Q1 2023 Anterix Inc Earnings Call
[music].
Good afternoon, ladies and gentlemen, and welcome to the <unk> first quarter fiscal year 2023 earnings call.
At this time, all participants have been placed on a listen only mode and we will open the floor for your questions and comments after the presentation.
It is now my pleasure to turn the floor over to your host Natasha Vecchiarelli ma'am the floor is yours.
Good afternoon, everyone and welcome Steve <unk> first quarter fiscal year, 2023, Investor call I'm, Natasha Vecchiarelli, Vice President Investor Relations and corporate communications.
Joining me on the call today are Rob Schwartz, our president and CEO Ryan.
Ryan Gerbrandt R C L L. Tim.
Tim Gray, our CFO and Chris gotten them to keep our chief regulatory and Communications officer.
Before we begin please note that during today's presentation. We may make forward looking statements either in our prepared remarks or any associated question and answer session.
These statements are based on current expectations or beliefs and are subject to risks and uncertainties that may cause actual results to differ materially.
Risk factors that May impact our performance are identified in our most recent SEC filings.
Our SEC filings can be found on our website or on the SEC's website.
Investors are cautioned not to place undue reliance on forward looking statements and we disclaim any obligation to update or revise these forward looking statements. After the date of this presentation.
Following our prepared remarks, we will have an operator led question and answer session.
In addition at the conclusion of today's call a replay and transcript of our discussion will be posted to our investor Relations website.
With that I'll turn the call over to Ann Turks, as President and CEO , Rob Schwartz.
Afternoon, everyone and thank you for joining the call.
With our last call being just several weeks ago I'm going to focus today's discussion on providing an update on our contract progress customer pipeline and industry movement.
Then we'll open it up for questions.
As we have said <unk> mission is to be the de facto private broadband solution for utilities, we fully recognize that continuing to close individual deals is a near term imperative. Our goal is to capture the sector.
While accomplishing this goal will take time I remain confident that we are uniquely built to succeed in this effort.
Let me share three reasons for my confidence.
First we have the right team with Nextel lineage experienced and successfully pioneering a disruptive and transformative effort Nextel was the first nationwide wireless platform and drove a range of industries public safety construction utilities and more to adopt a single unified wireless solution.
And at the time it was also difficult to predict how long would take to execute on that mission.
With our focus it on terex in the utility sector.
<unk> added considerable utility knowledge and experience to our seasoned wireless team to support and advance our efforts. We believe this combination of wireless and utility experience is unmatched.
And best positions us to continue to win customers and execute on our business plan.
Second our solid financial position is a core element of our strategy designed to ensure that we have the time it can take to define new market moving to industry and secure the fact omission.
We own a unique and valuable nationwide spectrum asset, we have a strong and debt free balance sheet operate a lean organization and our prudent stewards of capital at.
At the end of the quarter, we had $86 million in cash and roughly $50 million in remaining contracted proceeds due to repeat in the next few years.
Our capital efficient model allows the vast majority of contracted proceeds to result in free cash flow.
And we have multi decade customer lease contracts with renewals with little to no churn, providing significant value well into the future.
And third we have the right unique product at the right unique time.
And Terex has purposely positioned to help solve growing critical and complex challenges for utilities, including grid modernization renewable energy integration.
New environmental reality, including wildfires and massive storms, expanding cyber and physical security risks.
And a growing focus on energy equity and more.
These realities provides strong tailwind of support for the necessity of private broadband networks.
Accordingly attention is expanding across the sector reflected in the continuous growth and maturation of all three phases of our pipeline as well as forward movement for a number of our larger more complex deals.
The public industry focus on private LTE and <unk> is measurable.
There is over 50% of our nationwide spectrum value represented in the combined participation from the sea level leaders of our new utility strategic Advisory Board.
The utilities that have pursued experimental licenses at 900 megahertz and the membership of the independent utility broadband alliance that we helped found.
And it should not come as a surprise that these are the utilities that we are aggressively working with to help them finalize their 900 megahertz private LTE plants.
Add to that our 80 plus member in Terex active ecosystem program and our three early adopters and you can see the tremendous movement across the sector towards 900 megahertz broadband for utilities.
So with that let's dive into some details of our pipeline.
We've heard from investors the request to provide more color on specific pending opportunities. In addition to the pipeline stages and otherwise status that we previously shared.
