Anterix Inc. (ATEX) Earnings Call Transcript

[Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Natasha Vecchiarelli, Vice President of Investor Relations and Corporate Communications. Please go ahead.

Good morning, everyone. Thank you for joining us today for Anterix's second quarter fiscal year 2027 investor update call. I am Natasha Vecchiarelli, Vice President of Investor Relations and Corporate Communications. Joining me today are Scott Lang, President and CEO; Christopher Guttman-McCabe, Chief Regulatory and Communications Officer; and Elena Marquez, CFO. Please note that our second quarter financial results were issued yesterday afternoon and the related materials are available on our Investor Relations website. Today's call will begin with prepared remarks from management, followed by a question and answer session. We may also discuss our business outlook and make forward-looking statements. These statements are based on our current expectations and predictions. Actual events or results could differ materially due to risks and uncertainties described in our SEC filings, including our most recent Form 10-K and Form 10-Q. With that, I will turn the call over to Scott.

Thank you, Natasha. And thank you all for joining us. Last quarter, we said Anterix was no longer a single-path value story. The last 3 months have made that clearer. The market for spectrum is moving, strategic capital is flowing into the sector, and the number of available nationwide low-band assets is down to 1. It is Anterix. Since August 2025, nearly $70 billion has been committed to spectrum and spectrum-rich assets. The buyers include some of the largest and most respected visionary companies in the world, such as SpaceX, Amazon, and AT&T—companies that consistently skate to where the puck is going to be, not where it has been. They're securing the spectrum that will be needed for the networks of today and into the future. Even more important, these transactions have expanded their positions, but have not fulfilled their need. Licensed low-band spectrum is hardest to come by, and we have it. It travels farther, reaches inside buildings, and covers more ground with less infrastructure. Once a long-term strategic owner secures it, that spectrum is theirs and theirs alone. The Grain transaction shows what that scarcity is worth. Grain acquired a nationwide 800-megahertz portfolio in August in a transaction reported at $3.6 billion. Two months later, it agreed to sell that portfolio to SpaceX for a reported $8 billion. Critical infrastructure is where Anterix started. Our pipeline has grown from nearly a dozen active opportunities in August to 16 today that include 7-, 8-, and 9-digit deals. Utilities have consistently paid a premium for this spectrum. What has changed is the companies I mentioned earlier and others view spectrum as a key component of their forward-looking strategy, and that raises the bar for everyone. In this environment, strategic interest in our spectrum continues, and we are speaking with all the relevant parties. We are not dependent on 1 buyer, 1 structure, or 1 timeline. We have a real utility business, a growing set of opportunities, an asset that is becoming more capable and more scarce, and a device ecosystem that now includes multiple Apple devices. We understand what we own, and we are evaluating where it can create the greatest value. With that, I will turn it over to Chris.

Thank you, Scott. I love the Wayne Gretzky reference and the focus on value. Let me give you some updates on our spectrum. We have now crossed the 6-month milestone of the FCC's decision to provide us with the full 10 megahertz. In those 6 months, we have worked with CGPD to standardize the 10 megahertz for 5G. We have secured and successfully completed an investigation of satellite connectivity with Lynk. We have been included in an FCC NPRM to expand direct-to-device opportunities. We have continued to clear incumbents nationwide, and as Scott mentioned, we have secured Apple products as part of our device ecosystem. That is an amazing number of accomplishments in a 6-month period, further enhancing the value of our spectrum asset. Let me turn to 2 topics that naturally come up in discussions with investors and analysts: clearing and monetization. On clearing, we remain confident in our ability to clear the full 10 megahertz nationwide. Let me repeat that. We believe we can unlock the entirety of the country across the full 10 megahertz. Our approach continues to be strategic and market-driven. Approximately 85% of our nationwide spectrum remains available, including significant coverage across the majority of the largest metropolitan markets. On monetization, we see a broader opportunity than we did even a year ago. Utilities remain an important part of that opportunity, but the expanded capacity, established technology ecosystem, and emerging applications create additional possibilities across the satellite sector as well as other critical infrastructure and enterprise markets. On the satellite front, the FCC has taken another step that enhances opportunities for Anterix. On October 29th, the Commission advanced a notice of proposed rulemaking to modify its supplemental coverage from space rules, which includes consideration of adding 900 megahertz to the list of bands. This is a significant development that can support the evolution of our band and our opportunities. Ultimately, our objective is to make sure we are putting this spectrum to its highest and best use. The FCC's decision has expanded what the band can do, the technology ecosystem continues to develop and evolve, and we're actively working to advance the opportunities that it creates. With that, I will turn it over to Elena.

