27 Sep Anterix: Modernizing Infra Via Wireless Broadband Solutions
Anterix Inc. (NASDAQ: ATEX) delivers transformative private broadband that modernizes critical infrastructure for the energy, transportation, logistics, and other sectors of the U.S. economy.
Anterix Inc. (NASDAQ: ATEX)
Market Cap: $608.37M; Current Share Price: 31.94 USD
Data by YCharts
The Company
Anterix is a wireless communications company that commercializes spectrum assets to enable targeted utility and critical infrastructure customers to deploy private broadband networks and offer innovative broadband solutions to the same target customers.
The Company is the largest holder of licensed spectrum in the 900 MHz band (896 – 901 / 935 – 940 MHz) with nationwide coverage throughout the contiguous United States, Hawaii, Alaska, and Puerto Rico.
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Anterix’s spectrum is its most valuable owned asset. The Company holds licenses nationwide, including approximately 50% of the 900 MHz band in the United States. However, where spectrum is the highest priced, top 20 metropolitan market areas in the United States, which cover approximately 38% of the U.S. population, the Company holds, on average, more than 6 MHz worth of spectrum.
In 2020, the FCC approved the Report and Order to modernize and realign the 900 MHz band to increase its usability and capacity by allowing it to deploy broadband networks, technologies, and solutions.
Anterix is engaged in qualifying for and securing broadband licenses from the FCC. At the same time, the Company is pursuing opportunities to monetize the broadband spectrum it secures to targeted utility and critical infrastructure customers.
As of March 31, 2023, and 2022, Anterix was granted the FCC broadband licenses for 105 and 21 counties, respectively. As a result, the Company relinquished to the FCC its narrowband permits. It made the necessary Anti-Windfall Payments for the same 105 and 21 counties, respectively, as the Report and Order required.
Below, we’ll discuss the critical rationale for covering this Company.
- Significant Market Opportunity
The Company’s mission is to provide transformative broadband solutions for critical infrastructure industries and enterprises, including private wireless connectivity on 900 MHz spectrum and next-generation communications platforms.
As of today, demand for private Long Term Evolution (LTE) is driving growth.
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Anterix supports digital transformations, infrastructure modernization, and cybersecurity strategies that will establish the new standard for performance and safety. By leveraging Anterix solutions, critical infrastructure customers can tackle their most impactful opportunities, unlocking applications from analytics to automation to edge monitoring and artificial intelligence.
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To that end, Anterix is pursuing a two-pronged strategy focused on 1) converting its nationwide narrowband 900 MHz spectrum position into valuable broadband spectrum and 2) offering long-term leasing of broadband spectrum or other creative solutions in complex system areas to monetize spectrum and platform services and solutions to utility and critical infrastructure enterprises nationwide.
Anterix has identified utility and critical infrastructure enterprises as the primary customers for current and future broadband spectrum assets and the electric utility industry as its initial focused customer group.
Over the last decade, utility industry capital expenditures have increased from $78.6 billion in 2011 to $140.3 billion in 2023. These expenditures are expected to continue growing, and Anterix is well-positioned to benefit from this market opportunity.
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The electric utility business is more complex today, and enabling the modern grid requires a solid foundation of certain strategic technologies, including private wireless broadband communications.
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The security, priority access, latency, redundancy, private ownership, control, and unique coverage requirements are some of the reasons utility and critical infrastructure enterprises would be interested in obtaining rights to deploy private wireless broadband networks, technologies, and solutions that can be enabled through the use of Anterix’s licensed spectrum.
The demonstrated intent for 900 MHz is a measurable way to see the combined impact and development of Anterix’s market opportunity.
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Thus, there are potentially more than $3 billion in contracted proceeds in the phased pipeline for Anterix, which includes more than 60 potential customers and accounts for 90% of the addressable market.
- Compelling Business Strategy
The Company’s business strategy includes
- converting nationwide narrowband 900 MHz spectrum position to broadband. To achieve this conversion, the Company is clearing incumbents out of the broadband license segment and obtaining broadband licenses in those counties (i) in which it has customer contracts, (ii) where it has near-term commercial prospects, or (iii) may be strategically advantageous to achieve optimum costs for broadband licenses over time. Anterix has made significant progress towards this end, as shown below.
