lease right of use assets		989
Fixed assets		85,255
Intangible assets		1,232
Current liabilities		(10,176)
Lease liabilities		(967)
Deferred taxes		(14,388)
Debt		(31,639)
Net assets acquired	$	44,560

The acquired fixed assets are comprised of telecommunication equipment located in ~~Alaska and~~ the ~~western~~Southwest United States. The fixed assets were valued using the income and cost approaches. Cash flows were discounted between 4%7% and ~~14%~~12% based on the risk associated with the cash flows to determine fair value under the income approach. The fixed assets have useful lives ranging from 21 to 3025 years. The intangible assets ~~consist of $34.9~~include a $0.6 million ~~of customer relationships and $9.5 million of~~ trade name. The intangible assets were valued using an income approach based on data specific to Alaska Communications as well as market participant assumptions where appropriate. The estimated fair value of the customer relationships was determined using the multi-period excess earnings method. The estimated fair value of the trade name was determined using the relief from royalty method. The useful ~~lives~~life of the ~~customer relationships and~~ trade name ~~are~~ ~~five~~ ~~and 15 years, respectively.~~is 5 years. The acquired receivables consist of trade receivables incurred in the ordinary course of business. The Company expects to collect the full amount of the receivables. ~~Other~~Current liabilities includes ~~$81.5~~$6.5 million of ~~deferred revenue from long term customer contracts. The Company adopted ASU~~ ~~2021~~-08deposits received under government grant programs that will be used to construct fixed assets in 2021, which requires contract liabilities to be accounted for consistently with how they were recognized and measured in the acquiree’s financial statements. As a result, the acquired deferred revenue was recorded at Alaska Communications’ book value as of the Closing Date.future periods.

The Company’s statement of operations for the three months ended June 30, 2022 includes $62.6 million of revenue and $1.5 million of losses before taxes attributable to the Alaska Transaction, excluding transaction fees. The Company’s statement of operations for the six months ended June 30, 2022 includes $120.9 million of revenue and $4.3 ~~million of losses before taxes attributable to the Alaska Transaction, excluding transaction fees.~~ The Company incurred ~~$11.2~~$0.8 million of ~~transaction related~~transaction-related charges pertaining to legal, accounting, consulting services, and employee related costs associated with the transaction ~~of which $0.2 million and $0.8 million were incurred during the three and six months ended June 30, 2022, respectively.~~

~~The following table reflects unaudited pro~~ forma operating results of the Company for the three and six months ended June 30, 2021 assuming the transaction occurred on January 1, 2020. The unaudited pro forma amounts adjust Alaska Communications’ results to reflect the depreciation and amortization that would have been recorded assuming the fair value adjustments to fixed assets and intangible assets had been applied from January 1, 2020. Additionally, all

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transaction costs associated with the Alaska Transaction were recorded on January 1, 2020 in the unaudited pro forma results. Lastly, the unaudited pro forma results were adjusted to reflect changes to the acquired entities’ financial structure related to the transaction. Specifically, the pre-closing debt of $164.6 million, and associated interest, was removed and $283.0 million of transaction debt, and associated interest, was included in the unaudited pro forma results. In addition, the pro forma results included the allocation of income and accrual of preferred dividends to the redeemable noncontrolling interest.

Three months ended

Six months ended

June 30, 2021

June 30, 2021

As Reported

Pro Forma

As Reported

Pro Forma

Revenue
$
123,865

$
185,508

$
248,375

$
370,686
Net Income (loss) attributable to ATN International, Inc. Stockholders
$
2,019

$
(209)

$
4,723

$
315

Earnings (loss) Per Share

Basic
$
0.13

$
(0.09)

$
0.30

$
(0.13)
Diluted
$
0.13

$
(0.09)

$
0.30

$
(0.13)

The unaudited pro forma adjustments decreased net income attributable to ATN International, Inc. Stockholders by $2.2 million and $4.4 million for the three and six months ended June 30, 2021, respectively. The decrease was due to an increase from the net income of the Alaska Communications operations excluding transaction costs offset by increased acquisition related depreciation and amortization expenses.

The unaudited pro forma data is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have occurred if the acquisitions had been consummated on these dates or of future operating results of the combined company following this transaction.

~~Renewable Energy~~

~~Disposition of International Solar Business~~

In January 2021, the Company completed the sale of 67% of the outstanding equity in its business that owns and operates distributed generation solar power projects operated under the Vibrant name in India (the “Vibrant Transaction”). The post-sale results of the Company’s ownership interest in Vibrant are recorded through the equity method of accounting within the Corporate and Other operating segment. As such, the Company’s consolidated financial statements do not include revenue and operating expenses from Vibrant, but instead, “other income (expense)” within the Corporate and Other operating segment includes the Company’s share of Vibrant’s profits or losses. The Company will continue to present the historical results of its Renewable Energy segment for comparative purposes.

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~~The table below identifies the assets and liabilities transferred (in thousands):~~

Consideration Received
$
35,218
Assets and liabilities disposed

Current assets

4,899
Property, plant and equipment

45,891
Other assets

439
Current liabilities

(759)
Net assets disposed
$
50,470

Consideration less net assets disposed

(15,252)

Foreign currency losses reclassified from accumulated other comprehensive income

(6,258)

Loss on sale

(21,510)
Transaction costs

(1,283)
Loss on sale including transaction costs
$
(22,793)

~~The Company reported a loss on sale of $21.5 million~~ during the year ended December 31, 2020 due to the Vibrant Transaction. The Company recorded transaction costs of $1.3 million on the Vibrant Transaction, of which $0.7 million was recorded during the year ended December 31, 2020 and $0.6 million was recorded during the year ended December 31, 2021. The consideration received includes $19.5 million of cash and $3.9 million of receivables related to the amounts held in escrow and earn out consideration. The Company has recorded $11.8 million pursuant to an equity method investment with respect to its remaining 33% ownership interest in Vibrant. The Company is assessing earn out and escrow amounts which will be finalized in 2023. During the year ended December 31, 2021, the Company recorded additional losses of $1.6 million related to the ongoing working capital, escrow, and contingent consideration assessment. During the three months ended June 30, 2022, the Company received $1.8 ~~million of amounts previously held in escrow. The Company has~~ ~~24 months after the close of the transaction to satisfy the conditions necessary to receive the earn-out consideration.~~

The Vibrant Transaction does not qualify as discontinued operations because the disposition was not a strategic shift which will have a major effect on the Company’s operations, and as a result, the historical results and financial position of the operations are presented within continuing operations.

2022.

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7. 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.

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.

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Assets and liabilities of the Company measured at fair value on a recurring basis as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 are summarized as follows (in thousands):


	March 31, 2023
	Significant Other
	Quoted Prices in		Unobservable
	Active Markets		Inputs
Description	(Level 1)		(Level 3)		Total
Short term investments	$	300	$	—	$	300
Other investments		—		1,694		1,694
Alaska Communications redeemable common units		—		(22,266)		(22,266)
Alloy redeemable common units		—		(14,760)		(14,760)
Warrants on Alaska Communications redeemable common units		—		(654)		(654)
Total assets and liabilities measured at fair value	$	300	$	(35,986)	$	(35,686)

June 30, 2022

Significant Other

Quoted Prices in

Observable

Unobservable

Active Markets

Inputs

Inputs

Description

(Level 1)

(Level 2)

(Level 3)

Total
Money market funds

$
2,822

$
—

$
—

$
2,822
Short term investments

300

—

—

300
Other investments

—

—

1,961

1,961
Alaska Communications redeemable common units

—

—

(22,640)

(22,640)
Warrants on Alaska Communications redeemable common units

—

—

(559)

(559)
Total assets and liabilities measured at fair value

$
3,122

$
—

$
(21,238)

$
(18,116)

December 31, 2021

Significant Other

Quoted Prices in

Observable

Unobservable

Active Markets

Inputs

Inputs

Description

(Level 1)

(Level 2)

(Level 3)

Total
Money market funds

$
3,301

$
—

$
—

$
3,301
Short term investments

300

—

—

300
Other investments

—

—

1,925

1,925
Alaska Communications redeemable common units

—

—

(22,640)

(22,640)
Warrants on Alaska Communications redeemable common units

—

—

(559)

(559)
Interest rate swap

—

(894)

—

(894)
Total assets and liabilities measured at fair value

$
3,601

$
(894)

$
(21,274)

$
(18,567)

~~During the six months ended June 30, 2022, the fair value of the remaining Level 3 investments increased $0.1~~ ~~million due to income recognized in the other income line of the Company’s statement of operations.~~

~~Certificate of Deposit~~

As of June 30, 2022 and December 31, 2021 this asset class consisted of a time deposit at a financial institution denominated in US dollars. The asset class is classified within Level 2 of the fair value hierarchy because the fair value was based on observable market data.

~~Money Market Funds~~

As of June 30, 2022 and December 31, 2021, this asset class consisted of a money market portfolio that comprises Federal government and US Treasury securities. The asset class is classified within Level 1 of the fair value hierarchy because its underlying investments are valued using quoted market prices in active markets for identical assets.


	December 31, 2022
	Significant Other
	Quoted Prices in		Unobservable
	Active Markets		Inputs
Description	(Level 1)		(Level 3)		Total
Short term investments	$	300	$	—	$	300
Other investments		—		1,616		1,616
Alaska Communications redeemable common units		—		(22,557)		(22,557)
Alloy redeemable common units		—		(14,760)		(14,760)
Warrants on Alaska Communications redeemable common units		—		(654)		(654)
Total assets and liabilities measured at fair value	$	300	$	(36,355)	$	(36,055)

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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. ~~In the first quarter of 2021, the Company began to account for its former India solar operations under the equity method of accounting.~~ 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:




	Investments without a readily determinable fair value		Fair value investments		Equity investments		Total		Investments without a readily determinable fair value		Fair value investments		Equity investments		Total
Balance, December 31, 2022									$	22,590	$	1,616	$	13,963	$	38,169
Income recognized										—		77		238		315
Contributions										—		—		630		630
Foreign currency gain										—		—		111		111
Balance, March 31, 2023									$	22,590	$	1,693	$	14,942	$	39,225

Balance, December 31, 2021	$	17,820	$	1,925	$	28,699	$	48,444	$	17,820	$	1,925	$	28,699	$	48,444
Income recognized		—		205		(1,645)		(1,440)
Contributions / (distributions)		—		(169)		1,400		1,231
Foreign currency loss		—		—		(1,423)		(1,423)
Income (loss) recognized										—		99		(662)		(563)
Foreign currency gain										—		—		256		256
Gain recognized		4,770		—		—		4,770		4,770		—		—		4,770
Balance, June 30, 2022	$	22,590	$	1,961	$	27,031	$	51,582
Balance, March 31, 2022									$	22,590	$	2,024	$	28,293	$	52,907

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 ~~a subsidiary~~consolidated subsidiaries of the ~~Company in conjunction with its acquisition of Alaska Communications (Refer to Note 6).~~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 begins in 2026. The put options for the Alaska Communications redeemable common units begin the earlier of a public offering or 2028. The Company calculates the fair value of the instruments using a market approach with Level 3 inputs.

~~Table of Contents~~

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 the interest rate swap is measured using Level 2 inputs.~~

The fair value of long-term debt is estimated using Level 2 inputs. At ~~June 30,~~March 31, 2023, the fair value of long-term debt, including the current portion, was $519.0 million and its book value was $512.8 million. At December 31, 2022, the fair value of long-term debt, including the current portion, was ~~$403.5~~$473.7 million and its book value was ~~$396.6~~$467.2 million. ~~At December 31, 2021, the fair value~~

Table of ~~long-term debt, including the current portion, was $373.7 million and its book value was $366.5 million.~~Contents

8. LONG-TERM DEBT

CoBank Credit Facility

On April 10, 2019, the Company entered into a credit facility, with CoBank, ACB and a syndicate of other lenders ~~(the~~(as amended, the “2019 CoBank Credit Facility”). The 2019 CoBank Credit Facility provides for a ~~$200~~$200 million revolving credit facility that includes (i) up to $75 million for standby or trade letters of credit and (ii) up to $10 million under a swingline sub-facility. Approximately ~~$26.0~~$24.0 million of performance letters of credit have been issued and remain outstanding and undrawn as of ~~June 30, 2022.~~March 31, 2023. The 2019 CoBank Credit Facility matures on April 10, 2024.

Refer to Liquidity disclosure in Note 1 regarding the maturity of the facility.

Amounts borrowed under the 2019 CoBank Credit Facility bear 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 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 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 is 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 must also pay 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.

On November 7, 2022, the Company further amended the 2019 CoBank Credit Facility to allow for the incurrence of certain indebtedness related to payment guarantees in connection with its Replace and Remove project.

On December 28, 2022, the Company further amended the 2019 CoBank Credit Facility, effective November 7, 2022, to allow for certain transactions contemplated with the Sacred Wind Transaction.

The 2019 CoBank Credit Facility contains customary representations, warranties and covenants, including a financial covenant that imposes a maximum ratio of indebtedness to EBITDA as well as 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 Company’s investments in “unrestricted” subsidiaries and certain dividend payments to ~~its~~our stockholders are not limited unless the Total Net Leverage Ratio is equal to or greater than 1.75 to 1.0. The Total Net Leverage Ratio is measured each fiscal quarter and is required to be less than or equal to 2.75 to 1.0. In the event of a Qualifying Acquisition (as defined in the 2019 CoBank Credit Facility), the Total Net Leverage Ratio increases to 3.25 to 1.0 for the subsequent three fiscal quarters.

The 2019 CoBank Credit Facility also provides for the incurrence by the Company of incremental term loan facilities, when combined with increases to revolving loan commitments, in an aggregate amount not to exceed $200 million (the “Accordion”). Amounts borrowed under the Accordion are also subject to proforma compliance with a net leverage ratio financial covenant.

As of ~~June 30, 2022,~~March 31, 2023, the Company was in compliance with all of the financial covenants, had ~~$78.0~~$122.0 million outstanding ~~in borrowings~~ and ~~net of the $26.0~~$54.0 million of availability in connection with the 2019 CoBank Credit Facility. There are no outstanding ~~performance letters of credit, had $96.0 million of availability~~interest rate hedge agreements under the 2019 CoBank Credit ~~Facility.~~ Facility as of March 31, 2023.

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 March 31, 2023, $4.2 million of Standby Letters of Credit had been issued under this agreement.

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Alaska Credit Facility

On July 22, 2021, 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 $35.0 million revolving facility (the “Alaska Revolving Facility”) and a $210.0 million initial term loan facility (the “Alaska Term Loan”).

On December 23, 2022, Alaska Communications entered into a First Amendment Agreement (the “ACS Amendment’). The ACS Amendment amends the Alaska Credit Facility to increase its Revolving Credit Commitment from $35.0 million to $75.0 million and Term Loan Commitment from $210 million to $230 million. As a part of the transaction, the Term Loan commitment was fully funded as the outstanding Revolving Credit Commitment balance was transferred.

As of ~~June 30, 2022,~~ ~~$210.0~~March 31, 2023, Alaska Communications had drawn $17.0 million ~~was outstanding under the Alaska~~on its Revolving Credit Commitment and had $58.0 million is available to draw. The Term Loan balance was $230.0 million and ~~$10.0~~ ~~million was outstanding under~~principal payments commence in the ~~Alaska Revolving Facility.~~fourth quarter of 2023. Both facilities mature on July 22, ~~2026.~~2026

~~Table~~In addition to the above changes, the ACS Amendment replaced the calculation of ~~Contents~~interest from an applicable margin applied to LIBOR with the same applicable margin applied to the Secured Overnight Financing Rate (“SOFR”) plus a 10-basis point adjustment.

The Company capitalized ~~$6.6~~$7.3 million of fees associated with the Alaska Credit Facility which are being amortized over the life of the debt and ~~$5.6~~$5.0 million ~~of such fees~~ were unamortized ~~at June 30, 2022.~~as of March 31, 2023.

The Alaska Credit Facility also provides for incremental ~~term loans~~facilities up to an aggregate principal amount of the greater of $70.0 million and Alaska Communications’ trailing ~~twelve month~~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 ~~LIBOR, or~~the forward-looking SOFR rate with a ~~LIBOR replacement rate as applicable,~~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 ~~LIBOR~~SOFR margin;

●

Principal repayments are due quarterly commencing in the fourth quarter of 2023 in quarterly amounts as follows: from the fourth quarter of 2023 through the third quarter of 2024, ~~$1.3~~$1.4 million; and from the fourth quarter of 2024 through the third quarter of 2026, ~~$2.6~~$2.9 million. The remaining unpaid balance is due on the final maturity date;

●

Alaska Communications is required to maintain financial ratios ~~subsequent to the closing of the Alaska Transaction,~~ 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; 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.

Alaska Communication’s interest rate swap, which had been designated as a cash flow hedge with an interest rate of 1.6735%, expired on June 30, 2022. As of March 31, 2023, there are no outstanding interest rate hedge agreements associated with the Alaska Credit Facility.

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Alaska Term Facility

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

The Alaska Term Facility provides for a secured delayed draw term loan in an aggregate principal amount of up to $7.5 million and the proceeds may be used to pay certain invoices from a contractor for work performed in connection with a fiber build. Interest on the Alaska Term Facility accrues at a fixed rate of 4.0% and is payable commencing on March 31, 2023. Scheduled quarterly payments of principal commenced on March 31, 2023. The Alaska Term Facility matures on June 30, 2024.

The Alaska Term Facility contains events of default customary for facilities of this type.

As of March 31, 2023, the Company had $7.1 million outstanding and no available borrowings under the Alaska Term Facility.

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”).

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 ~~29, 2021,~~23, 2022, CoBank amended the Receivables Credit Facility and extended the delayed draw period to December 31, ~~2022.~~

2023.

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 accrues 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, 2022,~~March 31, 2023, the Company had ~~$41.3~~$48.7 million outstanding, of which ~~$5.3~~$6.6 million was current, and ~~$29.7~~$18.0 million of availability under the Receivables Credit Facility. The Company capitalized $~~0.9~~0.8 million ofin fees associated with the Receivables Credit Facility which are being amortized over the life of the debt and ~~$0.7~~$0.6 million were unamortized as of March 31, 2023.

GTT Credit Facilities

On September 5, 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”) subject to the approval from the Minister of Finance at ~~June 30, 2022.~~ the Bank of Guyana. Such approval from the Minister of Finance was received during the quarter ended March 31, 2023.

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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 11, 2023.

As of March 31, 2023, $3.6 million was outstanding on the overdraft facility and there were no outstanding amounts under the term facility.

Sacred Wind Term Debt

In connection with the Sacred Wind Transaction 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 the 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 March 31, 2023, the Company was in compliance with that corrective action plan.

As of March 31, 2023, $30.6 million was outstanding under the Sacred Wind Term Debt. Of that amount, $3.2 million was current and $27.4 million was long term.

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 our Viya subsidiaries and is guaranteed by us. ~~With RTFC’s consent, the Company funded the restoration of Viya’s network, following Hurricanes Irma and Maria in 2017, through an intercompany loan arrangement in the amount of $51.6 million.~~

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, 2022,~~March 31, 2023, $60.0 million of the Viya Debt remained outstanding and ~~$0.4~~$0.3 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. ~~This covenant will be~~The Ratio is tested onannually and the Company was in compliance with the Net Leverage Ratio as of December 31, 2022.

