Business context and reporting period
The filing is pdvWireless, Inc.’s Form 10-Q for the quarter and nine months ended December 31, 2015 (fiscal 2016 third quarter). The request metadata names Anterix Inc.; the filing itself identifies the registrant as pdvWireless, Inc.
The company was building a private push-to-talk (PTT) network and selling mobile workforce communications solutions, while pursuing an FCC process to repurpose some 900 MHz spectrum for broadband use. Houston, Dallas and Atlanta were fully launched; Philadelphia, Chicago, greater New York and Washington/Baltimore had sites in service. DispatchPlus revenue remained at an early stage.
Financial results and liquidity
| Metric | Three months ended Dec. 31, 2015 | Prior-year quarter | Nine months ended Dec. 31, 2015 | Prior-year period |
|---|---|---|---|---|
| Operating revenue | $0.94 million | $0.84 million | $2.59 million | $2.36 million |
| Gross profit (margin) | $0.03 million (3.6%) | $0.55 million (66.1%) | $0.82 million (31.6%) | $1.57 million (66.5%) |
| Operating loss | $5.27 million | $3.53 million | $15.13 million | $8.57 million |
| Net loss | $5.24 million | $3.53 million | $15.05 million | $9.13 million |
| Basic and diluted loss per share | $0.36 | $0.28 | $1.07 | $1.00 |
For the nine months, operating cash flow was negative $14.74 million, investing cash flow negative $9.30 million, and financing cash flow positive $64.84 million, primarily from the May 2015 stock offering. Cash and cash equivalents were $160.68 million at December 31, 2015, versus $119.87 million at March 31, 2015.
Total assets were $278.90 million and total liabilities $11.32 million. The company reported $1.29 million of note borrowings for spectrum licenses, of which $0.30 million was current. Current assets were $161.45 million and current liabilities $4.50 million. No EBITDA or operating cash-flow margin is presented in the filing.
Material changes versus prior periods
- Quarterly revenue rose 12.5%; nine-month revenue rose 10.0%. Growth reflected spectrum lease revenue and the early DispatchPlus business, while legacy service revenue declined 10.3% for the nine-month period amid higher pdvConnect customer churn.
- Cost of revenue increased substantially as the company maintained and supported its new network and sold handsets. Gross profit fell sharply and the quarterly gross margin contracted to 3.6%.
- Nine-month operating expenses rose to $15.95 million from $10.13 million, reflecting higher staffing and costs supporting DispatchPlus, sales and marketing, and public-company expenses.
- Cash increased following the $64.8 million net proceeds from the May 2015 follow-on offering. Network equipment purchases and construction contributed to nine-month investing outflows.
Outlook, risks and other notable items
- Management estimated total capital costs, including amounts already spent, of $30 million to $40 million to deploy networks in up to 20 metropolitan areas. It said it was focused on improving sales and marketing in the seven markets with service and completing coverage in existing markets.
- Management believed cash on hand would cover financial obligations for at least 12 months, but cautioned that spending could exceed expectations or revenue could develop more slowly than anticipated; future financing might be needed, with no assurance it would be available on favorable terms.
- The company was pursuing an FCC rulemaking petition with the Enterprise Wireless Alliance to realign part of the 900 MHz band from narrowband to broadband. Success was uncertain.
- Revenue and receivables were concentrated among two carrier partners. Those carriers accounted for 53% and 28% of quarterly revenue in the prior-year quarter; in the current quarter they accounted for 35% and 18%. At December 31, 2015, they represented 51% and 17% of receivables.
- The international carrier relationship ended in July 2015. Management reported no material litigation and no material changes to previously disclosed risk factors. Disclosure controls were deemed effective, and no material change in internal control was reported.
- A subsequent event disclosed executive equity awards authorized January 13, 2016. The company also disclosed $9.71 million of future minimum office and tower lease payments.
Important facts for investors to verify
- Confirm the issuer and period: the source filing is for pdvWireless, Inc., quarter ended December 31, 2015, despite the Anterix Inc. request metadata.
- Track DispatchPlus customer growth, revenue contribution, churn, and unit economics against network operating and rollout costs.
- Monitor cash burn, remaining network capital requirements, and whether management’s 12-month liquidity assessment remains supportable.
- Assess the outcome and timing of the FCC spectrum proceeding and any related license acquisitions or exchanges.
- Evaluate exposure to the two carrier partners and the company’s ability to diversify revenue and receivables.