Anterix Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended December 31, 2022 (Anterix fiscal 2023 third quarter). The company commercializes 900 MHz spectrum for private broadband networks serving utilities and critical-infrastructure customers.
Financial results
| Metric | Three months ended Dec. 31, 2022 | Nine months ended Dec. 31, 2022 |
|---|---|---|
| Spectrum revenue | $578,000, up 50% year over year | $1.311 million, up 75% |
| Operating expenses | $14.779 million, up 16% | $42.775 million, up 16% |
| Operating loss | $8.404 million | $32.136 million |
| Net loss | $8.020 million; $0.42 per share | $31.859 million; $1.69 per share |
| Operating cash flow | Not separately reported for the quarter | $(18.676) million, versus $27.037 million provided in the prior-year period |
- The quarter’s operating loss included a $5.776 million noncash gain from exchanging narrowband licenses for broadband licenses. The nine-month period included a $9.329 million gain, compared with $10.230 million in the prior-year period.
- Cash and cash equivalents were $57.511 million at December 31, 2022, down from $105.624 million at March 31, 2022. Total assets were $257.606 million; total liabilities were $98.581 million. No debt is listed on the balance sheet.
- Deferred revenue was $61.367 million, including $8.0 million received from Xcel Energy. Operating cash use and investments in licenses and equipment contributed to the cash decline. Investing cash outflow was $20.612 million and financing cash outflow was $8.825 million for the nine months.
- Operating expenses rose mainly because of higher stock-based compensation and headcount-related costs. The filing does not present a conventional gross margin; spectrum revenue remains small relative to operating expenses.
Material developments and outlook
- In October 2022, Anterix signed a 20-year Xcel Energy spectrum agreement covering service territories in eight states, with two optional 10-year extensions. Scheduled initial-term prepayments total $80 million; $8 million had been received by December 31, 2022, with remaining payments due through mid-2028 as spectrum and licenses are delivered. Payments are recorded as deferred revenue and revenue is recognized as delivery obligations are satisfied over the contract term.
- Anterix delivered broadband spectrum and licenses for 70 counties to Evergy during the nine-month period and recognized approximately $0.3 million of revenue. It also delivered a first county to SDG&E and received a $0.2 million milestone payment. The company recorded a $20.2 million short-term contingent liability for SDG&E payments that may be refundable if delivery fails or the agreement is terminated.
- The company reported $57.5 million of cash and stated that cash on hand, together with contracted customer proceeds, should be sufficient for at least 12 months from the filing date. It also said additional capital may be needed; financing availability and terms are not assured. No numerical earnings or revenue guidance was provided.
- Key execution risks include qualifying for FCC broadband licenses, clearing incumbent spectrum, completing deliveries under customer contracts, controlling spectrum acquisition and retuning costs, and converting customer agreements into recognized revenue. Anterix’s Xcel agreement includes delivery guarantees; maximum potential future undiscounted liability was approximately $8 million at December 31, 2022.
- Management cited inflation and macroeconomic conditions as potential headwinds to costs and customer commercialization. The filing reported no material litigation and no material changes to previously disclosed risk factors. Disclosure controls were assessed as effective.
Important facts for investors to verify
- Progress, timing, and costs of FCC approvals, incumbent retuning, and broadband-spectrum delivery in Xcel, SDG&E, and other customer territories.
- Timing and conditions for the remaining Xcel prepayments and SDG&E milestone payments, and the extent to which deferred revenue converts to recognized revenue.
- Cash burn, planned spectrum and equipment spending, and whether additional financing is required.
- The effect of stock-based compensation and noncash license-exchange gains on reported losses and operating trends.
- Future use of the share-repurchase authorization: $26.8 million remained at December 31, 2022, with authorization through September 29, 2023.