Anterix Inc. Q2 FY2025 Earnings Call

Good morning and welcome to the Anterix Fiscal Year 2025 Second Quarter Earnings Call. All participants will be in listen-only mode. Please note this event is being recorded. I would like now to turn the conference over to Natasha Vecchiarelli, Vice President of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. I'm Natasha Vecchiarelli, Vice President of Investor Relations and Corporate Communications, and I welcome you to our second quarter Fiscal Year 2025 Investor Update call. Joining us today are Scott Lang, our newly appointed President and CEO, Tim Gray, our CFO, Ryan Gerbrandt, COO, and Chris Guttman-McCabe, Chief Regulatory and Communications Officer. Before turning the call over to Scott, I'd like to remind everyone that during this conference call, we may discuss forward-looking statements related to our commercial outlook, future operations, and expected performance. These statements are based on our current expectations and assumptions, but they do carry inherent risks and uncertainties. We advise investors not to place undue reliance on these forward-looking statements. We encourage you to review our SEC filings, including our Form 10-K and 10-Q, which outline specific risk factors that could cause actual results to differ materially from those discussed today. These documents are available on our website. Please note that we do not undertake any obligation to update these forward-looking statements. With that, I will turn the call over to Scott.

Good morning, everyone, and thank you all for joining us today for our second quarter Fiscal Year 2025 earnings call. Today marks a special milestone in my professional career, as this is my first earnings call as the newly appointed President and CEO of Anterix. It is truly an honor to be leading this great organization, and I'm excited about all that lies ahead for the company. Since taking the helm in early October, I've enjoyed getting to know our team and gaining an in-depth appreciation for our company, our product, and our offering. I've also had the pleasure of meeting with a number of investors and analysts, some new faces and some I've worked with before, as well as a range of current and future customers. On today's call, I want to focus on two of the recurring questions I've been asked throughout these conversations, which I think will provide all of you with a picture of Anterix as I see the company and the opportunity. The first question is, why am I excited to take this job? And the second is, why would the board choose me? Let's start with why I would take this job. Think about it. Put yourself in my shoes. I am taking over a company that has established itself as a preeminent technology solution for the utility sector. It has zero debt, a great balance sheet, an expansive $3 billion pipeline of customer opportunities, a seasoned thought leadership position, an exceptionally talented and committed team, and we're just getting started. Dig a little deeper, and it gets even clearer why I or anyone would want this job. First off, it's really about our customers. They're moving from the lab to actual deployments that are driving real results, validating our product offering. They are becoming our greatest advocates. As we witnessed again last week at the Utility Broadband Alliance event, next it's about our spectrum asset. We've managed to enhance the value by making it 5G capable and have jointly filed with nine other organizations a petition with the FCC to expand our offering from 3/3 megahertz to 5/5 megahertz. Regarding our market positioning, AMI has become a movement that nearly touches every home and business with advanced technology. It unlocked ways for utilities to deliver a better experience and more value to every customer in the United States. A similar movement is underway that we will look back on, fueled by artificial intelligence and edge computing, that won't only touch every home and business, but also every device that controls, monitors, or protects the flow of power across the United States. The powerful connectivity that Anterix provides will enable this movement to happen. The totality of what I see is incredible. All of this with a market capitalization that I believe is far below the value of what this company has achieved. The opportunities in front of us to drive growth and enhance shareholder value are significant. It was an easy decision for me to say yes to the board. So why me? Without sounding boastful, I believe I am uniquely qualified. I've been here before. I understand the complexities of working with the utility sector, and I recognize the incredible opportunities that this sector can deliver for our customers, our partners, our company, and absolutely for our shareholders. I know how to run a company that is driving technology change. The experiences and relationships I've cultivated over my career have allowed me to step into this role with a roadmap and a vision for success. I've been working around the energy and telecom space for over 30 years. During my tenure as CEO and Executive Chairman of Silver Spring Networks, I helped guide the development of the smart grid network evolution for utilities and created deep, long-lasting relationships within the sector. This ultimately led to successfully positioning Silver Spring as an innovative leader within the utility sector, placing advanced wireless metering into more than 50 million homes and businesses across the country while working with almost every utility in the nation. Silver Spring went public in 2013 and was subsequently purchased by Itron in 2018, with the technology