One Communications Debt

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The Company ~~has~~had an outstanding loan from HSBC Bank Bermuda Limited (the “One Communications Debt”) which ~~is scheduled to mature~~matured and was repaid in full on ~~August 31, 2022 and bears~~December 22, 2022. This loan bore interest at the one-month LIBOR plus a margin ranging between 2.5% to 2.75% per annum paid quarterly.

Debt Maturity

The One Communications Debt contains customary representations, warranties and affirmative and negative covenants (including limitations on additional debt, guaranties, sale of assets and liens) and financial covenants, tested annually as of and fortable below summarizes the twelve months ended December 31st, that limit the ratio of tangible net worth to long term debt and total net debt to EBITDA and require a minimum debt service coverage ratio (as defined in the One Communications Debt agreement).

~~As of June 30, 2022, $3.8 million~~annual maturities of the ~~One Communications Debt was outstanding.~~ Company’s debt instruments (amounts in thousands).


							Customer
	US		International		Total		Receivable
	Telecom		Telecom		Debt		Credit Facility
2023 (excluding the three months ended March 31, 2023)	$	4,998	$	3,553	$	8,551	$	4,904
2024		138,536		—		138,536		6,787
2025		14,969		—		14,969		7,083
2026		230,469		60,000		290,469		7,393
2027		3,723		—		3,723		7,718
Thereafter		14,028		—		14,028		14,794
Total		406,723		63,553		470,276		48,679
Debt Discounts		(5,277)		(318)		(5,595)		(572)
Book Value		401,446		63,235		464,681		48,107

9. GOVERNMENT SUPPORT AND SPECTRUM MATTERS

Universal Service Fund and Connect America Fund Phase II 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”)., and the Emergency Connectivity Fund (“ECF”), a program to help schools and libraries support remote learning in underserved communities. USF funds are disbursed to telecommunication providers through 4four 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.

The Company also recognizes revenue from the Connect America Fund Phase II program (“CAF II”) which offers subsidies to carriers to expand broadband coverage in designated areas. Under CAF II, the Company’s US Telecom segment will 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.

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 March 31, 2023. Revenue recognized from the USF and CAFII programs is recognized as revenue from government grants. Revenue from other programs is recognized in accordance with ASC 606.

RDOF (“Rural Digital Opportunities Fund”)

The Company expects to receive 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.

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Both the USF and CAFII programs are subject to certain operational and reporting compliance requirements. The Company believes it is in compliance with these requirements as of June 30, 2022. Revenue recognized from the USF and CAFII programs is recognized as revenue from government grants. Revenue from other programs is recognized in accordance with ASC 606.

~~RDOF (“Rural Digital Opportunities Fund”)~~

The Company expects to receive approximately $20.1 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”).

The Company recorded the amounts below as communication services revenue for the reported periods:


	Three months ended						Six months ended						Three months ended
	June 30, 2022						June 30, 2022						March 31, 2023

	US Telecom		International Telecom		Total		US Telecom		International Telecom		Total		US Telecom		International Telecom		Total

High cost support	$	989	$	2,761	$	3,750	$	2,045	$	5,522	$	7,567	$	2,494	$	1,397	$	3,891
CAF II		6,822		—		6,822		13,644		—		13,644		6,815		—		6,815
RDOF		478		—		478		956		—		956		608		—		608
Other Programs		6,167		22		6,189		11,228		37		11,265		15,660		4		15,664
Total	$	14,456	$	2,783	$	17,239	$	27,873	$	5,559	$	33,432	$	25,577	$	1,401	$	26,978


	Three months ended						Six months ended						Three months ended
	June 30, 2021						June 30, 2021						March 31, 2022

	US Telecom		International Telecom		Total		US Telecom		International Telecom		Total		US Telecom		International Telecom		Total

High cost support	$	311	$	4,295	$	4,606	$	622	$	8,385	$	9,007	$	1,056	$	2,761	$	3,817
CAF II		1,899		—		1,899		3,798		—		3,798		6,822		—		6,822
Other Programs		1,777		10		1,787		3,894		25		3,919		5,554		—		5,554
Total	$	3,987	$	4,305	$	8,292	$	8,314	$	8,410	$	16,724	$	13,432	$	2,761	$	16,193

In 2018, the FCC initiated a proceeding to replace the High Cost Program support received by Viya in the US Virgin Islands with a new Connect USVI Fund. On November 16, 2020, the FCC announced that Viya was not the recipient of the Connect USVI Fund award and authorized funding to be issued to the new awardee in June 2021. Pursuant to the terms of the program and effective in July 2021, Viya’s annual USF support was reduced from $16.4 million to $10.9 million. In July 2022, this support was ~~scheduled to be~~ reduced ~~again~~ to $5.5 million for the annual period through June 2023. ~~Thereafter, Viya is not expected to receive~~In April of 2023, the FCC issued an order extending the high cost support ~~under~~in the ~~High Cost Program.~~US Virgin Islands at the current $5.5 million per year received from July 2023 through December 31, 2025. In connection with this order, the FCC requires that the Company maintain its current footprint for voice and broadband services in the US Virgin Islands.

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 distributed upon completion of a project. As of December 31, 2021, the Company had been awarded approximately $27.9 million of such grants. The Company was awarded $0.4 million of additional grants and cancelled $2.1 million of previously awarded grants in the six months ended June 30, 2022. Of the $26.2 million of retained awards, the Company has completed its construction obligations on $17.1 million of these projects and $9.1 million of such construction obligations remain with

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~~completion~~Completion deadlines ~~beginning~~begin in June ~~2023. Once~~2023 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).

During July 2022, we were awarded a grant for approximately $10 million to provide fiber connectivity to certain areas within southern Apache County, Arizona. We are currently assessing the impact that this award will have on our financial statements.


	Amount
Grants awarded, December 31, 2022	$	80,197
New grants		4,364
Grants awarded, March 31, 2023	$	84,561

In addition, the Company partners with tribal governments to obtain grants under the Tribal Broadband Connectivity Program ("TBCP"). The TBCP is a program administered by the National Telecommunications and Information Administration to deploy broadband connectivity on tribal lands. The Company was identified as a sub recipient of TBCP grants totaling $145.5 million as of March 31, 2023.

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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 its first request for reimbursement for services performed under the program no later than July 14, 2023, and that it complete the project no later than one year from submitting its initial reimbursement request. The Company ~~is currently assessing the impact of this program on its financial statements and~~ anticipates that it will be able to meet the deadlines and requirements of the program.

~~CARES Act~~

~~As of December~~ At March 31, ~~2020,~~2023, the Company ~~had received $16.3~~established a receivable for $6.7 million of ~~funding~~costs for which it expects to be reimbursed under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) to construct network infrastructure within the Company’s US Telecom segment. During the year ended December 31, 2021, the Company received an additional $2.4 million of funding for the same purpose. The construction was completed as of December 31, 2021 and $18.4 million of the funding was recorded as a reduction to property, plant and equipment with a subsequent reduction to depreciation expense. The remaining $0.3 million was recorded as a reduction to operating expense in the year ended December 31, 2021.

~~CBRS Auction~~

During the third quarter of 2020, the Company participated in the FCC’s Citizens Broadband Radio Service (CBRS) auction for Priority Access Licenses (PALs) in the 3.5 GHz spectrum band. These PALs are licensed on a county-by-county basis and are awarded for a 10-year renewable term. The Company was a winning bidder for PALs located strategically throughout the United States at a total cost of approximately $20.4 million. In the third quarter of 2022, the Company surrendered a portion of the PALs that it won in the auction in exchange for repayment of the approximately $1.1 million paid for such licenses, and entered into a Consent Decree with the FCC with respect to such surrender and receipt of the remaining licenses. In connection with the awarded licenses, the Company will have to achieve certain CBRS spectrum build out obligations. The Company currently expects to comply with all applicable requirements related to these licenses.program.

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10. 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 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 ~~in its International Telecom segment~~ who meet certain eligibility criteria. ~~As part~~The majority of benefits under the ~~Alaska Transaction,~~plans are frozen and the ~~Company acquired a defined benefit pension plan and a post-retirement medical plan covering certain employees. The pension plan had a projected benefit obligation of~~ ~~$15.4 million and plan assets of $12.1~~ ~~million on July 22, 2021. The post-retirement medical plan is unfunded and had a projected benefit obligation of~~ ~~$0.4~~ ~~million on July 22, 2021.~~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								Three months ended
	June 30, 2022				June 30, 2021				June 30, 2022				June 30, 2021				March 31, 2023				March 31, 2022
	Pension benefits		Postretirement benefits		Pension benefits		Postretirement benefits		Pension benefits		Postretirement benefits		Pension benefits		Postretirement benefits		Pension benefits		Postretirement benefits		Pension benefits		Postretirement benefits
Operating expense
Service cost	$	57	$	36	$	54	$	35	$	114	$	72	$	108	$	70	$	38	$	31	$	57	$	36
Non-operating expense
Interest cost		565		33		572		41		1,130		66		1,144		82		593		35		565		33
Expected return on plan assets		(925)		—		(687)		—		(1,850)		—		(1,374)		—		(953)		—		(925)		—
Settlements		(1,725)		—		—		—		(1,725)		—		—		—		369		—		—		—
Net periodic pension expense (benefit)	$	(2,028)	$	69	$	(61)	$	76	$	(2,331)	$	138	$	(122)	$	152	$	47	$	66	$	(303)	$	69

The Company was not required to make contributions to its pension plans during the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022. 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 three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~

2022.

11. INCOME TAXES

The Company’s effective tax rate for the three months ended ~~June 30,~~March 31, 2023 and 2022 was 9.5% and ~~2021 was 75.2% and (88.2%)~~296.7%, respectively.

The Company recorded an income tax benefit of ~~$4.0~~$0.7 million in relation to a pretax loss of ~~$5.3~~$7.8 million for the three months ended ~~June 30, 2022.~~March 31, 2023. The effective tax rate for the three months ended ~~June 30, 2022 was primarily impacted by the following items (i) the mix of income generated among the jurisdictions in which the Company operates and (ii) discrete items including a~~ ~~$3.3 million benefit from the reversal of an unrecognized tax position due to a statute of limitations expiration and a $0.3 million expense for interest on unrecognized tax positions.~~

March 31,

~~Table of Contents~~

The effective tax rate for the three months ended June 30, 2021 was primarily impacted by the following items: (i) the mix of income generated among the jurisdictions in which the Company operates and (ii) discrete items including a $3.4 million benefit from the reversal of an unrecognized tax position due to a statute of limitations expiration and a $0.5 million expense for interest on unrecognized tax positions.

~~The Company’s effective tax rate for the six months ended June 30, 2022 and 2021 was 23.8% and (19.7%), respectively.~~

~~The Company recorded an income tax benefit of $1.0 million in relation to a pretax loss of $4.3~~ ~~million for the six months ended June 30, 2022. The effective tax rate for the six months ended June 30, 2022~~ 2023 was primarily impacted by the following items (i) the mix of income generated among the jurisdictions in which the Company operates, (ii) a net increase related to valuation allowances placed on certain deferred tax assets and (iii) discrete items including $0.6 million of expense for interest on unrecognized tax positions.

The Company recorded an income tax provision of $ 3.0 million in relation to income before taxes of $1.0 million for the three months ended March 31, 2022. The effective tax rate for the three months ended March 31, 2022 was primarily impacted by the following items: (i) a $ 0.5 million net increase of unrecognized tax positions recognized discretely, (ii) a $ 2.1 million net expense recognized discretely to record a valuation allowance on certain deferred tax

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assets that are not expected to be realizable based on the weight of positive and negative evidence, and (iii) discrete items including a $3.3 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 effective tax rate for the six months ended June 30, 2021 was primarily impacted by the following items: (i)~~ the mix of income generated among the jurisdictions in which the Company operates and (ii) discrete items including a $3.4 million benefit from the reversal of an unrecognized tax position due to a statute of limitations expiration and a $1.0 million expense for interest on unrecognized tax positions.

operates.

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.

12. 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 March 31,
	2023		2022
Numerator:
Net Loss attributable to ATN International, Inc. stockholders- Basic		(5,885)		(948)
Less: Preferred dividends		(1,045)		(1,116)
Net Loss attributable to ATN International, Inc. common stockholders- Diluted	$	(6,930)	$	(2,064)

Denominator:
Weighted-average shares outstanding- Basic		15,768		15,708
Effective of dilutive securities:
Stock options, restricted stock units and performance stock units		—		—
Weighted-average shares outstanding- Diluted		15,768		15,708

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~~12. 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,

2022

2021

2022

2021
Numerator:

Net income (loss) attributable to ATN International, Inc. stockholders

(525)

2,019

(1,471)

4,723
Less: Preferred dividends

(1,154)

—

(2,270)

—
Net income (loss) attributable to ATN International, Inc. common stockholders
$
(1,679)

$
2,019

$
(3,741)

$
4,723

Denominator:

Weighted-average shares outstanding- Basic

15,749

15,912

15,736

15,907
Effective of dilutive securities:

Stock options, restricted stock units and performance stock units

—

9

—

23
Weighted-average shares outstanding- Diluted

15,749

15,921

15,736

15,930

For each of the three and six months ended June 30, 2021, the calculations of basic and diluted weighted average shares of common stock outstanding do not include 5,000 shares relating to stock options as the effects of those options were anti-dilutive.

Redeemable Noncontrolling Interests

In connection with ~~the Alaska Transaction,~~certain acquisitions, the Company ~~has accounted~~accounts for ~~the Freedom 3 Investment~~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 redeemable noncontrolling interests consist of $22.6 million of redeemable common units and $48.3~~

~~million of redeemable preferred units.~~ The common units contain a put ~~option~~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 earning 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 ~~option is solely~~options allowing the ~~obligation~~holder to sell at a future date, the preferred units to a subsidiary of ~~Alaska Communications~~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 iscarry a fixed dividend rate.

The put options for both the common and preferred units, if any, are nonrecourse to the ~~Company. The put option begins~~Company and exercisable at the earlier of a future initial public offering of the ~~Alaska Communications operations~~subsidiary or certain dates beginning in July 2028. ~~The fair value of the common units remained at~~ ~~$22.6~~ ~~million at June 30, 2022, unchanged from the value at July 22, 2021. The redeemable preferred equity carries a~~ 9% preferred dividend which compounds quarterly. The preferred units contain a put option allowing the holder to sell the preferred units to a subsidiary of the Company at the unpaid issue price plus unpaid dividends. The put option is solely the obligation of Alaska Communications and is nonrecourse to the Company. The put option begins at the earlier of a future initial public offering of the Alaska Communications operations or July 2028. The unpaid preferred dividend was ~~$4.3 million at June 30, 2022.~~

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, the Company allocated losses of ~~$0.6~~$2.8 million and ~~$1.7~~$1.1 million, respectively, to the redeemable common units representing their proportionate share of operating losses. ~~Additionally,~~The Company then compared the book value of the common units to the fair value ofand the ~~redeemable common units~~fair value exceeded the book value. As a result, the book value was increased by ~~$1.7~~$2.5 million during the ~~six~~three months ended ~~June 30, 2022.~~

~~Table of Contents~~

March 31, 2023.

The following table provides a roll forward of the activity related to the Company’s redeemable noncontrolling interests for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022:


	Redeemable Preferred Units		Redeemable Common Units		Total Redeemable Noncontrolling Interests		Redeemable Preferred Units		Redeemable Common Units		Total Redeemable Noncontrolling Interests
Balance, December 31, 2021	$	50,296	$	22,640	$	72,936
Balance, December 31, 2022							$	55,152	$	37,317	$	92,469
Accrued preferred dividend		2,270		—		2,270		1,045		—		1,045
Allocated net loss		—		(1,678)		(1,678)		—		(2,821)		(2,821)
Change in fair value		—		1,678		1,678		—		2,530		2,530
Balance, June 30, 2022	$	52,566	$	22,640	$	75,206
Balance, March 31, 2023							$	56,197	$	37,026	$	93,223


	Redeemable Preferred Units		Redeemable Common Units		Total Redeemable Noncontrolling Interests
Balance, December 31, 2021	$	50,296	$	22,640	$	72,936
Accrued preferred dividend		1,116		—		1,116
Allocated net loss		—		(1,092)		(1,092)
Change in fair value		—		1,092		1,092
Balance, March 31, 2022	$	51,412	$	22,640	$	74,052

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13. SEGMENT REPORTING

The Company has the following 3two reportable and operating segments: i) International Telecom and ii) US ~~Telecom, and iii) Renewable Energy.~~

Telecom.

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


For the Three Months Ended June 30, 2022
For the Three Months Ended March 31, 2023											For the Three Months Ended March 31, 2023

	International		US		Renewable		Corporate and					International		US		Corporate and
	Telecom		Telecom		Energy		Other (1)		Consolidated			Telecom		Telecom		Other (1)		Consolidated
Revenue
Communication Services
Mobility - Business	$	3,675	$	301	$	—	$	—	$	3,976		$	3,575	$	172	$	—	$	3,747
Mobility - Consumer		21,279		1,549		—		—		22,828			22,532		987		—		23,519
Total Mobility		24,954		1,850		—		—		26,804			26,107		1,159		—		27,266
Fixed - Business		16,996		31,866		—		—		48,862			17,113		36,320		—		53,433
Fixed - Consumer		41,353		19,166		—		—		60,519			41,778		22,582		—		64,360
Total Fixed		58,349		51,032		—		—		109,381			58,891		58,902		—		117,793
Carrier Services		3,421		31,753		—		—		35,174			3,690		32,084		—		35,774
Other		436		—		—		—		436			400		75		—		475
Total Communication Services Revenue		87,160		84,635		—		—		171,795			89,088		92,220		—		181,308
Construction		—		3,297		—		—		3,297			—		590		—		590
Other
Managed Services		1,246		3,159		—		—		4,405			1,320		2,556		—		3,876
Total Other Revenue		1,246		3,159		—		—		4,405
Total other revenue													1,320		2,556		—		3,876
Total Revenue		88,406		91,091		—		—		179,497			90,408		95,367		—		185,774
Depreciation		15,074		17,763		—		980		33,817
Depreciation and amortization													14,186		21,487		731		36,404
Amortization of intangibles from acquisitions		394		2,856		—		—		3,250			380		2,867		—		3,247
Non-cash stock-based compensation		56		79		—		2,433		2,568			67		77		1,634		1,778
Operating income (loss)		11,646		(281)		(22)		(9,621)		1,722			13,825		(4,342)		(8,847)		636

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For the Three Months Ended June 30, 2021
For the Three Months Ended March 31, 2022											For the Three Months Ended March 31, 2022

	International		US		Renewable		Corporate and					International		US		Corporate and
	Telecom		Telecom		Energy		Other (1)		Consolidated			Telecom		Telecom		Other (1)		Consolidated
Revenue
Communication Services
Mobility - Business	$	1,298	$	342	$	—	$	—	$	1,640		$	3,616	$	374	$	—	$	3,990
Mobility - Consumer		21,456		2,065		—		—		23,521			19,970		1,456		—		21,426
Total Mobility		22,754		2,407		—		—		25,161			23,586		1,830		—		25,416
Fixed - Business		16,855		2,031		—		—		18,886			17,254		27,145		—		44,399
Fixed - Consumer		42,271		3,846		—		—		46,117			41,093		18,968		—		60,061
Total Fixed		59,126		5,877		—		—		65,003			58,347		46,113		—		104,460
Carrier Services		2,523		20,038		—		—		22,561			3,402		32,989		—		36,391
Other		239		—		—		—		239			276		—		—		276
Total Communication Services Revenue		84,642		28,322		—		—		112,964			85,611		80,932		—		166,543
Construction		—		9,325		—		—		9,325			—		1,987		—		1,987
Other
Renewable Energy		—		—		—		—		—
Managed Services		1,576		—		—		—		1,576			1,176		2,313		—		3,489
Total Other Revenue		1,576		—		—		—		1,576			1,176		2,313		—		3,489
Total Revenue		86,218		37,647		—		—		123,865			86,787		85,232		—		172,019
Depreciation		13,374		5,079		—		1,286		19,739			13,897		18,442		953		33,292
Amortization of intangibles from acquisitions		416		—		—		—		416			418		2,840		—		3,258
Non-cash stock-based compensation		10		—		—		2,165		2,175			60		90		1,311		1,461
Operating income (loss)		14,643		(556)		(771)		(10,411)		2,905			11,802		(4,635)		(7,059)		108

