Earnings Call Transcript - ATEX Q4 2025

Operator, Operator

Good day, and thank you for standing by. Welcome to Anterix Fiscal Fourth Quarter 2025 Earnings Conference Call. Please note that today's conference may be recorded. I will now hand the conference over to your first speaker host, Natasha Vecchiarelli, please go ahead.

Natasha Vecchiarelli, Vice President of Investor Relations and Corporate Communications

Thank you, operator, and good morning, everyone. I'm Natasha Vecchiarelli, Vice President of Investor Relations and Corporate Communications. Welcome to our fiscal '25 fourth quarter investor update call. Joining me today are Scott Lang, President and CEO; Tim Gray, CFO; Chris Guttman-McCabe, Chief Regulatory and Communications Officer; and Ryan Gerbrandt, COO. Before we begin, please note that today's discussion may include forward-looking statements regarding our outlook, operations, and expected performance. These are based on current assumptions and subject to risks and uncertainties. We do not undertake any obligation to update forward-looking statements. We encourage you to review our SEC filings including Forms 10-K and 10-Q for a detailed discussion of these risks, which are available on our website. With that, I'll turn the call over to Scott.

Scott A. Lang, President and CEO

Good morning, everyone. I am excited to give you a brief update on the progress we have made since our last earnings call where we announced three important initiatives to drive growth for Anterix that will return value to our shareholders, our employees, and deliver great benefits to our customers. First, we committed to focus on optimizing our cost structure and streamlining our operations. We are already seeing these benefits, which Tim will cover in detail shortly. Second, we launched AnterixAccelerator designed to test the correlation between price and action in the industry. We are very pleased with how this initiative has ramped up during the quarter. As of today, we are oversubscribed with utilities that are in active discussions and negotiations for the $250 million of spectrum we made available as part of the program. What we are seeing is clear: the demand for 900 megahertz LTE continues to be strong. And finally, the strategic review process that Morgan Stanley is leading has been active and continues. We entered it from a position of strength with zero debt, nearly $150 million in outstanding contracted proceeds, a $3 billion pipeline, a proven deployment model, and a disciplined cost structure. We have no predetermined outcome, particularly at our current market cap. This initiative continues, and we will keep you updated as appropriate. Before I introduce Chris to give us an update on the FCC process, I want to address a question that we've been asked about other spectrum choices that may become available to the utility industry. One of those that might be more well known is at 800 megahertz. We are confident that our economics, along with our market leadership of actual deployments and our long-term commitment to the industry, will continue to be the utilities' preferred choice. To reinforce this, our current 3 x 3 offering is being deployed at scale and is already delivering the robust and powerful bandwidth that utilities need to meet today's demands and support virtually any use case well into the future. But as we have said before, we are not standing still. We are pushing forward. Our momentum toward a 5 x 5 future is accelerating, unlocking even greater potential for the digital grid. We are in a strong position as the market leader. We will continue to be aggressive to drive value for this company, and I am excited for our future. With that, I will hand it over to Chris.

Christopher Guttman-McCabe, Chief Regulatory and Communications Officer

Thank you, Scott, and good morning, everyone. I'm excited about the momentum we've seen since the last investor call. To recap, earlier in 2025, the FCC developed and adopted a Notice of Proposed Rulemaking to modify the 900 megahertz rules to allow for a 5 x 5 megahertz opportunity. Since our last call, both the initial comment period and the reply comment period have now officially closed. What came through loud and clear in those filings was a chorus of support from multiple utilities, 20 technology companies like Ericsson, GE, Nokia, and more, as well as multiple industry associations, all calling for an evolution of the band to support the growing demand for private, secure, dedicated wireless networks. Again, we're excited about the current status of the proceeding and believe there is a real opportunity to cement the United States as a global leader in smart grid communications as well as private network deployments by authorizing this next phase of broadband innovation. The case has been made, the record is strong, and we're optimistic about a forward-looking outcome. As stewards of the 900 megahertz band, we will continue to engage with the FCC and stakeholders in the proceeding in this final stage, urging a timely and favorable outcome. We thank Chairman Kuhn for his leadership and the commission for its hard work to date, and we look forward to updating you as this proceeding moves towards a conclusion. With that, I'll turn it over to Tim to walk through our financial performance.

