ANTERIX INC. This discussion and analysis of the financial condition and results of operations ofAnterix Inc. ("Anterix ," the "Company", "we", "us", or "our") should be read in conjunction with our financial statements and notes thereto included in this Quarterly Report on Form 10-Q (this "Quarterly Report") and the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year endedMarch 31, 2022 , filed with theSecurities and Exchange Commission (the "SEC") onMay 26, 2022 (the "2022 Annual Report"). In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors including, but not limited to, those identified or referenced in "Item 1A-Risk Factors" in Part II of this Quarterly Report. As a result, investors are urged not to place undue reliance on any forward-looking statements. Except to the limited extent required by applicable law, we do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report.
Overview
We are a wireless communications company focused on commercializing our spectrum assets to enable our targeted utility and critical infrastructure customers to deploy private broadband networks and on offering innovative broadband technologies and solutions to the same target customers. We are the largest holder of licensed spectrum in the 900 MHz band (896 - 901 / 935 - 940 MHz) with nationwide coverage throughout the contiguousUnited States ,Hawaii ,Alaska andPuerto Rico . OnMay 13, 2020 , theFCC approved the Report and Order to modernize and realign the 900 MHz band to increase its usability and capacity by allowing it to be utilized for the deployment of broadband networks, technologies and solutions. The Report and Order was published in theFederal Register onJuly 16, 2020 and became effective onAugust 17, 2020 . We are now engaged in qualifying for and securing broadband licenses from theFCC . At the same time, we are pursuing opportunities to lease the broadband spectrum we secure to our targeted utility and critical infrastructure customers. We were originally incorporated inCalifornia in 1997 and reincorporated inDelaware in 2014. InNovember 2015 , we changed our name fromPacific DataVision, Inc. to pdvWireless, Inc. InAugust 2019 , we changed our name from pdvWireless, Inc. toAnterix Inc. We maintain offices inWoodland Park ,New Jersey ,McLean, Virginia andAbilene, Texas . Refer to our 2022 Annual Report for a more complete description of the nature of our business, including details regarding the process and costs to secure our broadband licenses. Business Developments OnOctober 28, 2022 , we entered into an agreement withXcel Energy Services Inc. ("Xcel Energy") providing Xcel Energy dedicated long-term usage of our 900 MHz Broadband Spectrum for a term of 20 years throughout our service territory in eight states (the "Xcel Energy Agreement"). The Xcel Energy Agreement also provides Xcel Energy an option to extend the agreement for two 10-year terms for additional payments. The Xcel Agreement allows Xcel Energy to deploy a private LTE network to support its grid modernization initiatives for the benefit of its approximately 3.7 million electricity customers and 2.1 million natural gas customers. InSeptember 2021 , we entered into a long-term lease agreement of 900 MHz Broadband Spectrum with Evergy (the "Evergy Agreement"). The Evergy service territories covered by the Evergy Agreement are inKansas andMissouri with a population of approximately 3.9 million people. The Evergy Agreement is for a term of up to 40 years, comprised of an initial term of 20 years with two 10-year renewal options for additional payments. We received full prepayment of$30.2 million for the initial 20-year term inOctober 2021 . During the six months endedSeptember 30, 2022 , we leased to Evergy the first deliverable of 1.4 x 1.4 cleared Broadband Spectrum and the associated broadband licenses for 45 counties. The revenue recognized for the three and six months endedSeptember 30, 2022 was approximately$0.1 million . InFebruary 2021 , we entered into an agreement with SDG&E, to provide 900 MHz Broadband Spectrum throughout SDG&E'sCalifornia service territory, includingSan Diego and Imperial Counties and portions ofOrange County for a total payment of$50.0 million . The total payment of$50.0 million is comprised of an initial payment of$20.0 million received inFebruary 2021 and the remaining$30.0 million payment, which is due through fiscal year 2024 as we deliver the associated broadband licenses to SDG&E and the relevant cleared 900 MHz Broadband Spectrum. During the quarter endedSeptember 30, 2022 , we delivered to SDG&E 1.4 x 1.4 cleared Broadband Spectrum and the associated broadband license related toImperial County and received a milestone payment of$0.2 million . 21
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OnMay 18, 2022 , we issued Motorola 500,000 shares of our common stock (the "Shares"). Motorola received the Shares by electing to convert 500,000 ClassB Units (the "Units") it held in our subsidiary,PDV Spectrum Holding Company, LLC (the "Subsidiary"). Motorola acquired the Units inSeptember 2014 in connection with a Spectrum Lease Agreement between Motorola and the Subsidiary (the "2014 Motorola Spectrum Agreement"). Under the 2014 Motorola Spectrum Agreement, Motorola leased a portion of our narrowband spectrum, which was held by the Subsidiary, in consideration for an upfront, fully-paid leasing fee of$7.5 million and a$10.0 million investment in the Units. OnJune 30, 2022 , we filed a Registration Statement on Form S-3 to register the 500,000 shares of our common stock held by Motorola for resale or other disposition by Motorola (the "Resale Registration Statement"). The Resale Registration Statement was declared effective by theSEC onJuly 15, 2022 .
