Q2 2024 Anterix Inc Earnings Call

Welcome to the <unk> fiscal 2024 second quarter Investor Conference call.

All participants will be in listen only mode.

Should you need any assistance. Please signal a conference specialist by pressing the star key followed by zero.

After todays presentation, there will be an opportunity to ask questions to ask a question. Please press Star then one.

We would like to withdraw your question. Please press Star then two.

Please also note that this event is being recorded today.

I would now like to turn the conference over to Natasha Vecchiarelli. Please go ahead.

Thank you and good morning, everyone I'm, the Kashi back rally Vice President of Investor Relations and corporate Communications and I Welcome you to the I'm, sorry second quarter Conference call.

Any need today are Rob Schwartz, President and CEO, Ryan Gerbrandt C O L. Tim Gray, our CFO and Chris gotten them 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.

With 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 filing.

These files can be accessed on our website or on the Sec's website.

After Rob provide his prepared remarks, well open the call for questions.

With that I'll turn the call over to Rob.

Thank you Sasha.

Morning, everyone and thank you for joining us.

As we continue to execute on our vision of an industry wide movement centered on 900 megahertz I'm pleased to share that there has been significant progress made this past quarter across a number of key initiatives.

Today I'll focus my brief comments on three areas that emphasize our confidence in continuing to deliver value to our shareholders.

First I'll discuss our recently announced share repurchase program, which will be leveraging to transcend their anticipated contracted proceeds into shareholder value second I'll provide examples of activities accomplishments and industry thought leadership. They are important milestones on our path to move the utility industry and scale to 900 megahertz private wireless.

Broadband and third I'll provide an update on our customer demonstrated intent scorecard.

Let's start with our reviewing our new share repurchase program.

One way that we're marking our confidence in our future with a robust share repurchase program. We launched in September under the program, we have the ability to repurchase up to $250 million of our outstanding shares of common stock over a three year period.

With our current visibility, we see near term opportunities in excess of this $250 million.

We remain fully funded and are forecasted to have free cash flow for fiscal 'twenty 'twenty four.

In addition, we expect to receive $53 million in proceeds from our existing contracts during the remainder of this fiscal year.

As we've said throughout our journey in Terex is doing more than simply providing spectrum.

Through our ongoing collaboration with our customers and a host of solutions providers and Terex is enabling a nationwide platform for utilities that will support a resilient secure and clean energy future.

One of the most significant validators of our approach came last month during the utility broadband alliance or other annual summit.

As many of you know in Terex created funded and actually manage.

And since 2019, AMA has held an annual summit, where leading utilities and the industry ecosystem come together with a specific and valuable focus of sharing experiences use cases and plans to build private wireless broadband networks.

This year sell energy hosted this dynamics sold out event in Minneapolis with more than 500 participants in attendance, including Representatives from 35 utilities and increased C level participation.

To put in perspective utilities in attendance represented more than 60% of our spectrum value.

Yes.

We also were pleased to have a group of investors and equity analysts attend to witness this event directly.

My thanks to those who participated.

At the show and moderate a panel where several senior excel energy executives, including their C. O L shared insights on the 900 megahertz private wireless LTE investment.

And how will bring valuable business outcomes and supportive excels secure resilient energy future.

What was also visible in nearly all of the sessions was at 900 megahertz broadband was front and center.

Our terex active ecosystem members, we're very well represented showcasing 900 megahertz enabled devices and solutions and I Tron and in Terex active ecosystem member and one of the industry's most respected technology and solutions providers announced during the show that it now offered several 900 megahertz compatible devices, giving utilities.

Cities, the flexibility to deploy and operate I drawn solutions across the enteric supported private LTE networks.

And the in Terex booths, we offered a live demonstration of catalysts are turnkey subscriber management in roaming solution that helps utilities realize even greater benefits from private broadband networks.

We believe the growth of this forum directly correlates to a growing market and the opportunities we are driving and experiencing executive acknowledgement throughout the event. The private wireless broadband is a critical asset underpinning most if not all of their primary utility objectives strongly aligns with our effort to move the entire sector forward.

The message that 900 megahertz is a critical asset was again echoed last week when he I Foundation hosted a wildfire mitigation panel with our own C O L and executives from SD journey and Fortis <unk>.

