Q1 2024 Anterix Inc Earnings Call
Good day, and welcome to the Antares Investor Conference call.
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Okay.
Thank you and good morning, everyone I'm, Natasha Vecchiarelli, Vice President of Investor Relations and corporate Communications and I Welcome you to the <unk> first quarter conference call.
Joining me today are Rob Schwartz, President and CEO , Ryan Gerbrandt L L. Tim Gray, our CFO and Chris Gutman, Mccabe, Chief regulatory and Communications Officer.
Before we begin I'd like to remind you that we will make forward looking statements. During this call regarding future events and our anticipated future performance, such as our commercial outlook and guidance.
These statements are based on current expectations and assumptions that are subject to risks and uncertainties.
Investors are cautioned not to place undue reliance on forward looking statements.
Additionally, we do not undertake any duty to update any forward looking statements.
Important factors and risks that could cause actual results to differ materially from the company's expectations are disclosed in our most recent SEC filings.
These filings can be accessed on our website or on the SEC's website.
After Rob provide his prepared remarks, Tim will provide a quick update on the.
Open the call for questions.
With that I'll turn the call over to Rob.
Thanks, Atocha good morning, everyone and thank you for joining us.
Our most recent call in April focused on the signing of the LCR a deal providing them with broadband spectrum and succeed counties of the approximately 73000 square mile Service territory in Texas, We highlighted that L. CRA is unique to our previous customers as it's a public power generation and transmission utility and also water management utility, creating a new universe.
A private broadband use cases, it's already attracting additional utility attention to in terex.
So before I start I want to acknowledge that the frustration of investors with a cautious pace of the utility sector and are lagging stock price is not lost on us.
We share this frustration.
We do remain laser focused on continuing to capture valuable customer contracts that we will further demonstrate to the market the substantial value of our spectrum asset and our full business opportunity.
With that today I'll focus on two areas first I'll provide an update on our demonstrated intent scorecard, providing at the request of investors to give them market pulse of customer progress between spectrum transactions.
And second I will give you an update on a range of activities and accomplishments.
They are important building blocks in our mission to become the utility industries de facto wireless broadband solution.
We introduced demonstrated intent or D. I in February to address the challenge of communicating interim progress with customer contracts, given the slower than anticipated pace of the market longer sales cycles, and resulting prolonged length of time between agreements.
This transparent and fact based view scorecard is intended to measure and quantify the meaningful signs of customer <unk> that we see before we get to a contract.
This tool aligns well with our goal of providing investors with a consistent and measurable way to see the combined impact and development of our target customers complementing the standalone phases of our sales pipeline, we previously reported.
We also believe this tool provides a detailed picture of prospective customer progress towards contracting for our 900 megahertz spectrum and supports our result and confidence in the strength and potential value of our pipeline.
For this analysis every targeted customer and our sales pipeline representing over $3 billion in contracted proceeds.
Is tracked and measured on it on 20 individual indicators of intent to pursue a 900 megahertz private wireless network.
Each of these 20 indicators is individually weighted based on our assessment of its importance.
These include for example rate case filings participation on panels or interviews experimental licenses membership in our utility strategic advisory board participation.
Participation in Alba and more.
We will continue to use the same indicators consistently from quarter to quarter.
If that total weighted score places utility over specific threshold. This indicates that a customer has demonstrated substantial intent to move forward with <unk> on our 900 megahertz contract.
This data provides three key metrics that we'll share.
The number of utilities that are scoring above the specific threshold along with the total dollar value of the potential contract proceeds associated with those utilities and lastly, the net increase in the total number of individual indicators recorded.
For utilities in our pipeline.
And our first demonstrated intent report shared in February of this year, we highlighted that 15 utilities had crossed the threshold representing over $800 million in potential contract proceeds.
In April we provided our second Gi update at this time, just after announcing the LCR a contract for $30 million 14 utilities still remained above the threshold, representing approximately 800 million potential contract proceeds.
And in June we provided the third update our on our D. I scorecard. When there were still 14 utilities that had crossed the threshold. We also reported progress on a significant number of additional indicators of movement.
