Okay, we're going to go ahead and get started with the next presentation. First off, I want to say thank you everyone for joining us here today. My name is Joe Noyons, I'm with Three Part Advisors. Up next, we have one of our investor relations clients, ATN International, which is traded on the NASDAQ under the symbol ATNI. Essential critical infrastructure for the telecom space. It has a pretty nice opportunity in the near to medium term for continued EBITDA margin expansion, improved operating cash flow. We had a recent transaction that really provided a lot of strength in the balance sheet and some flexibility going forward to focus on shareholder returns. Presenting on behalf of the company today is going to be the CEO, Naji Khoury, and the CFO, Carlos Doglioli.
Hi. Good morning, everyone. Thank you for the introduction. I am the CEO of the company. I just started a couple months ago. A bit later on, you'll hear from Carlos, our CFO, and if we meet again a bit later on a one-on-one, you'll also meet Michele, our Head of IR. Let me just get to the bottom very quickly. Very exciting opportunity, and hopefully by the time you leave, you feel the same way. Our offices are outside Boston, north of Boston, in Beverly. A company in business for a very long time, approaching 40 years, but more than 2,000 employees spread across different markets. We had a good run on the stock, if you follow us closely from the past few months, and I think we closed close to $30 yesterday.
I think what I like about our story is, one, it's quite diverse and the opportunities are quite significant, organically and inorganically. As we go through the presentation, I'm going to talk about the U.S. segment, and I'm going to talk about the international segment. Okay. Same business. We're a telecom providers, fixed and mobile enterprise, and carrier, and household and consumer, but in different market, very different dynamic as well. All right. If we look at the operating segment, the way we divide it, as I explained, by the U.S. and international. If you look at the revenue growth and the revenue distribution, it's quite almost equal between U.S. and international. When you split it between the business and household, you realize it's a 50/50 split between the two, and you wonder, have you capped your opportunities?
You're going to see as I go through the deck, that it's actually completely reversed in each of the segments. In the U.S. segment, we are dominant on the enterprise and have not penetrated well the consumer business, versus on the international side, we've done really well on the household, but we have opportunities on the enterprise. But when you put them together, math is math, you get a 50% roughly between the two. Our revenue is sitting at about $728 million. We did guide for this year, and you'll hear from Carlos, and we're on a good track. Our adjusted EBITDA is $190 million, and we guided as well for this year, about $183 million- $193 million. If you normalize 2025, you remove about $12 million worth of revenue and cost that we no longer have because of the tower sales that we had explained.
It's quite a growth from year over year. All right. If you follow us and you had a chance to go through our second quarter close, in which Carlos will go in a bit more detail, I'll tell you why I'm excited about the second quarter. First, we grew both segment on the U.S. and international. We had growth on both segment. Second, obviously, we did close the tower sale. It was $268 million cash in the bank, and there's still more coming as of the second close. We also announced a spectrum sale of about $41 million. We expect that to close in next year. O ur balance sheet is extremely strong. Right. Your next question might be, what are you going to do with all that capital? My answer is very simple. I need dry powder. We're thinking through our strategy.
We're thinking what we're going to do with it. We're not ready yet to commit what we're going to do with it. We did commit to doing a share buyback. The board approved to double the size from 15- 30. We're doing this. I think that should give you confidence that management is confident, the board is confident that we are undervalued and there is opportunity in that space. F or me, it's super critical that we do things right and we are very disciplined in our next step. In terms of. Now, digging a bit deeper on each segment, and you're going to see through the opportunity, I'm going to use the word optimize. The reason I'm using it and being very careful is that, yes, there is room to optimize the way we operate the business.
When I say optimize, it's not only about cost structure, it's about understanding what the consumer wants and understanding how the consumer sees us, which is typically not the way ATN has run this operation for the past many years. I'm changing this, and initial results are promising, right? If you look at those key metrics, 273,000 homes we pass in the Caribbean, right? We're improving, we're adding homes sequentially as well as year over year. If you do our penetration, 135 divided by 273, you get to a fairly healthy number. But there's still room to growth because many of these markets are not yet fully penetrated, okay? Including, for example, Guyana, which I'm very excited and we'll talk a bit more about it.