Results of Operations
Comparison of the three and six months ended
The following tables set forth our results of operations for the three and six months endedSeptember 30, 2022 ("Fiscal 2023") and 2021 ("Fiscal 2022"). The period-to-period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods.
Spectrum revenues
Three months ended September 30, Aggregate Change Six months ended September 30, Aggregate Change
(in thousands) 2022 2021 2022 from 2021 2022 2021 2022 from 2021
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Spectrum revenues $ 398 $ 182 $ 216 119 % $ 733 $ 364 $ 369 101 %
Spectrum revenues increased by $0.2 million , or 119%, to $0.4 million for the
three months ended September 30, 2022 from $0.2 million for the three months
ended September 30, 2021 . The increase for the three months ended September 30,
2022 of $0.2 million , was attributable to revenue recognized in connection with
our agreements with Ameren and Evergy of approximately $0.1 million and $0.1
million , respectively. For the six months ended September 30, 2022 , spectrum
revenue increased by $0.4 million , or 101%, to $0.7 million from $0.4 million
for the six months ended September 30, 2021 . The increase for the six months
ended September 30, 2022 of $0.4 million , was attributable to revenue recognized
in connection with our agreements with Ameren and Evergy of approximately $0.3
million and $0.1 million , respectively.
Operating expenses
Three months ended September 30 , Aggregate Change Six months ended September 30 , Aggregate Change
(in thousands) 2022 2021 2022 from 2021 2022 2021 2022 from 2021
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
General and administrative $ 11,427 $ 9,825 $ 1,602 16 % $ 22,786 $ 19,555 $ 3,231 17 %
Sales and support 1,164 993 171 17 % 2,400 2,048 352 17 %
Product development 980 930 50 5 % 2,076 1,933 143 7 %
Depreciation and amortization 372 335 37 11 % 734 673 61 9 %
Operating expenses $ 13,943 $ 12,083 $ 1,860 15 % $ 27,996 $ 24,209 $ 3,787 16 %
General and administrative expenses
General and administrative expenses increased by$1.6 million , or 16%, to$11.4 million for the three months endedSeptember 30, 2022 from$9.8 million for three months endedSeptember 30, 2021 . The increase for the three months endedSeptember 30, 2022 of$1.6 million , primarily resulted from$1.6 million higher stock compensation expense due to additional grants awarded inAugust 2022 ,$0.6 million higher headcount and related costs, and$0.1 million higher travel and meeting costs, partially offset by$0.4 million lower professional service costs,$0.2 million lower recruiting fees and$0.1 million lower site related costs. For the six months endedSeptember 30, 2022 , general and administrative expenses 22
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increased by$3.2 million , or 17%, to$22.8 million from$19.6 million for six months endedSeptember 30, 2021 . The increase for the six months endedSeptember 30, 2022 of$3.2 million , primarily resulted from$2.5 million higher stock compensation expense due to additional grants awarded inMay 2022 andAugust 2022 ,$0.7 million higher headcount and related costs,$0.2 million higher travel and meeting costs, and$0.1 million higher IT related costs, partially offset by$0.2 million lower site related costs and$0.1 million lower professional service costs. Sales and support expenses Sales and support expenses increased by$0.2 million , or 17%, to$1.2 million for the three months endedSeptember 30, 2022 from$1.0 million for three months endedSeptember 30, 2021 . The increase for the three months endedSeptember 30, 2022 , primarily resulted from a$0.2 million higher headcount and related costs. For the six months endedSeptember 30, 2022 , sales and support expenses increased by$0.4 million , or 17%, to$2.4 million from$2.0 million for six months endedSeptember 30, 2021 . The increase for the six months ended, primarily resulted from a$0.2 million higher marketing costs,$0.2 million higher headcount and related costs,$0.1 million higher travel and meeting costs, partially offset by$0.1 million lower professional services.