Since our last report in June we measured additional activity across our accounts as of today. There are now 15 utilities that have crossed the threshold representing more than $850 million in potential contract proceeds.
And beyond that the next three utilities that are close to crossing the threshold represent more than $275 million in potential contract proceeds.
In additional measurement of progress below the <unk> threshold, we've seen a total of 13 incremental demonstrated intent indicators across eight utilities that have been recorded on our Gi scorecards since June .
Several of you also asked for a report on the total progress since we introduced the <unk> scorecard in February .
In this period of less than six months, we have recorded positive movement by customers on about 50, new measurable indicators of intent throughout our Gi scorecard.
Additionally.
Beginning in June we created info graphics. The captures these updates and is available on the Investor Relations page of our website.
The individual results recorded on our scorecard are directly attributable to our broader efforts to become the de facto wireless broadband solution for the utility sector.
We have been successful to date closing a 100% of the contracts within the five utilities that have committed to wide area private wireless broadband since we've had our broadband spectrum available with.
We strongly believe this outcome is based on our focus of being a partner to the utilities through our work with the utility strategic Advisory Board are <unk> active ecosystem and the utility broadband alliance and more.
Through our utility strategic Advisory Board, we've had the unique ability to collectively identify and pursue solutions that are key priorities of our current and potential customers.
The board consists of a senior level executive from nine utilities, including Ameren <unk> Excel L. CRA Exelon Dominion Southern Northwestern and we're excited to report the New edition of New York Power Authority.
In addition, we continue to aid the development and growth of the utility broadband alliance or Uba a.
Our collaborative industry Association dedicated to advancing the adoption of private broadband networks in the industry in June <unk> announced that it had surpassed 100 members with Centerpoint energy, Duke energy and L. CRA listed as its newest utility members and terex couldn't be any prouder of this success of Bubba since our co founding of this critical.
<unk> organization.
And finally, another program that passed the 100 member Mark our own in Terex active ecosystem program, which turned to in May and now has more than 100, leading innovator companies collect collectively focused on offering the broad array of equipment solutions and services that you told us it require to plan build operate and capture Val.
<unk> from their 900 megahertz private wireless broadband network investments, it's a who's who of wireless and utility technology and service leadership.
I'll conclude with an update on our increasing thought leadership presence in the industry and important element of our near and long term strategic positioning.
Beyond the work with our ecosystem utility strategic Advisory Board and Uba as pioneers of a new market. Our goal is to consistently educate our key stakeholders on the necessity and value of private broadband networks, it's a big industry and that sort of educational effort is no small undertaking for <unk>. It means we need.
To be nothing less and diligent providing insightful trusted thought leadership at every opportunity not just getting the word out but explaining why 900 megahertz private LTE is the right answer for each specific utility its customers and its regulators as well as for the industry the region in the nation.
In the last few months alone from <unk>, I Tripoli to our own industry insights and more we have participated.
On panels and spoken at conferences broadcast Webinars and written a number of pieces in industry publications.
Our teams profile is high enough now that <unk> has sought out as a thought leader on utility communications not only by utilities themselves, but also by regulators and the media.
We believe it's the cumulative impact of all of these efforts that will continue to drive customer contracts is reflected in our demonstrated intense scorecard and will lead to our goal of becoming the de facto broadband solution.
And with that I'll turn it over to Tim for a brief financial update.
Sure.
Thanks, Rob.
I'm pleased to.
I am pleased to share that after delivering our first week sell spectrum milestone for broadband licenses, we received approximately $21 million last week.
We also expect to receive roughly $80 million of additional near term proceeds based on the delivery of additional milestones to our current customers spread across the remainder of this fiscal year.
We remain debt free are fully funded and forecast to have free cash flow for fiscal 'twenty four.
As a reminder, we have approximately $26 million available to repurchase shares and our current program and we anticipate efficiently using this plan during the remainder of the quarter by leveraging a majority of the funds we received last week from excel.
<unk>, we intend to put a significantly more robust plan in place prior to the expiration of the current plan subject to board approval.
With that I'll turn it over to the operator for questions.
We will now begin the question and answer session to ask a question you May press star one on your Touchtone telephone.
