Anterix Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended December 31, 2020 (fiscal 2021 Q3). Amounts below are in U.S. dollars; financial statement amounts are generally in millions unless noted.
Business context
Anterix is commercializing its licensed 900 MHz spectrum for private broadband networks serving utilities and critical infrastructure. Following the FCC’s August 2020 900 MHz band modernization order, the company is qualifying for broadband licenses and pursuing spectrum leases. Legacy service revenue continues to decline as customers have been transferred to third parties.
In December 2020, Anterix entered into its first long-term broadband spectrum lease agreements with Ameren for service territories in Missouri and Illinois, potentially covering about 7.5 million people. The agreements provide for approximately $48 million of scheduled prepayments for initial 30-year terms, with about half due by June 2021 and full prepayment due by 2026, subject to spectrum clearing, license delivery and other conditions. Anterix expects to begin delivering licenses by county in June 2021 and recognize lease revenue beginning in fiscal 2022.
Financial performance and liquidity
| Metric | Three months ended Dec. 31 | Nine months ended Dec. 31 |
|---|---|---|
| Operating revenue, 2020 | $0.236 million | $0.740 million |
| Operating revenue, 2019 | $0.361 million | $1.237 million |
| Net loss, 2020 | $12.089 million | $43.499 million |
| Net loss, 2019 | $8.811 million | $25.900 million |
| Operating cash used, 2020 | Not provided for quarter | $20.669 million |
| Operating cash used, 2019 | Not provided for quarter | $20.455 million |
- Quarterly revenue fell 35%; nine-month revenue fell 40%, principally due to the transfer of pdvConnect customers. Spectrum revenue was $0.183 million for the quarter and $0.547 million for nine months, unchanged from the comparable periods.
- Operating expenses were $12.300 million for the quarter and $40.493 million for nine months, up 29% and 44%, respectively. Higher general and administrative, product development and stock-based compensation costs drove much of the increase.
- Nine-month investing cash use was $11.116 million, mainly for wireless license acquisitions; financing cash provided was $2.818 million, mainly from stock option exercises. Prior-year financing cash included $94.244 million of net follow-on offering proceeds.
- Cash and cash equivalents were $108.486 million at December 31, 2020, down from $137.453 million at March 31, 2020. Total assets were $241.115 million and total liabilities were $21.948 million. The balance sheet reports no borrowings; it includes $7.457 million of operating lease liabilities.
- There is no meaningful positive operating margin to report given the small revenue base and operating losses. The filing reports basic and diluted net loss per share of $0.69 for the quarter and $2.51 for nine months, compared with $0.52 and $1.60, respectively, a year earlier.
Material changes and unusual items
- Nine-month stock compensation expense increased to $13.245 million from $4.393 million. The 2020 amount included approximately $5.1 million recognized after the FCC order met a performance goal and $0.8 million related to a former chairman’s award modification.
- The company recorded a net $3.849 million loss from disposal of intangible assets for nine months, primarily associated with cancellation of licenses under the AAR relocation arrangement; a license exchange generated a $1.1 million gain that partly offset the loss.
- Intangible assets (wireless licenses) increased to $118.066 million from $111.526 million at March 31, 2020, reflecting acquisitions and exchanges, partly offset by license cancellations.
- Management estimates combined spectrum clearing, acquisition and anti-windfall costs of $130 million to $160 million, with most expected to be spent by the end of fiscal 2024. Spending pace will depend on customer demand, market opportunities and offsetting lease income.
Outlook, risks and contingencies
- Management believes existing cash is sufficient for at least the next 12 months, while cautioning that additional capital may be needed to execute business plans. The company has an effective $150 million shelf registration and a $50 million at-the-market program, but reported no securities sold under either through the filing date.
- Ameren’s agreements remain subject to approvals and Anterix’s ability to clear incumbents and obtain and deliver FCC broadband licenses on schedule. The filing cautions that anticipated payments may be delayed, reduced or not received; clearing costs could also exceed estimates, and Ameren may not take the optional 10-year extensions.
- Other material execution risks include satisfying county-level FCC eligibility requirements, clearing or relocating incumbent users (including complex systems), making anti-windfall payments, and raising capital on acceptable terms. COVID-19’s effects on customers, operations and the economy remain uncertain.
- Accounts receivable were only $19,000, but approximately 89% was owed by one Tier 1 carrier; one carrier and one reseller together accounted for approximately 89% of receivables. The company reported no material legal proceedings and said disclosure controls were effective.
Important facts for investors to verify
- Whether Ameren’s board approvals and other contractual conditions are satisfied, and whether license delivery and the expected June 2021 payment milestones occur.
- Actual costs and timing for spectrum clearing, acquisitions and FCC anti-windfall payments versus the $130 million–$160 million estimate.
- Cash burn, funding needs and access to financing as the company pursues its spectrum strategy.
- Progress in securing broadband licenses and converting the Ameren agreement and other customer opportunities into recognized revenue.
- Whether declining legacy revenue, elevated stock compensation and customer concentration change materially in subsequent filings.