Product development expenses
Product development expenses increased by$0.1 million , or 5%, to$1.0 million for the three months endedSeptember 30, 2022 from$0.9 million for three months endedSeptember 30, 2021 . The increase in the three months endedSeptember 30, 2022 , primarily resulted from$0.2 million higher consulting costs offset by$0.1 million lower headcount and related cost. For the six months endedSeptember 30, 2022 , product development expenses increased by$0.1 million , or 7%, to$2.1 million from$1.9 million for six months endedSeptember 30, 2021 . The increase in the six months endedSeptember 30, 2022 , primarily resulted from$0.4 million higher consulting costs offset by$0.2 million lower headcount and related costs and$0.1 million lower stock compensation expense.
Depreciation and amortization
Depreciation and amortization increased by$37 thousand , or 11%, to$0.4 million for the three months endedSeptember 30, 2022 from$0.3 million for three months endedSeptember 30, 2021 . For the six months endedSeptember 30, 2022 , depreciation and amortization increased by$0.1 million , or 9%, to$0.7 million from$0.7 million for six months endedSeptember 30, 2021 . The increase for the three and six months endedSeptember 30, 2022 , primarily as a result of assets placed in service during the periods.
Gain from disposal of intangible assets, net
Three months ended September 30 , Aggregate Change Six months ended September 30 , Aggregate Change
(in thousands) 2022 2021 2022 from 2021 2022 2021 2022 from 2021
(Unaudited) (Unaudited) (Unaudited) (Unaudited)Gain from disposal of intangible assets, net $ (2,905)$ (10,230) $ 7,325 -72 %$ (3,553) $ (10,230)$ 6,677 -65 % During the three months endedSeptember 30, 2022 , we exchanged our narrowband licenses for broadband licenses in 33 counties. In connection with the exchange, we recorded an estimated accounting cost basis of$4.0 million for the new broadband licenses and disposed of$1.1 million related to the value ascribed to the narrowband licenses we relinquished to theFCC for those same 33 counties. As a result, we recorded a$2.9 million gain from disposal of the intangible assets in our Consolidated Statements of Operations for the three months endedSeptember 30, 2022 . During the six months endedSeptember 30, 2022 , we exchanged our narrowband licenses for broadband licenses in 45 counties. In connection with the exchange, we recorded an estimated accounting cost basis of$4.9 million for the new broadband licenses and disposed of$1.3 million related to the value ascribed to the narrowband licenses we relinquished to theFCC for those same 45 counties. As a result, we recorded a$3.6 million gain from disposal of the intangible assets in our Consolidated Statements of Operations for the six months endedSeptember 30, 2022 . Refer to Note 3 Intangibles in the Notes to the Unaudited Consolidated Financial Statements contained within this Quarterly Report for further discussion on the exchanges. During the three and six months endedSeptember 30, 2021 , we exchanged our narrowband licenses for broadband licenses in 12 counties. In connection with the exchange, we recorded an estimated accounting cost basis of$13.6 million for the new broadband licenses and disposed of$3.4 million related to the value ascribed to the narrowband licenses we 23
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relinquished to theFCC for those same 12 counties. As a result, we recorded a$10.2 million gain from disposal of the intangible assets in the Consolidated Statements of Operations for the three and six endedSeptember 30, 2021 .
Loss from disposal of long-lived assets, net
Three months ended September 30, Aggregate Change Six months ended September 30, Aggregate Change
(in thousands) 2022 2021 2022 from 2021 2022 2021 2022 from 2021
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Loss from disposal of
long-lived assets, net $ 20 $ 36 $ (16) -44 % $ 22 $ 54 (32) -59 %
Loss from disposal of long-lived assets, net decreased a modest amount for the
three and six months ended September 30, 2022 as compared to the three and six
months ended September 30, 2021 .
Interest income
Three months ended September 30, Aggregate Change Six months ended September 30, Aggregate Change
(in thousands) 2022 2021 2022 from 2021 2022
2021 2022 from 2021
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Interest income $ 244 $ 20 $ 224 1120 % $ 261 $ 46 $ 215 467 %
Interest income increased by $0.2 million , or 1120%, to $0.2 million for the
three months ended September 30, 2022 from $20 thousand for three months ended
September 30, 2021 . For the six months ended September 30, 2022 , interest income
increased by $0.2 million , or 467%, to $0.3 million from $46 thousand for six
months ended September 30, 2021 . The increase for the three and six months ended
September 30, 2022 , was attributable to higher interest rates.