In response within the limitation of our NDA is I'm going to take you through four deals presently in phase III of our pipeline as well as to provide a few additional updates.
To start.
We've agreed to commercial contract terms, including price term deployment schedule and more with a large multistate multi operating company utility I'm pleased to say that we are presently working through the utility's internal approval process with C level support, which we believe will lead to a final sign off on the contract.
Arms.
We are confident that we're on a solid path towards our next contract with what would be our largest customer to date.
Through this experience we continue to learn that like all pioneers, it's difficult to predict the exact timing of when these deals close as past can and often do evolve as they proceed.
As Morgan likes to remind me that our startup one said patients as bidder, but its fruit suite.
And our second example involving a large multistate utility customers private LTE network as part of a much larger grid hardening effort, which involves their transmission system the significant integration of renewable energy.
And the overall enhancement of resilience this broad and complex scope of this project prolongs the duration of their executive review, which is well underway. This relationship began as a 900 megahertz pilot where the entity explored multiple use cases and has now evolved to include in terex engaged up to their president while simultaneously.
<unk>, there's third party experts to develop a strong private LTE network business case.
Our third example involves a multistate IOU with several operating companies, resulting in an increased complexity, but in turn a significantly larger scope of opportunity.
Comparable historical commitments like this would have been achieved over many sequential years, one operating company at a time.
For this utility however, private LTE is proving a different model demonstrating a set of strategic benefits best realized across the entire unified service territory.
They've developed a comprehensive plan, which has now been validated by multiple third parties and demonstrating among other benefits significant opex savings throughout the program life.
This prospective customer has strong C level support across their holdings and operating companies.
The final opportunity that I'll highlight today is developing at the operating company level of a large multistate holding company. This utility has successfully developed its strategic technical and capital plans to support their private LTE network build out we've worked with this utility to align the goals of their deployment with state regulatory.
Priorities and cyber security initiatives, they too have C level involvement given the strategic importance of the solution.
These are for grid examples pulled from our current pipeline of over 60 perspective customers demonstrating the growing demand for 900 megahertz private LTE our role in these strategic decisions and the value we can bring to the sector.
Looking more broadly I am pleased to share that there are multiple utility rfps under development, where our 900 megahertz spectrum is being specified.
And Additionally worth noting based on inbound requests we are now seeing interest from a number of entities that were previously opposed to private LTE with.
Which to US is another strong sign of progress towards our de facto emission.
And while we continue to stay laser focused on the utility sector and our mission to become the de facto provider of private broadband solutions for our nations utilities, we are receiving interest from a range of organizations and other sectors. This inbound interest is reflective of the private broadband network demand we're seeing.
Across critical infrastructure verticals, including pipelines gas companies freight rail operators and government installations.
We believe the majority of these entities and the use cases, they're pursuing could fit well within our utility private broadband deployment supported by our nationwide network of networks platform strategy.
So when you cut through it all we are pioneering the transformation of the utility sectors communication capabilities as well as the monetization of our nationwide spectrum asset we are creating an even more valuable and unique platform that supports the critical need to revolutionize our nation's electric grid a process that we.
Believe we will be well worth the time invested.
And while there is considerable and growing attention in the marketplace regarding private broadband networks, we aren't just talking about it we are uniquely converting large multistate customers to commit to build the largest private broadband networks and our nation.
Additionally, the activity we have seen in Congress and with the administration from bipartisan infrastructure legislation to the recent inflation reduction Act supports our efforts and confirms the importance of the issues, we're helping utilities address.
With the growing challenge of demand for private networks across sectors, the requirements to address our nation's de carbonization and grid modernization goals and with an increasing focus on mitigating the risks to our grid caused by natural and man made disasters. We remain confident that we can achieve our mission to become the de facto provider of prime.
Broadband solutions to utility and critical infrastructure sectors, leveraging our 900 megahertz spectrum asset.
With that I'll turn it over to the operator for questions.
Yeah.
Certainly ladies and gentlemen, the floor is now opened for questions. If you have any questions or comments. Please press star one on your phone at this time, we do ask that while posing a question. Please pickup your handset if you're listening on speaker phone to provide optimum sound quality.
Once again, if you have any questions or comments. Please press star one on your phone please.
Please hold while we poll for questions.