Timothy A. Gray, CFO

Thanks, Chris, and good morning all. As a reminder, in our fiscal '25, we executed key spectrum sales agreements with Encore and LCRA, two critical steps in expanding 900 megahertz broadband coverage across Texas. We've now contracted spectrum that covers 93% of Texas counties, creating a powerful regional deployment model that can be replicated nationwide. In addition, these deals for a combined $116 million represent our best year of contracted proceeds. We also received milestone payments of $44 million from Encore and $8.5 million from Amarin and successfully accelerated the delivery of spectrum to a customer ahead of schedule, resulting in an additional $34 million in cash received at the end of January. We closed the fourth quarter of fiscal year '25 with over $47 million in cash and no debt, a position we view as a meaningful strategic advantage. Additionally, we have approximately $150 million of contracted proceeds outstanding with $80 million expected in fiscal '26. These are not potential deals; they're binding commitments that provide clear visibility and confidence in our future cash flow. As Scott mentioned, we undertook a thorough review of our cost structure and implemented targeted changes to strengthen our long-term financial discipline. These efforts resulted in roughly a $4 million reduction to our operating expense run rate from the first half of fiscal '25, enhancing both efficiency and cash flow. Importantly, we achieved these savings without impacting our ability to serve our customers or advance strategic priorities. We're now operating leaner and continue to be well positioned to execute. As we look toward FY '26, we are entering the year with a healthy cash position, $80 million in contracted payments expected during the fiscal year, a streamlined cost structure that enhances cash generation, and a capital-light model where customer-funded deployments allow us to scale without incurring significant CapEx. We will continue to focus on monetizing our pipeline, expanding our customer base, and delivering value through both strategic execution and financial discipline. With that, let's open the line for questions.

Operator, Operator

Our first question comes from George Sutton from Craig-Hallum.

George Frederick Sutton, Analyst

I think the real meaningful update is the fact that you're oversubscribed on the $250 million accelerator program. Can you just give us a sense of what are the incentives? I assume there's multiple players involved? Is this a first come, first serve scenario? Can you just walk through how these customers are thinking of it?

Scott A. Lang, President and CEO

George, it's great to hear from you. This is Scott. Yes, we launched this and we've been very pleased with the energy it has generated since the last quarterly earnings call. There are many players involved, and negotiations are actively progressing. We are very satisfied with the results. To give you an idea, over a dozen utilities participated and the demand for private LTE 900 megahertz has been very strong. We learned a lot from this experience. Furthermore, all those utilities have remained engaged and are in active discussions. Many have advanced to negotiations, which is remarkable to see such a ramp-up in just one quarter in the utility industry. In my career, I haven't seen the utility sector come together to support demand in such a short time frame. As we mentioned in our prepared remarks, we are testing the connection between economics and action, and we feel optimistic about our current position. We can offer strong economic incentives and are achieving impressive results with our existing customers, who are experiencing significant benefits from the network. Overall, discussions and negotiations are vibrant, and we are pleased with our progress.

George Frederick Sutton, Analyst

So you have a partner program in addition to your program that is part of the accelerator program. Have some of these utilities begun to engage with some of the partners as a result? And is that part of the negotiation?

Scott A. Lang, President and CEO

There have been other companies that have participated in the accelerator program. I'll let Ryan speak to a couple of those in a moment. I'm not going to get into exactly which ones or where they're at in their own negotiations. But the consistent theme is the C-level exposure of the importance of making network-first decisions, which really tees up the additional players that are getting involved in bringing these holistic solutions live and standing up these networks. So, Ryan, do you want to talk about a couple of specific companies that have jumped in and been part of the program?

Ryan Gerbrandt, COO

Yes. I'd be happy to. And yes, what you're noting is, as we initiated the accelerator program, we have recognized, consistent with what we've said before, that spectrum is just one part of the overall decision-making process. It was critical as we contemplated how to help them through that process to encompass as many of the larger technology partners as necessary to facilitate that. We were delighted to have Ericsson, Nokia, and GE jump in, as you saw in the announcement, who defined unique packages specifically targeted to provide a level of support and acceleration to these utilities and as part of the conversations across the overarching aspects of the accelerator program.