Thanks, Chris. My comments today are going to be fairly short because it was another solid quarter. As a company, we continue to make great progress across a number of fronts, and more broadly, the spectrum environment continues to be active. Starting with our financials and looking at our income statement, GAAP revenue for the quarter was approximately $2 million, and operating expenses were approximately $9.4 million. We also recorded a $6.1 million gain on license exchanges in 6 counties. Our balance sheet is strong. We ended the quarter with approximately $107.5 million in cash and no debt. We have approximately $33.1 million in contract proceeds outstanding, including approximately $9.6 million expected over the remainder of fiscal '27. During the quarter, we also invested $5.4 million in clearing. We remain disciplined on costs and invest where it makes the spectrum more valuable. With that foundation in place, let me take you through how we think about the value of our 900-megahertz spectrum. Double-clicking on one recent transaction, the SpaceX purchase of 800-megahertz spectrum at a reported $8 billion works out to roughly $1.70 per megahertz POP. What did that demonstrate? 2 things. First, the only other readily available low-band spectrum option is off the table. Second, a new price comparable has been set. So where does that place us? We recognize that we are at this moment the only remaining licensed low-band spectrum available nearly nationwide at a value that far exceeds our current market cap. As Scott said, we are not dependent on 1 buyer, 1 structure, or 1 timeline. Our balance sheet gives us the flexibility to make decisions carefully. We can be patient and disciplined while continuing to consider a range of monetization options. Patient, not passive. We're extremely disciplined in how we allocate capital. Capital goes where it creates the greatest long-term value per share, whether that is share repurchases, clearing and license acquisition, or preserving liquidity. Our board's $250 million share repurchase authorization runs through September 2029. We did not repurchase shares in the quarter, and the full authorization remains available. It is clear to see why we believe this asset is worth significantly more than the market reflects today. We're focused on maximizing the potential of this scarce asset that has just become more scarce. With that, I will turn the call back over to Scott.

Thank you, Elena. As you have heard from the team today, we are in a great spot. Our responsibility is to protect and increase the value of this asset and deliver the best outcome for shareholders. We love the position we are in. With that, operator, please open the line for questions.

[Operator Instructions] Please stand by while we compile the Q&A roster. Our first question comes from Greg Pendy with Clear Street. Your line is open.

A couple, just on the Apple iPhone arrangement regarding Band 106, can you just give us any color? Are there any customers using this, and when might we find out that customers are using this?

Yes, hey, Greg. It's Chris, and thank you. Great question. Yes, we actually do have several customers that are taking the phone through a trial internally. And you'll probably hear us talk about it from time to time. I don't think there'll be any press releases about the use or anything directly about that, but we definitely have multiple existing customers that are actively pursuing utilization of the iPhone. So it's a good outcome for Anterix, for our customers, for the ecosystem.

And then just another one, just on the buyback, I know you didn't use any of it this quarter, but how are you ranking your priorities, I guess, over the next, say, 6 months with your cash position? Is it clearing the band, buybacks, or possibly investing in new products?