A discussion attended by Representatives from more than 30 utilities centered on combining a 900 megahertz private LTE network with cutting edge technology solutions to address critical extra essential issues facing utilities sector.

S D Genie shared their updated experience on the deployment and successful operation of their wildfire mitigation solution.

This executive level industry focus has been reflected in the continuing significant movement, we see within our demonstrated intent scorecard.

As a reminder, the demonstrated intent metric, which we introduced several quarters ago tracks the activity and movements of utilities across a range of 20 indicators toward a 900 megahertz LTE contract.

To summarize the scorecard movement from just August until the beginning of November.

The utilities below the demonstrated 10 threshold seven have added a total of 11 demonstrated intent indicators to their scorecard. Examples of these include the identification of a senior executive to lead the private LTE process, the provision of pricing data exchange of contract language and more.

Currently 16 utilities, representing approximately $900 million in potential contract proceeds have crossed the demonstrated intent threshold a point at which we believe indicates a high degree of confidence that a customer has clearly demonstrated their intent to move forward with interest on our 900 megahertz contract.

To give you a sense of the scale and intensity of the movement in the last three quarters. Since we've introduced this measurement we've recorded positive movement by customers and more than 60, new measurable indicators of intent throughout our D. I score card.

The totality of this activity and the indicators recorded on our scorecard underpin our confidence in continuing to deliver scale value to our shareholders.

And before I close I'm pleased to note that we announced just a few days ago, while Seamark Dar has joined <unk> as our senior Vice President of product innovation from a long career, bringing innovative solutions to utilities he'll oversee the delivery of products and solutions that harness utility owned 900 megahertz private LTE networks.

In collaboration with our enteric active ecosystem.

We expect these solutions to produce value across the industry for utilities ecosystem members and enteric shareholders.

And then tariffs we continue to view the opportunity before us not just by the water passing over the dam, but by the amount of water swelling behind it.

I'll close with a summary of why I remain highly confident in our ability to continue delivering value to our shareholders.

The industry moving towards 900 megahertz represented at forums like others summit.

Clear demonstrations of utility progress through our demonstrated intense scorecard and finally, our confidence shown through our share repurchase program and based on our visibility of the near term opportunities in excess of $250 million.

And with that I'll turn it over to the operator for questions.

Thank you we will now begin the question and answer session.

To ask a question you May Press Star then one on your Touchtone phone.

If youre using a speakerphone please pick up your handset before pressing the keys and to withdraw question you May Press Star then two.

At this time, we will take our first question, which will come from George Sutton with Craig Hallum. Please go ahead.

Okay.

Thank you nice to have you all in Minneapolis recently forever. So I'm curious if you've ever quantified because you know the stark amount of both utilities and ecosystem partners that were represented at Alba have you ever quantified the amount of investment being made by others to.

Port and benefit from this ecosystem.

Hey, George Good morning, and thanks for the Minneapolis Shout out I was great to be there for the event.

I think I want to make sure I understood. Your question clearly you know we are we do focus on the spectrum spend clearly.

The ecosystem as we talked about we had 60% roughly of our spectrum value represented at the at that recent utility broadband alliance or that in Minnesota.

When you expand into the full ecosystem of partners that we have we.

We've said in the past that our spectrum represents let's just say roughly a third of the spend and that varies based on the size and the nature of the build outs.

That's just off the network deployment full costs, but obviously the private LTE systems are part of a much broader solution sets and whether that's part of.

Multibillion dollar am I, rfps or whether that's part of large scale SCADA systems that are being deployed or integrated into a larger grid monetization projects. When you look at the percentage of what the spend is or just the spectrum.

It's a relatively small piece compared to the grid modernization budget I mean utilities are spending upwards of $150 billion a year in aggregate.

On capital projects, and so you can imagine that relative to what we're talking about being a much smaller element of the overall budget, Hey, George It's Chris and and you know, while we don't track the exact investment one of the things obviously, we're tracking membership in the active ecosystem, we talk about that regularly but we also track those that have.

[laughter] ready products and and that number keeps so I try and Rob Rob referenced a few minutes ago.

