Business context and reporting period
This is pdvWireless, Inc.’s Form 10-Q for the quarter ended June 30, 2017 (the first quarter of its fiscal 2018). The filing identifies the registrant as pdvWireless, Inc., not Anterix Inc. The company operates DispatchPlus push-to-talk services in seven U.S. metropolitan markets and is pursuing FCC changes to enable broader use of its 900 MHz spectrum.
Financial results and liquidity
Amounts below are in millions of dollars unless noted.
| Metric | Quarter ended June 30, 2017 | Prior-year quarter | Change |
|---|---|---|---|
| Revenue | $1.465 | $1.045 | Up 40% |
| Cost of revenue | $1.700 | $1.584 | Up 7% |
| Gross loss | $(0.235) | $(0.539) | Loss narrowed |
| Operating expenses | $7.119 | $9.535 | Down 25% |
| Operating loss | $(7.354) | $(10.074) | Loss narrowed |
| Net loss | $(7.910) | $(10.052) | Loss narrowed |
| Net loss per share | $(0.55) | $(0.70) |
- Service revenue rose to $1.105 million from $0.765 million, primarily with more DispatchPlus customers. Spectrum lease revenue was $0.182 million in both periods; other revenue increased to $0.178 million from $0.098 million.
- Gross margin remained negative: gross loss was about 16% of revenue, compared with about 52% in the prior-year quarter.
- Operating cash use was $6.374 million, versus $9.603 million. Investing cash use was $2.328 million, including $1.677 million for wireless licenses and $0.651 million for equipment. Financing provided $0.160 million from option exercises.
- Cash and cash equivalents were $115.541 million at June 30, down from $124.083 million at March 31. Management said cash on hand should cover obligations for at least the next 12 months.
- Total liabilities were $17.531 million, including $0.497 million current note payable and $0.5 million total note borrowings. The note bears 0.55% interest and matures in March 2018.
- Total assets were $238.766 million; stockholders’ equity was $221.235 million. Wireless licenses, treated as indefinite-lived intangible assets, totaled $106.352 million.
Material changes versus the prior comparable period
- Revenue increased 40%, led by DispatchPlus service growth; cost of revenue rose more slowly, narrowing the gross loss.
- General and administrative expense declined $2.9 million, primarily because the prior-year quarter included $3.4 million of consulting costs related to a FirstNet bid opportunity. Sales and support costs increased $0.5 million with higher headcount and related costs.
- Income tax expense was $0.650 million, versus none in the prior-year quarter. The filing attributes the charge primarily to tax amortization of indefinite-lived intangible assets and valuation-allowance accounting; management expected about $2.6 million of such expense for fiscal 2018.
- Cash used for license acquisitions and network investment increased versus the prior-year quarter, while operating cash use decreased.
Outlook, risks and unusual items
- Management said DispatchPlus sales had ramped more slowly than initially expected, citing indirect sales-channel performance, longer sales cycles, and coverage gaps caused by delayed site deployment. It is trialing sales and marketing initiatives and intends to focus on its initial seven markets before broader rollout; more than 13 additional markets have preliminary network designs or site-development work.
- On August 4, 2017, after quarter-end, the FCC issued a Notice of Inquiry on 900 MHz band rules, including options for broadband reconfiguration. The company planned to respond by September 18, with reply comments due October 18. The NOI is not an approval of the company’s proposal; favorable regulatory action is uncertain and may take significant time and resources.
- Management identified future capital needs as dependent on revenue growth, product development, sales spending, and FCC-related initiatives. The company has a shelf registration statement permitting up to $100 million of securities offerings, but availability and terms of future financing are uncertain.
- One Tier 1 carrier represented about 40% of quarterly revenue and 65% of accounts receivable at quarter-end, creating customer and collection concentration risk.
- Non-cancelable office and tower leases totaled $13.969 million in remaining contractual rentals. The company reported no material litigation and no off-balance-sheet arrangements.
- The company reported effective disclosure controls and no material change in internal control over financial reporting during the quarter. Forward-looking statements remain subject to the risks described in the filing and its prior annual report.
Important facts for investors to verify
- Confirm issuer identity and period: this filing is for pdvWireless, Inc., quarter ended June 30, 2017; the request metadata names Anterix Inc.
- Track DispatchPlus customer additions, sales-cycle length, market coverage, revenue growth, and whether the business can reduce its negative gross margin.
- Monitor FCC proceedings and deadlines; the NOI itself does not secure broadband rights or guarantee a favorable rulemaking outcome.
- Assess cash burn against the $115.5 million cash balance, planned network and spectrum spending, and the company’s stated 12-month liquidity view.
- Review dependence on the Tier 1 carrier, the March 2018 note maturity, lease commitments, and any future financing or dilution.