Anterix Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended December 31, 2021 (fiscal 2022 third quarter). Amounts below are in U.S. dollars; financial statement figures are in thousands unless stated otherwise.
Business context
Anterix is commercializing its 900 MHz spectrum for private broadband networks serving utilities and critical infrastructure customers. Its near-term work includes securing FCC broadband licenses, clearing spectrum, and leasing licensed spectrum. The company describes itself as the largest holder of licensed spectrum in the 900 MHz band, with nationwide coverage.
Financial performance and position
| Metric | Three months ended Dec. 31, 2021 | Three months ended Dec. 31, 2020 | Nine months ended Dec. 31, 2021 | Nine months ended Dec. 31, 2020 |
|---|---|---|---|---|
| Revenue | $385 | $236 | $749 | $740 |
| Operating loss | $(12,375) | $(12,064) | $(26,044) | $(43,596) |
| Net loss | $(12,715) | $(12,089) | $(26,502) | $(43,499) |
| Net loss per share, basic and diluted | $(0.69) | $(0.69) | $(1.47) | $(2.51) |
- Revenue remains minimal. Quarterly spectrum revenue was $385,000, including approximately $202,000 recognized from Ameren; no service revenue was recorded in 2021.
- Nine-month operating expenses were $36.9 million, down 9% year over year. Lower direct costs and depreciation more than offset higher sales and support costs. Quarterly general and administrative expense rose 16%, primarily from higher headcount, professional services, and stock compensation.
- The nine-month 2021 results included a $10.23 million gain from exchanging narrowband licenses for broadband licenses in 12 counties; the comparable 2020 period included a $3.849 million net loss on intangible-asset disposals. This contributed to the improvement in nine-month operating loss.
- Cash and cash equivalents were $127.8 million at December 31, 2021, versus $117.5 million at March 31, 2021. Current assets were $135.0 million and current liabilities $9.9 million. Total liabilities were $92.4 million, including $20.0 million of contingent liability and $6.0 million of operating lease liabilities. The filing reports no borrowings or other debt balance.
- For the nine months, operating cash flow was positive $27.0 million, versus negative $20.7 million a year earlier; investing cash flow was negative $16.3 million and financing cash flow negative $0.5 million. Operating cash flow benefited primarily from $52.0 million of increased deferred revenue from customer prepayments, rather than recurring operating profitability.
- Deferred revenue was $55.0 million at period-end, compared with $3.0 million at March 31, 2021. Stockholders’ equity was $195.6 million. Gross margins are not meaningful given the very small revenue base and substantial operating expenses.
Material changes, outlook, and risks
- Customer agreements: Ameren’s initial 30-year terms provide for $47.7 million in scheduled prepayments; $22.9 million had been received by December 31, 2021, with remaining payments tied to delivery and due by mid-2026. Evergy paid $30.2 million for its initial 20-year term in October 2021. Anterix expects Evergy revenue recognition to begin in the first half of fiscal 2023 as spectrum and licenses are delivered.
- Delivery and contingent exposure: The $50.0 million SDG&E agreement includes $20.0 million received and recorded as a contingent liability because it may need to be refunded if the agreement is terminated or spectrum is not delivered. Delivery is expected to begin in fiscal 2023 and finish before the end of fiscal 2024. Ameren and Evergy agreements also depend on clearing spectrum and obtaining or delivering relevant licenses; Evergy’s contract includes refund and termination remedies for non-delivery.
- Liquidity and capital: Management believes cash on hand is sufficient for obligations through at least the next 12 months. Future capital needs depend on license acquisition, spectrum clearing and retuning costs, customer demand, and operating expenses. The company says it may need additional capital, but availability and terms are uncertain. A shelf registration statement permits offerings of up to $150 million; no securities had been sold under it through the filing date.
- Capital allocation: The board authorized repurchases of up to $50 million through September 29, 2023. The company repurchased about 199,815 shares for $12.0 million at an average $60.02 per share during the nine months. The authorization does not require further repurchases and may reduce available cash.
- Controls and reporting: Management concluded disclosure controls were not effective because of a material weakness in controls over identification, review, analysis, and accounting for intangible-asset transactions, particularly non-monetary license exchanges. Remediation is underway but will not be considered complete until controls have operated effectively and been tested. The filing also describes immaterial corrections to prior financial statement presentation and to depreciation, disposal, and share-retirement accounting.
- Other risks: The filing cites uncertainty from COVID-19, spectrum-clearing and licensing execution, possible financing needs, and the potential effect of repurchases on cash and share-price volatility. No material legal proceedings were reported. Management did not provide quantitative revenue or earnings guidance.
Important facts for investors to verify
- Progress and timing for FCC approvals, spectrum clearing, and delivery under the Ameren, Evergy, and SDG&E agreements, including any payment or refund conditions.
- How much of reported operating cash flow reflects customer prepayments and how much is sustainable from ongoing operations.
- Whether management remediates and tests the material weakness in financial reporting controls, and whether further corrections are required.
- Cash use for spectrum acquisitions, clearing costs, and share repurchases, and whether additional financing becomes necessary.
- The timing and amount of recurring revenue recognition as customer spectrum and licenses are delivered.