If youre using a speakerphone please pick up your handset before pressing the keys to.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Simon Flannery from Morgan Stanley . Please go ahead.
Great. Thank you very much Tim thanks for the clarification on the buybacks maybe you can just remind us on what you think an appropriate cash balances for the company.
And then Rob.
And you opened with.
Talking about the frustration with the delays with the utility industry can.
Can you just give us an update on what the key issues here or is it sort of just the layers of management the layers of approval is it syncing with.
Others in that you know, whether it's equipment providers or other parts of our broader grid modernization just how do we think about this and why even.
Even now it's still taking longer than you expected.
Yes.
Hey, Savi. This is Tim on the cash balance sheet.
Traditionally I would like to add at least.
To cover a year of our Opex, but I don't look at that like that as a standalone also look at the cash flows that we're going to have coming in from the contracts that we've got.
We've got the $238 million, we signed to date.
Received $102 million and we've got $136 million coming in still with $80 million of that this year, so I'm comfortable with where our cash position is with being able to buy back shares with the current cash balance.
Great and just remind us what you think a year of cash Opex is.
Roughly $40 million to $45 million. Thank.
Thank you.
And so to your second point.
I think yes, I think we went into probably more detail in our April call about kind of some of the process issues that we're seeing in our learnings along the way.
These are cautious customers cautious institutions that run our nation's electric grid and when they make decisions they make them for multiple decades, right and so while it takes a long time on the front end of those decisions because of the complexity of the of the organizations and the way they have to get agreement from the regulators.
They also at the same time, our committing as you know to multi decade 2030, 40 year terms that we have in our in our current agreements.
Long front end, but.
It's equivalent long.
Back end of contracts.
Part of it as well.
We really have we set it out 10 years ago to be the de facto provider here.
Really seen what I see as the thought leaders and pioneers step forward, who in my mind are an spa inspiring the followers. This is a very unique industry that they are influencing each other and while it takes time to get that that progress and momentum going you can now see through the activity in all of the organizations that.
I just talked about the participation open participation of senior executives that are now working as part of our use AD for example, utilities strategic advisory board that are not yet customers, but are committing their time to move forward in learning from other signed customers.
That's a great sign designated intent as we've talked about it that's just a quantification of all of the ways in which we are.
Working with these utilities to move forward, whether it's through their experimental licenses that are where theyre doing pilots whether it is through this is really use that through other efforts of how they need to bring their complex organizations. The larger deals that we're doing in our pipeline nine figure deals those require more work there are multiple <unk>.
Goes as we talked about back in April and each of them have have their own state regulatory environments their own leadership.
Need to make their individual decisions that then roll up into a broader holding company decision. So they are complicated but again. These are customers. Once we're embedded as we can see from the the five that we've got we've assigned all five that have made these wide area decisions for private LTE over the last three years.
We're batting a thousand it's unfortunate that it takes a while to get a new sector going like this but we're happy to see the the whole progress we're working on closing an entire sector here not just one at a time and so.
While it is frustrating at the speed at which it is happening.
The indications that we're seeing including as measured from Devin just traded 10 give us strong optimism.
And then anything on the water opportunity you mentioned the opportunity kind of sort of expanding your addressable market any more color you can give us on that.
Yes, I think it's interesting.
We approached it looking at alternatives originally of ways in which we can monetize our spectrum and Simon you've been followed for a long time, we're clearly committed as I like to say our bullseye as the utility sector, it's where the spending is to be fair right. The utility sector spending over $150 billion a year in capital expenditures. There's few sectors that you can look at that have that opportunity.
To monetize within them.
As you know when you look across the other sectors.
If you added up everything else going on in the private markets most likely it doesn't even equal what we've already signed.
For <unk>.
Contracted proceeds and service territory in 15 states with the five utilities that we have now.
Yes, Simon Hey, it's Brian here.
Ill add too I think it comes relationship with that is we've just been continuing to grow the set of use cases that ultimately drive the underpinnings of why utilities push forward with broadband networks in the first place and we've captured now and if it <unk>. It was a great example of this a new relatively unique company.
Power space that brings in additional use cases focus on transmission and distribution and water management through the lower calorie Cola, Colorado River that they're responsible for but all of these just add to this rolodex of value and the value gets established through these different use cases.