Your first question is coming from George Sutton from Craig Hallum. Your line is live.
Hey, Thank you. This is Adam on for George Thanks for taking my questions.
Rabbi Great to hear about the fourth contract under LOI is there an updated contracted proceeds to go along with that.
Yeah. Thanks, Adam good to hear from you.
But one important point right in our last call we talked about three otherwise this call. We gave some illustrative color on four different deals theres not a complete overlap there and we're happy to say that because.
So there isn't really a direct correlation of the numbers for before and this time, but Brian maybe you want to fill in some color on that yes happy too.
Yeah, just to correlate like Rob said, we were intentionally drawing at one to one relationship between the two Adam I'll say, specifically, though the four examples that Rob walked through from phase III of the pipeline two of those do specifically of LOI isn't too don't again, reflecting what we have said earlier about the option.
<unk> and kind of the multiple ways that we've seen customers really participate in these journey.
Reflecting their unique needs and complications as they work their way through the process.
What we're really trying to bring attention to as we focus in on kind of the later stages of the pipeline is specifically what some of those.
Methods are that utilities are going through and being able to demonstrate specifically where some of these customers are in the pipeline. So just just to highlight again you know really what the focus was of the four different examples that we walked through the first of course was really speaking to a specific example, where there's a significant level of maturity in the deal.
The contract structure of the deployment timelines elements that Rob listed.
We're really getting to the element now of the executive approval cycle that all utilities go through when they're in a similar shape and form but I'll have a unique cycle in process that we hope stakeholder the way through the second was really focusing on how LTE. We've found as a part of a much larger deal that the utility is working on as we've talked a lot.
The macro issues facing utilities today.
Focus on grid modernization or.
Bringing in renewables and clean energy sources become really macro level projects that PLT as a relatively small part of but it speaks to the level of work that the utility needs to do is theyre stakeholder and there was much larger deals excuse me that we are a relatively small part in.
The third piece was really focusing on something else that we've talked about the difference between the much larger holding company entities in the operating companies that sit underneath it.
We've spent significant effort really trying to develop and capturing some of the C level interest that really has gravitated over top.
Of the of the technical details of private LTE broadband and the operating company level discussions have really matured.
Which are by nature much larger transactions.
Encompassing the multiple operating companies that sit underneath but require a more significant level of due diligence, we're working to educate and drive that stakeholders now think of it in context of effectively selling and positioning into multiple different operating companies.
And that each have their own unique set of needs and ultimately their own regulatory requirements, but we believe the benefit of going after the approach that way.
Far outweighs you know kind of the extra time and effort that it takes to be able to get there and the final one is really the reciprocal of that you're continuing to see interest even added individual operating company level, who finds a champion and a single utility and then brings that learning back across the holding company with time and while we believe that opportunities.
To start at that at the operating company level.
It will with time develop into the rest of the holding company with learnings.
And the application of that experience.
That's great and maybe if I focus just on phase III of the pipeline any commentary on the mix there whether these are opportunities at the parent company or operating company level.
They're split Fran.
Frankly, like I said these examples kind of capture a few of them, but we're definitely seeing both.
But the highlight I'll kind of take out of it as we articulate in a couple of reuse.
Some of the ones coming through are certainly starting to represent some of the larger opportunities that we're seeing in the pipeline, which we think is a great example of kind of the next to come in line. After the first movers in the earliest early adopters as we start moving more deeply.
And to some of the larger companies out there and in the national utility landscape.
Great. Thanks, I'll hop back in the queue.
Thank you. Your next question is coming from Phil Cusick from J P. Morgan Your line is live.
Hey, guys. Thank you.
Two if I can first can you give us some idea on the progress on these four deals since the may call.
And are we talking about weeks months or years to get to the next siding.
And then second of all.
Talking about some a couple of companies that have multi state in there can you give us an idea of how many states. We're talking about is it sort of a handful or.
High single digits into the double digits. Thank you.
Thanks, Phil.
But I'm going to let Ryan jumping to just just one sort of set up on it.
Since may we didn't give color on these four specific deals in may but what I did say in my comments is that we're seeing progress across the pipeline, meaning that we're seeing advancements and growth in each of the phase of the pipeline.
And these are all of the large deals we're talking about now and somebody otherwise we talked about last call. These are multistate deals that debt.
We're not going to give you the exact number of states but.