The mobile story is a different story that you are used to in the U.S., where most of the subscribers are postpaid, and the opposite in our part of the world, it's the other way around. Again, that's an opportunity as consumer have more disposable income, they switch from a prepaid to postpaid, they have a more expensive device, and so on. T here's an opportunity there. Our consumer revenue in that part of the world is 70%. There goes the switch between enterprise and fixed. T here is room to grow on enterprise, not only to change the percentage, because there is actually an adjustable market that we can go after. T hese are the charts. I'm not sure you can see them if it's too small, but you can download the deck later. If you're going to meet, we can give you a copy.
This is our trajectory. There is a bit of up and down. We lost a bit of government subsidy, for example, in Virgin Islands, that has impacted our numbers and has guided a bit lower for this current year as well. If you focus a bit on the right-hand side, you look at our margin, and it has been improving little over little, quarter over quarter, and I still think there is room to improve it. There is room to improve it. It probably cannot get to 50% EBITDA margin, but can it get closer to 40? Probably it could. This is not only about cutting costs, but doing things more efficiently, keeping the customers in mind as well. I will go through each market in a second, I will give you a flavor of how we operate in each market.
This is the split, on the right-hand side, consumer versus business. On your left-hand side, you will see as well, the split between mobile, fixed, and carrier. Our revenue is dominated by fixed, that is broadband. What is exciting about that part is that our competition is very limited in those markets. The market structure are in our favor. This is not a three, four-player market. On the mobile, it is a bit more competitive. For example, in Virgin Islands, we have three players. In Bermuda, we have, I would say, two and a half player. In Guyana, we have almost three players. In Cayman, we do not have mobile.
The competitive dynamic is different in the mobile side, but on the fixed, our anchor is a fiber deployment, and it is working in terms of growth, in terms of ability to serve the customers, and ability to offer very high speed as well. Now, give me a chance to go through each market for a second, and I will tell you, hopefully, you will get a good understanding of how we are thinking. If you look at Guyana for a second, I am not sure how familiar you are with that country. With the recent oil and gas discovery since maybe four or five years ago, it is growing at about 20% GDP year-over-year. It is probably the only country in the world that is growing at that rate. That is injecting a significant amount of infrastructure investment into the country, road, hospital, schools, business are coming in.
We are the incumbent player in Guyana. It is a fiber network that we have upgraded from copper to fiber. We are three-fourths into the country with fiber. We have a very solid mobile network. We are number two in that space. We are number one on the fixed side. H ousehold is growing, income is growing, penetration is growing, everything is heading in the right direction. We are in a very good position to be able to capture that growth. It obviously requires some investment, but it is definitely paying off. When it comes to Cayman, we are the attacker, we are the challenger. It is a fiber network that we are building. We build almost the entire island. We are still left with the East Side of the island, which we expect to build in the next year and a half, and we will have 100% coverage.
We're taking share from the incumbent, and we're winning. The moment we go in, we get 20, 30, 40% penetration in our fiber footprint, even though our competitor also has fiber. But our product and our pricing and our service is much more desirable. Bermuda, stable market. It's delivering great margin, high ARPU. It's an HFC network, very fiber deep. It's a great mobile network, and I consider it to be definitely the market that has been delivering consistent revenue and EBITDA. The Virgin Islands, it has gone through a bit up and down. It needs a bit of investment on the side of the network. We're going to go from an HFC to a fiber network over time.
It's going to take a bit of time, but it's an area that we need to sort of disconnect from the power grid, which is very unstable, unfortunately. There we have a mobile network, and we are number three out of three players in the market. Moving to the U.S. side. If you focus quickly on the big number of 251,000 homes, these are the homes we pass between Alaska and the Southwest, the Four Corners region, between our fiber build-out and our fixed wireless coverage. If you look at the number at the bottom, you ask yourself, "Hey, what are you doing? You only have 6,000 customers of a footprint of 251." This is where the opportunity lies. Our commercial strategy has not delivered in the past. We made some changes. We're working through the changes. We made some recent change in our Alaska CEO.
