Anterix Inc. (ATEX) Earnings Call Transcript

Welcome to Anterix's first quarter fiscal 2027 earnings conference call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Natasha Vaccarelli. Please go ahead.

Good morning, everyone. Thank you for joining us today for Anterix's first quarter fiscal year 2027 investor update call. I'm Natasha Vaccarelli, Vice President of Investor Relations and Corporate Communications. Joining me today are Scott Lang, President and CEO; Chris Guttman-McCabe, Chief Regulatory and Communications Officer; and Elena Ageev, CFO. Please note that our first 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'll turn the call over to Scott.

Thank you, Natasha, and good morning, everyone. When we last spoke in June, we shared the progress we were seeing across the business, including increasing customer engagement, active commercial discussions, and a broader recognition of the strategic importance of licensed spectrum. Over the last 2 months, that activity has continued, and in many cases, has accelerated. First, as I am sure many of you have seen, just yesterday SpaceX filed an ex parte letter with the FCC across 3 separate dockets, including ours, advocating for inclusion of a new satellite build-out deployment option. Of note, 2 of the 3 bands referenced by SpaceX are still in the process of seeking a rulemaking where ours, as you know, has been finalized. In response, yesterday, Anterix filed a letter in support of SpaceX's proposal, stating our belief that their request will enhance the optionality and the expanded use of our spectrum in the market. This filing validates what we have been saying all along. Access to low-band spectrum is extremely limited, and the demand for our nationwide 10 MHz footprint is increasing across all sectors. This is further reflected in close to a dozen spectrum-related initiatives involving wireless carriers, satellite, and space-based connectivity providers, along with the successful conclusion of the AWS-3 auction. That plays directly into the position we have built at Anterix. Our 900 MHz spectrum gives us multiple ways to create value through utility transactions, product revenue around the networks we enable, strategic opportunities, and new applications as the market evolves. The key point is this. We are not managing to 1 outcome. We have optionality. And with a nationwide licensed low-band spectrum portfolio and increasing market recognition of what we own, that optionality puts us in a very strong position. And we continue to be disciplined on how we maximize this asset. We are pursuing the opportunities where value is most compelling and where we can create the best long-term outcome for customers and shareholders. The opportunity is significant, and the market is moving in our direction. And turning to our utility pipeline, the last 2 months have been equally active, and we were pleased with the amount of interest and engagement with nearly a dozen active opportunities. Before I turn the call over to Chris, I want to recognize the remarkable team at Anterix. The progress we are seeing today is a reflection of their hard work, commitment, and execution. And I am incredibly proud of what they continue to accomplish. With that, I will turn the call over to Chris.

Thanks, Scott, and good morning, everyone. As Scott highlighted, we have optionality, which extends not only to how we monetize our spectrum, but also to how we advance it. Whether market-specific, regional, or national in scope, we can approach our clearing objectives in a way that aligns with customer demands planned and the opportunities in front of us. With the FCC's expansion to the full 10 MHz broadband configuration, our focus remains on advancing our nationwide footprint, building on the 40% of counties already cleared in the 10 MHz configuration. We also have the capability to move at the pace the opportunity requires. We believe our teams can effectuate nationwide clearing of the full 10 MHz configuration in a way that fully aligns with customer deployment requirements and the opportunities we see in the market. We have consistently executed against our clearing commitments, meeting requested delivery schedules, and delivering broadband availability ahead of contracted timelines for the majority of our customers. That track record demonstrates the scalability of our approach and our ability to translate spectrum availability into customer and shareholder value. The progress we are making and the growing interest we see reflect the capabilities we have built, the strength of our relationships, and the significant opportunity that remains ahead. With that, I'll turn the call over to Elena.