Yes, Greg, thank you. I would say probably none of the above, potentially, as we're currently very focused on preserving liquidity and having a strong balance sheet to ensure that we can be patient as we consider different monetization options for our spectrum. And with $107.5 million in the bank, lower operating expenses, and an opportunistic approach to clearing costs, we're really in a great position to be able to exercise that patience. Of course, that is not equal to being passive, and the buybacks ultimately will continue being in our toolkit. I know I've commented in the past, we so far have returned $57 million in share repurchases over the past several years. And our board and management wanted to reauthorize the program as it expired in September to ensure that should there be the right time to pull that trigger, the program is available and no governance steps are required.

And then just one more, just on the deal pipeline. Can you just kind of tell us how many you think are in late stages? Just give us an update on how that pipeline has changed perhaps now that you've gone to 10 megahertz, and what those conversations are looking like on the utility side.

Yes. Hey there, this is Scott. Thanks for the question. As I stated in the prepared remarks, the active pipeline has gone from about a dozen to 16 during this last quarter. And I think your question is regarding the 16, which ones would we consider advanced, late stage, very active? I would say at least half. And those have been interesting, because with the dynamic happening regarding the value of the asset and the value of the spectrum, and as we alluded to in the prepared remarks, there's a couple of things that happened in the quarter, not least of which is we're the last man standing in low-band spectrum. And we have gone back to some of the utilities that we've been talking to for quite some time and have had to address the gap in pricing increases that have happened as a result of the value of spectrum and what both utilities and other potential strategics see that value to be. And so those conversations are very active. The utilities have had to sharpen their pencil. They're engaged. That takes a little bit of time. But as you heard us say in the last quarter and Elena emphasized, that patience we believe is paying off, and those conversations are active. But I would say about half of them I would put in a category of moving very quickly and very advanced as we continue to look at the other options that we have in front of us. They're nice, high-quality options that we're looking at, and we spend a lot of time on those every single day and looking at the best outcome for Anterix.

[Operator Instructions] Our next question comes from Michael Crawford with B. Riley Securities. Your line is open.

If you're successful in your goal of clearing a full 10 by 10, can you just break down for us in terms of megahertz POPs how much remains to be cleared or acquired pursuant to the report and order at 600-megahertz auction clearing prices, and then how much would have to be negotiated in transactions with owners of spectrum in markets like Boston where there are other holders of similar spectrum?

Yeah, Mike. So we have about 3 billion megahertz POPs available to monetize still. We are aware and have had conversations with every incumbent. We know what it will take to clear them and move them, including the folks up in Boston who have been—in fact, we have teams with some of these folks right now at the EWA events in Tucson, Arizona. We're comfortable. We're going to get there in a way that is very valuable and accretive to our shareholders. You know, a lot of folks talk about the recent 800-megahertz transaction and how it secured $8 billion for David Grain and his funds. What a lot of people don't talk about is he paid $3.6 billion to secure that, and he gave 50% of the upside return back to T-Mobile, right? These are the things that are reported. So when we look at a transaction like that, that's what he invested to secure that return. What we invest is our clearing costs, and I assure you, they are not going to approach $3.6 billion plus half of what remains. And so what we've said repeatedly is we're not going to give very specific numbers because it will help us hold down those clearing costs. With regard to your question about clearing costs versus unjust enrichment payments, it's a little bit of a sliding scale. The more we secure entities that we clear, we get their channels, and that allows us to offset what would ultimately be unjust enrichment payments. So if we pay $1 million to retune and clear someone out of the market, oftentimes we get $600,000, $700,000, or $800,000 in value in channels. So that $1 million in cost is actually only a net $200,000 or $300,000 off our balance sheet. So I'm going to take it back up a level and not fully answer your question. We are absolutely comfortable that we can clear the country, that yes, it will cost money, and yes, it will take some time with certain incumbents. But the fact of the matter is we are going to monetize the entirety of this nation in the spectrum, and if some of the folks want to work with us and secure a return, then they're going to do that. But we're going to negotiate an outcome that is absolutely valuable to our shareholders, and it is not going to approach the numbers that just happened with the 800-megahertz transaction.

[Operator Instructions] Our next question comes from Sebastiano Petti with JPMorgan. Your line is open.