still being used today. We have moved from the smart meter to the smart grid. Anterix is perfectly positioned to enable this smarter future. Just this week, the Wall Street Journal featured an article about the need for this smarter future, which highlighted the opportunity it presents for Anterix. Bottom line, the reason I’m here is that I see significant opportunities for Anterix, for the utility sector, and for our shareholders. As I outline my near-term priorities for the coming months, I want to share a few key areas of focus. I have worked very closely with our sales team to understand the current position of our pipeline. It is incredible to think about the success we've had, and yet recognize the amazing opportunity still in front of us. So what is next? Turning to my top near-term priorities? First, we're going to be laser-focused on driving spectrum transactions. We are revisiting every element of our sales process. A key priority of mine is to expand relationships with both existing and prospective customers. Our strong customer base represents a powerful opportunity to advocate for our technology and enhance our brand visibility within the industry. Next, I've asked Tim to review our operating budget to identify opportunities for efficiencies and reduce our overall annual cash spend. We will then execute on these findings. As we continue to focus on the task of driving contracts and reducing spending where it makes sense, I see an opportunity to increase our share buyback effort. We have a robust buyback plan in place, and I want to ensure that we pursue every opportunity to put that plan to work. At the current share price, I believe this is a great use of our contracted proceeds and can help drive significant shareholder value. Before I wrap up, I want to share that these last two weeks alone confirmed everything I thought about the company when I said yes to this opportunity. The UBBA Summit took place last week, where leading utilities and the industry ecosystem gathered with a specific and valuable focus on sharing experiences, use cases, and plans to build private wireless broadband networks. This year, Evergy, an Anterix customer, hosted this dynamic sold-out event, which took place in Kansas City with over 600 participants, including representatives from more than 30 utilities and increased C-level participation. To put it in perspective, the utilities in attendance represented more than 60% of our spectrum value. The summit featured insightful discussions on the vital role of private networks, with many of our customers sharing their journeys in adopting 900 megahertz private wireless broadband as the backbone of their network deployments. Our booth highlighted several mission-critical use cases, reinforcing our leadership position in this space. The event was invaluable and provided a platform for collaboration and innovation, setting the stage for our future growth. Earlier this week, I attended the Edison Electric Institute Financial Conference in Florida. It was great to be there and visit with many of the utilities and people I have worked with throughout my career. In these conversations, we discussed how Anterix is perfectly suited to meet the challenge that they now have in front of them to help them continue to deliver secure, reliable, cost-effective service for every customer in the United States. When I mentioned earlier that these events confirmed everything I believe about this opportunity, it is these personal conversations that reinforce my excitement to be leading the Anterix team. With that, I will turn over to Tim, and then we'll rejoin to share some closing remarks.

Thanks, Scott. Before I begin, I want to share that I've had the opportunity to get to know Scott over the course of the past few weeks, and I am truly looking forward to working with him as we execute on the priorities he outlined. It's also important to note that our balance sheet and our future incoming proceeds will continue to provide the opportunity for us to enhance shareholder value. Turning to our results, Anterix concluded its second quarter of fiscal year '25 in a strong financial position. We detailed these results in our 10-Q, which was filed yesterday and is available on our website. I will spend a few moments here reviewing some of the key highlights from this quarter. We ended our second quarter of fiscal year 2025 with more than $43 million in cash and no debt on our balance sheet. We continue to strongly believe that being debt-free is a significant advantage for Anterix. It is also important to note that we still have more than $168 million in contracted proceeds to be received over the next several years related to signed contracts, with roughly $110 million to be received by the end of our fiscal 2026, which positions us to continue to return value to our shareholders. Regarding some of the priorities that Scott mentioned, with regards to our share repurchase program, we will be pursuing additional opportunities to increase cash flow to fund additional buybacks in the nearer term. One example of this is that our team is actively working with certain customers at their request to deliver spectrum earlier than contractually required, which will help accelerate payment timing into this fiscal year. We are also taking a hard look at our operating expenses to drive efficiencies. I expect to have more to share on these initiatives on our next quarterly call. Let me conclude by reiterating that with the cash on our balance sheet and roughly $168 million in contracted payments to be received over the next several years, we're clearly in a solid financial position.

