Business context and reporting period
Anterix Inc. (Nasdaq: ATEX) is commercializing its 900 MHz spectrum for private broadband networks serving utilities and critical-infrastructure customers. This Form 10-Q covers the three months ended June 30, 2022, the first quarter of fiscal 2023; comparisons are with the three months ended June 30, 2021.
Financial results and position
| Metric | Q1 FY2023 | Q1 FY2022 |
|---|---|---|
| Spectrum revenue | $0.335 million | $0.182 million |
| Operating expenses | $14.053 million | $12.126 million |
| Operating loss | $13.072 million | $11.962 million |
| Net loss | $13.196 million | $12.010 million |
| Basic and diluted loss per share | $0.71 | $0.68 |
| Cash used in operating activities | $9.832 million | $9.663 million |
| Cash used in investing activities | $6.656 million | $6.347 million |
| Cash used in / provided by financing activities | Used: $2.680 million | Provided: $5.371 million |
At June 30, 2022, cash and cash equivalents were $86.456 million, down from $105.624 million at March 31, 2022. Total assets were $264.398 million and total liabilities were $89.848 million. The balance sheet reports no borrowings; liabilities include operating lease obligations of $5.362 million and a $20.0 million contingent liability. Management said cash on hand should cover obligations for at least 12 months from the filing date, while noting that future capital needs depend on license-clearing costs, customer activity and other factors. No gross margin is presented; revenue is small relative to operating costs.
Material changes versus the prior comparable period
- Revenue increased $0.153 million, or 84%, primarily from approximately $0.2 million recognized under Ameren agreements.
- Operating expenses rose $1.927 million, or 16%. General and administrative expense increased $1.629 million, largely due to higher stock compensation, recruiting, professional services and personnel-related costs.
- Net loss widened by $1.186 million. A $0.648 million gain from intangible-asset disposals partly offset higher costs; the gain related to exchanges of narrowband licenses for broadband licenses.
- Operating cash use was broadly comparable year over year. Investing cash use primarily funded spectrum acquisition, swaps and retuning. Financing shifted from $5.371 million provided in the prior-year quarter to $2.680 million used, including $2.725 million of share repurchases.
Outlook, risks and notable items
- The filing provides no quantified revenue or earnings guidance. Anterix is seeking FCC broadband licenses and pursuing spectrum leases; commercialization and license delivery timing remain important uncertainties.
- The company acquired or exchanged spectrum and obtained FCC broadband licenses for 11 counties associated with Evergy. It recorded those licenses at an estimated $0.9 million cost basis and recognized a $0.6 million gain on the exchange.
- Anterix’s agreement with SDG&E provides for $50.0 million in total payments, including $20.0 million received upfront and recorded as a contingent liability pending delivery of cleared spectrum and licenses. Delivery is expected to begin in fiscal 2023 and finish before the end of fiscal 2024; the remaining $30.0 million is due as delivery occurs.
- On May 18, 2022, Motorola converted 500,000 subsidiary units into 500,000 Anterix common shares. The conversion increased shares outstanding; Motorola’s resale registration became effective July 15, 2022.
- The board’s share repurchase authorization permits up to $50.0 million through September 29, 2023. During the quarter Anterix repurchased 55,716 shares for $2.725 million at an average $49.70 per share; $32.313 million remained authorized.
- Key risks include FCC licensing and regulatory outcomes, spectrum retuning and clearing costs, timely fulfillment of customer agreements, commercialization and customer demand, competition, and the possibility of needing additional capital. The company said no material changes had occurred to previously disclosed risk factors and reported no material legal proceedings.
- Management reported effective disclosure controls and no material change in internal control over financial reporting. The filing also describes corrections of immaterial prior-period errors in 2021 financial statement presentation.
Important facts for investors to verify
- Progress, timing and costs of FCC broadband licensing, spectrum retuning and clearing, and delivery obligations to Ameren, SDG&E and Evergy.
- How the $20.0 million SDG&E contingent liability and remaining contractual payments change as county deliveries are completed.
- Whether recurring spectrum revenue grows enough to offset operating expenses and ongoing cash use.
- Cash runway under actual license-acquisition, commercialization and share-repurchase spending, and whether external financing becomes necessary.
- The effect of Motorola’s converted shares and future repurchases on share count and ownership.