We're now at 23 companies that have commercial ready products for 900 megahertz and within.

Within those companies for some of them there are a multitude of products. So we are seeing incredible third party investment in in this opportunity and platform that we're creating.

Well it for what it's worth we summarized our takeaways as were waiting on the inevitable. So.

I'm curious separately, if we could talk about the unfortunate situation in Hawaii and what happened there.

Perhaps how boards that utilities have begun to respond with really moving this up to a much higher level of need rather than once.

Sure, maybe I'll start and Brian can add to it.

A couple of thoughts first of all we're actually.

Reporting live here from from Arizona at the EI Financial Conference.

Where you know most of the C suite of the I O U's in restaurant utilities are gathering talking about key issues and talking to them to their investors.

Front and center is absolutely a wildcard mitigation. Unfortunately, given the experience of Hawaii, but also the growing experience that many utilities are having.

It's just been a.

And ever increasing issue not just you know what used to be was an operational issue and then into kind of a logistics issue now. So it's a you know a financial liability issue, obviously with what we've seen and so the level of focus and investment as a result.

Ryan who can add some comments he was on this I mentioned in my comments on this.

Foundation I E. I Foundation call last week with the S. D Genie wildfire leader, where they really had a chance to talk specifically about.

The application of private LTE 900 megahertz on their wildfire mitigation plan, which they've now deployed on on numerous circuits and actually seen positive results from it already and so we think that that actual tangible realization of other solutions that is going to hopefully continue to.

Spread throughout our other utilities, Yeah, Hey, George Ryan Here, Let me add a couple of pieces of commentary I agree with you first off devastating to see the impact in Hawaii.

And the theme of the conversation as Rob said, it's kind of not not unique to Hawaii anymore. Unfortunately are part of the conversation we had with the foundation.

This call was moderated by David Hutchens, and CIO of <unk> energy was very specifically focused on you know just how pervasive you know these types of risks and threats are starting to become moving out from beyond the west coast and I think theres a realism to let you know once we start going through these situations around how do we be better prepared to deal with risks.

Proactively and you're going to specific topics that we were talking about with San Diego and one of the benefits of the falling conductor protection solution is it's one of those technological solutions. It's really purpose built to be able to you know.

The tax isolate and doing clear.

Aligned before it becomes a potential risk to ignite fire.

Quite different than detecting a buyer and being able to drive litigations and being able to slow it down or dispatch resources on cruise and.

And so that's been a very important conversation as Rob said kind of masking the risk attributes I bet, you are very pervasive or where we're at many of these conversations actually here right now in Arizona at EI.

Really a topic I'll tell you that as they continue to manage risks and wildfire mitigation being one of those extra potential ones that are just impossible to ignore.

Given the most impact on human lives and the potential impact too.

Drive utilities into bankruptcy.

Our role is to continue to be identified and just how important it is to drive the bad spend of multifaceted solutions to be able to deal with these kinds of breast and technology is a major major component to that in addition to physical things like dealing with the tree canopy and pruning them you know even elements of hardening and covered conductor is et cetera.

But the advancements of technologies are a necessary and critical component of that architecture.

And being able to put those out there at pace you know as part of a solution.

And George Chris I'll, just I'll just finish it up by saying the.

The rating agencies writes a Moody's S&P Fitch all of them are making this a focus and Fitch does that.

That is a state of the sector breakfast every year that sort of helps to kick off this financial that we're all that and the entirety of their focus joined the breakfast was on wildfire and as Ryan and Rob referenced the risk issues.

The impact the potential for bankruptcy the existential elements of its payout things like that and so it is as Brian referenced sort of front and center here, but it's really illustrated and Fitch spending the entirety of the state of the sector breakfast that they do on this issue.

Interesting stuff thanks, guys appreciate it.

Thank you George.

And our next question will come from Mike Crawford with B Riley. Please go ahead.

Thank you is there a second milestone.

You're expecting to occur with averaging them this quarter.

Yeah.

Mike This is Tim.

So ever Gee, Dave prepaid the $30 million at the beginning of the deal right. After we sign that one I don't know if youre, maybe referencing exelon.

But we've got money due from them this quarter.