George Frederick Sutton, Analyst

Super. One last question. I'm curious how the 5 x 5 could potentially slow somewhat for those who are requiring that as their launch thought process. So hypothetically, if I'm a potential customer, I want to take advantage of this program, but I also know that 5 x 5 is really my requirement. Can I still be involved in this program? Or how does that work?

Scott A. Lang, President and CEO

George, great question. We haven't seen any hesitation from utilities to jump in with 3 x 3 when they're seeing the results from our existing deployments and how much power remains in these current deployments. Having said that, I would say they're all excited about our 5 x 5 plan. The more they learn about it, the more comfortable they become that 3 x 3 provides more than enough bandwidth for the many years ahead that they foresee for any use case. The trajectory to 5 x 5 is very promising for us, but we haven't seen anybody hesitating due to concerns with just 3 x 3 at this point in time.

Operator, Operator

Our next question is from Mike Crawford from B. Riley Securities.

Michael Roy Crawford, Analyst

Who else has recently joined your Anterix Active ecosystem besides Digi International, which put out some news in that regard a couple of days ago?

Scott A. Lang, President and CEO

Ryan, do you want to take that?

Ryan Gerbrandt, COO

Yes, I could speak a little bit to it. I don't have the full list of who joined recently. I anticipate we're going to continue to see a handful of new companies come in. I think we're somewhere around 140 total participants in the program right now. The Digi announcement you saw was actually a product offering that they put out, specifically an IoT edge gateway that was capable of supporting some edge compute and capacity. A great innovation. I think this is where we're continuing to see the intersection of AI and edge conversations and what we're trying to do. It's a natural evolution of these use cases where connectivity enables data and real-time access to facilitate more sophisticated solutions. We're excited about seeing those product lines coming in natively off-the-shelf supporting 900.

Michael Roy Crawford, Analyst

Okay. And then if Grain Management acquires this 800 megahertz spectrum and targets utilities, what would happen if that entity negotiated the deal? What's the utility in the region where you have spectrum? What would be your fallback strategy to deploy your spectrum in a region where incidents like that might occur?

Scott A. Lang, President and CEO

Well, there were a lot of ifs there. The more spectrum, the better. We like where we are positioned with 900 megahertz, and we like our proven deployments. When I talk about proven deployments, remember, seven utilities, $400 million of contracts have now moved over the last few years from lab to field and they are now providing references for the next wave of utilities that are in the queue and with whom we're negotiating to expand the 900. Our economics are extremely powerful. We're going to continue to be aggressive as the market leader. Regarding 800, while it could become an alternative, we believe we’re in a great position to continue to be the preferred choice for utilities, and we’ll maintain our strong position in the market. The current 3 x 3 is very powerful, and there is no pause in our plan to get to 5 x 5. We are pleased with our progress.

Michael Roy Crawford, Analyst

Yes. And just maybe a final question for me is, it's nice that you have this $150 million, $160 million of contracted proceeds coming in, in the next couple of years. Do you have any goal for how much you would like to add to that in deals signed in the next, say, 12 to 18 months?

Timothy A. Gray, CFO

Sure. So Mike, our internal goals are to grow from the $116 million that we had last year, which was the best year that we've had. We believe with the accelerator program, we're going to be able to do that quite successfully. I'm not going to give any specific set of numbers, but we project that we will be able to grow a pretty significant percentage from the $116 million in contract proceeds that we achieved last year.

Operator, Operator

And I will now turn the call back over to Mr. Scott Lang for any closing remarks.

Scott A. Lang, President and CEO

I want to do a call-out for our customers that are really teamed up with us in full partnership to drive this movement across the industry. I want to thank my team and the Anterix team that are continuing to drive great results that I have the pleasure of seeing every single day, all of our partners and the customers that we're in conversations with and negotiating with. We're excited to be great partners and good stewards in the industry. I look forward to checking in with all of you in the next quarter or so and continue to share the progress that we're making in the company. That's it for now, and I hope you all have a great day. Thank you.

Operator, Operator

This concludes today's conference call. Thank you for your participation, and you may now disconnect.