Thank you, Chris. Anterix is entering this next phase from a position of financial strength. Our income statement has significantly improved over the last several quarters with higher revenue and lower expenses. For the first quarter fiscal year 2027, our GAAP revenue is $2 million, and our operating expenses are $9.5 million, a level we have maintained with our disciplined cost structure. In addition, broadband license exchanges generated a gain of approximately $11 million during the quarter, further demonstrating our ability to actively manage and maximize the value of this unique asset. Returning to the balance sheet, we ended the quarter with approximately $116 million in cash and no debt. During the quarter, we received approximately $16 million in customer payments and $20 million from stock option exercises. We expect to receive approximately $10 million of additional contracted proceeds during the remainder of fiscal 2027. We also continue to invest in clearing with approximately $7 million allocated to spectrum clearing during the quarter. Our balance sheet is one of our greatest strengths. Our scarce, low-band spectrum asset combined with our robust cash balance positions us to pursue attractive monetization opportunities as the market continues to evolve. We remain disciplined in managing expenses and thoughtful in how we allocate capital towards activities that increase the value and commercial availability of our spectrum. Importantly, as Scott discussed, the market environment surrounding spectrum transactions continues to provide greater transparency into the value of licensed spectrum ownership. We're seeing that through both our own commercial execution and broader market activity. Our executed utility spectrum transactions have averaged approximately $1.40 per MHz POP, while the FCC's most recent AWS-3 auction averaged approximately $2.50 per MHz POP. We believe there is a strong upside opportunity both for existing and prospective investors when compared to our current market capitalization, which implies a spectrum valuation of approximately $0.60 per MHz POP. We're also seeing continuous strategic demand for spectrum across the communications ecosystem, with activity involving companies like Amazon and Globalstar, and EchoStar, and Rocket Lab, and Iridium. While these transactions reflect different spectrum characteristics and strategic objectives, together they provide additional market reference points for the value of licensed spectrum. In our view, the market has more evidence than ever to value our asset, and Anterix has increasing ways to realize that value. That is an important distinction. We control a scarce, licensed, low-band spectrum at a time when demand for spectrum is increasing and supply remains constrained. With no debt, a strong cash position, and a disciplined cost structure, we have the flexibility to be thoughtful about timing and remain firm on pricing as we monetize this asset. That matters because the majority of the value remains ahead of us. Across our nationwide footprint, approximately 3 billion MHz POPs, representing about 85% of our total MHz POPs, remain available to monetize, including many of the largest and most valuable metropolitan markets. In closing, we have the balance sheet to be patient, the discipline to invest where it matters, and significant value still ahead of us to capture. With that, I will turn the call back over to Scott.

Thanks, Elena. Before we open the call for questions, I want to leave you with 1 final thought. We believe Anterix is uniquely positioned at the intersection of 2 powerful forces: heightened demand for secure connectivity and a finite supply of high-quality licensed spectrum. We are excited about where we are and what lies ahead.

[Operator Instructions] First question will be coming from the line of Sebastiano Petti of J.P. Morgan. Please go ahead.

I guess given just the amount of demand in the market and your, that you kind of, you touched on as well as the active customer engagements, are these strategic reviews still actively passive or has the volume or the level of conversations internally within the company kind of increased kind of given some of the market forces and, you know, activity out there as well? And then if you could also update us on where you are. I think you touched on there's engagement with, I think Scott said a dozen active opportunities out there. Because where are you with utilities, other utilities outside of your traditional IOUs, and maybe helping us think about maybe getting factors there for additional opportunities, additional perhaps announcements outside your traditional cohort and maybe some of these other utility infrastructure opportunities.

Good morning, Sebastiano. Thanks for the questions. The first one, the strategic review, as you could imagine, the increasing demand and the preciousness of licensed spectrum, I would say has increased the amount of interest with our spectrum, both from the utility side, which leads into your second question, and the first question of the strategic review, that those conversations on both of those angles are increasing in the last 2 months since we spoke with you. And regarding the deals, as I did mention on the prepared remarks, there's about a dozen deals. They're very active. There continues to be new deals that are coming to the table each month. And the ones that were starting 2 months ago when we spoke with you have continued to accelerate in their conversations. And I'll leave you this last thought to give you a little bit more color on the 12. There are a very nice set of 7-digit, 8-digit, and 9-digit deals and very well represented in each one of those categories. Thank you, Sebastiano.

Next question is coming from the line of Mike Crawford of B. Riley Securities. Please go ahead.