We're announcing a new CEO. She's starting next week. Things are happening that are going to increase that number. This is what I'm saying, that the residential part of the U.S. segment is going to increase over time. We have the fundamentals. We have what it takes to get there. In addition, we won a significant award, about $150 million BEAD build in Alaska, majority is in Alaska, and some of it is in the Southwest parts of the country, where we're going to build fiber to reach some homes that will be unprofitable to reach. But along the way, we're going to We call them grab along, where we're going to grab all the other homes that we can, otherwise we would not have been able to do because it's not profitable.
Our incremental investment now is much smaller than would've been otherwise, and that will increase our footprint, and it will increase our penetration as well. All right. In numbers, this is how the numbers look like. Again, it is a fixed base, and if you can put carrier, it's all fixed. There's no mobile in the U.S. If you look at EBITDA margin is quite compressed. It's in the low 20s. Again, this is where the opportunity lies in not only improving the top line, but a lot of that growth in the top line translate to EBITDA, when the conversion rate increases, which we are focusing on. This is by, on the left-hand side, again, mobility is almost nothing. It's almost zero. We had a network in the Southwest that we shut down, and the rest is mostly fiber-based.
On the right-hand side, as I mentioned, majority is business and the bottom is consumer. This is where we need to the blue part, the consumer part is a focus point. With that, I will pass it on to Carlos, our CFO, go through some numbers and then happy to jump in for Q&A at the end. If we can meet you one-on-one, that would be great. Thank you. Appreciate it.
Thank you, Naji.
Thank you, Carlos.
Good morning, everyone. I am going to try to go quick through the Q2 results. I guess, the main highlight certainly is that we saw continued operating momentum across both our segments, as well as we saw the benefits of the initial close of the tower sale. Revenue growth of close to 2% operating income of $240 million that reflected $230 million of the gain from the tower sale, and adjusted EBITDA improvement of close to 9% year-over-year, and total adjusted EBITDA margin expanded by 170 basis points. The beauty of the quarter was also that it reflected increases both in revenues and profitability across both segments. C ertainly strong results during that quarter. Moving on to the balance sheet. As you can see, we ended the quarter with a strong liquidity position, reflected benefits from the initial closing of the tower portfolio sale, which generated $268 million.
We used $68 million to repay the outstanding amounts in our CoB ank revolving facility, and ended the quarter with $513 million in outstanding debt on a much lower leverage ratio of 0.91x , and undrawn capacity of $240 million. Very strong liquidity position at the end of Q2. In terms of our capital expenditures, as you can see on the trends, 2022- 2023 as a percentage of revenues were periods of heavier investment. When you look at the capital expenditures in blue, you can see them trending more in line with what we see as more normalized levels in the long run of 10%-15% of revenues. You can also see throughout the years, the ramp-up in the reimbursable programs that we've been using in terms of taking advantage of government funding to continue to strengthen our infrastructure, especially in the U.S. segment.
For the first six months of the year, CapEx was $38 million and reimbursable was $27 million, which are slightly lower than what we did last year. Just to remind everybody, as we said on our Q2 earning, we manage CapEx on a full year basis, and we continue to expect capital expenditures for the year to remain in line with our guidance. Regarding government funding, it's important to mention also that we have provisional bid awards in the amount of $150 million in our key markets in the Southwest and Alaska, as well as more than $200 million of grant funding awarded to us or our partners that will be completed over the coming year or so. Moving on to return to shareholders. Just as a demonstration of the commitment that the company's always had to it, we've maintained an uninterrupted quarterly dividend since 1999.
During the quarter, the board approved and we announced a 5.5% increase in our quarterly dividend to $0.29 per share. In addition, as Naji mentioned, during July, our board authorized an expansion of the share repurchase program to $30 million. Turning to our outlook for the year, as we announced during our August 6th earning call, we reaffirmed our full year guidance with 2026 adjusted EBITDA expected to be in the range of $183 million-$193 million, including the impact of the initial closing of the U.S. tower portfolio sale and capital expenditures, net of reimbursable spending to remain in the range of $105 million-$115 million for the year. Regarding our priorities, the focus remains as Naji mentioned as well.
