Anterix Inc. Q4 FY2025 earnings call

• Cost optimization: They are optimizing cost structure and streamlining operations, with a roughly $4 million reduction in operating expense run rate from the first half of fiscal '25. - AnterixAccelerator: Launched to test price and action correlation, oversubscribed with utilities in active discussions for the $250 million spectrum program, with strong demand for 900 megahertz LTE. - Strategic review: Morgan Stanley is leading a strategic review process, entering from a position of strength with 0 debt, nearly $150 million in contracted proceeds, a $3 billion pipeline, proven deployment model, and disciplined cost structure. - FCC process: FCC had Notice of Proposed Rulemaking to modify 900 megahertz rules, comment periods closed with support from utilities, technology companies, and industry associations for evolving the band to support private networks. - Financial performance: Executed key spectrum sales agreements, received milestone and accelerated delivery payments, ended with strong cash position and no debt, and have a streamlined cost structure for FY '26.

In fiscal '25, Anterix executed key spectrum sales agreements with Encore and LCRA, totaling $116 million for a combined $116 million, which was the best year of contracted proceeds. They received milestone payments of $44 million from Encore, $8.5 million from Amarin, and an additional $34 million in cash from accelerating spectrum delivery. At the end of fiscal '25 fourth quarter, they had over $47 million in cash and no debt. They have approximately $150 million of contracted proceeds outstanding with $80 million expected in fiscal '26. The spectrum covers 93% of Texas counties, creating a regional deployment model. Revenue contribution: The $116 million from the Encore and LCRA deals was a significant portion of the contracted proceeds for the year.

• FY '26 is expected to have $80 million in contracted payments. - Internal goal is to grow from the $116 million contracted proceeds in fiscal '25, projecting a significant percentage growth from that amount in the next 12 - 18 months.

• Forward - looking statements are based on current assumptions and subject to risks and uncertainties.需参考SEC filings for detailed discussion of risks.

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

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

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

A: George, good to hear from you. It's Scott here. Yes, we launched this, and we've been -- at the last quarterly earnings call, we've been very pleased with the energy this has picked up. And there's a number of players involved. The negotiations are very active, and we couldn't be really more pleased. There were -- just to give you an idea, there were well over a dozen utilities that participated in it. And the demand for private LTE 900 megahertz was very strong. And we learned a tremendous amount. And I would also say, every one of those utilities have continued to stay engaged and in active conversations. And then a large number of them have continued all the way through to where we're actually negotiating. And you could imagine to see that kind of a ramp up in one quarter in the utility industry. I think, it is pretty well in my entire career nearly unheard of one quarter for the utility industry to kind of rally and get behind the demand. And as we said in the prepared remarks, kind of testing this correlation between economics and action, and we couldn't feel better about the position that we're in. With the economics we can bring to the table and the powerful results that we're seeing with our existing customers and how much robustness that they're seeing from the network. So it's been active. We've been very pleased. The conversations and the negotiations are very active, and we're pleased with where we're at.

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

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

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

A: George, great question. We haven't seen any hesitation from utilities to jump in with 3 x 3 when they're seeing the results coming from our existing deployments and the -- how much power that is still remaining in these current deployments that are being pushed and there's still room. And having said that, I would say they're all excited about our 5 x 5 plan and the more they learn about it, it makes them even more comfortable that 3 x 3 is more than enough bandwidth for the many years ahead that they see of any use case they can throw at it. But the trajectory to 5 x 5 is very powerful for us. And -- but we haven't seen anybody [ hesitate ] of the concern with the just 3 x 3 at this point in time.

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

A: Ryan, do you want to take that?

A: Yes, I could speak a little bit to it. I don't have the full list of kind of who joined recently. I mean he's probably noticing, Mike. I mean we've continued to focus on in partnership with our advisory board, another direction of utility executives of what is necessary as we continue to strategically grow that and so I anticipate we're going to continue to see a handful of new come in. I think we're somewhere 140, 140 plus of total participants in the program right now. The Digi announcement you saw was actually a product offering that they put out, specifically an IoT edge gateway that was capable of supporting some edge compute and capacity. A great innovation. I mean, I think this is where we're going to continue to see the intersection of a lot of the AI kind of edge conversation and what we're trying to do. It's a natural evolution of these use cases where connectivity really provides data and real - time access to enable those kinds of more sophisticated solutions as we see it start playing out in the market. So seeing those product lines come in natively kind of off - the - shelf supporting 900 is exactly what we would expect to see with a growing ecosystem and ultimately being able to put whole things in. So we're pretty excited about it overall.

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

A: Well, there were a lot of ifs there. We -- more spectrum, the better. We like where we are positioned with 900 megahertz. We like where we are with our proven deployments. And when I talk about proven deployments, remember, 7 utilities, $400 million of contracts have now moved over the last few years from lab to field and they are now providing references for these next wave of utilities that are in the queue and we're negotiating with to expand the 900. Our economics are extremely powerful of what we can bring to the table. When we look at the current market cap, and the accelerator program, we still have dry powder, and we're going to continue to be aggressive as the market leader to continue to show our market leadership across this industry. Regarding 800, I think it could become an alternative. It could become a choice, but we think we're going to be in a great position to continue to be the preferred choice for utilities when they look at it holistically from a -- what they're seeing and what we're seeing in the field, what any use cases on the near - term horizon and the economics that we bring to the table. And the fact that our current 3 x 3 is very powerful, all the device manufacturers are completely behind it. There is no pause in our plan to get to 5 x 5. And in fact, as Chris shared in our prepared remarks, we are very pleased with the progress of that. So I guess that would be my -- hopefully, that kind of starts to frame of how we're thinking about it, Mike.

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

A: Tim, do you want to talk a little bit about kind of what -- how we're looking at our next 12 months, rest of this fiscal year, please?

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