Fully 20, or excuse me excel that exelon I get the wrong name, but a $20 million due this quarter from them.

Just roughly the same as we got last quarter.

Okay, and then can you just remind me where the other 32 million coming in I guess in the March quarter.

Correct, Yeah. So.

We'll have another 16 from Excel and then we anticipate 50 million from LCR, a beginning of that.

Deal, which should come in.

December timeframe.

Oh, okay.

Great and then.

I suppose.

What I can tell from your demonstrated many times is that you've had one.

Additional utility representing about a $50 million licensing opportunity to move into above the threshold in the in the last three months is that accurate.

That's correct.

Okay. Thank you very much.

Thank you Mike Thank you.

And our next question will come from Simon Flannery with Morgan Stanley. Please go ahead.

Oh, great. Thank you and good morning.

First on the buyback nice to see the new program and the initiation on that how are you thinking about cash balances and liquidity in may.

You can kind of talk about the Opex burn here, but should we think about basically taking the 53 net of fee.

The ongoing Opex and then use that against our buybacks is there any other way to think about it.

Yeah, I think starting to see Tim we would expect to want to keep somewhere between $40 million to $50 million of cash on hand to cover the annual Opex spend that we've got anything above that we would consider looking at.

Ongoing clearing but outside of that we'd look at that as kind of excess liquidity that we would push it to the buyback program. So.

So we expect.

This new program to be pretty active.

Immediately and so you'll start to see that as we report on the next few quarters.

Great Great and.

<unk>.

T mobile and dish eight.

800, megahertz, it's sort of coming to a head right now the Doj case, and I think until April, but I think dish had said recently that their probability of being able to buy that spectrum from.

T mobile has dropped there's other counterparties out there potentially looking at a potentially for private networks would you ever could just comment on how that 800 fits against your 900, either for you as a partner or as a competitor or would you have an interest in working around that.

Thanks, very much Rob.

As you know, we know that spectrum well since since the origination of it was.

License still say Nextel communications on them.

Following actively and understand it.

Is it you know just broadly on any spectrum opportunities, we're always going to be opportunistic and looking at ways to be.

To be able to.

Capture that for the benefit of our shareholders.

The specifics of the ongoing.

Dialogues both.

Courts in between the parties.

What we talked to a lot of the folks but also read all the good research that you and others right about this.

It's hard to judge the tea leaves, but most likely in our view is that spectrum ends up within our with an it when a valuable carrier network could do what carriers do well it to serve consumers enterprise.

Should it come to market in an auction you know theres a lot of hurdles that would have to go through in order to get there.

You know we'd be absolutely looking to see if there's opportunities for us whether it's in partnership with others, including the current or future owners of that spectrum.

So I just just to go back to your other question I just wanted to know on the buyback piece I think it's important to say that the you heard it in my statement, but I Wanna restated our confidence in what we see in our near term opportunities is really what gives us the confidence to put out that $250 million buyback program.

We've got great visibility of all the activities spending time with these utilities both.

Year to EI, and so I'm really just gives us a strong confidence that we'll be able to utilize that program in the near future.

Got it that's helpful. And then maybe just one last one we continue to talk about that LTE, but the.

The carriers typically like talking about five G and moving most of their traffic and most of their subscribers onto five J devices covering most of the country now so what are you hearing from the utilities.

Despite the ecosystem buildup <unk> standalone cores that are out there is there more interest in having a combo LTE solution.

Yes, I think look carriers.

Like technology risk in any way and so one of my favorite quotes from one of the leaders of Southern company, you know the pioneers and using private LTE talks.

Talks about <unk> as being their workhorse and you've got to realize these L. T systems, replacing technologies they put out.

<unk> 15, 20, even 30 years ago.

So, but what we're putting in place now and it was a great form at the utility broadband Alliance, where we along with Ericsson Nokia and Qualcomm talked about the future of five G. On 900 megahertz of which all of them stated there there.

They are high confidence of that migration path and that's what the <unk> and LTE is right the evolution.

But also you know the forward compatibility of the gear, that's being sold by leaders like Nokia and Ericsson. So what what utilities are putting in place now as infrastructure will be software upgradable to double to utilize five G. When they need. It. There is no use cases today that are that are compelling that are driving that but I'm certain there will be at the right.