The focus remains on generating shareholder value through customer growth and maximization of infrastructure returns, leveraging government funding in the U.S. while improving operating margins and maintaining a healthy balance sheet. Why ATN? I think Naji also mentioned some of the things. We have really deep local experience in our markets. We have good positions, especially in the Caribbean market. Defensible infrastructure that is essential for the local connectivity. There's embedded asset value, which also was proved by the tower sale and the spectrum announcement, and we're very disciplined in terms of capital allocation. With that, Naji, I'll open it up for Q&A.
Can you talk a little bit about the growth of low-Earth- orbit constellations and what it means for both the broadband side but also mobile potentially with direct-to-device?
Yeah. Thank you. Sorry, we didn't catch your name.
Hunter.
Hunter. Nice to meet you. Let me repeat the question for the audience. Your question is about LEO, low- Earth- orbit satellite, what the threats could be and what it means for our business, and yeah, absolutely. Listen, very interesting question, one that I spend a lot of time on, and I'll address it in different ways. When you look at what LEO is doing and Starlink specifically and any future would come in, I look at it from two different perspective. I look at it as a partner, where we're going to be able to use that infrastructure for our own benefit, and I look at it as a competitor. Okay. As a user of that infrastructure, it helping us, and it's going to help our customer do a few things. It's going to help us provide a reliable service in very remote areas, right?
Where we have a fiber, for example, infrastructure, and we can use that as a backup. We'll offer to the consumer or to the enterprise a complete solution that includes both services, right? One that somebody like Starlink will not be able to do because they don't have feet on the ground. Also, we will use that, and we did that in Alaska, for example, to backhaul a significant amount of traffic to a very remote area that will be impossible to do. F rom there, we build fiber to the homes, and we connect homes. Right? N ow we are a user of that infrastructure that's further increasing our penetration and our growth. Right? T his is how I see it. As a competitor, again, I divide it into three different part. Part number one is do they compete in the world of broadband?
And the answer is yes, they compete. Nobody's going to deny that. I explained to you where the limiting factor is going to be on that first one. The second, the mobile ability to offer mobile, and the third is ability to offer D2D or device to device. Okay. Look at them in those three lenses. The first lens on the broadband. They do compete, and they do compete well in a very remote area where fiber is not an option. The moment fiber is an option, which is our case, we win. I'm not going to say we win 100% of the time, but we win most of the time. This is not only happening to us, it's happening to any other fiber providers.
The moment they serve a neighborhood or an area, there is no fiber and there is nothing, not even coax, they tend to have a higher penetration. The limiting factor of LEO and everything we have followed, and I've been following very carefully. If you look at the current satellite, which is the V3 now. The V3 has about 1 TB per second capacity on one beam versus about 200 Gb on the V2. They're starting to launch a V3 now. Even with that math, they cannot serve more than 50- 60 homes per square kilometer. There's just a physical limitation of number of homes they can serve. If you look at our footprint in the dense area, the risk is very low. The risk obviously increases when the density decreases significantly. Which you might find in some of this area.
Again, we're not going to ignore them. We're going to partner with them as much as we can. But if we have fiber in the ground, which is our strategy, we should be able to win. Are we going to lose 2%, 3%, 4% market share as a whole? Yeah, maybe, but not enough to swing the pendulum. On the second topic of on the mobile side. Too early to tell. Okay? I am of the belief, and I'm an engineer by education, I understand this very well. There is a limiting factor how much satellite can do. They need to have a terrestrial infrastructure. How they're going to provide that terrestrial infrastructure is the question. I don't have the answer. I can give you guesses, but I don't think the answer is clear yet.