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For the Six Months Ended June 30, 2022











International

US

Renewable

Corporate and

Telecom

Telecom

Energy

Other (1)

Consolidated
Revenue

Communication Services

Mobility - Business

$
7,291

$
674

$
—

$
—

$
7,965
Mobility - Consumer

41,249

3,006

—

—

44,255
Total Mobility

48,540

3,681

—

—

52,220
Fixed - Business

34,250

59,011

—

—

93,261
Fixed - Consumer

82,446

38,136

—

—

120,583
Total Fixed

116,696

97,147

—

—

213,843
Carrier Services

6,823

64,742

—

—

71,565
Other

710

—

—

—

710
Total Communication Services Revenue

172,769

165,569

—

—

338,338
Construction

—

5,283

—

—

5,283
Other

Renewable Energy

—

—

—

—

—
Managed Services

2,422

5,474

—

—

7,896
Total Other Revenue

2,422

5,474

—

—

7,896
Total Revenue

175,191

176,326

—

—

351,517
Depreciation

28,971

36,205

—

1,933

67,109
Amortization of intangibles from acquisitions

812

5,696

—

—

6,508
Non-cash stock-based compensation

116

169

—

3,743

4,028
Operating income (loss)

23,450

(4,914)

(45)

(16,658)

1,833

~~Table of Contents~~

For the Six Months Ended June 30, 2021









International

US

Renewable

Corporate and

Telecom

Telecom

Energy

Other (1)

Consolidated
Revenue

Communication Services

Mobility - Business

$
2,495

$
918

$
—

$
—

$
3,413
Mobility - Consumer

42,080

4,349

—

—

46,429
Total Mobility

44,575

5,267

—

—

49,842
Fixed - Business

33,488

4,728

—

—

38,216
Fixed - Consumer

84,385

7,520

—

—

91,905
Total Fixed

117,873

12,248

—

—

130,121
Carrier Services

4,406

38,774

—

—

43,180
Other

456

—

—

—

456
Total Communication Services Revenue

167,310

56,289

—

—

223,599
Construction

—

21,632

—

—

21,632
Other

Construction

—

—

—

—

��
Renewable Energy

—

—

418

—

418
Managed Services

2,726

—

—

—

2,726
Total Other Revenue

2,726

—

418

—

3,144
Total Revenue

170,036

77,921

418

—

248,375
Depreciation

26,803

10,272

188

2,586

39,849
Amortization of intangibles from acquisitions

813

—

—

—

813
Non-cash stock-based compensation

47

—

22

3,442

3,511
Operating income (loss)

27,786

(1,090)

(1,433)

(19,009)

6,254

~~(1)~~

~~Corporate and Other items refer to corporate overhead costs and consolidating adjustments~~

~~Table of Contents~~

Selected balance sheet data for each of the Company’s segments as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 consists of the following (in thousands):



	International		US		Renewable		Corporate and				International		US		Corporate and
	Telecom		Telecom		Energy		Other (1)		Consolidated		Telecom		Telecom		Other (1)		Consolidated
June 30, 2022
Cash, cash equivalents, and short term investments	$	36,472	$	26,867	$	133	$	7,889	$	71,361
March 31, 2023
Cash, cash equivalents, and short-term investments											$	30,664	$	19,433	$	6,219	$	56,316
Total current assets		107,004		108,005		1,243		8,028		224,280		113,711		110,108		7,733		231,552
Fixed assets, net		453,245		478,443		—		8,585		940,273		468,961		580,633		6,769		1,056,363
Goodwill		4,835		35,269		—		—		40,104		4,835		35,269		—		40,104
Total assets		632,399		864,324		14,970		84,061		1,595,754		658,621		959,395		81,999		1,700,015
Total current liabilities		85,703		91,138		356		26,587		203,784		88,967		96,844		19,573		205,384
Total debt		63,378		255,269		—		78,000		396,647		63,235		327,553		122,000		512,788
December 31, 2021
Cash, cash equivalents, and short term investments	$	43,128	$	28,486	$	659	$	7,628	$	79,901
December 31, 2022
Cash, cash equivalents, and short-term investments											$	25,345	$	22,679	$	6,936	$	54,960
Total current assets		108,677		111,741		3,585		8,614		232,617		105,324		116,038		8,326		229,688
Fixed assets, net		452,856		480,250		—		10,103		943,209		462,447		585,969		7,538		1,055,954
Goodwill		4,835		35,269		—		—		40,104		4,835		35,269		—		40,104
Total assets		630,515		877,041		17,481		83,567		1,608,604		643,664		980,543		83,662		1,707,869
Total current liabilities		91,090		108,950		356		20,548		220,944		86,738		119,755		26,687		233,180
Total debt		64,243		240,802		—		61,499		366,544		59,659		308,589		99,000		467,248


	Capital Expenditures								Capital Expenditures

		International		US		Corporate and				International		US		Corporate and
Six months ended June 30,		Telecom		Telecom		Other (1)		Consolidated
Three months ended March 31,										Telecom		Telecom		Other (1)		Consolidated
2023									$	21,464	$	31,261	$	—	$	52,725
2022	$	33,870	$	40,804	$	424	$	75,098		15,170		19,095		203		34,468
2021		21,843		18,792		1,297		41,932

(1)

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

14. 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 ~~proceedings~~matters currently pending will not have a material adverse effect on the Company’s financial position or results of operations.

~~In 1990,~~Beginning in 2006, the ~~Company’s Guyana subsidiary, GTT, was awarded a license to provide domestic and international voice and data services in Guyana on an exclusive basis until December 2030. Since 2001,~~National Frequency Management Unit (now the ~~Government of Guyana has stated its intention to introduce additional competition into Guyana’s telecommunications sector. In connection therewith,~~Telecommunications Agency , or the ~~Company~~“NFMU/TA”) and GTT ~~met on several occasions with officials~~have been engaged in discussions regarding the amount of ~~the Government~~and methodology for calculation of ~~Guyana to discuss potential modifications~~spectrum fees payable by GTT in Guyana. Since that time, GTT has made payments of, ~~GTT’s exclusivity and other rights under the existing agreement and license. On October 5, 2020, the Prime Minister of Guyana formally implemented telecommunications legislation previously passed~~undisputed spectrum fees as amounts invoiced by the ~~Guyana Parliament in 2016 that introduces material changes to many features~~NFMU/TA. There have been limited further discussions on the subject of ~~Guyana’s existing telecommunications regulatory regime~~a revised spectrum fee methodology with the ~~intention~~Telecommunications Agency and GTT awaits the determination of ~~creating a more competitive market. At that time, the Company was issued a new license to provide domestic and international voice as well as data services and mobile services in Guyana. NaN of the~~such fees.

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Company’s competitors were issued service licenses as well. While the Company has requested details of its competitors’ licenses, such information has not been made public by the Guyana Telecommunications Agency, and the Company is not yet able to ascertain whether the licenses issued to its competitors permit any competitors to provide services that have been subject to GTT’s exclusive rights contained in its 1990 license.

On October 23, 2020, the Government of Guyana also brought into effect new telecommunications regulations called for by the telecommunications legislation. The regulations include new requirements for the market as a whole, which impose costly additional regulatory fees and impact the Company’s operations, administrative reporting and services. There can be no assurance that these regulations will be effectively implemented, or that they will be administered in a fair and transparent manner.

Historically, GTT has been subject to other long-standing litigation proceedings and disputes in Guyana that have not yet been resolved. The Company believes that none of these additional proceedings would, in the event of an adverse outcome, have a material impact on the Company’s consolidated financial position, results of operations or liquidity.

In a letter dated September 8, 2006, the National Frequency Management Unit (“NFMU”) agreed that total spectrum fees in Guyana should not increase for the years 2006 and 2007. However, that letter implied that spectrum fees in 2008 and onward may be increased beyond the amount GTT agreed to with the Government of Guyana. GTT has objected to the NFMU’s proposed action and reiterated its position that an increase in fees prior to development of an acceptable methodology would violate the Government’s prior agreement. In 2011, GTT paid the NFMU $2.6 million representing payments in full for 2008, 2009 and 2010. However, by letter dated November 23, 2011, the NFMU stated that it did not concur with GTT’s inference that the amount was payment in full for the specified years as it was NFMU’s continued opinion that the final calculation for spectrum fees was not agreed upon and was still an outstanding issue. By further letter dated November 24, 2011, the NFMU further rejected a proposal that was previously submitted jointly by GTT and another communications provider that outlined a recommended methodology for the calculation of these fees. The NFMU stated that it would prepare its own recommendation for consideration by the Minister of Telecommunications, who would decide the matter. GTT has paid undisputed spectrum fees according to the methodology used for its 2011 payments and has reserved amounts payable according to this methodology. There have been limited further discussions on this subject and GTT has not been given the opportunity to review recommendations to the Minister on spectrum fee methodology, if any.

On May 8, 2009, a GTT competitor, Digicel, filed a lawsuit in Guyana challenging the legality of GTT’s exclusive license rights under Guyana’s constitution and GTT intervened in the suit in order to oppose Digicel’s claims. The case remains pending. The Company believes that any legal challenge to GTT’s exclusive license rights granted in 1990 is without merit and the Company continues to defend vigorously against such legal challenge.

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, have been consolidated with Digicel’s constitutional challenge described above. Prior to the declaration of COVID-19 related travel and business restrictions in Guyana, the consolidated cases were scheduled to proceed to trial in 2020. GTT expects to resume the litigation following the lifting of COVID-19 related restrictions and intends to prosecute these matters vigorously;above, however, the Company cannot accurately predict at this time when the consolidated suit will ~~go to trial.~~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. ~~The Company maintains~~GTT’s position has been upheld by various High Court rulings made in its favor including most recently in December 2021, when an assessment relating to 2010-2016 was quashed and declared to have no legal effect. 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, ~~totaling $44.1~~as alleged by the GRA in the aggregate amount of $32 million net of interest, would be offset in part by the amounts necessary to ensure that GTT’s return on investment was no less than 15% per annum for the relevant periods.

~~Table~~ Several High Court rulings in the favor of ~~Contents~~GTT have been appealed by the GRA and the Company believes that some adverse outcome in these or pending unheard matters could occur.

On May 20, 2021, the Company was served with a notice of application for enforcement of a foreign judgment with respect to a matter brought by the Trinidad & Tobago Electric Commission (“TTEC”) in the High Court of Justice in the Republic of Trinidad and Tobago in August 2013 against ~~the Company~~GTT and other defendants, alleging breach of contract due to ~~the Company’s~~GTT’s failure to pay TTEC in connection with amounts alleged to be owed as reimbursement for cable repair costs. In ~~May 2015, the Company failed to appear in the~~December 2022, GTT settled this matter and a default judgment was entered against the Company in the amount of approximately $2.8 million. In May 2021, TTEC took steps to enforce the judgment by commencing proceedings against GTT in Guyana, however, in May of 2022, the High Court of Guyana denied TTEC’s petition. GTT intends to continue to defend its position against the legitimacy of the claim.with TTEC.

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. The draft audit report alleges violations of the FCC’s rules for establishing rural rates and urban rates, the provisioning and billing of ineligible services and products, and violations of the FCC’s competitive bidding rules. Alaska Communications has provided USAC with extensive comments in response to its draft audit report seeking correction of numerous factual and legal errors that it believed it had identified. As a result of these conversations and comments being submitted by Alaska Communications, USAC’s auditors may revise their findings, including the amounts they recommend USAC seek to recover. USAC’s auditors are expected to issue a final audit report incorporating Alaska Communications’ responses that will be sent to USAC’s Rural Health Care Division to review and determine if corrective action would be appropriate. In the event that the Company disagrees with USAC’s final audit report, the Company can appeal that decision to USAC’s Rural Health Care Division and/or the FCC. At this time, the Company cannot predict the contents or timing of the final USAC audit report, the outcome of the audit or the impact on the Company’s business, financial condition, results of operations, or ~~liquidity.~~

liquidity and may require certain undertakings in addition to any proposed financial settlement.

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. The Company is engaged in discussions with the FCC’s Enforcement Bureau and will continue to work constructively ~~with the FCC’s Enforcement Bureau~~ to provide it the information it is seeking. ~~At this time, the Company cannot predict the~~Any adverse outcome ofwith respect to the FCC Enforcement Bureau’s inquiry ~~or the impact it~~ may have ~~on its~~an adverse impact the Company’s business, financial condition, results of operations, or ~~liquidity.~~

liquidity and may require certain undertakings in addition to any proposed financial settlement.

With respect to all of the foregoing matters, the Company believes that some adverse outcome is probable and has accordingly accrued ~~$13.3~~$15.3 million as of ~~June 30, 2022~~March 31, 2023 for these and other potential liabilities arising in various

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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.

15. SUBSEQUENT EVENTS

Verizon Carrier Managed Services Agreement

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

Pursuant to the Agreement and subject to certain limitations contained therein, Commnet will upgrade its wireless service in specific areas and provide services to Verizon for an initial seven year term (the “Commitment Period”). The Commitment Period will automatically renew for up to two additional three year periods, unless Verizon provides no less than twelve months’ notice on non-renewal prior to the expiration of the then-current term.

In connection with the Agreement, Commnet has also agreed to provide Verizon with high capacity transport in its coverage area. Verizon will continue to use Commnet’s wireless communications network for roaming services at a fixed rate per site during the build period until such time as upgrades to the network to meet certain performance service level agreements for both RAN operations and transport are met.

Verizon will pay Commnet an aggregate of an estimated approximately $200 million in total amounts for both non-recurring payments for upgrades and construction to its current RAN and transport network and in monthly recurring charges over the initial Commitment Period.

The Agreement may be terminated at any time upon the mutual written consent of Commnet and Verizon. In addition, Verizon may terminate the Agreement upon the occurrence of certain events, including failure to meet certain milestones or completion dates with respect to network coverage, failure to meet certain SLAs with respect to the ongoing services, the declaration of a bankruptcy event by Commnet and breach of any other material terms of the Agreement.

The foregoing summary of the Agreement is not intended to be complete and is qualified in its entirety by reference to the full text of the Agreement. The Company intends to file a redacted copy of the Agreement as an Exhibit to its Quarterly Report on Form 10-Q for the quarter ending June 30, 2023.

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~~15. SUBSEQUENT EVENTS~~

~~See Note 6 for a discussion of our pending acquisition of Sacred Wind Enterprises.~~

~~See Note 9 for a discussion regarding government grants to be received for our Southern Apache County Fiber to the Home project and the FCC’s Replace and Remove project.~~

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

Overview

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

At the holding company level, we oversee the allocation of capital within and among our subsidiaries, affiliates, new investments, and stockholders. We ~~also~~ have developed significant operational expertise and resources that we use to augment the capabilities of our individual operating subsidiaries in our local markets. ~~Over the past 10 years, we~~We have built a platform of resources and expertise to support our operating subsidiaries and to improve their quality of service with greater economies of scale and expertise than would typically be available at the operating subsidiary level. We ~~also~~ 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 potential acquisitions, 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 ~~“Glass~~“glass and ~~Steel”~~steel” and ~~“fiber first”~~“first to fiber” approach in markets while generating steady excess cash flows over extended periods of time. We use the cash generated from our operations to re-invest in organic growth in our existing businesses, to make strategic investments in additional businesses, and to return cash to our investors through dividends or stock repurchases.

For further information about our financial segments and geographical information about our operating revenues and assets, see Notes 1 and 13 to the Consolidated Financial Statements included in this Report.

As of ~~June 30, 2022,~~March 31, 2023, we offer the following types of services to our customers:

●

Mobility Telecommunications Services. We offer mobile communications services ~~and equipment (“Mobility”)~~ over our wireless networks and related equipment (such as handsets) to both our business and consumer ~~subscribers. In certain markets, mobility services also includes private network services to business customers and municipalities.~~customers.

●

Fixed Telecommunications Services. We provide fixed data and voice telecommunications services ~~(“Fixed”)~~ to ~~both our~~ business and consumer ~~subscribers in all of our markets.~~customers. These services include consumer broadband and ~~high speed~~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 ~~(“Carrier Services”)~~to other telecommunications providers such as ~~wholesale roaming,~~ the leasing of critical network infrastructure, such as tower and transport facilities, wholesale roaming, site maintenance and international long-distance ~~services to other telecommunications providers.~~services.

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●

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

~~Through June 30, 2022,~~As was previously disclosed, and effective January 27, 2021, we no longer provide distributed generation solar power to commercial and industrial customers. These operations were the only operations within our Renewable Energy segment. As such, we no longer identify the Renewable Energy segment as an operating segment and now have ~~identified three~~ only two

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operating segments to manage and review our operations and to facilitate investor presentations of our results. These ~~three~~two operating segments are as follows:

●

International Telecom. In our international markets, we offer ~~Fixed Services, Mobility Services, Carrier Services~~fixed services, mobility services, carrier services and ~~Managed Services~~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,~~fixed services, carrier services, and ~~Managed Services~~managed services to business and consumer customers in Alaska and the western United States. ~~In the western United States, we also provide Mobility Services and private network services to enterprise and consumer customers.~~

●

~~Renewable Energy.~~ ~~In India, we provided distributed generation solar power to commercial and industrial customers through January 27, 2021. See~~ ~~Disposition of International Solar Business~~ ~~for further details.~~

~~The following chart summarizes the operating activities of our principal subsidiaries, the segments in which we report our revenue and the markets we served as of June 30, 2022:~~


Segment	Services	Markets	Tradenames
International Telecom	Mobility Services	Bermuda, Guyana, US Virgin Islands	One, ~~GTT+,~~GTT, Viya
	Fixed Services	Bermuda, Cayman Islands, Guyana, US Virgin Islands	One, Logic, GTT, Viya
	Carrier Services	Bermuda, Guyana, US Virgin Islands	One, ~~GTT+,~~GTT, Viya
	Managed Services	Bermuda, Cayman Islands, US Virgin Islands, Guyana	Fireminds, One, Logic, GTT, Viya
US Telecom	Mobility Services	United States (rural markets)	Choice, Choice NTUA Wireless ~~Geoverse~~
	Fixed Services	United States	Alaska Communications, Commnet, Choice, Choice NTUA Wireless, Sacred Wind Communications, Ethos
	Carrier Services	United States	Alaska Communications, Commnet, Essextel, Sacred Wind Communications
	Managed Services	United States	Alaska Communications, Choice
~~Renewable Energy (1)~~	~~Solar~~	~~India~~	~~Vibrant Energy~~

~~(1)~~

~~See~~ ~~Disposition of International Solar Business~~ ~~for further details.~~

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The following chart summarizes the operating activities of our principal subsidiaries, the segments in which we report our revenue and the markets we served as of March 31, 2023:

~~Pending~~ Acquisition of Sacred Wind Enterprises

On ~~July 26,~~November 7, 2022, we, via our newly formed wholly owned subsidiary Alloy, Inc. (“Alloy”), ~~entered into a stock purchase agreement (the “Purchase Agreement”) to acquire~~acquired all of the issued and outstanding stock of Sacred Wind Enterprises, Inc. (“Sacred Wind”), a rural telecommunications provider in New ~~Mexico. Under~~Mexico (the “Sacred Wind Transaction”) for $44.6 million of consideration. The purchase price allocation was finalized during the ~~Purchase Agreement,~~three months ended March 31, 2023. As part of the Sacred Wind Transaction, we ~~will contribute all~~transferred consideration of ~~our ownership~~$18.0 million of cash, net of $9.4 million of cash acquired, $14.8 million of redeemable noncontrolling interests, and $3.7 million of contingent consideration, less $1.3 million of receivables related to working capital adjustments. Upon completion of the Sacred Wind Transaction, the former Sacred Wind shareholders own 6% of the Alloy equity. This equity is classified as redeemable noncontrolling interests in our ~~Commnet Wireless business~~financial statements because the holders have an option, beginning in 2026, to ~~Alloy,~~put the equity interest to a subsidiary of the Company at the then fair market value. The redeemable noncontrolling interests do not have preference relative to other equity units and ~~issue Alloy equity to~~

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~~the Sacred Wind stockholders representing the combined ownership~~participate in gains and losses in Alloy. The contingent consideration is earned based on certain operating metrics of Sacred Wind ~~and Commnet.~~beginning in 2025 through 2027. The ~~acquisition is subject to certain closing conditions, including the receipt of required third party and regulatory approvals such as approval~~fair value of the ~~Federal Communications Commission. Under~~contingent consideration was calculated using discounted cash flow analysis based on a range of probability weighted outcomes. We funded the ~~Purchase Agreement,~~acquisition with borrowing under our CoBank Credit Facility and assumed $31.6 million of Sacred Wind ~~will keep in place its approximately $32 million in~~ debt, and we will issue consideration of a combination of $24 million in cash, the issuance of $13 million of equity representing an approximate 6% in Alloy, Inc. In addition, the Purchase Agreement includes certain earn-outs, the accounting for which will be determined upon our completion of the acquisition, to be paid to the ~~Sacred Wind stockholders~~.United States of America administered through the Rural Utilities Service.