Other (expense) income
Three months ended September 30, Aggregate Change Six months ended September 30, Aggregate Change
(in thousands) 2022 2021 2022 from 2021 2022 2021 2022 from 2021
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Other (expense) income $ (12) $ 62 $ (74) -119 % $ 47 $ 134 $ (87) -65 %
Other (expense) income decreased a modest amount for the three and six months
ended September 30, 2022 as compared to the three and six months ended
September 30, 2021 .
Income tax expense
Three months ended September 30, Aggregate Change Six months ended September 30, Aggregate Change
(in thousands) 2022 2021 2022 from 2021 2022 2021 2022 from 2021
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Income tax expense $ 215 $ 152 $ 63 41 % $ 415 $ 298 $ 117 39 %
For the three and six months ended September 30, 2022 , we recorded a total
deferred tax expense of $0.2 million and $0.4 million , due to the inability to
use some portion of federal and state NOL carryforwards against the deferred tax
liability created by amortization of indefinite-lived intangibles.
On March 27, 2020 , the Coronavirus Aid Relief and Economic Security ("CARES")
Act was signed into law. The new CARES Act modified Section 172(b)(1)(A) of the
Code to state that NOL arising in a taxable year beginning before January 1,
2018 , is carried forward 20 years provided that a carryback claim is not
affected. From this adjusted provision, our March 31, 2018 NOL carryforward
changed from an indefinite life to a 20-year life. We used a discrete effective
tax rate method to calculate taxes for the three and six months ended
September 30, 2021 . We determined that applying an
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estimate of the annual effective tax rate would not provide a reasonable estimate as small changes in estimated "ordinary" loss would result in significant changes in the estimated annual effective tax rate. Accordingly, for the three and six months endedSeptember 30, 2021 , we recorded a total deferred tax expense of$0.2 million and$0.3 million , respectively, due to the inability to use some portion of our federal and state NOL carryforwards against the deferred tax liability created by amortization of indefinite-lived intangibles.
Liquidity and Capital Resources
At
We believe our cash and cash equivalents on hand will be sufficient to meet our financial obligations through at least 12 months from the date of this Quarterly Report. As noted above, our future capital requirements will depend on a number of factors, including among others, the costs and timing of our spectrum retuning activities, spectrum acquisitions and the Anti-Windfall Payments to theU.S. Treasury , our operating activities, any cash proceeds we generate through our commercialization activities and our ability to timely deliver broadband licenses to our customers in accordance with our contractual obligations. We will deploy capital at our determined pace based on several key ongoing factors, including customer demand, market opportunity, and offsetting income from spectrum leases. As we cannot predict the duration or scope of the COVID-19 pandemic and its impact on our Company or our targeted customers, the potential negative financial impact to our results of operations and financial condition cannot be reasonably estimated. We are actively managing our business to maintain our cash flow and believe that we currently have adequate liquidity. To implement our business plans and initiatives, however, we may need to raise additional capital. We cannot predict with certainty the exact amount or timing for any future capital raises. See "Risk Factors" in Item 1A of Part II of this Quarterly Report for a reference to the risks and uncertainties that could cause our costs to be more than we currently anticipate and/or our revenue and operating results to be lower than we currently anticipate. If required, we intend to raise additional capital through debt or equity financings, including pursuant to our Shelf Registration Statement (as defined below) or through some other financing arrangement. However, we cannot be sure that additional financing will be available if and when needed, or that, if available, we can obtain financing on terms favorable to our stockholders and to us. Any failure to obtain financing when required will have a material adverse effect on our business, operating results, financial condition and liquidity. OnApril 3, 2020 , we filed a shelf registration statement (the "Shelf Registration Statement") on Form S-3 with theSEC that was declared effective by theSEC onApril 20, 2020 , which permits us to offer up to$150.0 million of common stock, preferred stock, warrants or units in one or more offerings and in any combination, including in units from time to time. Our Shelf Registration Statement is intended to provide us with additional flexibility to access capital markets for general corporate purposes, which may include working capital, capital expenditures, repayment of debt, other corporate expenses and acquisitions of complementary products, technologies, or businesses. We entered into an Amended and Restated Controlled Equity Offering Sales Agreement and an Amended and Restated Sales Agreement (collectively, the "Sales Agreements") withCantor Fitzgerald & Co. andB. Riley FBR, Inc. , respectively (collectively, the "Agents"). OnApril 3, 2020 , we registered the sale of up to an aggregate of$50.0 million , in shares of our common stock in at the market sales transactions pursuant to the Sales Agreements under the Shelf Registration Statement. Through the date of this filing, we have not sold any shares of our common stock in at the market transactions or any securities under the Shelf Registration Statement.