And we get a lot of attention from the utilities as we're working with them through the pipeline as they explore how to use cases, ultimately underpin what they need to do most importantly is the utility and a big part of the work that we do in establishing how to build a business case with the utility is rooted in that foundation of use cases, so kind of whether it opens up a brand new market or not.
They're all valuable and the cumulative because they help a utility understand the full scope of the potential of driving this kind of a transformation on broadband.
Thank you.
The next question comes from Walter Piecyk from <unk>. Please go ahead.
Thanks.
Rob I don't know if Chris is on the call but.
Can you just kind of remind us and review again.
What government programs are out there not necessarily to fund purchases of our leases of your spectrum, but to help these utilities.
Upgrade the grid in order to reach Bidens goal and then.
I'm just curious like.
How sticky some of that stuff is if we have a change I mean.
Even the long lead time and a lot of the stuff.
It may ultimately result in.
Getting into a new administration.
How much of that funding.
Falls away or maybe what new opportunities, where do we have if the administration changes in the upcoming election.
Yes sure.
Great question so.
There are a range of programs I know, we've talked a little bit about this.
The Vil Iia JA has a multitude of programs the ones that are that we're focused on are on one side, the broadband side middle mile and on the other side.
Grip programs and what we've seen is that these programs are there are over a number of years. So the ones that people just filed for where for the first two years. So we will see these programs and this money available again over the next three years.
We're excited in that we did participate with a number of utilities.
In that first phase that first two year tranche.
Those programs are those applications in concept papers were given.
The greenlight the thumbs up to move forward to the decision making process. We've also seen and its been reported in the press a number of our customers and potential customers received grants for middle mile.
Deployments and so.
As we've said in the past we're excited because we see these programs as opportunities to accelerate to stimulate to move on.
<unk> that may have been further back in our pipeline to move them forward.
Don't see any.
Any future where those programs don't continue because of the way that they've gone through the process. They are fully funded.
And there they are ready to be used over a over the range of the next three years beyond this two year tranche. So I think they are sticky programs to use one of your words and I see them being around we are actively working with.
The utility community, we're working with the.
The consultants that they are working with and we're consistently meeting with folks on Capitol Hill and at the Department of energy to ensure that these types of programs or as written in the legislation continued to be.
Considered for funding.
So let me ask I guess more directly so Trump couldnt come in and basically blow them up if you got it necessarily.
A believer in the use of electric versus some other alternate energy alternatives out there that could not be a casualty in terms of blowing up those programs and then.
Similarly.
Again, I would assume that maybe I'm wrong.
Aware of something during his administration, where he was into helping electric utilities, but.
I'm, assuming that there would be probably less opportunity going forward under a Trump administration.
Right. So so let me start by saying.
We see these programs is additive theyre not theyre not a necessity for us.
To drive our success.
Could a new administration come in and have the department of energy interpret the legislative language differently absolutely.
But the neat thing that we were we're happy to see and obviously you had a hand in putting in there is a range of benefits I think Rob causes the Swiss Army knife is what private LTE provides.
The legislative language sort of recognizes that Swiss army knife element in that.
Funding can support the integration of renewable energy. It can also support the integration of of wildfire mitigation tools or the capture and analysis of data or the cyber security benefits of private LTE. So even if an element or elements were interpreted differently by a new.
If energy there are so many benefits.
Encapsulated in that language that private LTE underpins that we're excited about pretty much. However, it's interpreted but again, it's not a necessity, but we've always thought about it and set it up as additive going forward.
Got it thank you Jeff.
Yes.
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The next question comes from Philip Cusick from Jpmorgan. Please go ahead.
Hi, guys, it looks like someone or a customer moved up from tier two to tier three can you give us any more detail as to sort of what criteria changes to get that customer up.
And within that to the highest tier of potential customers.
Anything additional you can tell us in terms of people getting closer or or what's sort of contracted and ready to go versus not quite negotiated thank you.
Hey, Phil it's Ryan here.