We believe that the acquisition of Sacred Wind will expand our infrastructure reach and broadband services in the rural Southwest and increase our wholesale carrier, residential and business broadband services.

~~The acquisition of Sacred Wind is expected to close subject to Federal Communications Commission and other required approvals in the fourth quarter of 2022 or first quarter of 2023.~~

~~Completed Acquisition of Alaska Communications~~

On July 22, 2021, we completed the acquisition of Alaska Communications Systems Group, Inc. (“Alaska Communications”), a publicly listed company, for approximately $339.5 million in cash, net of cash acquired, (the “Alaska Transaction”). Alaska Communications provides broadband telecommunication and managed information technology services to customers in the state of Alaska and beyond using its statewide and interstate telecommunications network.

In conjunction with the Alaska Transaction, we entered into an agreement with affiliates and investment funds managed by Freedom 3 Capital, LLC as well as other institutional investors (collectively the “Freedom 3 Investors”). The Freedom 3 Investors contributed $71.5 million in conjunction with the Alaska Transaction (the “Freedom 3 Investment”). The Freedom 3 Investment consists of common and preferred equity instruments in our subsidiary of which holds the ownership of Alaska Communications. We accounted for the Freedom 3 Investment as a redeemable noncontrolling interest in our consolidated financial statements and we also entered into a financing transaction drawing $220 million on a new credit facility to complete the Alaska Transaction. As a result of the Alaska Transaction, we own approximately 52% of the common equity of Alaska Communications and control its operations and management. Beginning on July 22, 2021, the results of Alaska Communications are included in our US Telecom segment.

~~See~~ ~~Liquidity and Capital Resources~~ ~~for a discussion regarding the credit agreement used to help finance the Alaska Transaction.~~

~~COVID-19~~

~~We are continuing to monitor and assess the effects of the ongoing COVID-19 pandemic on our commercial operations, the safety of our employees and their families, our sales force and customers.~~

The preparation of the condensed consolidated financial statements requires us to make estimates, judgments and assumptions, which are evaluated on an ongoing basis, which may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. We assessed certain accounting matters and estimates that generally require consideration of forecasted financial information in context with the information and estimates reasonably available to us and the unknown future impacts of COVID-19 as of June 30, 2022 and through the date of this report. The accounting matters assessed included, but were not limited to, the allowance for credit losses, the carrying value of goodwill and other long-lived assets, financial assets, valuation allowances for tax assets and revenue recognition.

Our assessment of the impact of COVID-19 on our operations did not indicate that there was a material adverse impact to our consolidated financial statements as of and for the three months ended June 30, 2022. However, future assessments of the impacts of COVID-19, as well as other factors, including the possible reinstatement of certain COVID-19 travel-related and stay-at-home restrictions, could result in material adverse impacts to our consolidated financial statements in future reporting periods. For example, we may experience difficulty in procuring network or retail equipment, such as handsets for subscribers, as a result of COVID-19 restrictions and related supply chain challenges. In addition, there is increased uncertainty related to predicting subscribers’ procurement behavior for services.

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~~Disposition of International Solar Business~~

In January 2021, we completed the sale of 67% of the outstanding equity in our business that owns and operates distributed generation solar power projects operated under the Vibrant name in India (the “Vibrant Transaction”). The post-sale results of our ownership interest in Vibrant, representing 33% of Vibrant’s profits and losses, will be recorded through the equity method of accounting within the Corporate and Other operating segment. We will continue to present the historical results of our Renewable Energy segment for comparative purposes.

~~The operations of Vibrant did not qualify as discontinued operations because the disposition did not represent a strategic shift that had a major effect on our operations and financial results.~~

FirstNet Agreement

In July 2019, we entered into a Network Build and Maintenance Agreement with AT&T Mobility, LLC (“AT&T”) that we amended in August 2020, May 2021 and August 2022 (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 ~~area~~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 inception of~~We expect that total construction revenue related to FirstNet will approximate $80 million to $85 million. During the ~~project through June 30,~~three months ended March 31, 2023 and 2022, we ~~have~~ recorded ~~$52.1~~$0.6 million and $2.0 million in construction revenue, ~~including $5.3 million during 2022. In 2022, we also expect to record additional costs of construction revenue, as sites are completed, that will approximate that revenue.~~respectively. Revenues from construction are expected to have minimal impact on operating income. ~~The network build portion~~As of March 31, 2023, approximately 75% of the cell sites related to the FirstNet Agreement ~~has continued during the COVID-19 pandemic, but the overall timing of~~were completed and we expect to substantially complete the build ~~schedule has been delayed.~~ by the end of 2023 with the remainder to be completed in early 2024.

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 2029.

AT&T 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 transferred to AT&T. Thereafter, revenue from the maintenance, leasing and transport services provided to AT&T is expected to generally offset revenue from wholesale mobility roaming services. We are currently receiving revenue from the FirstNet Transaction and expect overall operating income contributions from the FirstNet Transaction to have a relatively steady impact going forward.

Universal Service Fund and Connect America Fund Phase II Programs

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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”)., and the Emergency Connectivity Fund (“ECF”), a program to help schools and libraries support remote learning in underserved communities. 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.

We also recognize revenue from the Connect America Fund Phase II program (“CAF II”) which offers subsidies to carriers to expand broadband coverage in designated areas. Under CAF II, our US Telecom segment will 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.

~~Both~~All of the ~~USF and CAFII~~ programs are subject to certain operational and reporting compliance requirements. We believe we are in compliance with these requirements as of ~~June 30, 2022.~~March 31, 2023.

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In April of 2023, the FCC issued an order extending the high cost support in the US Virgin Islands at the current $5.5 million per year received from July 2023 through December 31, 2025. In connection with this order, the FCC requires that we maintain our current footprint for voice and broadband services in the US Virgin Islands.

RDOF (“Rural Digital Opportunities Fund”)

We expect to receive approximately ~~$20.1~~$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”). We recorded ~~$0.5 million and $1.0~~$0.6 million of revenue from the RDOF program during the three ~~and six~~ months ended ~~June 30, 2022, respectively.~~

March 31, 2023.

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 upon completion of a project. As of December 31, 2021, we had been awarded approximately $27.9 million of such grants. We were awarded $0.4 million of additional grants and cancelled $2.1 million of previously awarded grants during the three months ended June 30, 2022. Of this $26.2 million of retained awards, we have completed our construction obligations on $17.1 million of these projects and $9.1 million of such construction obligations remain with completionCompletion deadlines ~~beginning~~begin in June ~~2023. Once~~2023 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. A roll forward of our grant awards is below (in thousands).


	Amount
Grants awarded, December 31, 2022	$	80,197
New grants		4,364
Grants awarded, March 31, 2023	$	84,561

In addition, we partner with tribal governments to obtain grants under the Tribal Broadband Connectivity Program ("TBCP"). The TBCP is a program administered by the National Telecommunications and Information Administration to deploy broadband connectivity on tribal lands. We were identified as a sub recipient of TBCP grants totaling $145.5 million as of March 31, 2023.

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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 ~~ZTE~~prohibited communications equipment and services in our U.S. networks and replace such equipment. The Replace and Remove Program requires that we complete our first request for reimbursement for services performed under the program no later than July 14, 2023 and that we complete the project no later than one year from submitting our initial reimbursement request. We ~~are currently assessing the impact of this program on our financial statements and anticipates~~anticipate that we will be able to meet the deadlines and requirements of the program.

~~CBRS Auction~~ At March 31, 2023, we established a receivable for $6.7 million of costs for which we expect to be reimbursed under the program.

During the third quarter of 2020, we participated in the FCC’s Citizens Broadband Radio Service (CBRS) auction for Priority Access Licenses (PALs) in the 3.5 GHz spectrum band. These PALs are licensed on a county-by-county basis and are awarded for a 10-year renewable term. We were a winning bidder for PALs located strategically throughout the United States at a total cost of approximately $20.4 million. In the third quarter of 2022, we surrendered a portion of the PALs that we won in the auction in exchange for repayment of the approximately $1.1 million paid for such licenses and entered into a Consent Decree with the FCC with respect to such surrender and receipt of the remaining licenses. In connection with the awarded licenses, we will have to achieve certain CBRS spectrum build out obligations. We currently expect to comply with all applicable requirements related to these licenses.

~~Presentation of Revenue~~

Effective July 1, 2021, we began to categorize Mobility revenue and Fixed revenue as either “consumer” or “business” based upon the characteristics of our subscribers. Effective October 1, 2021, our statement of operations

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~~separately reflects Construction revenue. All periods presented have been adjusted to conform to these presentation updates.~~

~~Presentation of Operating Expenses~~

Effective January 1, 2021, we changed our presentation of operating expenses in the Condensed Consolidated Statements of Operations by combining the previously disclosed Termination and Access Fees with Engineering and Operations as the newly represented Cost of communications services and other. In addition, the previously disclosed Sales, Marketing and Customer Service expenses are now combined with the previously disclosed General and Administrative expenses within the newly represented Selling, General and Administrative expenses. The change in presentation was made to better align our results with industry standards. Cost of construction services continues to be broken out separately and all depreciation and amortization continues to be shown separately.

Selected Segment Financial Information

The following represents selected segment information for the three months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands):


For the Three Months Ended June 30, 2022
For the Three Months Ended March 31, 2023											For the Three Months Ended March 31, 2023

	International		US		Renewable		Corporate and					International		US		Corporate and
	Telecom		Telecom		Energy		Other (1)		Consolidated			Telecom		Telecom		Other (1)		Consolidated
Revenue
Communication Services
Mobility - Business	$	3,675	$	301	$	—	$	—	$	3,976		$	3,575	$	172	$	—	$	3,747
Mobility - Consumer		21,279		1,549		—		—		22,828			22,532		987		—		23,519
Total Mobility		24,954		1,850		—		—		26,804			26,107		1,159		—		27,266
Fixed - Business		16,996		31,866		—		—		48,862			17,113		36,320		—		53,433
Fixed - Consumer		41,353		19,166		—		—		60,519			41,778		22,582		—		64,360
Total Fixed		58,349		51,032		—		—		109,381			58,891		58,902		—		117,793
Carrier Services		3,421		31,753		—		—		35,174			3,690		32,084		—		35,774
Other		436		—		—		—		436			400		75		—		475
Total Communication Services Revenue		87,160		84,635		—		—		171,795			89,088		92,220		—		181,308
Construction		—		3,297		—		—		3,297			—		590		—		590
Other
Managed Services		1,246		3,159		—		—		4,405			1,320		2,556		—		3,876
Total Other Revenue		1,246		3,159		—		—		4,405			1,320		2,556		—		3,876
Total Revenue		88,406		91,091		—		—		179,497			90,408		95,367		—		185,774

Operating income (loss)		11,646		(281)		(22)		(9,621)		1,722			13,825		(4,342)		(8,847)		636

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For the Three Months Ended June 30, 2021











International

US

Renewable

Corporate and

Telecom

Telecom

Energy

Other (1)

Consolidated
Revenue

Communication Services

Mobility - Business

$
1,298

$
342

$
—

$
—

$
1,640
Mobility - Consumer

21,456

2,065

—

—

23,521
Total Mobility

22,754

2,407

—

—

25,161
Fixed - Business

16,855

2,031

—

—

18,886
Fixed - Consumer

42,271

3,846

—

—

46,117
Total Fixed

59,126

5,877

—

—

65,003
Carrier Services

2,523

20,038

—

—

22,561
Other

239

—

—

—

239
Total Communication Services Revenue

84,642

28,322

—

—

112,964
Construction

—

9,325

—

—

9,325
Other

Renewable Energy

—

—

—

—

—
Managed Services

1,576

—

—

—

1,576
Total Other Revenue

1,576

—

—

—

1,576
Total Revenue

86,218

37,647

—

—

123,865

Operating income (loss)

14,643

(556)

(771)

(10,411)

2,905


For the Three Months Ended March 31, 2022

	International		US		Corporate and
	Telecom		Telecom		Other (1)		Consolidated
Revenue
Communication Services
Mobility - Business	$	3,616	$	374	$	—	$	3,990
Mobility - Consumer		19,970		1,456		—		21,426
Total Mobility		23,586		1,830		—		25,416
Fixed - Business		17,254		27,145		—		44,399
Fixed - Consumer		41,093		18,968		—		60,061
Total Fixed		58,347		46,113		—		104,460
Carrier Services		3,402		32,989		—		36,391
Other		276		—		—		276
Total Communication Services Revenue		85,611		80,932		—		166,543
Construction		—		1,987		—		1,987
Other
Managed Services		1,176		2,313		—		3,489
Total Other Revenue		1,176		2,313		—		3,489
Total Revenue		86,787		85,232		—		172,019

Operating income (loss)		11,802		(4,635)		(7,059)		108

(1) ~~Corporate and Other~~Reconciling items refer to corporate overhead costs and consolidating ~~adjustments~~

adjustments.

A comparison of our segment results for the three months ended ~~June 30,~~March 31, 2023, and 2022 ~~and 2021~~ is as follows:

International Telecom. Revenues within our International Telecom segment increased ~~$2.2~~$3.6 million, or ~~2.6%~~4.1%, to ~~$88.4~~$90.4 million from ~~$86.2~~$86.8 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, as a result of improved retail and marketing strategies which drove an increase in ~~Fixed~~subscribers and ~~Mobility subscribers~~equipment sales within all of our international markets. In addition, our US Virgin Islands and Bermuda markets recognized ~~an increase of $0.9 million~~growth in Carrier Services revenue as a result of increased roaming revenues due to an increase in tourism ~~as certain COVID-19 related travel and stay-at-home restrictions were lifted.~~in those markets. These increases, however, were partially offset by the scheduled $1.4 million ~~scheduled step down~~reduction in federal high cost support revenues in the US Virgin Islands.

Operating expenses within our International Telecom segment increased by ~~$5.2~~$1.6 million, or ~~7.3%~~2.1%, to ~~$76.8~~$76.6 million from ~~$71.6~~$75.0 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. The increase ~~in operating expenses~~ was primarily the result of an increase in ~~direct costs, primarily roaming~~equipment expenses ~~related to increased tourism in the US Virgin Islands~~ and ~~Bermuda, increased equipment costs, an increase in sales~~retail and marketing ~~expenses to support the expansion of our subscriber base and additional costs for our continued investment in network expansion and enhancement.~~

costs.

As a result, our International Telecom segment’s operating income ~~decreased $3.0~~increased $2.0 million, or ~~20.5%~~16.9%, to ~~$11.6~~$13.8 million from ~~$14.6~~$11.8 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

US Telecom. Revenue within our US Telecom segment increased by ~~$53.5~~$10.2 million, or ~~142.3%~~12.0%, to ~~$91.1~~$95.4 million from ~~$37.6~~$85.2 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, respectively. Increases in our Alaska subsidiary and ~~2021, respectively, primarily as a result~~the revenue impact of ~~$44.1 million associated with~~ the ~~Alaska~~Sacred Wind Transaction were partially offset by a ~~$6.0 million~~ reduction in construction revenue related to the FirstNet Transaction, ~~as well as a~~ reduction in roaming revenue due to the restructuring of certain ~~restructured~~ carrier contracts in our western United States ~~operations.~~operations, and a reduction in our international long-distance service revenues.

Operating expenses within our US Telecom segment increased $9.9 million, or 11.0%, to $99.7 million from $89.8 million for the three months ended March 31, 2023 and 2022, respectively, as a result of increases in expenses

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~~Operating expenses~~being incurred to support the increased revenues within our ~~US Telecom segment increased $53.2 million to $91.4 million from $38.2 million for~~Alaska operations and the ~~three months ended June 30, 2022 and 2021, respectively, as a result~~impact of the ~~Alaska~~Sacred Wind Transaction ~~and increases in other expenses being incurred in connection with both the FirstNet Transaction and the CARES Act-funded build-out of rural broadband operations,~~ partially offset by athe decrease in FirstNet construction costs as fewer sites were completed in 2023 as compared to 2022 and a reduction in costs related to our wholesale long-distance business as a result of ~~$6.2 million.~~

its decrease in revenues.