Cash Flows from Operating, Investing and Financing Activities
Six months ended September 30,
(in thousands) 2022 2021
(Unaudited) (Unaudited)
Net cash used in operating activities $ (17,948) $ (12,592)
Net cash used in investing activities $ (12,373) $ (12,075)
Net cash (used in) provided by financing activities $
(5,189)
Net cash used in operating activities. Net cash used in operating activities was$17.9 million for the six months endedSeptember 30, 2022 , as compared to net cash used in operating activities of$12.6 million for the six months endedSeptember 30, 2021 . The majority of net cash used operating activities during the six months endedSeptember 30, 2022 , resulted from a net loss of$23.8 million , partially offset by non-cash adjustments to net loss of$6.4 million (primarily 25
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attributable to stock compensation expense). The majority of net cash used in operating activities during the six months endedSeptember 30, 2021 , resulted from a net loss of$13.8 million , gain on disposal of intangible assets of$10.2 million and a decrease in accounts payable and accrued expenses by$1.6 million , partially offset by non-cash stock-based compensation of$6.5 million and deferred revenue of$5.1 million . Net cash used in investing activities. Net cash used in investing activities was$12.4 million for the six months endedSeptember 30, 2022 , as compared to net cash used in investing activities of$12.1 million for the six months endedSeptember 30, 2021 , primarily to acquire, swap or retune wireless licenses in markets acrossthe United States . Net cash (used in) provided by financing activities. Net cash used in financing activities was$5.2 million for the six months endedSeptember 30, 2022 , as compared to net cash provided by financing activities of$8.0 million for the six months endedSeptember 30, 2021 . For the six months endedSeptember 30, 2022 , net cash used in financing activities was primarily from the repurchase of treasury shares of$4.7 million , partially offset by the proceeds from stock option exercises of$0.9 million , net of payments of withholding tax on net issuance of restricted stock of$1.3 million . For the six months endedSeptember 30, 2021 , net cash provided by financing activities was primarily from the proceeds from stock option exercises.
Material Cash Requirements
Our future capital requirements will depend on many factors, including: the timeline and costs to acquire broadband licenses pursuant to the Report and Order, including the costs to acquire additional spectrum, the costs related to retuning, or swapping spectrum held by 900 MHz site-based licensees in the broadband segment that is required under section 90.621(b) to be protected by a broadband licensee with a base station at any location within the county, or any 900 MHz geographic-based SMR licensee in the broadband segment whose license area completely or partially overlaps the county, and the costs of paying Anti-Windfall Payments to theU.S. Treasury ; costs related to the commercializing of our spectrum assets; and our ability to sign customer contracts and generate revenues from the license or transfer of any broadband licenses we secure; the terms and conditions of any customer contracts, including the timing of payments.
Share Repurchase Program
InSeptember 2021 , our Board authorized a share repurchase program pursuant to which we may repurchase up to$50.0 million of our common stock on or beforeSeptember 29, 2023 . The manner, timing and amount of any share repurchases will be determined by us based on a variety of factors, including price, general business and market conditions and alternative investment opportunities. The share repurchase program authorization does not obligate us to acquire any specific number of shares. Under the program, shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We currently anticipate the cash used for the share repurchase program will come primarily from our prepaid customer agreements. The following table presents the share repurchase activity for the three and six months endedSeptember 30, 2022 and 2021 (in thousands, except per share data): Three Months Ended September 30, Six Months Ended September 30, 2022 2021 2022 2021 Number of shares repurchased 54 - 110 - Average price paid per share*$ 36.73 $ -$ 48.42 $ - Total cost to repurchase$ 2,000 $ -$ 4,725 $ -
*Average price paid per share includes costs associated with the repurchases.
As of
Off-balance sheet arrangements
As ofSeptember 30, 2022 andMarch 31, 2022 , we did not have and do not have any relationships with unconsolidated entities or financial partnerships that were established for the purpose of facilitating off-balance sheet arrangements, as defined in the rules and regulations of theSEC . 26
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