And so whenever.

Remember, we're signing 2030 year relationships with these utilities and so over that lifespan that we will continue to be their trusted advisor and helping them figure out that path of evolution and so we're working with.

With the utilities and a lot of those ecosystem partners and the three GPP process to make sure that our band continues to be supported through all the new revisions.

Did that occur and we're always looking at other ways of expanding our spectrum opportunity to in the in the future should there be any additional needs and as utilities, both serve their own needs, but they're also serving needs of other folks within their service territories and those could be municipal and cooperative utilities those could be other other industrial entities.

And so we think there's opportunities to take this initial infrastructure and continue to build upon it both in services and products, but also in expanding to serve other parties like minded parties, but we like to say.

Okay. Thank you.

Thank you Kevin if you have a question or follow up Please press Star then one.

Our next question will come from Walter Piecyk with light shed. Please go ahead.

Thanks.

Rob you've had a I think a $500 million or so in phase III for I.

I guess about a year if there was like a phase four that you created where someone hands out what what what do you think that would be.

That mix of 500.

Yeah, I think I mean.

We've had those phases out for really since we've launched our commercial operations post the FCC ruling.

We added demonstrated really to to give you that kind of granularity to think of it from a different facets and so we're measuring element by element of the things that utilities are doing that are that are moving them through those phases and really driving them towards a contract process. So I think when you're looking for that kind of granularity within that phase.

As we call. It is probably the right way to to understand that progress. So when you see the movement that we've had you know just in the few quarters.

We've been reporting that that continues to expand even as we've had.

Entities like SCRA signed obviously fall out of that.

Good way, we continue to see growth in that.

As we say above that threshold, where they're showing enough elements to show that they're showing significant intent that we have confidence about them contracting.

But.

Maybe I'm confused the D I as that's a different track right is that so DIY is a demonstrated intent is.

After someone's been in the phase III bucket.

Where it's where it's.

What's how would you describe it.

Three negotiate negotiation and commitment faith. So D is after that or is that before that yeah. It's intersecting almost need to think about the three phases as kind of the classic.

Sales funnel as we're tracking through those three categories, but deny measures on much many more characteristics of the things that we've realized are indications of them getting to contract.

Every one of our cohort D. I. So all the D. I is in phase III right now that I have that right.

Do you guys actually Walt is running or do you guys actually covering phase II phase III, specifically 16 deals we referenced but Rob said like it is intended to provide more overlap you know and granularity with the 'twenty metrics of the items I gave you. One example, there's different things that happened in the phases of the pipeline, but very specifically in D. I know one of the elements that we noted here.

You always get when we're actually specifically passing contract papers.

One of the pieces that were flagged on it obviously happens within the phases of the pipeline, but it's a very specific measure obviously oven. That's we're starting to <unk>.

Pre negotiate terms for example, obviously, we don't break those out into a separate phase of the pipeline as we can't get down to that level, but it sounds like by the way you describe it.

You describe it sounds like negotiation commitments I would think that all of D. I should be in phase III now.

Well not all of them are at that at that level of step yet one of 'twenty things. So there are several other pieces that are equally important while we're even getting prepared for that and that's why we've got some that you know kind of later stages of phase III and he wants to work in a way to phase III.

Yes.

And it might also we've had entities that have jumped pass those phases of some of the deals that we've done where they've gone from a standing start relatively.

Although the threshold and D. I M not in phase III and suddenly accelerated because for one reason or another they move forward and contracted so it's two different facets of the way we look at our at our customer flow.

But we were happy to go into in more detail with you.

Okay.

The D. I guess I guess I could ask my first question, maybe targeted D. I. So if there's a.

D I plus our D IMAX immediate terms, where someone's tenants out [laughter] and getting ready like how much of a demonstrated and kind of getting you closer to actually.

Getting something on the table.

Yes, I think I think.

Bring our third number on the table in there I think the.

What we just talked about with our share buyback program by putting out that scale.

In saying that we have visibility in our near term opportunities and that scale, that's really what that's how I'd probably answer that question.

Again, we have a strong influence on these on these opportunities we can't predict the precise timing.