Significant impact on sort of the overall footprint of our success.
Do you want to comment on the on the first question, Yeah, I'll add a little bit more color. I mean, we are seeing progress all the time I think is the right way to think about it.
Certainly as Rob said, while we didn't specifically focus on these deals individually. It may we're progressing all of these activities in parallel with our growing sales and support teams every single day and see momentum moving forward, sometimes it's faster than other times like like you see with any kind of complex transaction, but we're continuing to see them move forward as the <unk>.
<unk> are working forward.
Terms of the specifics on our states as Rob said.
These <unk> cover a variety of different scenarios can't get into specifics on how many are in them.
But definitely spend some of the larger companies when utilities.
In the U S.
And any idea.
Weeks months, a year before we're going to see when they sign.
Again, let me emphasize that it may be it may be the.
Rule out a shorter term rather than longer term yet. So I. Appreciate the question I think as we as reemphasize in my comments earlier.
We're confident we're on a great path, especially in the first example that I talked about but if anything we've learned our lesson about predicting the precision of that.
Is not a not a good place to be but the overall movement in that specific transaction that we highlighted.
We'll see that move forward at a good pace.
Got it thanks Robyn.
<unk>.
Thank you. Your next question is coming from Simon Flannery from Morgan Stanley . Your line is live.
Great. Thank you very much good evening. Thank you for the color on those four examples what's the status of the third LOI that was not in those four deals.
Look I think as we said in the prior call. Those <unk> were comprised of both phase two and three.
So you can you can.
Use your imagination.
Like every one of these deals.
We use an LOI as a tool as Ryan said, it's not a necessity in every deal, but it's a tool to get alignment of commitment writes a letter of intent it states the intention of the parties and so.
In one of those three cases, we use it earlier in our pipeline to be able to align on our priorities and the other two it was use later so what I can tell you that every one of our deals nothing has fallen out everything everything remains in the pipeline and moves forward and that's pretty important given our our mission of being a de facto standards, it's not that we're losing deals to competition.
Or to utilities, not moving forward just the opposite.
Everything progresses as Ryan said, there are good days and bad days about the speed of that progress, but we continue to push them. All forward. Yeah, just I'd want to highlight one other point there too I think the most notable thing from the pipeline.
I don't want to overlook is the comment that we're seeing development in all phases of the pipeline. So it means we're seeing overall growth in the pipeline and we're seeing the development of accounts work their way through and obviously, that's inclusive of deals that we're working on to the contracts constructive LOI and ones that were not.
Where we're seeing the kind of movement that I would hope to be seeing kind of.
Into this phase of the process and the level of education and the momentum the comments that Rob was making earlier about the activities in the market. It's resonating its way down into the activities. We're seeing in the day to day activities at the sales team are driving and the what excites me at kind of the volume of activity that we're seeing and puts us still on good track to keep the total market moving forward.
Which is the necessary objective to achieve that facto standard goal that we set.
Great.
Think you don't want to give.
Specific forecast I think you did reiterate your confidence in the $1 8 billion.
On or around fiscal 'twenty four is that still the case.
Yes, Simon it remains our target.
No.
It doesn't bother us.
Or minus a quarter or two in that in that target you know for us. It's about the long term value opportunity that I talked about earlier, it's about driving the industry adoption Holistically clearly, we got to deliver on deals and we know that and we will continue to do so.
The precision of that target it remains our target and we're sticking with it.
Great.
Big carriers are all starting to talk about the b to b opportunities private networks Standalone five G.
The hyper scaler in there as well what are you what are you seeing on the competitive landscape.
Are they trying to compete against your.
Your utilities and maybe try to win some of those customers away from you.
Yes Simon.
From our view and we talked about being a pioneer as you know when we filed our FCC petition now over six seven years ago.
It was about <unk>.
Pioneering private networks as a concept, which then it was unheard of now absolutely. There is theres no shortage of people talking about it I think what's important is as I said.
What we are achieving but I really think we are the leading private LTE movement and we're leading the movement at this at this time the footprint that we've established with just our existing customers.
Already I think is bigger probably than everybody else combined from from a from a scale standpoint, and as you can see by what we talked about in the pipeline right. All of the people who are publicly spoken in some way right I went through.
The folks who are involved in our.