Given that SpaceX now can be seen as a credible buyer to take everything and having over $100 billion of cash and securities on its balance sheet, have you come back to your critical infrastructure targets and said, look, this is like now or never, because I'm sure your asset would be more valuable to someone like a SpaceX to the extent that it covered more of the country and with less of a patch quilt pattern.

Hey, good morning, Mike. It's Scott. We clearly are talking about that. We'll be prepared for that. That's a rich problem to have when the time comes, and we will be ready to have it. I will leave you with this. I wake up every morning of how to maximize the shareholder value and this incredible asset that we're sitting on. And I know I have the board's full support and this team's full support, that we will not compromise this asset and the value of this asset for a subpar deal.

Okay, thank you. Just on the status of quote this asset, so you got 40% of counties now cleared for a 10 MHz configuration. Can you give any estimate of cost to clear everything? And then including what percent of that might be additional slices of spectrum you would need to acquire at the [ 600 megahertz oxygen cooling place for the report in order earlier this year? ]

Elena, do you want to take that?

Yes, Mike, I will start that and then pass it over to Chris for some additional remarks. As we've commented in the past, we speak to different audiences in these calls, and we need to continue to maintain our negotiation leverage as we negotiate with our incumbents and keep our costs down and returns up. Those different audiences, of course, yourself, the analysts, our investors, incumbents, and customers. In addition, given that there's now optionality to how we may monetize this spectrum, if we continue to monetize geography by geography, the cost may be lower as they will be over several years. If there's a nationwide buyer, of course, that is looking to clear the spectrum faster, then that cost estimate may be higher, given that there may be a higher level of incentives to be provided and so on and so forth. And just the process will need to be accelerated. But regardless of the cost estimates, even with the most conservative highest estimates, we believe that there's significant upside in the gross value of our asset as compared to the current market cap. And I wanted to also in addition comment on the gross value of the asset. I mentioned in my prepared remarks that the current 2 most relevant benchmarks to us are our own, which is the average of all the deals that we've closed, which is the 12 deals over the last several years. That's about $1.40 per MHz POP. The gross value of the asset of the remaining 3 billion POPs, if we use that benchmark, would put us at well over $4 billion. If we use the most current, most latest auction by the FCC, which averaged about $2.50, the gross value of our asset will be about $7.5 billion. Again, we believe there's significant upside as compared to our current market cap. Chris, did you have any additional comments on clearing?

Yes, thanks, Elena. Mike, to your question specifically about 600, first, I just want to make sure we level set with everyone on the call. Every one of our deals to date has been a significant premium to 600. So even if we were starting with the basis of having to secure our spectrum from the commission's inventory at that price point, the delta between what we've sold at to date and that is significant. And then more specifically, the reality is the amount of spectrum we take from the commission's inventory, it's a sliding scale. Obviously, it differs from county to county. And the fact of the matter is every time we clear an incumbent, we onboard their channels, which means we pay less to the FCC from a spectrum in their inventory, 600 MHz price. So we've been careful not to give a macro or micro level. But what we've said is, as Scott said, we're going to be a shepherd of this asset and we're going to monetize it to our shareholders' benefit. And we're very good at this clearing. We can and will be able to monetize 100% of the country. I know you and I and the team and our team had that conversation after the last call. We are confident that 100% of the country is monetizable. And we're confident that we can do it in a way that is extremely valuable to our shareholders and to the ultimate buyer.

You know, I have to pile on. And early in my days as the CEO of this company, I called out that one of the superpowers that was immediately obvious in this company was its ability to understand spectrum, ability to clear spectrum, and put that to use in the market. And that continues to show up as a superpower that's only gained strength, and the amount of work that Chris and his team are doing with the strategic nature of our nationwide footprint and clearing to ensure all 10 MHz POPs are monetized has been really a pleasure to watch and to see their performance.

Great. Thank you for those answers. I have 1 final question. Hopefully, given the clearing activity that you've already been incurring for the first half of this quarter, is there any you can give on potential GAAP broadband license gain estimate for this quarter or the remainder of this fiscal year following the just over $10 million gain recorded in the first quarter?

Yes, Mike, as you know, we don't guide. But, you know, I will say we do expect, I'll call them at least single-digit million gains in the following quarter.

Thank you very much.