Thanks, Tim. With the right people, strong partnerships, and innovative solutions, we are committed to supporting our nation's utilities in their electric grid modernization efforts. We take great pride in our accomplishments to date and are excited about the opportunities that lie ahead. I look forward to sharing more insights with you in our upcoming discussions. With that, we'll now open the call to questions. Brian and Chris will also be joining Tim and me to provide additional perspectives as well. Operator, please open the call for questions.

We will now begin the question and answer session. Our first question comes from George Sutton of Craig Hallum. Please go ahead.

Thank you. First, Scott, welcome. In our intro call, one of the points you made I thought was helpful and I'd like you to go into a little more detail. At Silver Spring, you were working with a lot of these same utilities who had no tech at that time. You were providing them some initial tech. You are now in a position to take old technology and deliver to those same customers new technology. Can you just talk about the differences in those two?

Hey, George, thanks for that. I appreciate it. It's great to be here. Yes, I remember the conversation we had back in 20 years ago—sometimes it's hard to imagine, it was 20 years ago. We truly pushed the limit of technology that was available to us. We leveraged the unlicensed spectrum of 902 to 928, and that technology, which is still in use today, has touched, as I mentioned in the prepared remarks, more than 50 million homes and businesses across the United States. The movement we saw was very real. And now we're witnessing even more demand, more use cases, and a higher level of expectation from customers regarding what they want from utilities and the solutions we now have to extend that, making it more secure and robust. These advancements are really unlocked with the bandwidth that Anterix has and our 5G capability, which wasn’t available 20 years ago. As I start these conversations with our current clients and prospective clients, the light goes on. The challenges we face in getting utilities to move from very low technology prior to 2004 to embracing change—I used to think of it as crossing the bridge. They had never crossed it. That bridge was connectivity to their point-of-sale device. I could never imagine running a business that wasn’t connected beyond a monthly manual read. That changed. Now, the bar has risen higher, and the needs for customers to protect the grid are much more valuable and at greater risk today. The solutions available in the market can be unlocked with the kind of capability Anterix provides through 5G. I think that captures some of our earlier conversation, George. Since then, those discussions have evolved into real conversations just earlier this week following the EEI.

Super. My other question is for Tim. I've been on record as a believer that a more aggressive share buyback program makes sense. So I'm interested in hearing about the delivery of Spectrum earlier than contracted. Can you walk through the economic logic behind that? Is it much different? I just want to ensure we fully appreciate this concept.

Yes, George, it's really being driven by the customer and their desire to move their networks along faster, to deploy the Spectrum faster. We've had customers actively ask us to deliver faster than was contractually obligated, which will result in cash flow coming in earlier. Right now, our current projection is that in our fourth quarter of this current fiscal year, we'll receive roughly $35 million that we had planned to come in next fiscal year. With that additional cash flow in this fiscal year, we feel stronger about being more aggressive with the buyback program in the nearer term. You'll see those results play out as we release our numbers in the next few quarters.

Hey, George, it's Chris. Tim referenced this, and I know you know this. One of the things that makes our offering so unique is the ability to do exactly what Tim just described: being flexible enough to adapt if a customer wants to accelerate or evolve their delivery decisions. This flexibility is one of the aspects that makes our offering unique—our ability to match what we deliver to what the utility directly needs.

Beautiful. I'll turn it over to others. Thank you.

Thanks, George.

Our next question comes from Mike Crawford from B. Riley. Please go ahead.

Thank you. Just to follow up on that, Tim, that's $35 million you're talking about in fiscal Q4. Is that in addition to the $10 million that had been expected in that quarter, or is it $35 million altogether in that quarter?

So it's $35 million altogether in that quarter, Mike. We've already received about $18 million this year, and the $35 will put us in the low 50s for the fiscal year based on contracts we've signed and the amounts we expect to receive this fiscal year.