Excellent question. So as you can imagine I mean, what we're looking at kind of across the factors is how the utilities are progressing in a variety of these these 20 different metrics that we're looking at so it's hard to distinguish a single one even though one may move it above the threshold from a scorecard perspective, it's really the Q.
Additive effect of all of them that we look at that ultimately are how we measure kind of the combination effect of what those elements all mean in terms of.
Demonstrated in Tet, but let me let me give you a couple of examples.
Because we do continue to develop the opportunities both I'll describe it as above the line and below the line.
And obviously our primary focus every single day.
Drive customers through to the end game in closed contracts that drives us to be able to continue to develop their opportunities as they sit above the line.
And a couple of the items that Ive got to pick just one example of a utility that's sitting above the line as we've been continuing to work with them.
Couple of the measures that we've worked on specifically with them.
As they were progressing closer to the end state and realizing as we get closer to the end having.
The executive champion.
Really the executive stakeholder that takes responsibility to help promote and drive the topic in the program through is it a very important part and we've talked about it here on these calls before as their stake holding across the organization and so thats one of the elements that we've moved with this team and the other one was.
Formulating with what they do internally around how they assign team allocations in budget and in this year to have a perspective of just utilities are relatively labor constraints and a lot of different ways and for a variety of reasons, but when it comes to program allocation I've always track, how do utilities make conscious decisions around.
They allocate people and in turn how they allocate money as a measure to where theyre, putting their attention on what truly matters for them and so it's been another indicator on one of these deals as we're trying to progress it through at the at the end stage to put the kind of what I call. A closing team together you know, what's ultimately driving the decisions the approvals.
We're getting ready for negotiations and such things as we're working through with them and so that's one kind of it sits above the line.
We also talked about the metrics as we continue to grow through the rest of the pipeline and how they develop coming up below the line.
One wanted to call out and this is where obviously, we're seeing more volume of move it because there is more activity and there is just more more general utilities are sit below the threshold.
Where we've had one customer potential customer demonstrate and movement in just in five indicators in just the last six months and Thats one of the faster ones that I've seen in terms of the ability to progress them all the way through and they've done a handful of different things. They've also got an executive sponsor they've they've created an internal working.
<unk> assigned budget cost centers, these kind of things to promote the work.
<unk> also already brought in an outside firm, which I track as an indicator of again, where they are allocating budget.
They're making a commitment to invest time and external resources to be able to put together the kind of the third party expertise necessary to be able to evaluate the components of putting our plan together.
But so those are just examples of the types of things that I am seeing is there is they are moving their way through it and amongst all of the other activity as Rob highlighted we've seen.
Total of 50 movements here just since we started tracking it this way in February .
I look at positive latest in terms of the big picture of how we're generally seeing things move through.
Okay. Thanks, guys.
Thank you.
The last question for today's call comes from George Sutton from Craig Hallum. Please go ahead.
Thank you.
Have seen Ericsson begin marketing our partnership within our TC, which as you know represents 500 rural utilities and they've said, they're moving on 900 megahertz and they of course had the west Kentucky trial that was successful how does something like that fit into your pipeline how would that rollout.
Is that would move forward.
Thanks for the question George.
Anybody wants to add on right. So for those who don't know <unk> is the National Rural Telecommunications Association their members are.
Our rural Telcos that also often operate utilities as well.
They're a great organization and happened to be led by Nextel veterans as we are as well. So we've got a close alliance as they develop opportunities we see opportunities for us to work continue to work with them to be able to to drive.
I think of as to the next segment of customers right.
Got small smaller rural co ops and municipal organizations, most of whom are not in what we talked about in the top of our pipeline.
They are a great opportunity they've been a channel for many vendors for services and products and that could include.
Metering systems other other kinds of equipment.
<unk> done bulk purchasing support deployment of other systems and I think likely.
That's a way in which we could get to that next segment of customers.
As you know that's we're focused initially on really where the where the money is which is in the larger ious, but that's that's a segment that we're already starting to see demand growing and we see opportunity, yes, I'll just add a little bit there.
I've seen the announcements and stuff too and I think it's reflective of just kind of a broad industry wide needs for communications, digitalization, and adding resiliency and robustness is not unique to the I'll use even though they're our primary customer that we're targeting in the pipeline.