But what we're seeing is this kind of broad movement, and you really kind of identify that tip of the iceberg.

The best way to talk about the scale of what we're seeing.

Okay.

A question for Chris.

You know biden.

Put some stuff out yesterday.

Uh huh.

Who was it I guess.

Blanking on his name not.

Car had some negative commissioner car had some perhaps negative things to say basically just saying it was kind of bullshit that none of that spectrum was going to hit the market anytime soon.

Just curious kind of can you give us your take on it.

Does any of that spectrum hit the market is that stuff that youre utilities would look at as they've looked at C. B R. S in the past.

In terms of being integrated with the low band spectrum that you can have to offer.

Yes, I mean, well I think first of all I think the process of getting that spectrum in the nation sort of spectrum plan to market will take will take some time.

We're always excited to see potential spectrum opportunities as Rob referenced whether it's you know 800 or other bands that we think can be accretive and valuable and beneficial to our shareholders and additive like C. B R. S K.

It can be complementary to our to our 900. So we definitely track that you know that.

That spectrum will have to go through a process at the FCC much of it will likely be auctioned.

So we certainly are aware of it.

You know what what we're doing in and you've heard US talk about this you've heard this theme throughout many of our calls is we're building a solution set sort of an ecosystem of solutions that makes our spectrum different than other spectrum opportunity because it's wrapped into 110 companies and 11 utility.

Advisory Board members all of the things we talk about.

In terms of creating value in creating solutions for the sector, but certainly if other.

<unk> opportunities from a spectrum perspective come come to play we will be at.

<unk> are aware and participating.

I mean, where do you think the government is right now obviously the government can change.

And shortly but where where are they right now in terms of shared spectrum. There's been a lot of debate around CVR asking me the cable guys claim they're using it but it doesn't seem like it's.

Actually getting deployed aggressively yet your customers have integrated it do you think that shared spectrum.

It's something for.

For the future regardless of who's in charge at the FCC or is it kind.

Lost its luster, yeah. So my micro macro so I'll I'll take micro the sector, we're serving a want need control they want and need certainty and so the idea of relying.

Relying completely on a shared spectrum opportunity is just not in their their core way of thinking and so you know when you talk about C. B R. S. There are some utilities, who bought those power licenses, even those have some unique aspects in traits to them and so we you know we likely will see.

Any of them pursuing you know <unk> in 900 megahertz.

But sure Dan I'll go macro shared from a macro perspective, I think there are spectrum bands that only can be shared going forward and so I think I don't think the concept of shared will go away I think we will still see it from time to time and in certain bands and there is there is a little bit of a political element.

Do it.

Sure. It is is appreciated more by the Democratic side of the aisle.

And license and exclusive is generally but both parties I think understand the benefit of both sides and and so you know the luster.

Rises and falls from time to time, but I think we will see both shared spectrum model going forward and are in an exclusive license to auction model going forward as well.

Okay and then just last question you know given the low band nature of your spectrum.

Have you received any inquiries anyone sniffing around in the satellite industry, perhaps Leo constellations.

That are planned or in process that are looking for.

You know some additional uplink that they could use.

To achieve their goals of trying to provide satellite connectivity to phones.

Yeah, well I think look we're watching talking with with leading vendors on all those fronts nothing specific to really share. There. We're really focused on staying this low band spectrum has such high value for our utility.

<unk> and what they're doing absolutely the eventual hybrid approach of terrestrial and satellite makes sense for them and others and so that is replacement of it as a compliment.

We foresee that that will be a product that will also continue to supplement I mean, it's just like what we've watched over the decades with carriers evolution, starting with low band in all of the supplemental things they've added to those networks. The layer cake other elements of of technologies to strengthen those systems will see the same thing here 900 will be the foundational elements of these utilities and other.

Infrastructure and we'll expand from there I am sure that will include satellite overtime.

Roger that thank you.

Thanks, a lot. Thank you.

And this concludes our question and answer session I'd like to turn the conference back over to Rob Schwartz for any closing remarks.

Thank you operator, and thank you everybody for joining US today, we're really looking forward to continuing to share our progress over time, and we'll talk to everyone. Soon thank you.

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