Okay, excellent. Then, Scott, can you share any low-hanging fruit that you've identified as you revisit your sales process?

What was the first part of the question, Mike?

Well, you said you're revisiting every element of your sales process. So, as you embark on this investigation of your sales process, is there anything you've identified already that you think you can improve upon?

Yes, there it is. One thing that comes to mind is when we met as an entire group a couple of weeks ago. We were going around the room, and the testimonials I was hearing from our current clients and prospects were good. As I probed further, the real story started to emerge. We developed long examples of why Anterix was uniquely positioned; nobody could offer the kind of security, ubiquity, and control that we provide with our 5G platform. It reminded me of many challenges we faced at Silver Spring 20 years ago when everyone thought this would be a carrier-led solution. The fact is, utilities love to own their private networks. They appreciate being able to call upon that connectivity when they need it most. Carriers cannot offer that or the pricing flexibility we can provide. Those are some takeaways, Mike, as we dug into the details of use cases and the value Anterix brings to the table. This creates a strong foundation for getting our clients to become our biggest advocates. Utilities don’t compete with one another, but they enjoy using each other’s references and boasting about accomplishments. Our company has a great opportunity to feature customers explaining how they're advancing from the lab to actual deployments, which we saw last week at UBBA. I'm going to ask Ryan, who was there, if he wants to share some stories from the event.

Yes, I'd be happy to. Good morning, Mike. Yes, UBBA has been an organization we've tracked for a while, a trade association we founded with like-minded partners several years ago and then transitioned into a nonprofit with a utility-run board. It's been remarkable to see the entire lifecycle of this conversation, and the utilities’ ability to share their testimonials, experiences, and lessons learned. Last week in Kansas City was no exception. The organization has evolved as we've seen these deployments unfold. Conversations we had two years ago primarily revolved around understanding technology. This year, the focus shifted to learning from the successes of various customers who deployed their networks, having devices in the field, and onboarding applications. Evergy, as the host utility, did a remarkable job sharing their experiences and the key applications they are utilizing. They had a booth that attracted a lot of attention, allowing attendees to engage with them about showcasing real applications that provide value through the 900 MHz LT technology, like SCADA, FLISR—fault location isolation and service restoration—security cameras, device management, pull tilt sensors, and various line sensors. These represent the building blocks for modern smart technology being integrated into the grid. As the grid modernizes and utilities implement advancements, there will be thousands of devices like these. Just one example of the many conversations we had over three days in Kansas City. I’m thrilled about Scott's idea as well. I've said before that your past customer is your best salesperson, and capturing that excitement to share across the organization presents a powerful opportunity for us.

And Mike, I'd just like to add some exciting use cases that are underway, involving AI and intelligence at the last mile of the grid. The technology we've deployed has the potential to transform occasional manual data points into hundreds and thousands per day. The AI chips being tested at endpoints we enable with our spectrum and connectivity might take that number to millions. The information unlocked through this technology greatly enhances the security that utilities can use to protect their grids. This exciting prospect will continue to be discussed and deployed as the utilities begin to embrace it.

Thank you. One last question for me. Any changes in perspective from the FCC under potentially a Brendon Kraham administration as you look to seek approval to offer 5/5 LTE instead of just 3/3?

Chris and I have had some great conversations about it. He and his team are doing a terrific job. Chris, why don't you respond?

Yes. Thanks, Scott. Hey, Mike. Recall that our initial 3/3 received a five-vote. One of the commissioners who voted in favor was Commissioner Carr. I don't see any political nature to our multi-party petition. I'm excited to see the movement of the petition through the process. I believe we will likely secure Commissioner Carr's support if he transitions to the acting chair and then to chair. I feel good about our position, not just for Anterix but for our nine co-petitioners as we work this forward.

Great. Thank you very much.

Thanks, Mike.

This concludes our question and answer session. I would like to turn the conference back over to Mr. Scott Lang for any closing remarks.

I would like to conclude today by thanking all of you for your support. Stay tuned. We're excited to be here. I'm excited to be here and look forward to connecting with many of you over the coming weeks. Have a great rest of your week, everybody.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.