There's going to be some need for terrestrial infrastructure, specifically for in-building coverage like we have here, right? Where most of the capacity is being used. The third aspect, which I think is very exciting from the LEO perspective, which is a completely different area that they will create or call it you have a pie, a pizza pie today. Are we going to share a slice or are we going to grow the pie? This third thing I'm going to talk about actually will grow the pie. That is on the D2D, which is basically a million of devices spread around the world, power meter, water meters, remote devices, those tiny little things that consume very little data, but very hard to reach with either a physical network or a mobile network. I think this is going to be a new area they're going to build.
This is the area that really doesn't exist to anyone today. T hey're going to create that, I think. So, sound like a bit of a lecture, but as you can tell, I understand very well that space. But in terms of ATN, I'm not worried because I think we have the right foundation. We have relationship with Starlink. We use them, and they use us as well. W e're plugged in. We're not isolated, or oops, what's going to happen? All right. T hat's a bit. T hank you for the question. Any other questions?
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Yes.
Talk about your stock buyback and sort of how aggressive you might be or just give me a sense because it's a pretty big number.
Let me see. I don't know, Carlos, if you have any comment, or I can.
You know, look, I think we don't necessarily.
You're going to have to come to this.
Yeah. In terms of the buyback, we don't necessarily get into the specific details of it. But certainly, we feel that the business is at a place where this was something that the board felt appropriate. When you look at all the work that we have been doing in terms of improving cash flows and strengthening the balance sheet, I think this is the time. We haven't done it for a while, I think it was kind of an important moment for us.
Okay. We'll wait and see how serious you guys are on that. I hear you.
If I may add, of course, to answer your question, I'm sorry, I didn't get your name.
Rudy.
Rudy. Nice to meet you, Rudy. At the end of the day, as you all know, it's a capital allocation game.
Right.
I need a bit of time to figure out if I put a dollar back in the buyback, what is my return versus investing it into the network or into organic, inorganic growth. We're going through that exercise today, and we're very disciplined about it. That's one of the reason we decided to keep the dry powder, keep the cash in the bank a bit until we figure out what we do. Our incremental buyback is not as big as the amount of capital we have collected from the recent tower sale and to be collected as well. In the grand scheme of things, it's not a big number, but that's the math that we're going through. We need a bit more time to figure out how better to allocate the CapEx. If the answer is share buyback, it is what it is.
But I don't have that answer yet.
Fair enough. Thank you.
Okay. Thank you, Rudy.
On the U.S. side specifically, just on, you mentioned there's probably some room on the bottom line from there. Just given you've been here for a couple of months now, would you categorize some of that as low- hanging fruit, or is some of that margin expansion, as you mentioned as well, come from growth in specific sides of the business? Just a little bit more detail.
No, the question is about the U.S. EBITDA margin and what will it take to improve it, and my sense on it. Yes, I think it's a two points, exactly as you mentioned. One is revenue growth, which will happen. There is our ability and discipline for every dollar you add, a high percentage of it flows to the bottom line, and not much of it goes into gross, in the gross margin and gets consumed. That's something we are focusing on, improving our gross margin, majority of it can flow to the bottom line. The second one, yes, there are some low-hanging fruit, and that's the exercise we're going through. I think if you look at how we operated both the Southwest as well as Alaska, we focus a lot on revenue growth, but I don't think we took care of our cost structure.
Our cost structure today does not match our revenue. T here are some low-hanging fruits, but there's some that will require CapEx investment to get a bit more efficient in the way we do things. That's an example. For example, Alaska, we're about wrapping up our complete overhaul of our OSS/BSS platform. I mean complete. We are very close to being complete this year. We will be done in 2026, and that's going to reflect a lot of improvement on our OpEx and therefore on our EBITDA. On the Southwest part, I think it's some areas I need a bit more time. Actually, I'm heading there tomorrow, spend some time with the team in Albuquerque, to talk about that. But yes, there is definitely an opportunity there. I think it has to do also with not only improving the OpEx margin but also improving the gross margin.
Fiber, are we using our own backhaul? Are we leasing backhaul? Again, a bit of more detail in there, but there is definitely an opportunity. Even if you land somewhere between what you are today to what the international market is, it's a significant number. Yep. Thank you. Any other questions?
That's all for today. Thank you, Naji. We appreciate your time.
Thank you.