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- Deploying commercial business offering – towards this end, the Company continues to
- Build customer pipelines by working with many of the largest Investor Owned Utilities (IOU). IOUs are an ideal customer fit for Anterix’s business model as they cover much of the U.S. population and its spectrum monetization opportunity and have strong credit. Moreover, there is growing interest in deploying significant capital necessary to build private networks.
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- Build support with Federal and State agencies
- Develop a road map for expanded service
- Enable the Anterix Active Ecosystem with U.S. Band 8
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- Identify and evaluate new opportunities for the spectrum
Anterix already has investment-grade customers with long-term contracts and strong cash flow. Additionally, customer-preferred pre-payment generates near-term solid cash flow, providing more substance to a robust business model.
Overall, it seems that Anterix will succeed because of the advantages and customer benefits it offers, as shown below.
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- Financial Highlights
For Q1 FY24, spectrum revenue stood at $608 thousand compared to $335 thousand in Q1 FY23, reflecting an 81% increase YoY.
For Q1 FY24, the Company reported a net loss of $2,118 thousand compared to a net loss of $13,196 thousand in Q1 FY23. It is to be noted that Anterix gained about $10,785 thousand from the disposal of intangible assets during Q1 FY24.
The other highlights for Q1 FY24 were
- Cash and cash equivalents of $29.0 million as of June 30, 2023
- Entered into a $30.0 million spectrum sale agreement with the Lower Colorado River Authority
- Exchanged narrowband for broadband licenses in 9 counties and recorded a gain on the exchange of narrowband licenses for broadband licenses of $10.8 million
For the full year 2023, Anterix reported spectrum revenue of $1919 thousand compared to $1084 thousand for FY22, reflecting an increase of 77%.
Net loss for FY23 was $16,317 thousand compared to net loss of $37,519 thousand in FY22.
During FY23, Anterix
- Executed a new spectrum lease agreement with Xcel Energy for a total of $80.0 million, of which $8.0 million was received in December 2022
- Exchanged narrowband for broadband licenses in 84 counties and recorded a gain on the exchange of narrowband licenses for broadband licenses of $38.4 million
The above details highlight that utilities have been meaningfully demonstrating intent to pursue 900 MHz private wireless broadband networks, which validates the demand for Anterix’s unique offering. It is also important to note that as of today, the Company is debt-free and poised to benefit from a low capex-intensive business model.
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As discussed earlier, Anterix’s business model is attractive as it operates via long-term lease contracts. Moreover, the lease model is pre-paid, with most pre-payments received in the first 3-5 years – this ensures near-term solid cash flows.
All of these factors lend strength to Anterix’s performance, and it seems that the Company will perform well financially in the future.
Risks
The main risks associated with Anterix is that the Company may not be able to obtain broadband licenses on favorable terms and on a timely basis, as a result of which its business, liquidity, results of operations, and prospects will be materially adversely affected.
Similarly, the Company may be unable to commercialize spectrum assets on a timely basis or per business plans and expectations.
Finally, Anterix’s initiatives with the federal and state agencies and commissions that regulate electric utilities may fail to be successful.
It is also important to note that Anterix has had net losses each year since inception and may not achieve or maintain profitability in the future due to reasons such as costs to obtain broadband licenses, including the costs to clear the 900 MHz band, the costs to promote and commercialize spectrum assets to targeted utility and critical infrastructure customers, and so on.
Conclusion
Anterix is on a mission to become the de facto private wireless broadband solution provider to the utility sector. It seems to have a promising future because it is the largest holder of licensed 900 MHz spectrum in the U.S. and is, therefore, uniquely positioned to benefit from a large and growing addressable market.
However, there is always the risk that the Company may not be able to obtain broadband licenses on favorable terms or successfully commercialize its assets, due to which its performance may eventually suffer.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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Reference:
https://s25.q4cdn.com/860532731/files/doc_presentations/2023/05/Anterix-Investor-Presentation.pdf
https://www.sec.gov/ix?doc=/Archives/edgar/data/1304492/000130449223000030/atex-20230331.htm
https://www.sec.gov/ix?doc=/Archives/edgar/data/1304492/000130449223000043/atex-20230630.htm
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