Anterix Inc. — Form 10-K Summary
Reporting period: Fiscal year ended March 31, 2021. The filing also reports unaudited fourth-quarter results for the three months ended March 31, 2021. This is an annual filing, not a standalone quarterly filing.
Business context and reporting period
Anterix is focused on converting and leasing its nationwide 900 MHz spectrum for private broadband networks serving utilities and other critical infrastructure customers. The FCC’s 2020 Report and Order authorized a 6 MHz broadband segment, but Anterix must meet county-level eligibility, spectrum-clearing and payment requirements before receiving licenses. The company had submitted its first broadband-license applications on May 27, 2021, after fiscal year-end.
During the year, Anterix signed agreements with Ameren and SDG&E. The Ameren agreements cover service territories in Missouri and Illinois, serving approximately 7.5 million people, with scheduled prepayments totaling about $48 million for initial 30-year terms. The SDG&E agreement covers its California service territory, serving approximately 3.6 million people, for total payments of $50 million.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Operating revenue | $0.921 million | $1.564 million |
| Net loss | $54.434 million | $37.638 million |
| Net loss per share, basic and diluted | $3.13 | $2.29 |
| Cash used in operating activities | $9.959 million | $27.823 million |
| Cash used in investing activities | $14.174 million | $7.560 million |
| Cash provided by financing activities | $4.218 million | $96.114 million |
At March 31, 2021, cash and cash equivalents were $117.538 million, down from $137.453 million a year earlier. Current assets were $121.050 million and current liabilities were $8.615 million. Total liabilities were $40.547 million; the balance sheet reports no borrowings, with liabilities primarily comprising lease obligations, deferred revenue and a contingent liability. Operating lease obligations totaled $9.271 million in undiscounted future payments.
FY2021 revenue included $0.192 million of service revenue and $0.729 million of spectrum revenue. The filing does not provide a clear quarterly cash-flow or margin figure. Fourth-quarter revenue was $0.181 million, net loss was $10.935 million and loss per share was $0.62, compared with revenue of $0.327 million, net loss of $11.738 million and loss per share of $0.68 in the prior-year quarter.
Material changes versus the prior comparable period
- FY2021 revenue fell 41% year over year, principally reflecting transferred TeamConnect customers and fewer pdvConnect customers.
- Net loss increased by $16.796 million. General and administrative expense rose 55% to $39.237 million, including higher stock-based compensation, employee costs and strategic consulting expenses.
- Stock-based compensation expense was $15.925 million, versus $5.826 million in FY2020.
- Cash used in investing increased, principally due to $13.944 million of wireless-license purchases and refundable deposits. FY2020 financing included $94.244 million of net proceeds from a follow-on offering; FY2021 financing primarily reflected option exercises.
- The company recorded a net $3.849 million loss from disposal of intangible assets, including the cancellation of licenses under its AAR agreement, partly offset by a gain on a spectrum exchange.
Outlook, commentary, risks and unusual items
- Management estimated total spectrum-clearing, acquisition and Anti-Windfall costs of $130 million to $160 million, with most expected to be spent by the end of FY2024. The pace is intended to reflect customer demand, market opportunities and lease income.
- Management said existing cash was expected to fund planned operating expenses and capital needs for at least 12 months from the filing date, while noting that additional capital might be needed. A $150 million shelf registration and $50 million at-the-market program were available; the company reported no sales under them through the filing date.
- Ameren payments and delivery obligations are contingent on clearing spectrum and obtaining FCC licenses. The agreements provide for revenue recognition as spectrum is delivered, amortized over the initial 30-year terms; the company expected Ameren revenue to begin in FY2022.
- SDG&E paid $20 million upfront, recorded as a contingent liability because it may be refundable upon termination or non-delivery. The remaining $30 million is conditional on delivery. The filing’s descriptions differ on SDG&E delivery timing: the main discussion gives FY2023 through FY2024, while a note gives a different schedule.
- Key risks include FCC licensing and regulatory changes, incumbent retuning and complex systems that are exempt from mandatory retuning, execution of customer agreements, long utility sales cycles, competition, COVID-19 disruption, and the potential need for additional financing. Anterix reported net losses in every year since inception and does not provide profitability guidance.
- The filing reports no material legal proceedings and says disclosure controls and internal control over financial reporting were effective at March 31, 2021. Prior material weaknesses were reported as remediated by March 31, 2020.
Important facts for investors to verify
- Progress, timing, cost and FCC approval status for broadband licenses in Ameren and SDG&E territories, including resolution of the inconsistent SDG&E delivery dates.
- Whether Anterix can clear incumbents and meet the 90% Broadband Segment Test and 240 Channel Requirement at the expected cost and pace.
- Conditions for retaining the $20 million SDG&E upfront payment and collecting remaining SDG&E and Ameren payments.
- Cash burn, future spectrum-related spending, customer revenue recognition and whether additional financing or dilution becomes necessary.
- Whether utility demand, regulatory support, and available Band 8 equipment translate into additional binding commercial agreements.