As a result of the above, our US Telecom segment’s operating loss decreased by $0.3 million, or 6.5%, to a loss of ~~$0.3~~$4.3 million from a loss of ~~$0.6~~$4.6 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

The following represents a year over year discussion and analysis of our results of operations for the three months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands):



	Three Months Ended				Amount of		Percent		Three Months Ended				Amount of		Percent
	June 30,				Increase		Increase		March 31,				Increase		Increase
	2022		2021		(Decrease)		(Decrease)		2023		2022		(Decrease)		(Decrease)
REVENUE:
Communication services	$	171,795	$	112,964	$	58,831	52.1	%	$	181,308	$	166,543	$	14,765	8.9	%
Construction		3,297		9,325		(6,028)	(64.6)			590		1,987		(1,397)	(70.3)
Other		4,405		1,576		2,829	179.5			3,876		3,489		387	11.1
Total revenue		179,497		123,865		55,632	44.9			185,774		172,019		13,755	8.0
OPERATING EXPENSES (excluding depreciation and amortization unless otherwise indicated):
Cost of communications services and other		77,860		48,479		29,381	60.6			79,040		73,011		6,029	8.3
Cost of construction revenue		3,286		9,535		(6,249)	(65.5)			588		2,033		(1,445)	(71.1)
Selling, general and administrative		59,178		40,652		18,526	45.6			61,348		54,882		6,466	11.8
Stock-based compensation										1,778		1,461		317	21.7
Transaction-related charges		412		1,396		(984)	(70.5)			13		554		(541)	(97.7)
Depreciation		33,817		19,739		14,078	71.3
Restructuring charges										2,887		—		2,887	100.0
Depreciation and amortization										36,404		33,292		3,112	9.3
Amortization of intangibles from acquisitions		3,250		416		2,834	681.3			3,247		3,258		(11)	(0.3)
(Gain) Loss on disposition of long-lived assets		(28)		743		(771)	(103.8)			(167)		3,420		(3,587)	(104.9)
Total operating expenses		177,775		120,960		56,815	47.0			185,138		171,911		13,227	7.7
Income from operations		1,722		2,905		(1,183)	(40.7)			636		108		528	488.9
OTHER INCOME (EXPENSE):
Interest income		—		46		(46)	n/m			182		51		131	256.9
Interest expense		(4,278)		(1,137)		(3,141)	276.3			(8,807)		(3,363)		(5,444)	161.9
Other income (expense)		(2,724)		(66)		(2,658)	n/m
Other income										194		4,199		(4,005)	(95.4)
Other income (expense), net		(7,002)		(1,157)		(5,845)	505.2			(8,431)		887		(9,318)	(1,050.5)
INCOME BEFORE INCOME TAXES		(5,280)		1,748		(7,028)	(402.1)
Income tax provision		(3,971)		(1,542)		(2,429)	157.5
NET INCOME (LOSS)		(1,309)		3,290		(4,599)	(139.8)
(Net income) loss attributable to noncontrolling interests, net of tax:		784		(1,271)		2,055	(161.7)
NET INCOME (LOSS) ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS	$	(525)	$	2,019	$	(2,544)	(126.0)	%
INCOME (LOSS) BEFORE INCOME TAXES										(7,795)		995		(8,790)	(883.4)
Income tax expense (benefit)										(740)		2,952		(3,692)	(125.1)
NET LOSS										(7,055)		(1,957)		(5,098)	260.5
Net loss attributable to noncontrolling interests, net of tax:										1,170		1,009		161	16.0
NET LOSS ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS									$	(5,885)	$	(948)	$	(4,937)	520.8	%

~~n/m = not meaningful~~

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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 increased by ~~$1.6~~$1.9 million, or ~~6.3%~~7.5%, to ~~$26.8~~$27.3 million for the three months ended ~~June 30, 2022~~March 31, 2023 from ~~$25.2~~$25.4 million for the three months ended ~~June 30, 2021.~~March 31, 2022. Of this increase, ~~$2.3~~Mobility revenue from consumer customers increased by $2.1 million, ~~related to an increase~~partially offset by a reduction in Mobility revenue from business customers ~~while revenue from consumers declined by $0.7~~of $0.2 million.

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

●

International ~~Telecom~~Telecom. . Within our International Telecom segment, Mobility revenue increased by ~~$2.2~~$2.5 million, or ~~9.6%~~10.6%, to ~~$25.0~~$26.1 million for the three months ended ~~June 30, 2022~~March 31, 2023 from ~~$22.8~~$23.6 million for the three months ended ~~June 30, 2021.~~March 31, 2022. The increase in Mobility revenue ~~increased~~within this segment was recognized in ~~each~~all of our international markets ~~as total revenue from business customers increased by $2.4 million partially offset by a reduction~~and was attributable to an increase in revenue from consumers ~~of $0.2 million. The net increases were the~~as a result of improved retail and marketing strategies which ~~lead~~led to an increase in subscribers ~~in all of our markets~~ and ~~an increase~~ in equipment ~~and services revenues in certain markets.~~sales.

●

US Telecom. Mobility revenue within our US Telecom segment decreased by ~~$0.5~~$0.6 million, or ~~20.8%~~33.3%, to ~~$1.9~~$1.2 million from ~~$2.4~~$1.8 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, as a result~~respectively. Substantially all of the decrease related to a decrease in ~~subscribers~~revenue from consumers within our retail ~~operations.~~operations due to a decrease in subscribers.

We expect that Mobility revenue within ~~both~~ our ~~US Telecom and~~ International Telecom ~~segments~~segment may increase as a result of anour marketing efforts to increase ~~in subscribers if certain COVID-19 travel related restrictions continue to be lifted.~~the number of our subscribers. However, such growth ~~in both segments~~ may be partially offset due to increased competition ~~and if COVID-19 related travel restrictions are reinstated so~~in that segment. We expect that Mobility revenue within our US Telecom segment will decrease over time as ~~to result in significant business interruptions and retail store closures.~~we put more emphasis on other revenue sources within that segment.

Apart from possible government issued travel restrictions, we currently cannot assess how the impact of COVID-19 may influence our subscribers’ procurement behavior for our services or how that behavior will affect our Mobility revenues in the foreseeable future.

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 ~~revenue~~awards from the Connect America Fund Phase II program ~~awards~~ 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 increased by ~~$44.4~~ m~~illion,~~$13.3 million, or ~~68.3%~~12.7%, to ~~$109.4~~$117.8 million from ~~$65.0~~$104.5 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. Of this increase, ~~$30.0~~$9.0 million ~~relates~~and $4.3 million relate to increases in revenue from business and consumer customers, ~~while the remaining increase of $14.4 million pertains to consumers.~~respectively. The increase in Fixed revenue, within our segments, consisted of the following:

●

International Telecom. Within our International Telecom segment, Fixed revenue ~~decreased~~increased by ~~$0.8~~$0.6 million, or ~~1.4%~~1.0%, to ~~$58.3~~$58.9 million from ~~$59.1~~$58.3 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, ~~primarily~~ as ~~a result~~increases in fixed broadband subscribers in all of our international markets were partially offset by the previously disclosed and scheduled $1.4 million reduction in revenue from the FCC’s High Cost Program ~~within our Viya operations. Offsetting this decrease was an increase~~ in ~~revenue from fixed broadband fiber subscribers and services to further enable and support remote working in our markets.~~
the US Virgin Islands.

●

US Telecom. Fixed revenue within our US Telecom segment increased by ~~$45.1~~$12.8 million, or 27.8%, to ~~$51.0~~$58.9 million from ~~$5.9~~$46.1 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. This increase was ~~related to the Alaska Transaction, which generated $44.1 million of Fixed revenue during the three months ended June 30, 2022, and a $1.0 million increase, within the western United States,~~primarily related to an increase in ~~usage for both business~~revenue in Alaska and ~~consumer subscribers to support our subscribers’ increase in their remote working.~~the revenue impact of the Sacred Wind Transaction.

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Fixed revenue within our International Telecom segment may further decrease as a result of ~~the loss of USF funding in the US Virgin Islands,~~ a decrease in demand for our video services due to subscribers using alternative

~~Table of Contents~~

methods to receive video ~~content, and if COVID-19 travel related restrictions are reinstated in some of our international markets.~~content. Such decreases, however, may be ~~partially~~ offset as a result of an increase in demand for broadband ~~subscribers~~and other data services from consumers, businesses and government, driven by such trends as ~~workers continue to shift to remote working, subscribers adopting higher bandwidth offerings at higher price points~~the popularity of video and audio streaming, demand for cloud services and smart home, business and city solutions as well as macro-economic and population growth in ~~connection with certain new contracts with oil~~places like the Cayman Islands and ~~gas providers in~~ Guyana.

Within our US Telecom segment, Fixed revenue is expected to increase as both our Alaska operations and our western United States operations, including the impact of the Sacred Wind Transaction, further deploy broadband access to both consumers and businesses.

Apart from possible government issued travel restrictions, we currently cannot assess how the impact of any COVID-19 restrictions may influence our subscribers’ procurement behavior for our services or how that behavior will affect our Fixed revenue in the foreseeable future.

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 Transaction, wholesale roaming revenues, the provision of network switching services, tower lease revenue and other services provided to other carriers.

Carrier Services revenue ~~increased~~decreased by ~~$12.6~~$0.6 million, or ~~55.8%~~1.6%, to ~~$35.2~~$35.8 million from ~~$22.6~~$36.4 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. The increase, within our segments, consisted of the following:

●

International Telecom. Within our International Telecom segment, Carrier Services revenue increased by ~~$0.9~~ $0.3 million, or ~~36.0%~~8.8%, to ~~$3.4~~$3.7 million, from ~~$2.5~~$3.4 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, as a result of an increase in tourism, primarily within the US Virgin Islands and Bermuda, that resulted in ~~increased~~an increase in roaming revenues.

●

US Telecom. Carrier Services revenue within our US Telecom segment ~~increased~~decreased by ~~$11.8~~$0.9 million, or ~~59.0%~~2.7%, to ~~$31.8~~$32.1 million from ~~$20.0~~ m~~illion,~~$33.0 million, for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, primarily as a~~respectively. This decrease was the result of the Alaska Transaction, which generated $15.4 million of Carrier Services revenue during the three months ended June 30, 2022 and an increase within our wholesale long-distance voice services business of $0.6 million. These increases were partially offset by the $4.2 million revenue reductiona decrease in our western United States operations, primarily as a result of the restructure of certain carrier ~~contracts.~~contracts, and in our wholesale long-distance voice services business. Such decreases were partially offset by the impact of the Sacred Wind Transaction.

Within our International Telecom segment, Carrier Services revenue may continue to increase if tourism continues to move toward a return to pre-pandemic levels. Apart from possible government issued travel restrictions, we currently cannot assess how the impact of COVID-19 may influence our subscribers’ procurement behavior for our services or how that behavior will affect our revenues in the foreseeable future. Also,However, within our International Telecom segment, we expect that Carrier Services revenue from our international ~~long-distance~~long distance business in Guyana may decrease as consumers seek to use alternative technology services to place long-distance calls. ~~In addition,~~Further, such revenue may decline as the result of the implementation, by the Government of Guyana, of passed legislation which terminates our right to be the exclusive provider of domestic Fixed and international long-distance service in Guyana. While the loss of our exclusive rights in Guyana may cause an immediate reduction in our Carrier Services revenue, the complete impact of the new legislation to our operations will not be fully known until the Government of Guyana makes the terms and conditions of licenses issued to two of our competitors available to us. Over the longer term, such declines in Carrier Services revenue may be offset by increased Fixed revenue from broadband services to consumers and enterprises in Guyana, increased Mobility revenue from an increase in regulated local calling rates in Guyana or possible economic growth within that country.

Within our US Telecom segment, Carrier Services revenue may decrease ~~from~~as a result of the impact of continued reduced contractual wholesale roaming rates and imposed revenue caps with our Carrier customers. We believe that maintaining roaming favorable to our carrier customers allows us to preserve revenue for a longer period of time while creating the potential for long-lived shared infrastructure solutions for carriers in areas they may consider to be non-strategic.

~~Table of Contents~~

The most significant competitive factor we face within our US Telecom segment is the extent to which our carrier customers in our wholesale carrier services business choose to roam on our networks and lease our tower space and transport services or elect to build or acquire their own infrastructure in a market, reducing or eliminating their need for our services in those markets. We also face competition from other providers of such shared infrastructure solutions. In the past, we have entered into buildout projects with existing carrier customers to help these customers accelerate the buildout of a given area in exchange for the carrier’s agreement to lease us spectrum in that area and enter into a contract with specific pricing and terms. Historically, these arrangements have differed from our FirstNet Transaction and have typically included a purchase right in favor of the carrier to purchase that portion of the network for a predetermined price, depending on when the right to purchase is exercised.

Other Communications Services Revenue. Other Communications Services revenue includes miscellaneous services that the operations within our International Telecom segment provide to retail subscribers. Other Communications Services revenue increased to ~~$0.4~~$0.5 million from ~~$0.2~~$0.3 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

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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,~~March 31, 2023 and 2022, ~~and 2021,~~ Construction revenue decreased to ~~$3.3~~$0.6 million from ~~$9.3~~$2.0 million, respectively, as a result of a decrease in the number of sites completed during ~~the three months ended June 30, 2022~~2023 as compared to ~~the same period in 2021.~~2022. As of ~~June 30, 2022, 65%~~March 31, 2023, approximately 75% of the cell sites related to the FirstNet Agreement were completed and we expect ~~another 20%~~to substantially complete the build by the end of ~~the total build to be completed during second half of 2022~~2023 with the remainder to be completed in early ~~2023.~~

2024.

Other Revenue

~~Renewable Energy Revenue.~~ ~~We did not generate any renewable energy revenue during the three months ended June 30, 2022 or 2021 as a result of the Vibrant Transaction.~~

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 by ~~$2.8~~$0.4 million, or 11.4%, to ~~$4.4~~$3.9 million from ~~$1.6~~$3.5 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, as a result of the Alaska Transaction, which generated $3.2 million of Managed Services revenue during the three months ended June 30, 2022~~respectively.

International Telecom.~~. Our~~ Managed Services revenue in our International Telecom segment ~~decreased $0.4~~increased $0.1 million to $1.3 million, or ~~25.0%~~8.3%, tofrom $1.2 ~~million from $1.6~~ million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

US Telecom. Within our US Telecom segment, Managed Services revenue increased $0.3 million, or 13.0%, to $2.6 million from $2.3 million for the three months ended March 31, 2023 and 2022, respectively.

We expect that Managed Services revenue may increase in ~~our~~ 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. ~~Cost of communication services and other~~These costs also ~~includes~~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 ~~bad debt reserves~~credit loss allowances and the cost of handsets and customer resale equipment incurred by our retail businesses.

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Cost of communication services and other increased by ~~$29.4~~$6.0 million, or ~~60.6%~~8.2%, to ~~$77.9~~$79.0 million from ~~$48.5~~$73.0 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ 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 increased by ~~$1.6~~$0.1 million, or ~~4.8%~~0.3%, to ~~$34.9~~$34.2 million from ~~$33.3~~$34.1 million, for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. This increase was the result of an increase in ~~roaming expense, due~~equipment expenses, primarily the cost of handsets, as a result of improved retail and marketing strategies which led to an increase in ~~related roaming revenues from higher levels of travel~~subscribers and ~~tourism in the US Virgin Islands and Bermuda, increased equipment costs, and increases from certain network enhancements.~~handset sales.

●

US Telecom. Cost of communication services and other within our US Telecom segment increased by ~~$27.4~~$5.7 million, or ~~175.6%~~14.5%, to ~~$43.0~~$45.1 million from ~~$15.6~~$39.4 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. ~~This~~Such increase was ~~a result~~primarily related to an increase in direct costs in Alaska to support revenue growth and the impact of the Alaska Transaction which incurred $26.9 million of these costs during 2022 and a $0.8 million increase in our wholesale long-distance voice services business needed to support its increased revenue partially offset by a reduction of costs within our private network business.Sacred Wind Transaction.

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We expect that cost of communication services and other may increase within ~~both~~ our International ~~and US~~ Telecom ~~segments~~segment due to an expected increase in roaming ~~and other termination~~ costs if ~~COVID-19 related travel restrictions continue~~tourism continues to ~~be lifted.~~return to pre-pandemic levels. Within the US Telecom segment, ~~we expect an~~these expenses are expected to increase in ~~the expenses associated~~connection with our ~~funding award under the CARES Act~~expected increase in fixed revenue, and anticipated expenses in connection with our performance ~~under~~related to the construction phase of our FirstNet Transaction which is expected to be substantially completed in ~~early~~ 2023. In addition, we expect cost of services may increase as a result of continued inflationary pressure, issues facing the global supply chain and geopolitical uncertainty.

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,~~March 31, 2023 and 2022, ~~and June 30, 2021,~~ cost of construction revenue decreased to ~~$3.3~~$0.6 million from ~~$9.5~~$2.0 million as a result of a decrease in the number of sites completed during ~~the three months ended June 30, 2022~~2023 as compared to ~~the same period in 2021.~~2022. As of ~~June 30, 2022, 65%~~March 31, 2023, 75% of the cell sites related to the FirstNet Agreement ~~were completed~~ and we expect ~~another 20%~~to substantially complete the build by the end of ~~the total build to be completed during the second half of 2022~~2023 with the remainder to be completed in early ~~2023.~~

2024.

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 increased by ~~$18.5 million,~~$6.4 million, or ~~45.5%~~11.7%, to ~~$59.2~~$61.3 million from ~~$40.7~~$54.9 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. The net increase 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 increased by ~~$1.8~~$2.2 million, or ~~7.3%~~8.6%, to ~~$26.3~~$27.7 million from ~~$24.5~~$25.5 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. This increase was incurred within all of our international markets primarily as a result of an increase in ~~both~~ our sales and marketing ~~efforts and customer support~~ capabilities to support the expansion of our subscriber base.

●

US Telecom. Selling, general and administrative expenses increased within our US Telecom segment by ~~$16.1~~$2.8 million, or 11.6%, to ~~$24.1~~$26.9 million from ~~$8.0~~$24.1 million, for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021, respectively,~~respectively. This increase was primarily ~~as a result of~~related to expenses to support the ~~Alaska Transaction, which generated $17.6 million of these costs during~~operations from the ~~three months ended June 30, 2022 partially offset by a decrease in spending within our private network business.~~Sacred Wind Transaction.

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●

~~Renewable Energy.~~ ~~During the three months ended June 30, 2022 and 2021, our Renewable Energy segment incurred a nominal amount and $0.1 million of selling, general and administrative expenses, respectively.~~

●

Corporate Overhead. Selling, general and administrative expenses within our corporate overhead increased by ~~$0.6~~$1.4 million, or ~~7.4%~~26.4%, to ~~$8.7~~$6.7 million from ~~$8.1~~$5.3 million, for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, primarily related to ~~increased professional service~~the support needed for our recent acquisitions and ~~travel-related expenses.~~expanded operations.

~~Within both our International and US Telecom segments, we~~We expect that selling, general and administrative expenses may increase ~~if COVID-19 related travel restrictions continue~~in our international telecom segment to ~~be lifted. We also~~support our expanded operations. Within the US Telecom segment, we expect an increase ~~in 2022~~ in these costs as a result of expected costs associated with ~~our recent funding award under~~ the ~~CARES Act, our recently received grant to bring fiber connectivity to certain areas in southern Apache County, Arizona and the cost~~ impact of the construction phase of the FirstNet Transaction, ~~which is expected to be completed during early 2023.~~the Sacred Wind Transaction, our commitments under the Cares Act funding and other network expansions in Alaska and the southwest US. Our Corporate Overhead segment may also experience an increase in these expenses to support our recent acquisitions and expanding operations. In addition, we expect our selling, general, and administrative expenses may increase as a result of continued inflationary pressure, issues facing the global supply chain and geopolitical uncertainty.

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

Stock-based compensation for the three months ended March 31, 2023 and 2022 was $1.8 million and $1.5 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 ~~internal costs, such as~~ employee salary and travel-related expenses, incurred in connection with acquisitions or dispositions or any integration-related costs.

We incurred ~~$0.4 million and $1.4 million~~a nominal amount of transaction-related charges ~~primarily related to the Alaska Transaction,~~ during the three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021, respectively.~~$0.6 million during the three months ended March 31, 2022.