So as Rob said I think looking at it as another channel potentially.
And frankly, another area that we've seen some utilities start to explore is what other advantages. This is but this is an IOU for example, George what can they do to take advantage of.
A to be built private LTE network in terms of looking provided likeminded services to other constituents.
Uncommon in the energy landscape either.
Other capabilities can be ported down and they provide services to others. Southern company is a great example of that that we reference who have used their network not just for their own services, but to be able to try to offer commercialization services to other industrial customers.
And so certainly we will see a few of those opportunities kind of develop as they go forward.
One other question on the active ecosystem, obviously, you have got a number of.
People that are working with your 100 companies I believe you referenced you have five customers today. So obviously those 100 companies are seeing a very different opportunity than what's represented by your current base can you just talk about any sort of examples of spending being done by those 100 companies to go after this opportunity therefore.
Justin that bigger opportunity.
Yes, yes, I can't speak to specifics, but you are right in that they are participating in the ecosystem because it helps inform their understanding of the general trajectory of the market.
And so by associating with the overall collective and we hold kind of an annual event with them, where we get together, we invite customers and prospective customers and to speak about what they're trying to do and where their private LTE journey is going that informs and like any product development business case, those are critical inputs for them to understand kind of all.
<unk>, what they see in their forecast to drive the R&D and vice of investment priorities in the form of chips and devices and infrastructure solutions and services and so that's a particular reason why they are why they are paying attention. Let me add one other lens to it too.
On top of this we announced the formation of our utility strategic Advisory Board, which is R. C level governance structure.
It's another reason why members participate in the ecosystem and it's a specific value proposition that utilities can extract by having association with us in that ecosystem.
And so now through that and that member group and I will just reflect back on as we've been having sessions with them, we were face to face with them at EI down in Austin, not that long ago, and having the opportunity to sit in a room with the C level executives from the utilities talking and having them share their experiences because keep in mind that not all existing customers today.
On the spectrum.
So we've got participation there from some other large utilities that are hearing the lessons learned firsthand from the other utilities that have gone before them and more importantly, collectively we're talking about the next set of priorities that those utilities collectively are seeing so that we can drive and influence through the form of something that we call collective. It's just like we did with the cyber security <unk>.
The to bring programs back into the ecosystem. So that we can create these programs that collectively we try to put our heads together to find to find a way to tackle because honestly the big picture of where this market is developing the point aspects of the solutions aren't necessarily where the value is extracted the tighter that we can bring these together.
And deliver real outcomes to the utilities.
The more rapidly they are going to be able to adopt them and extract the value that ultimately helps to move forward with broadband faster, which is our goal.
And George it's Chris.
You had asked about sort of how they and.
Sort of what type of activity, we're seeing from those 100 plus members.
We are full third of them have been developing products in fact.
The numbers like 21 have broadband enabled products already 900 megahertz enabled products and those are those are companies like GE and Cisco and Motorola Nokia Ericsson. So these are some of the behemoths in both the utility sector and the wireless sector, who already have developed.
Products and there are commercially available and another another 10 or so half half.
What we call showcase ready.
30, 30, plus of our 100 already have products that they can either demonstrated or actively.
Actively offer to utility customers that aligns sensibly with what we're seeing this year right, we're going to see networks being built this year.
Number number of our utilities are building towers are putting up brand.
Deploying infrastructure and so we are.
This is going to be an exciting active year in terms of of really the deployment of 900 megahertz and tarts enabled utility equipment.
Gotcha perfect. Thanks, guys.
Thank you.
Okay.
This concludes our question and answer session I would now like to turn the conference back over to Ralph <unk> for any closing remarks.
Thank you operator.
And clothes.
As I said earlier, the lagging stock price slowly developing market frustrates us no doubt.
With that in mind.
Tim said, we do intend and we will use our proceeds from our contracts to take advantage of these prices to buy back stock.
But really make no mistake, we remain confident in our future we see activity throughout our pipeline, we see consistent signs of progress in intent as we just.
Shared with you all and we appreciate everybody's patience and time today. Thank you very much.
The conference has now concluded. Thank you very much for attending today's presentation. You may now disconnect your lines Goodbye.
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