Pfizer reward for our platform the experimental licenses those who are now members of Alba and which continues to grow that's half of the nation for the value of our spectrum in the nation at least and so.
Just as far as that.
The impact we're having on private LTE overall, yes, theres other I would say and others, who are talking about it but I don't think it's from a competitive standpoint.
Talking about the wide area coverage that we're talking about when you measure it whether it's on pops or square miles or otherwise I'm confident we have.
A far more substantial position and see a lot more opportunity for growth.
Great. Thank you.
Thank you once again, ladies and gentlemen, if you have any questions or comments. Please press Star then one on your phone at this time.
Your next question is coming from Katherine Nope from B Riley financial your line is live.
So.
It's not hard to conclude U S.
<unk> block.
Great spectrum.
And.
Donlin.
So one of the only need five megahertz of Bon.
And I'll look quiet Powerpoint terrestrial.
Network, leading three megahertz on surplus that potentially could be repurposed for communication question.
Question for.
For you guys is do you think.
LTE is nothing utilities or are there some customers might.
It might be better off going to abide by.
If that were possible in the future. Thanks.
Yes, let me take your second question first and then I'll go to the earlier part of it.
Yes, absolutely we think.
Our three by three is a starting point for our <unk>.
Private network is plenty of spectrum Theres a lot of good examples of it not just the customers. We've signed to date, who have done their deep analysis of capacity planning, but southern company, who runs a private LTE network on that six megahertz of spectrum as well and they've made the conscious decision to also allow other third parties other Likeminded party.
To utilize that network, so they actually have capacity to handle their own needs as well as others.
And your specific question about next NAV, and we know those folks and have a lot of respect for their for their business model, serving the vertical aspect of location.
I think the spectrum is really not directly comparable to what we have we.
We have exclusive use of our spectrum, specifically for LTE and I think that there's some different kind of usage like I said before but what other spectrum bands.
There's a lot of different bands that the FCC is designated for a lot of different uses.
And so for us starting with the six megahertz and like every good.
Harrier model, there's always opportunities to expand as we say that's a that's a rich man's problem, if youre able to fill up that capacity and utilize it all it means you have such powerful use cases, and you can probably think about adding more spectrum other layers to that layer cake as you expand the model.
Great. Thanks.
Thank you. Your next question is coming from Walter Piecyk from light shed your line is live.
Hey, Rob.
What's been the dialogue around CVR lately.
A variety of companies you're talking to your existing LOI otherwise.
Sure so.
Thanks Walter.
The <unk> dialog I think continues to grow as a complementary aspect of low band spectrum right now with 900 being.
Sub one gig serves a very different purpose of what <unk> does as a solution set CBS is great spectrum.
I've heard it described bye bye folks in that space is Super Wi Fi right. It replaces the lot of the use cases that Wi Fi was okay, yet, but is more proprietary whether it's licensed or unlicensed.
We have numerous both customers and prospective customers that CBS as part of their either either licensed or unlicensed part of their model.
They continue to.
Drive that dual band solution right no different than ever.
Everyone's using Wi Fi or in their offices and steps outside that goes onto a wide area cellular network CBS will be the same thing for a lot of these customers were in a factory in an office and a substation that can use it for more capacity and its going to complement another important point about it though is that we've got our <unk> active ecosystem that I mentioned earlier with 80 <unk>.
Different companies and growing.
Within that solution set one of the key things. We did was identify the need for communications modules that can bridge the gap between CBS Araban uneven carrier bands and one of the opportunities. We have done is we've driven that crowdsourcing of vendors to collectively drive a module maker to make a solution set just for that need it is.
A really good growing example of why there needs to be an intermediary like us to help drive the solution set that's one of many examples that you'll see that the ecosystem is driving.
Well, let me ask the question this way.
Do you have when you are having discussions with your again existing.
Licensees with people that you sold too.
As well as the four LOI as well as other people different.
Pages of this.
Carla.
China pharma.
No.
What are you still with us.
Alright, operator, who can proceed and we will go back to Walter because back in.
Certainly.
Thank you everyone that concludes our Q&A session I will now hand, the conference back to our host for closing remarks. Please go ahead.
Thanks, very much and thank you everybody for your continued interest and time today look forward to talking to you. All soon have a great day.
Thank you ladies and gentlemen. This concludes today's event you may disconnect at this time and have a wonderful day. Thank you for your participation.