Restructuring expenses. In connection with our repositioning of our legacy wholesale roaming operations in our US Telecom segment, we recorded a $2.9 million restructuring charge during the three months ended March 31, 2023 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 increased by ~~$14.1~~$3.1 million, or ~~71.6%~~9.3%, to ~~$33.8~~$36.4 million from ~~$19.7~~$33.3 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. The net increase 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 ~~$1.7~~$0.3 million, or ~~12.7%~~2.2%, to ~~$15.1~~$14.2 million from ~~$13.4~~$13.9 million, for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021, respectively. This increase was~~respectively, as a result of recent ~~upgrades~~capital expenditures used to expand and ~~expansions to this segment’s network.~~upgrade our network operations.

●

US Telecom. Depreciation and amortization expenses increased within our US Telecom segment by ~~$12.7~~$3.1 million, or 16.8%, to ~~$17.8~~$21.5 million from ~~$5.1~~$18.4 million, for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, primarily as a result of the ~~Alaska Transaction.~~
impact of the Sacred Wind Transaction, which was completed in November 2022, and the depreciation expense recorded on recent capital expenditures.

●

Corporate Overhead. Depreciation and amortization expenses decreased within our corporate overhead by ~~$0.3~~$0.2 million, or ~~23.1%~~22.2%, to ~~$1.0~~$0.7 million from ~~$1.3~~$0.9 million, for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, primarily as a result of certain assets becoming fully depreciated in recent periods.

We expect depreciation and amortization expense to increase within ~~all of~~ our International Telecom and US Telecom segments as we acquire tangible assets to expand or upgrade our telecommunications networks.

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 ~~increased~~decreased by ~~$2.9~~$0.1 million to ~~$3.3~~$3.2 million from ~~$0.4~~$3.3 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021, respectively,~~respectively.

We expect that amortization of intangibles from acquisitions will decrease as ~~a result of the Alaska Transaction.~~such costs continue to amortize.

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Loss on disposition of long-lived assets. During the three months ended ~~June 30, 2022,~~March 31, 2023, we recorded a ~~nominal~~ gain on the ~~disposal~~disposition of ~~certain assets.~~long-lived assets of $0.2 million within our US Telecom segment.

During the three months ended ~~June 30, 2021,~~March 31, 2022, we recorded a loss on the disposition of long-lived assets of ~~$0.7~~$3.4 million. Of this amount, $2.4 million ~~primarily related~~was incurred in our US Telecom segment relating to the ~~Vibrant Transaction.~~disposal of certain assets while $1.0 million was incurred in our International Telecom segment as a result of the modification of agreements for the use of other certain assets.

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Interest income. Interest income represents interest earned on our cash, cash equivalents, restricted cash and short-term investment ~~balances and were~~balances. Interest income was a nominal ~~amounts during~~amount for both the three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022.

Interest expense. We incur interest expense on the 2019 CoBank Credit Facility, the Alaska Credit ~~Facility (beginning in July 2021),~~and Term Facilities, the Viya Debt, the One Communications Debt and the Receivables Credit ~~Facility~~Facility. Beginning in the fourth quarter of 2022 and the first quarter of 2023, interest expense also includes interest expense on the Sacred Wind Term Debt and the GTT Credit Facilities (each as defined below). ~~Interest~~Previously, we also incurred interest expense on the One Communications Debt, which matured on December 22, 2022. In addition, interest expense also includes commitment fees, letter of credit fees and the amortization of debt issuance costs.

Interest expense increased to ~~$4.2~~$8.8 million from ~~$1.1~~$3.4 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, as additional interest expense was incurred as a result ~~of new~~an increase in borrowings under our credit facilities, the ~~2019 CoBank Credit Facility, the Alaska Credit Facility~~inclusion of Sacred Wind Term Debt and the ~~Receivables~~GTT Credit ~~Facility~~Facilities, as well as an increase in interest rates on ~~those facilities.~~

all floating-rate borrowings.

We expect that interest expense ~~will~~may increase in future periods as a result of ~~an expected increase in both~~increased interest rates and ~~borrowings under the 2019 CoBank Credit Facility and the Receivables Credit Facility.~~

borrowings.

Other income (expenses). ~~Other income (expenses) represents miscellaneous non-operational income earned and expenses incurred.~~

For the three months ended ~~June 30, 2022,~~March 31, 2023, other income (expenses) was ~~$2.7~~$0.2 million of ~~expense~~income primarily related to ~~expenses associated with certain employee benefit plans, losses~~gains from our noncontrolling ~~investments and losses on foreign currency transactions~~.

investments.

For the three months ended ~~June 30, 2021,~~March 31, 2022, other income (expenses) was ~~an expense~~$4.8 million of ~~$0.1 million which was~~income primarily related to ~~losses~~gains from our ~~noncontrolling investments and on foreign currency transactions. These losses were partially offset by miscellaneous income generated during the quarter.~~non-controlling investments.

Income taxes. Our effective tax rate for the three months ended ~~June 30,~~March 31, 2023 and 2022 was 9.5% and ~~2021 was 75.2% and (88.2%)~~296.7%, respectively.

We recorded an income tax benefit of ~~$4.0~~$0.7 million in relation to a ~~pre-tax~~pretax loss of ~~$5.3~~$7.8 million for the three months ended ~~June 30, 2022.~~March 31, 2023. The effective tax rate for the three months ended ~~June 30, 2022~~March 31, 2023 was primarily impacted by the following items (i) the mix of income generated among the jurisdictions in which we operate, (ii) a net increase related to valuation allowances placed on certain deferred tax assets and ~~(ii)~~(iii) discrete items including ~~a $3.3~~$0.6 million ~~benefit from the reversal~~ of ~~an unrecognized tax position due to a statute of limitations expiration and a $0.3 million~~ expense for interest on unrecognized tax positions.

We recorded an income tax provision of $3.0 million in relation to income before taxes of $1.0 million for the three months ended March 31, 2022. The effective tax rate for the three months ended ~~June 30, 2021~~March 31, 2022 was primarily impacted by the following items: (i) a $0.5 million net increase of unrecognized tax positions recognized discretely, (ii) a $2.1 million net expense recognized discretely to record a valuation allowance on certain deferred tax assets that are not expected to be realizable based on the weight of positive and negative evidence, and (iii) the mix of income generated among the jurisdictions in which we operate and (ii) discrete items including a $3.4 million benefit from the reversal of an unrecognized tax position due to a statute of limitations expiration and a $0.5 million expense for interest on unrecognized tax positions.

operate.

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 onetime 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

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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.

~~Net income attributable to noncontrolling interests, net of tax.~~ ~~Net income attributable to noncontrolling interests, net of tax~~ reflected an allocation of $0.8 million of losses and $1.3 million of income generated by our less than wholly owned subsidiaries for the three months ended June 30, 2022 and 2021, respectively. Changes in net income attributable to noncontrolling interests, net of tax, within our segments, consisted of the following:

●

~~International Telecom~~. Within our International Telecom segment, net income attributable to noncontrolling interests, net of tax decreased by $0.9 million, or 50.0%, to an allocation of $0.9 million of income from an allocation of $1.8 million of income for the three months ended June 30, 2022 and 2021, respectively, primarily as a result of reduced profitability at our less than wholly owned subsidiaries partially offset by an increase in our ownership of certain less than wholly owned subsidiaries in certain international markets.

●

~~US Telecom~~. ~~Within our US Telecom segment,~~ net income attributable to noncontrolling interests, net of tax decreased by $1.1 million to an allocation of losses of $1.7 million from an allocation of losses of $0.6 million for the three months ended June 30, 2022 and 2021, respectively, as a result of reduced profitability in certain less than wholly owned subsidiaries within our US Mobility operations.

~~Net income (loss) attributable to ATN International, Inc. stockholders.~~ Net income (loss) attributable to ATN International, Inc. stockholders was a loss of $0.5 million for the three months ended June 30, 2022 as compared to income of $2.0 million for the three months ended June 30, 2021.

On a per diluted share basis, net income (loss) was a loss of $0.11 per diluted share for the three months ended June 30, 2022 (which includes the impact of accrued preferred dividends of $1.2 million) as compared to income of $0.13 per diluted share for the three months ended June 30, 2021.

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~~Selected Segment Financial Information~~

~~The following represents selected segment information for the six months ended June 30, 2022 and 2021 (in thousands):~~

For the Six Months Ended June 30, 2022











International

US

Renewable

Corporate and

Telecom

Telecom

Energy

Other (1)

Consolidated
Revenue

Communication Services

Mobility - Business

$
7,291

$
674

$
—

$
—

$
7,965
Mobility - Consumer

41,249

3,006

—

—

44,255
Total Mobility

48,540

3,681

—

—

52,220
Fixed - Business

34,250

59,011

—

—

93,261
Fixed - Consumer

82,446

38,136

—

—

120,583
Total Fixed

116,696

97,147

—

—

213,843
Carrier Services

6,823

64,742

—

—

71,565
Other

710

—

—

—

710
Total Communication Services Revenue

172,769

165,569

—

—

338,338
Construction

—

5,283

—

—

5,283
Other

Renewable Energy

—

—

—

—

—
Managed Services

2,422

5,474

—

—

7,896
Total Other Revenue

2,422

5,474

—

—

7,896
Total Revenue

175,191

176,326

—

—

351,517

Operating income (loss)

23,450

(4,914)

(45)

(16,658)

1,833

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For the Six Months Ended June 30, 2021











International

US

Renewable

Corporate and

Telecom

Telecom

Energy

Other (1)

Consolidated
Revenue

Communication Services

Mobility - Business

$
2,495

$
918

$
—

$
—

$
3,413
Mobility - Consumer

42,080

4,349

—

—

46,429
Total Mobility

44,575

5,267

—

—

49,842
Fixed - Business

33,488

4,728

—

—

38,216
Fixed - Consumer

84,385

7,520

—

—

91,905
Total Fixed

117,873

12,248

—

—

130,121
Carrier Services

4,406

38,774

—

—

43,180
Other

456

—

—

—

456
Total Communication Services Revenue

167,310

56,289

—

—

223,599
Construction

—

21,632

—

—

21,632
Other

Renewable Energy

—

—

418

—

418
Managed Services

2,726

—

—

—

2,726
Total Other Revenue

2,726

—

418

—

3,144
Total Revenue

170,036

77,921

418

—

248,375

Operating income (loss)

27,786

(1,090)

(1,433)

(19,009)

6,254

~~(1)~~

~~Reconciling items refer to corporate overhead costs and consolidating adjustments~~

~~A comparison of our segment results for the six months ended June 30, 2022, and 2021 is as follows:~~

~~International Telecom.~~ Revenues within our International Telecom segment increased $5.2 million, or 3.1%, to $175.2 million from $170.0 million for the six months ended June 30, 2022 and 2021, respectively, as a result of an increase in Fixed and Mobility subscribers within our international markets. In addition, our US Virgin Islands and Bermuda markets recognized an increase in Carrier Services revenue as a result of increased tourism as certain COVID-19 related travel and stay-at-home restrictions were lifted. These increases, however, were partially offset by a $2.7 million reduction in federal support revenues in the US Virgin Islands.

Operating expenses within our International Telecom segment increased by $9.5 million, or 6.7%, to $151.7 million from $142.2 million for the six months ended June 30, 2022 and 2021, respectively. The increase was primarily the result of an increase in direct costs, primarily roaming expenses due to increased tourism in the US Virgin Islands and Bermuda, equipment expenses due to increased handset sales and an increase in sales and marketing expenses to support the expansion of our subscriber base.

~~As a result, our International Telecom segment’s operating income decreased $4.3 million, or 15.5%, to $23.5 million from $27.8 million for the six months ended June 30, 2022 and 2021, respectively.~~

~~US Telecom~~. Revenue within our US Telecom segment increased by $98.4 million, or 126.3%, to $176.3 million from $77.9 million for the six months ended June 30, 2022 and 2021, respectively, primarily as a result of $120.9 million associated with the Alaska Transaction partially offset by a $16.3 million reduction in construction revenue related to the FirstNet Transaction as well as a reduction in roaming revenue due to the restructuring of certain carrier contracts in our western United States operations.

Operating expenses within our US Telecom segment increased $102.2 million to $181.2 million from $79.0 million for the six months ended June 30, 2022 and 2021, respectively, as a result of the Alaska Transaction and increases in other expenses being incurred in connection with both the FirstNet Transaction and the CARES Act-funded

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build-out of rural broadband operations, partially offset be a decrease in FirstNet construction costs of $16.8 million. In addition, certain costs were incurred during the six months ended June 30, 2022 that were not incurred during the six months ended June 30, 2021 as a result of the impact of COVID-19 restrictions.

As a result of the above, our US Telecom segment’s operating loss increased by $3.8 million to a loss of $4.9 million from a loss of $1.1 million for the six months ended June 30, 2022 and 2021, respectively.

~~Renewable Energy.~~ ~~Until the completion of the Vibrant Transaction on January 27, 2021, we distributed generation solar power to~~ ~~commercial and industrial customers~~ ~~under the Vibrant name in India. Accordingly, we did not generate revenue or incur operating expenses within our Renewable Energy segment subsequent to that date. For the~~ ~~six months ended June 30, 2021, we generated revenue, incurred operating expenses and reported an operating loss of $0.4 million, $1.1 million and $0.7 million, respectively.~~

~~The following represents a year over year discussion and analysis of our results of operations for the six months ended June 30, 2022 and 2021 (in thousands):~~

Six Months Ended

Amount of

Percent

June 30,

Increase

Increase

2022

2021

(Decrease)

(Decrease)



REVENUE:











Communication services

$
338,338

$
223,599

$
114,739

51.3
%
Construction

5,283

21,632

(16,349)

(75.6)

Other

7,896

3,144

4,752

151.1

Total revenue

351,517

248,375

103,142

41.5

OPERATING EXPENSES (excluding depreciation and amortization unless otherwise indicated):

Cost of communication services and other

150,871

97,986

52,885

54.0

Cost of construction revenue

5,319

22,142

(16,823)

(76.0)

Selling, general and administrative

115,519

78,344

37,175

47.5

Transaction-related charges

966

2,126

(1,160)

(54.6)

Depreciation and amortization

67,109

39,849

27,260

68.4

Amortization of intangibles from acquisitions

6,508

813

5,695

n/m

Loss on disposition of long-lived assets

3,392

861

2,531

294.0

Total operating expenses

349,684

242,121

107,563

44.4

Income (loss) from operations

1,833

6,254

(4,421)

(70.7)

OTHER INCOME (EXPENSE):

Interest income

3

40

(37)

(92.5)

Interest expense

(7,593)

(2,285)

(5,308)

232.3

Other income (expense)

1,474

2,309

(835)

(36.2)

Other income (expense), net

(6,116)

64

(6,180)

n/m

INCOME (LOSS) BEFORE INCOME TAXES

(4,283)

6,318

(10,601)

(168)

Income tax provision (benefit)

(1,018)

(1,247)

229

(18.4)

NET LOSS

(3,265)

7,565

(10,830)

(143.2)

Net income attributable to noncontrolling interests, net of tax:

1,794

(2,842)

4,636

(163.1)

NET LOSS ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS

$
(1,471)

$
4,723

$
(6,194)

(131.1)
%

~~n/m = not meaningful~~

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~~Communications Services Revenue~~

~~Mobility Revenue.~~ Mobility revenue increased by $2.4 million, or 4.8%, to $52.2 million for the six months ended June 30, 2022 from $49.8 million for the six months ended June 30, 2021. Of this increase, $4.6 million related to an increase in revenue from business customers while revenue from consumers declined by $2.2 million. The increase in Mobility revenue, within our segments, consisted of the following:

●

~~International Telecom~~. Within our International Telecom segment, Mobility revenue increased by $3.9 million, or 8.7%, to $48.5 million for the six months ended June 30, 2022 from $44.6 million for the six months ended June 30, 2021. Mobility revenue increased in each of our markets as total revenue from business customers increased by $4.8 million which was partially offset by a decline of $0.8 million in revenue from consumers. The increases were the result of improved retail and marketing strategies which lead to an increase in subscribers and equipment sales in certain markets.

●

~~US Telecom~~. Mobility revenue within our US Telecom segment decreased by $1.6 million, or 30.2%, to $3.7 million from $5.3 million for the six months ended June 30, 2022 and 2021, respectively. Of this decrease, $1.3 million related to a decrease in revenue from consumers within our retail operations due to a decrease in subscribers while the remaining $0.2 million decrease was the result of a ~~decrease in revenue from our private networks business.~~

~~Fixed Revenue.~~ ~~Fixed revenue increased by $83.7 m~~illion, or 64.3%, to $213.8 million from $130.1 million for the six months ended June 30, 2022 and 2021, respectively. Of this increase, $55.0 million and $28.7 million relate to revenue from business and consumer customers, respectively. The increase in Fixed revenue, within our segments, consisted of the following:

●

~~International Telecom~~. Within our International Telecom segment, Fixed revenue decreased by $1.2 million, or 1.0%, to $116.7 million from $117.9 million for the six months ended June 30, 2022 and 2021, respectively, primarily as a result of the previously disclosed and scheduled $2.7 million reduction in revenue from the FCC’s High Cost Program. Partially offsetting these decreases was an increase in revenue from fixed broadband fiber subscribers and services to further enable and support remote working in our markets.

●

~~US Telecom~~. Fixed revenue within our US Telecom segment increased by $84.9 million, to $97.1 million from $12.2 million for the six months ended June 30, 2022 and 2021, respectively. This increase was related to the Alaska Transaction, which generated $83.5 million of Fixed revenue during the six months ended June 30, 2022, and a $1.4 million increase, within the western United States, related to an increase in usage for both business and consumer subscribers to support increased remote working.

~~Carrier Services Revenue.~~ Carrier Services revenue increased by $28.4 million, or 65.7%, to $71.6 million from $43.2 million for the six months ended June 30, 2022 and 2021, respectively. The increase, within our segments, consisted of the following:

●

~~International Telecom~~~~. Within our International Telecom segment, Carrier Services revenue increased by $2.4~~ million, or 54.5%, to $6.8 million, from $4.4 million for the six months ended June 30, 2022 and 2021, respectively, as a result of an increase in tourism, primarily within the US Virgin Islands and Bermuda, that resulted in increased roaming revenues.

●

~~US Telecom~~~~. Carrier Services revenue within our US Telecom segment increased by $25.9 million, or 66.8%, to $64.7 million from $38.8~~ million, for the six months ended June 30, 2022 and 2021, respectively, primarily as a result of the Alaska Transaction, which generated $31.9 million of Carrier Services revenue during the six months ended June 30, 2022 and a $0.9 million increase in revenue from our wholesale long-distance business. These increases were partially offset by the revenue reductions in our western United States operations as a result of the restructure of certain carrier contracts.

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~~Other Communications Services Revenue.~~ ~~Other Communications Services revenue increased to $0.7 million from $0.5 million for the six months ended June 30, 2022 and 2021, respectively.~~

~~Construction Revenue~~

During the six months ended June 30, 2022 and 2021, Construction revenue decreased to $5.3 million from $21.6 million, respectively, as a result of a decrease in the number of sites completed during 2022 as compared to 2021. As of June 30, 2022, 65% of the cell sites related to the FirstNet Agreement were completed and we expect another 20% of the total build to be completed during the second half 2022 with the remainder to be completed in early 2023.

~~Other Revenue~~

~~Renewable Energy Revenue.~~ As a result of the Vibrant Transaction, we did not generate any renewable energy revenue during the six months ended June 30, 2022 and generated $0.4 million of renewable energy revenue during the six months ended June 30, 2021.

~~Managed Services Revenue.~~ Managed Services revenue increased by $5.2 million to $7.9 million from $2.7 million for the six months ended June 30, 2022 and 2021, respectively, as a result of the Alaska Transaction, which generated $5.5 million during the six months ended June 30, 2022~~. Our Managed Services revenue in our International Telecom segment decreased $0.3 million, or 11.1%, to $2.4 million from $2.7 million for the~~ ~~six months ended June 30, 2022 and 2021, respectively.~~

~~Operating Expenses~~

~~Cost of communication services and other.~~ Cost of communication services and other increased by $52.9 million, or 54.0%, to $150.9 million from $98.0 million for the six months ended June 30, 2022 and 2021, 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 increased by $1.4 million, or 2.1%, to $69.1 million from $67.7 million, for the six months ended June 30, 2022 and 2021, respectively. This increase was the result of an increase in roaming expense, due to an increase in related roaming revenues from higher levels of travel and tourism in the US Virgin Islands and Bermuda, as well as an increase in equipment expense as a result of improved retail and marketing strategies which lead to an increase in handset sales. These increases were partially offset by reduced network maintenance and facility costs

●

~~US Telecom~~. Cost of communication services and other within our US Telecom segment increased by $51.7 million, or 168.4%, to $82.4 million from $30.7 million for the six months ended June 30, 2022 and 2021, respectively, as a result of the Alaska Transaction which incurred $50.8 million of these costs during the six months ended June 30, 2022, a $1.1 million increase in data transport costs in connection with the fully constructed cell sites as part of the FirstNet Transaction and a $1.1 million increase within our wholesale long-distance voice services business to support its increase in revenues. These increases were partially offset by decreases in our private network business.

~~Cost of construction revenue.~~ During the six months ended June 30, 2022 and June 30, 2021, cost of construction revenue decreased to $5.3 million from $22.1 million as a result of a decrease in the number of sites completed during 2022 as compared to 2021. As of June 30, 2022, 65% of the cell sites related to the FirstNet Agreement were completed and we expect another 20% of the total build to be completed during the second half of 2022 with the remainder to be completed in early 2023.

~~Selling, general and administrative expenses.~~ ~~Selling, general and administrative expenses increased by $37.2 m~~illion, or 47.5%, to $115.5 million from $78.3 million for the six months ended June 30, 2022 and 2021, respectively. The net increase 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 $4.9 million, or 10.4%, to $51.9 million from $47.0 million for the six months ended June 30, 2022 and 2021, respectively. This increase was incurred within all of our international markets primarily as a result of an increase in our sales and marketing capabilities to support the expansion of our subscriber base.

●

~~US Telecom~~. Selling, general and administrative expenses increased within our US Telecom segment by $32.4 million to $48.3 million from $15.9 million, for the six months ended June 30, 2022 and 2021, respectively, primarily as a result of the Alaska Transaction, which generated $35.5 million of these costs during the six months ended June 30, 2022 partially offset by a decrease in spending within our private network business.

●

~~Renewable Energy.~~ During the six months ended June 30, 2022 and 2021, our Renewable Energy segment incurred a nominal amount and $0.4 million of selling, general and administrative expenses, respectively, as a result of the Vibrant Transaction.

●

~~Corporate Overhead.~~ Selling, general and administrative expenses within our corporate overhead increased by $0.3 million, or 2.0%, to $15.3 million from $15.0 million, for the six months ended June 30, 2022 and 2021, respectively, primarily related to an increase in professional service expenses, integration costs associated with the completion of the Alaska Transaction and an increase in travel related costs.

~~Transaction-related charges.~~We incurred $1.0 million and $2.1 million of transaction-related charges during the six months ended June 30, 2022 and 2021, respectively. Transaction-related charges incurred during both periods were primarily related to the Alaska Transaction.

~~Depreciation and amortization expenses.~~ Depreciation and amortization expenses increased by $27.3 million, or 68.6%, to $67.1 million from $39.8 million for the six months ended June 30, 2022 and 2021, respectively. The net increase 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 8.2%, to $29.0 million from $26.8 million, for the six months ended June 30, 2022 and 2021, respectively. This increase was a result of recent upgrades and expansions to this segment’s network.

●

~~US Telecom~~. Depreciation and amortization expenses increased within our US Telecom segment by $25.9 million to $36.2 million from $10.3 million, for the six months ended June 30, 2022 and 2021, respectively, primarily as a result of the Alaska Transaction.

●

~~Renewable Energy~~~~. Our Renewable Energy segment incurred $0.2 million of depreciation and amortization expenses during the six months ended June 30, 2021.~~

●

~~Corporate Overhead~~. Depreciation and amortization expenses decreased within our corporate overhead by $0.7 million, or 26.9%, to $1.9 million from $2.6 million, for the six months ended June 30, 2022 and 2021, respectively, primarily as a result of certain assets becoming fully depreciated in recent periods.

~~Amortization of intangibles from acquisitions.~~Amortization of intangibles from acquisitions increased by $5.7 million to $6.5 million from $0.8 million for the six months ended June 30, 2022 and 2021, respectively, as a result of the Alaska Transaction.

~~Loss on disposition of long-lived assets~~. During the six months ended June 30, 2022, we recorded a loss on the disposition of long-lived assets of $3.4 million. Of this amount, $2.4 million was incurred in our US Telecom segment relating to the disposal of certain assets while $1.0 million was incurred in our International Telecom segment as a result of the modification of agreements for the use of other certain assets.

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~~During the six months ended June 30, 2021, we recorded a loss on the disposition of long-lived assets of $0.9 million, primarily related to the Vibrant Transaction.~~

~~Interest income.~~ Interest income represents interest earned on our cash, cash equivalents, restricted cash and short-term investment balances and were nominal amounts during both the six months ended June 30, 2022 and 2021.

~~Interest expense.~~ Interest expense increased to $7.6 million from $2.3 million for the six months ended June 30, 2022 and 2021, respectively, as additional interest expense was incurred as a result of new borrowings under the 2019 CoBank Credit Facility, the Alaska Credit Facility and the Receivables Credit Facility as well as an increase in interest rates.

~~Other income (expenses).~~ For the six months ended June 30, 2022, other income (expenses) was $1.5 million of income primarily related to gains from our noncontrolling investments partially offset by increased expenses associated with certain employee benefit plans and losses on foreign currency transactions.

~~For the~~ ~~six~~ months ended June 30, 2021, other income (expense) was income of $2.3 million which was primarily related to gains from our noncontrolling investments partially offset by a net loss on foreign currency transactions.

~~Income taxes.~~~~Our effective tax rate for the six months ended June 30, 2022 and 2021 was 23.8% and (19.7%), respectively.~~

We recorded an income tax benefit of $1.0 million in relation to a pretax loss of $4.3 million for the six months ended June 30, 2022. The effective tax rate for the six months ended June 30, 2022 was primarily impacted by the following items (i) the mix of income generated among the jurisdictions in which we operate, (ii) a $2.1 million net expense recognized discretely to record a valuation allowance 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 $3.3 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 effective tax rate for the six months ended June 30, 2021 was primarily impacted by the following items: (i) the mix of income generated among the jurisdictions in which we operate and (ii) discrete items including a $3.4 million benefit from the reversal of an unrecognized tax position due to a statute of limitations expiration and a $1.0 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 onetimeone-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 attributable to noncontrolling interests, net of tax. Net income attributable to noncontrolling interests, net of tax reflected an allocation of ~~$1.8~~losses of $1.2 million ~~of losses~~ and ~~$2.8~~$1.0 million ~~of income~~ generated by our less than wholly owned subsidiaries for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. Changes in net income attributable to noncontrolling interests, net of tax, within our segments, consisted of the following:

●

International Telecom. Within our International Telecom segment, net income attributable to noncontrolling interests, net of tax ~~decreased~~increased by ~~$1.1~~$0.3 million, or ~~31.4%~~20.0%, to an allocation of ~~$2.4~~$1.8 million of income from an allocation of ~~$3.5~~$1.5 million of income for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, primarily

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as a result of ~~reduced~~increased profitability at ~~our~~certain less than wholly owned subsidiaries ~~partially offset by an increase in our ownership in certain international markets.~~within this segment.

●

US Telecom. Within our US Telecom segment, netnet income attributable to noncontrolling interests, net of tax decreased by ~~$4.3~~$0.5 million, or 20.0%, to an allocation of losses of ~~$4.2~~$3.0 million from an allocation of ~~income~~losses of ~~$0.1~~$2.5 million for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, as a result of the ~~Alaska Transaction and reduced profitability in certain~~increased losses at our less than wholly owned subsidiaries within ~~our US Mobility operations.~~this segment.

Net ~~income (loss)~~loss attributable to ATN International, Inc. stockholders. Net ~~income (loss)~~loss attributable to ATN International, Inc. stockholders was a loss of ~~$1.5~~$5.9 million for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 as compared to ~~income~~a loss of ~~$4.7~~$0.9 million for the ~~six~~three months ended ~~June 30, 2021.~~March 31, 2022.

On a per diluted share basis, net ~~income (loss)~~loss was a loss of ~~$0.24~~$0.44 per diluted share for the ~~six~~three months ended ~~June 30, 2022 (which includes the impact of accrued preferred dividends of $2.3 million)~~March 31, 2023 as compared to ~~income~~a loss of ~~$0.30~~$0.13 per diluted share for the ~~six~~three months ended ~~June 30, 2021.~~

March 31, 2022. Such per share amounts were negatively impacted by accrued preferred dividends of $1.0 million and $1.1 million for the three months ended March 31, 2023 and 2022, respectively.

Regulatory and Tax Issues

We are involved in ~~a number of~~several 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 a discussion of ongoing proceedings, see Note 14 toof the Consolidated Financial Statements in this Report.

~~Tax Reform~~

The Tax Cuts and Jobs Act of 2017 (the “Tax Act”), which was signed into law on December 22, 2017, has resulted in significant changes to the US corporate income tax system and the US Virgin Islands mirror code which replaces “United States” with “US Virgin Islands” throughout the Internal Revenue Code. The Tax Act transitions international taxation from a worldwide system to a modified territorial system and includes two base erosion prevention measures on non-US earnings, which has the effect of subjecting certain earnings of our foreign subsidiaries to US taxation as global intangible low taxed income (“GILTI”), eliminates the deduction of certain payments made to related foreign corporations, and imposes a minimum tax if greater than regular tax under the base-erosion and anti-abuse tax (“BEAT”). These changes became effective beginning in 2018 but did not have an impact on us in the initial or following years. Based on our forecasted income for 2022, we are not currently projecting a GILTI inclusion. We do not expect we will be subject to BEAT and therefore have not included any tax impacts of BEAT in our consolidated financial statements for the quarter ended June 30, 2022.

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, proceeds from dispositions, borrowings under our credit facilities 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, 2022,~~March 31, 2023, we had approximately ~~$72.2~~$61.0 million in cash, cash equivalents, and restricted cash. Of this amount, ~~$25.5~~$25.7 million was held by our foreign subsidiaries and is indefinitely invested outside the United States. In addition, we had approximately ~~$396.6~~$464.7 million of debt, net of unamortized deferred financing costs, as of ~~June 30, 2022.~~March 31, 2023. How and when we deploy our balance sheet capacity 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.

Sacred Wind Transaction. On November 7, 2022, we assumed $31.6 million of debt in connection with the Sacred Wind Transaction. See Acquisition of Sacred Wind Enterprises.

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~~Alaska Transaction.~~ ~~On July 22, 2021, Alaska Communications entered into a new debt financing in connection with the Alaska Transaction. See~~ ~~Acquisition of Alaska Communications System Group, Inc~~.

We continue to explore opportunities to expand our telecommunications business or acquire new businesses ~~and telecommunications licenses~~ 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 licenses~~ 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 ~~increased by $49.4~~was $52.8 million ~~to $74.7 million from $25.3~~and $34.5 million for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. Capital expenditures for the six months ended June 30, 2022 and 2021 were $75.1 million and $41.9 million, respectively. Of these capital expenditure amounts, $3.9 million and $6.5 million for the six months ended June 30, 2022 and 2021, respectively, are reimbursable. We also incurred expenditures of $1.4 million and $5.2 million during the six months ended June 30, 2022 and 2021, respectively, for strategic investments. Partially offsetting these expenditures were cash receipts of $1.8 million and $18.6 million during the six months ended June 30, 2022 and 2021, respectively, for the proceeds from the Vibrant Transaction and a receipt of $3.3 million during the six months ended June 30, 2021 for certain government grants.

~~Cash provided by (used in) financing activities.~~ ~~Our financing activities provided us with $15.4 million during the six months ended June 30, 2022. For the six months ended June 30, 2021, we used $11.2 million for our financing activities.~~ The net ~~change~~increase in cash used for investing activities of ~~$26.6~~$18.3 million was ~~primarily a~~the result of an increase in capital expenditures of $18.3 million, which includes an increase in reimbursable capital expenditures under certain government programs of $1.9 million.

Cash provided by financing activities. Cash provided by financing activities increased by $18.8 million to $38.0 million from $19.2 million for the three months ended March 31, 2023 and 2022, respectively. This increase was primarily related to an increase in borrowings, ~~from~~net of repayments, under our credit facilities of ~~$39.4~~$22.4 million and a $1.9 million reduction in cash used to repurchase non-controlling interests in certain less than wholly-owned subsidiaries. These increases in cash provided by financing activities were partially offset by ~~the~~a reduction in borrowings, due to repayments under our customer receivable credit facility of $4.3 million and a $0.6 million increase in our repayments under those facilities of $25.4 million. Other significant changes in financing activities included the decreases in payments made for the repurchase of noncontrolling interests in our less than wholly-owned subsidiaries, distributions made to the minority stockholders of our less than wholly-owned subsidiaries and the repurchase ofdividends paid on our common ~~stock of $8.2 million, $3.1 million and $1.3 million, respectively.~~

stock.

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.

Capital expenditures. Historically, a significant use of our cash has been for capital expenditures to expand and upgrade our telecommunications networks and ~~to expand our previously owned renewable energy operations.~~business support systems.

For the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ we spent approximately ~~$75.1~~$52.7 million and ~~$41.9~~$34.5 million, respectively, on capital expenditures relating to our telecommunications networks and ~~our~~ business support systems of which ~~$3.9~~$2.1 million and ~~$6.5~~$0.2 million, respectively, are ~~reimbursable.~~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
2022

$
33,870

$
40,804

$
424

$
75,098
2021

21,843

18,792

1,297

41,932


	Capital Expenditures

		International		US		Corporate and
Three months ended March 31,		Telecom		Telecom		Other (1)		Consolidated
2023	$	21,464	$	31,261	$	—	$	52,725
2022		15,170		19,095		203		34,468

(1)

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

We are continuing to invest in our telecommunication networks along with our operating and business support systems in many of our markets. ~~Such~~For the year ended December 31, 2023, such investments ~~primarily relate to the upgrade and expansion of our networks and~~ are expected to total approximately ~~$150~~$160 million to ~~$160~~$170 million, net of reimbursable amounts, ~~for the full year 2022.~~

~~We expect~~and will primarily relate to ~~fund our current capital expenditures primarily from our current cash balances, cash generated from operations~~network expansion and ~~our existing credit facilities including the Receivables Credit Facility.~~

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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 accumulated earnings of foreign subsidiaries.

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Dividends. ~~We use cash-on-hand to make dividend payments to our stockholders when declared by our Board of Directors.~~ For the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, our Board of Directors declared ~~$5.4~~$3.3 million of dividends to our stockholders which includes a ~~$0.17~~$0.21 per share dividend declared on ~~June 13, 2022~~March 14, 2023 and paid on ~~July 8, 2022.~~April 7, 2023. We have declared quarterly dividends since the fourth quarter of 1998.

Stock Repurchase Plan. On September 19, 2016, our Board of Directors authorized the repurchase of up to $50.0 million of our common stock from time to time on the open market or in privately negotiated transactions (the “2016 Repurchase Plan”). We repurchased ~~$0.9~~$1.4 million and ~~$2.2~~$0.9 million of our common stock under the 2016 Repurchase Plan during the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. As of ~~June 30, 2022,~~March 31, 2023, we had ~~$19.5~~$18.0 million authorized and available for share repurchases under the 2016 Repurchase Plan.

Sources of Cash

Cash provided by operations. Cash provided by operating activities was ~~$50.7~~$16.0 million for the ~~six months~~year ended ~~June 30, 2022~~March 31, 2023 as compared to ~~$27.5~~$11.4 million for the ~~six~~three months ended ~~June 30, 2021.~~March 31, 2022. The increase of ~~$23.2~~$4.6 million was primarily related to ~~a decrease in net income of $10.8 million offset by~~ an increase in ~~depreciation~~cash provided by operating assets and ~~amortization~~liabilities, primarily receivables of $1.9 million and certain accrued expenses of ~~$33.0~~$2.9 million.

CoBank Credit Facility

On April 10, 2019, we entered into a credit facility, with CoBank, ACB and a syndicate of other lenders ~~(the~~(as amended, the “2019 CoBank Credit Facility”). The 2019 CoBank Credit Facility provides for a $200 million revolving credit facility that includes (i) up to $75 million for standby or trade letters of credit and (ii) up to $10 million under a swingline sub-facility. Approximately ~~$26.0~~$24.0 million of performance letters of credit have been issued and remain outstanding and undrawn as of ~~June 30, 2022.~~March 31, 2023. The 2019 CoBank Credit Facility matures on April 10, 2024.

Amounts borrowed under the 2019 CoBank Credit Facility bear 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 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 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 is 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 must also pay 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.

On November 7, 2022, we further amended the 2019 CoBank Credit Facility to allow for the incurrence of certain indebtedness related to payment guarantees in connection with its Replace and Remove project.

On December 28, 2022, we further amended the 2019 CoBank Credit Facility, effective November 7, 2022, to allow for certain transactions contemplated with our recently completed acquisition of Sacred Wind Enterprises, Inc.

The 2019 CoBank Credit Facility contains customary representations, warranties and covenants, including a financial covenant that imposes a maximum ratio of indebtedness to EBITDA as well as covenants limiting additional indebtedness, liens, guaranties, mergers and consolidations, substantial asset sales, investments and loans, sale and leasebacks, transactions with affiliates and fundamental changes. Our investments in “unrestricted” subsidiaries and certain dividend payments to our stockholders are not limited unless the Total Net Leverage Ratio is equal to or greater than 1.75 to 1.0. The Total Net Leverage Ratio is measured each fiscal quarter and is required to be less than or equal to 2.75 to 1.0. In the event of a Qualifying Acquisition (as defined in the 2019 CoBank Credit Facility), the Total Net Leverage Ratio increases to 3.25 to 1.0 for the subsequent three fiscal quarters.

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The 2019 CoBank Credit Facility also provides for the incurrence by us of incremental term loan facilities, when combined with increases to revolving loan commitments, in an aggregate amount not to exceed $200 million (the

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~~“Accordion”~~ “Accordion”). Amounts borrowed under the Accordion are also subject to proforma compliance with a net leverage ratio financial covenant.

As of ~~June 30, 2022,~~March 31, 2023, we were in compliance with all of the financial covenants, had ~~$78.0~~$122.0 million outstanding ~~in borrowings~~ and ~~net of the $26.0~~$54.0 million of availability in connection with the 2019 CoBank Credit Facility. There were no outstanding ~~performance letters of credit, had $96.0 million of availability~~interest rate hedge agreements under the 2019 CoBank Credit ~~Facility.~~ Facility as of March 31, 2023.

Letter of Credit Facility

On November 14, 2022, we entered into General Agreement of Indemnity to issue performance Standby Letters of Credit on behalf of us and our subsidiaries. As of March 31, 2023, $4.2 million of Standby Letters of Credit had been issued under this agreement.

Alaska Credit Facility

As of ~~June 30, 2022, $210.0~~March 31, 2023, Alaska Communications had drawn $17.0 million ~~was outstanding under the Alaska~~on its Revolving Credit Commitment and had $58.0 million is available to draw. The Term Loan balance was $230.0 million and ~~$10.0 million was outstanding under~~principal payments commence in the ~~Alaska Revolving Facility.~~fourth quarter of 2023. Both facilities mature on July 22, ~~2026.~~2026

In addition to the above changes, the ACS Amendment replaced the calculation of interest from an applicable margin applied to LIBOR with the same applicable margin applied to the Secured Overnight Financing Rate (“SOFR”) plus a 10-basis point adjustment.

We capitalized ~~$6.6~~$7.3 million of fees associated with the Alaska Credit Facility which are being amortized over the life of the debt and ~~$5.6~~$5.0 million were unamortized as of ~~June 30, 2022.~~March 31, 2023.

The Alaska Credit Facility also provides for incremental ~~term loans~~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 ~~LIBOR, or~~the forward-looking SOFR rate with a ~~LIBOR replacement rate as applicable,~~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 ~~LIBOR~~SOFR margin;

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●

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; and

●

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

Alaska Term Facility

The Alaska Term Facility contains events of default customary for facilities of this type.

As of March 31, 2023, we had $7.1 million outstanding and no available borrowings under the Alaska Term Facility.

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,~~us, Commnet Wireless, and CoBank, ACB (the “Receivables Credit Facility”).

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security, relate to the obligations of AT&T under the FirstNet Agreement.

On December ~~29, 2021,~~23, 2022, CoBank amended the Receivables Credit Facility and extended the delayed draw period to December 31, ~~2022.~~

2023.

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 accrues at a fixed annual interest rate to be quoted by CoBank.

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As of ~~June 30, 2022,~~March 31, 2023, we had ~~$41.3~~$48.9 million outstanding, of which ~~$5.3~~$6.8 million was current, and $$18.0 ~~29.7~~ million of availability under the Receivables Credit Facility. We capitalized ~~$0.9~~$0.8 million ofin fees associated with the Receivables Credit Facility which are being amortized over the life of the debt and ~~$0.7~~$0.6 million were unamortized as of ~~June 30, 2022.~~ March 31, 2023.

GTT Credit Facilities

On September 5, 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”) subject to the approval from the Minister of Finance at the Bank of Guyana. Such approval from the Minister of Finance was received during the quarter ended March 31, 2023.

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 11, 2023.

As of March 31, 2023, $3.6 million was outstanding under the overdraft facility and there were no outstanding amounts under the term facility.

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 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 Enterprises was not in compliance with as of December 31, 2021. Sacred Wind Enterprises submitted a corrective action plan to comply with the financial covenant as of December 31, 2025. On May 5, 2022, Sacred Wind Enterprise’s corrective action plan was accepted by the RUS. As of March 31, 2023, we were in compliance with that corrective action plan.

As of March 31, 2023, $30.6 million was outstanding under the Sacred Wind Term Debt. Of that amount, $3.2 million was current and $27.4 million was long term.

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

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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 our 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, 2022,~~March 31, 2023, $60.0 million of the Viya Debt remained outstanding and ~~$0.4~~$0.3 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. ~~This covenant will be~~The Ratio is tested onannually and we were in compliance with the Net Leverage Ratio as of December 31, 2022.

One Communications Debt

We ~~have~~had an outstanding loan from HSBC Bank Bermuda Limited (the “One Communications Debt”) which ~~is scheduled to mature~~matured and was repaid in full on ~~August 31, 2022 and bears~~December 22, 2022. This loan bore interest at the one-month LIBOR plus a margin ranging between 2.5% to 2.75% per annum paid quarterly.

The One Communications Debt contains customary representations, warranties and affirmative and negative covenants (including limitations on additional debt, guaranties, sale of assets and liens) and financial covenants, tested annually as of and for the twelve months ended December 31st, that limit the ratio of tangible net worth to long term debt and total net debt to EBITDA and require a minimum debt service coverage ratio (as defined in the One Communications Debt agreement).

~~As of June 30, 2022, $3.8 million of the One Communications Debt was outstanding.~~

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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 ~~and renewable energy industries.~~industry.

Restrictions under Credit Facility. Our 2019 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,~~Maturity of Credit Facility. Our 2019 CoBank Credit Facility matures on April 10, 2024, which is within twelve months of the date these consolidated financial statements are available to be issued. At March 31, 2023, we owed $122.0 million for amounts drawn under the credit facility. For the year ended December 31, 2022, we generated positive cash flows from operating activities of $102.9 million. At March 31, 2023, we had $56.0 million of unrestricted cash and cash equivalents and $5.0 million of restricted cash. If we are unable to refinance our existing debt or obtain additional financing on or before the maturity of the 2019 CoBank Credit Facility, ~~contains a~~this could impact our ability to meet our obligations coming due within one year after issuance of these consolidated financial ~~covenant that imposes a maximum ratio of indebtedness to EBITDA. As of June 30, 2022, we were in compliance with all of~~statements. We are actively pursuing debt financing options which would extend the ~~financial covenants~~maturity date of the 2019 CoBank Credit ~~Facility.~~Facility and may increase its capacity, and we expect to complete this financing process during 2023. In the event that we are unable to refinance or replace our 2019 CoBank Credit Facility, we have additional actions at our discretion, including reducing capital expenditures not required to sustain current network operations, reducing operating cash flows such as marketing and general and administrative expenses, and pursuing equity financing through issuance of equity securities in public markets. However, we do not currently believe these additional actions will be required to be implemented due to our debt financing plans.

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

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Capital markets. Our ability to raise funds in the capital markets depends on, among other things, general economic conditions, the conditions of the telecommunications ~~and renewable energy industries,~~industry, our financial performance, the state of the capital markets and our compliance with SEC requirements for the offering of securities.

We may file a new “universal” shelf registration statement with the SEC, to register potential future offerings 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,~~March 31, 2023 and 2022, ~~and 2021,~~ we recorded $0.2 million~~and $0.3 million, respectively, in losses on foreign currency transactions. During each of the six months ended June 30, 2022 and 2021, we recorded $0.4 million~~ 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 ~~increases~~an increase in operating costs, some of which we believe, ~~are~~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

~~See Note 2 to the Unaudited Condensed Consolidated Financial Statements included in this Report.~~None.

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, ~~2021.~~

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2022.

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 income statement.

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Employee Benefit Plans. We sponsor pension and other postretirement benefit plans for employees of certain subsidiaries. Net periodic pension expense is recognized in our income statement. We recognize a pension or other postretirement plan’s funded status as either an asset or liability in our consolidated balance sheet. 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, 2022,~~March 31, 2023, we had ~~$301.8~~$372.6 million of ~~outstanding~~ 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 ~~$3.1~~$3.7 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.

Item 4. CONTROLS AND PROCEDURES

~~Management’s~~ Evaluation of Disclosure Controls and ~~Procedures.~~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, 2022.~~March 31, 2023. 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”), ~~means~~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 inby the ~~SEC’s~~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, 2022,~~March 31, 2023, 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.~~ 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, 2022~~March 31, 2023 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 14 to the Unaudited Condensed Consolidated Financial Statements included in this Report.

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Item 1A.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 ~~2021~~2022 Annual Report on Form 10-K. The risks described herein and in our ~~2021~~2022 Annual Report on Form 10-K, as amended, are not the only risks facing our Company. Additional risks and

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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.

We may not be able to ~~consummate our merger with Sacred Wind on a timely basis or at all.~~

On July 26, 2022, we entered into a stock purchase agreement (the “Purchase Agreement”) with Sacred Wind Enterprises, Inc. (“Sacred Wind”) to purchase all of the issued and outstanding Sacred Wind stock (the “SWE Transaction”). The SWE Transaction remains subject to customary closing terms and conditions including (i) obtaining the necessary consents of third parties, including the Federal Communications Commission (“FCC”), (ii) obtaining the consent of the Rural Utility Service to the continuation of Sacred Wind’s current loan facilities, and (iii) the absence of certain legal impediments. There can be no guarantee that the regulatory authorities will grant such required approvals. In addition, the FCC may impose conditions on any approval, such as requiring the divestiture of certain markets and spectrum licenses. These conditions, if imposed and if sufficiently significant, may permit Sacred Wind not to consummate the transaction or may have other negative impacts on our business.

If we are able to successfully consummate the SWE Transaction, we may have difficulties integrating its operations and its business and our business, financial condition and results of operations could be adversely affected.

The SWE Transaction will occur as we are engaged in the transformation of our rural Southwest business from a primarily wholesale wireless business to a rural broadband and carrier service business model. We anticipate that the SWE Transaction will contribute to business transformation needed in our US Telecom segment by growing our fiber assets and increasing internal operational experience running those fiber assets. The complexities of the integration and expansion of Sacred Wind’s operations are not yet known, and our team will be executing on the integration alongside the transformation ofrefinance our existing business. We have devoted and will continue to devote a significant amount of time and attention to integrating these operations with our existing operations. If we have difficulties with the integration or transition process, it could harm our reputation and have a material adverse effect on our business, financial condition or results of operations.

~~We are reliant on government funding to comply with the FCC’s “Replace and Remove” Program.~~

A number of our equipment suppliers and vendors are based outside the United States, with China serving as a significant non-US source for our telecommunications network equipment in the United States. The FCC, and other governmental restrictions on the procurement of equipment and services from certain Chinese vendors, will result in a costly network replacement build in our western United States operations that, if not offset by government support, could adversely affect our results of operations. We have been allocated more than $207 million to reimburse us for our demonstrated costs attributable to the FCC’s Replace and Remove Program for our Chinese vendor equipment and services, however, due to a universal reduction in funding to all applicants in the Replace and Remove Program by the FCC, this represents less than the total amount of funding that we initially applied for. Although Congress is currently considering increasing funding to the FCC for the Replace and Remove Program, there can be no assurances that the FCC will actually receive such additional funding, that it will allocate any such additional funds to us, or that any such funds will be adequate to completely remove, securely destroy, and replace all prohibited equipment from our network.

In addition, the FCC has mandated an aggressive timeline for the completion of the Replace and Remove Program, requiring that participants only receive funding in reimbursement for costs incurred in program-related activities, and that the initial reimbursement request be submitted no later than July 14, 2023. In addition, we must complete the project no later than one year after submitting our initial reimbursement request, in effect requiring that build activities be concluded no later than July 2024. If we are unable to complete the removal and replacement in that time frame, cannot secure advanced funding for the program activitiescredit facility on terms and conditions ~~that are acceptable to us,~~

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~~or have underestimated the cost of replacement, it could adversely affect our ability to operate, maintain or expand our domestic network infrastructure.~~

~~Changes in~~ interest rates and credit markets could impact our ability to service and expand our financing.

We require a significant amount of capital to expand our networks and grow our business that we fund partially from cash from operations and in part from borrowings under our credit facilities. ~~Interest~~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”). At March 31, 2023, we owed $122.0 million for amounts drawn under the 2019 CoBank Credit Facility. For the year ended December 31, 2022, we generated positive cash flows from operating activities of $102.9 million. At March 31, 2023, we had $56.0 million of unrestricted cash and cash equivalents and $5.0 million of restricted cash. The 2019 CoBank Credit Facility matures on April 10, 2024 at which point the full amount outstanding is due and payable. Management is actively pursuing debt financing options which would extend the maturity date of the 2019 CoBank Credit Facility and may increase its capacity, however, higher interest rates ~~are highly sensitive to many factors which are beyond our control, including general economic conditions~~ and ~~policies of various governmental and regulatory agencies and,~~less availability in ~~particular,~~ the ~~U.S. Federal Reserve. Changes in monetary policy, including changes in interest rates,~~debt markets could increase our costs of borrowing.

In the event we are unable to refinance or replace the 2019 CoBank Credit Facility on terms and conditions favorable to us or at all, we may need to take actions impacting our operations such as reducing capital expenditures not required to sustain current network operations, reducing operating cash outflows such as marketing and general and administrative expenses. If we are unable to refinance our existing debt, obtain additional financing through the debt or equity markets, as needed, there may be an adverse impact on our operations or financial results.

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

Purchases of Equity Securities by the Issuer

On September 19, 2016, our Board of Directors authorized the repurchase of up to $50.0 million of our common stock from time to time on the open market or in privately negotiated transactions (the “2016 Repurchase Plan”). We have ~~$19.5~~$18.0 million available to be repurchased under that plan as of ~~June 30, 2022.~~

March 31, 2023.

The following table reflects the repurchases by us of our common stock during the quarter ended ~~June 30, 2022:~~March 31, 2023:

(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, 2022 — April 30, 2022

831
(1)
$
39.53

$
19,451,514
May 1, 2022 — May 31, 2022

—

—

—

19,451,514
June 1, 2022 — June 30, 2022

—

—

—

19,451,514


						(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
January 1, 2023 — January 31, 2023	—		$	—	—	$	19,451,514
February 1, 2023 — February 28, 2023	—			—	—		19,451,514
March 1, 2023 — March 31, 2023	71,563	(1)		39.69	35,656		18,044,049

(1)

~~Represents~~Includes 35,907 shares purchased on ~~April 30, 2022~~March 9, 2023, March 11, 2023, March 13, 2023 and March 25, 2023, from our executive officers and other employees who tendered these shares to us to satisfy their tax withholding obligations incurred in connection with the vesting of restricted stock ~~units~~awards at such date. These shares were not purchased under the 2016 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.

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Item 5. Other Information

Verizon Carrier Managed Services Agreement

~~Replace~~On May 10, 2023, Commnet Wireless, LLC (“Commnet”), a subsidiary of ATN International, Inc. (the “Company”) entered into a Carrier Managed Services Master Agreement (the “Agreement”) with Cellco Partnership d/b/a Verizon Wireless (“Verizon”), pursuant to which Commnet will provide a variety of network, infrastructure and ~~Remove Program~~

~~On July 15, 2022, the Company was notified~~technical services that ~~it was an approved participant~~will help deliver next generation wireless services to Verizon’s subscribers in Commnet’s current operating area 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. southwestern United States.

Pursuant to the ~~Replace~~Agreement and ~~Remove, the Company was allocated~~subject to certain limitations contained therein, Commnet will upgrade its wireless service in specific areas and provide services to Verizon for an initial seven year term (the “Commitment Period”). The Commitment Period will automatically renew for up to two additional three year periods, unless Verizon provides no less than twelve months’ notice on non-renewal prior to the expiration of the then-current term.

Verizon will pay Commnet an aggregate of an estimated approximately ~~$207~~$200 million in ~~reimbursement~~total amounts for both non-recurring payments for upgrades and construction to ~~cover documented~~its current RAN and ~~approved costs~~transport network and in monthly recurring charges over the initial Commitment Period.

The Agreement may be terminated at any time upon the mutual written consent of Commnet and Verizon. In addition, Verizon may terminate the Agreement upon the occurrence of certain events, including failure to ~~remove~~meet certain milestones or completion dates with respect to network coverage, failure to meet certain SLAs with respect to the ongoing services, the declaration of a bankruptcy event by Commnet and ~~securely destroy all ZTE communications equipment~~breach of any other material terms of the Agreement.

The foregoing summary of the Agreement is not intended to be complete and ~~services~~is qualified in its ~~U.S. networks and replace such equipment. The Replace and Remove Program requires that~~entirety by reference to the ~~Company complete its first request for reimbursement for services performed under~~full text of the ~~program no later than July 14, 2023 and that it complete the project no later than one year from submitting its initial reimbursement request.~~Agreement. The Company ~~is currently assessing the impact of this program on its financial statements and anticipates that it will be able~~intends to ~~meet the deadlines and requirements~~file a redacted copy of the ~~program.~~

~~On August 4, 2022, we amended our FirstNet~~ Agreement ~~with AT&T~~as an Exhibit to ~~extend~~its Quarterly Report on Form 10-Q for the overall build schedule. For more information about our FirstNet Agreement with AT&T, please refer to “FirstNet Agreement” under Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

quarter ending June 30, 2023.

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Item 6. Exhibits:



~~10.1~~3.1*			~~Amendment~~ ~~to Loan Agreement dated May 5, 2022 between~~Amended and Restated Bylaws of ATN ~~VI Holdings, LLC and Rural Telephone Finance Cooperative (incorporated~~International, Inc. (as amended March 8, 2023), incorporated by reference to Exhibit ~~10.1~~3.1 to the Company’s ~~Quarterly~~Current Report on Form ~~10-Q~~8-K (file No. 001-12593) ~~for the quarterly period ended March 31, 2022~~ filed on ~~May 10, 2022).~~March 14, 2023.

10.2*			~~Thir~~d Amendment to Network Build and Maintenance Agreement dated as of the 4th day of August, 2022 and effective as of the 1st day of January, 2022 by and between Commnet Wireless, LLC and AT&T Mobility LLC.

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~~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 8, 2022~~May 10, 2023	/s/ Michael T. Prior
	Michael T. Prior
	President and Chief Executive Officer

Date: ~~August 8, 2022~~May 10, 2023	/s/ Justin D. Benincasa
	Justin D. Benincasa
	Chief Financial Officer

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	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Net income (loss)	$	(1,309)	$	3,290	$	(3,265)	$	7,565
Other comprehensive income (loss):
Foreign currency translation adjustment		(1,680)		(370)		(1,423)		(410)
Reclassification of loss on pension settlement, net of $(0.8) million of tax		915		—		915		—
Unrealized gain (loss) on derivatives		(199)		29		(34)		60
Other comprehensive income (loss), net of tax		(964)		(341)		(542)		(350)
Comprehensive income (loss)		(2,273)		2,949		(3,807)		7,215
Less: Comprehensive income (loss) attributable to noncontrolling interests		784		(1,271)		1,794		(2,842)
Comprehensive income (loss) attributable to ATN International, Inc.	$	(1,489)	$	1,678	$	(2,013)	$	4,373


	Six months ended June 30, 2022		Six months ended June 30, 2021

Balance at beginning of period	$	13,885	$	12,121
Current period provision for expected losses		3,153		2,299
Write-offs charged against the allowance		(1,497)		(1,196)
Recoveries collected		208		267
Balance at end of period	$	15,749	$	13,491


Consideration Transferred	$	353,280
Noncontrolling interests		470
Total value to allocate		353,750
Purchase price allocation:
Cash and cash equivalents		10,553
Restricted cash		1,326
Short-term investments		434
Accounts receivable		30,453
Inventory, materials and supplies		1,374
Prepayments and other current assets		8,038
Fixed assets		408,694
Telecommunication licenses		683
Intangible assets		44,333
Operating lease right-of-use assets		60,402
Other assets		2,387
Accounts payable and accrued liabilities		(39,188)
Accrued taxes		(3,766)
Advance payments and deposits		(15,842)
Current portion of lease liabilities		(2,425)
Deferred income taxes		(17,040)
Lease liabilities, excluding current portion		(44,234)
Other liabilities		(92,432)
Net assets acquired	$	353,750


Consideration Received	$	35,218
Assets and liabilities disposed
Current assets		4,899
Property, plant and equipment		45,891
Other assets		439
Current liabilities		(759)
Net assets disposed	$	50,470

Consideration less net assets disposed		(15,252)

Foreign currency losses reclassified from accumulated other comprehensive income		(6,258)

Loss on sale		(21,510)
Transaction costs		(1,283)
Loss on sale including transaction costs	$	(22,793)