Anterix Inc.

Good afternoon, ladies and gentlemen, and welcome to the Antarex Third Quarter Investor Update Call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Natasha Beccarelli. Ma'am, the floor is yours.

Good afternoon, and thank you for joining us. With me today are Morgan O'Brien, our Executive Chairman, Rob Schwartz, our President and CEO, Ryan Gerbrandt, our COO, and Kim Gray, our CFO. Before I turn the call over to Rob, who will deliver our prepared remarks, I'll remind you that any statements we make during this call that are not based on historical facts represent forward-looking statements, and our actual results could differ materially. A discussion of the factors that may affect our future results is contained in our SEC filings, which are available on our investor relations website. A replay and transcript of this call will also be made available on our website. Following our discussion, we will open the call to take questions from the audience. And with that, I'll turn it over to Antarex's President and CEO, Rob Schwartz.

Thanks, Natasha. Good afternoon, everyone, and thanks for joining our fiscal Q3 investor call. It's been just a short time since our last investor call when we announced our Ameren contract. So today I'll provide a brief update on our continued progress since then. We're really excited about Enterix's current market position with continued customer progress, growing macro demand, and strong regulatory tailwinds. As we enter this fourth fiscal quarter of a big year for Enterix, let me start with how we're tracking against our stated goals thus far. In this fiscal year, we've delivered on the FCC decision to bring broadband to 900 megahertz. We've secured our first long-term customer contract, demonstrating the considerable value of our nationwide spectrum asset to utilities. We've cultivated the expanding interest in 900 MHz private LTE, which can be measured through a growing number of pilots, experimental licenses, and industry collaborations. We continue to see and foster strong tailwinds from the legislative and regulatory environment, including for the administration regarding their focus on modernizing the electric grid to support the expansion of renewable energy. Despite the challenges of operating during a pandemic, we've expanded and developed a leadership team that is successfully executing on our business plan. And lastly, and most importantly, we've continued our development of a robust and maturing customer pipeline that we believe will enable us to achieve our business goals. I want to focus on three key takeaways in my remaining comments today. First, our continued progress with target customers. Second, our momentum that is now beginning to translate into an industry movement towards private LTE. And third, the positive legislative and regulatory trends that we're seeing and as a result of the energy policy focus of the new administration. So starting with our progress with target customers, we're solidly on track with our stated goals and remain confident in our ability to report an additional customer progress with at least one or two more customer agreements before our fiscal year end of March 31st of this year. Our sales funnel continues to strongly develop and accordingly in our upcoming fiscal year, we're now targeting the signing of an additional two to three customer agreements in fiscal year 2022, which puts us right on track for our previously stated fiscal year end 2024 customer goals. Our confidence is based on the continued progress in the seasoning of our customer funnel. which is a direct result of the growing industry demand for private LTE. Further, we're already seeing utility customers react positively and show stronger interest based on Ameren's commitment to private LTE. In addition, our top-down initiatives continue to develop increased industry awareness that the modernized private 900 MHz communication solution that Enterix is offering to utilities is essential to support the modernizing electric grid. A recent example of this continued progress is our announcement with Xcel Energy and Motorola. Xcel is one of the largest IOUs with four operating companies providing energy to over 12 million people across eight Western and Midwestern states. And Motorola, the leader in private two-way radio communications for industrial users, is providing an innovative private LTE solution called Nitro. This offering effectively expands legacy two-way radio systems with a high-powered overlay of 900 megahertz LTE and with the ability to complement the deployment with CBRS. As Tim Peterson, CIO of Xcel Energy stated about their private LTE initial deployment, quote, this new telecommunications technology will provide a basis for new solutions which can improve grid operations, enhance system security, and ultimately deliver a better experience for our customers, unquote. Innovation, however, isn't only being realized within utilities. I'm also excited about the movement towards 900 MHz private LTE from other entities that will drive future innovation. Texas State University recently received what is now the ninth FCC 900 MHz experimental license to focus on applied research for connected infrastructure embedding smart technology into utilities, cities, transportation, and renewable energy. They're bringing together a broad group of innovators and thinkers to test evolutionary use cases, taking full advantage of the powerful capabilities made possible by private LTE networks. We're looking forward to working with Texas State University and its technology partners as their work gets underway. As a result of the continued progress we're making on the customer front, we've garnered substantial additional experience with prospective customers. We now better understand some important dynamics of our business model that I'd like to share with you. As we've said before, our customer contracts will be diverse in size, from mid-sized deals at tens of millions of dollars to larger deals at hundreds of millions of dollars in contracted proceeds, and we continue to see an increasing desire for these customers to prepay. Future opportunities may come as one large transaction and others could be done as incremental steps by the regulated op companies within the large utility holding companies. Our addressable market opportunity includes the FCC designated complex systems where our target customers are also significant 900 megahertz licensees. In these situations, we'll be creative in our deal structures and we'll target paths forward that are creative for our shareholders. Predicting the precise timing of the signing of these contracts is not easy. These customers are managing critical infrastructure networks, and events do happen that can temporarily shift their priorities. Despite any of these short-term timing challenges, we remain confident in the positive trend line of future transactions. We believe future transactions will mark the value of the nationwide spectrum asset on our balance sheet, just like it did with the Ameren Agreement, and demonstrate the growing demand and continued willingness to pay fair market value for our scarce low-band spectrum. And these deals may also close at irregular intervals, not necessarily correlated to our fiscal quarters. We may go quarters without announcing new deals, only to be followed by extremely strong quarters. This dynamic is the nature of our unique and valuable business model, and we're confident that the broader trend line will demonstrate the opportunity for continued and long-term value creation. So as we continue to learn more from the closing of customer transactions, we'll continue to provide updates. Additionally, it's worth pointing out the recent CBAN auction results, where prices well exceeded analyst and market expectations. This reflects the increasing value of license spectrum and provides further support for our spectrum negotiations. Looking more broadly at utility industry's sharpening focus on private LTE, there is accelerating momentum and dialogue across the collective industry in support of 900 megahertz private LTE adoption. Across the country, utilities are making bold commitments to net zero carbon emission goals, and as a result, are planning to invest billions of dollars in generation, transmission, and distribution infrastructure to expand, strengthen, and modernize the grid in support of these goals. Through our efforts, more and more of these utilities are becoming aware of the foundational role of 900 megahertz private LTE in achieving these important objectives. This increased focus on private LTE is translating into action and customer engagement. We see all of this activity, validation and momentum across the utility sector as a movement. The entire ecosystem's broad embrace of private LTE will result in the networking benefits that we've discussed in the past. And that movement extends beyond the utility and vendor community. It's illustrated in our press coverage, webinars, seminars, and roundtables focusing on private LTE. And it's also reflected in legislation, as well as the new administration's policies regarding climate change and the focus on clean and renewable energy. Working with industry associations, individual utilities, and thought leaders, we've educated policymakers regarding the critical importance of having a modern, secure, broadband platform as part of any grid modernization. Those joint education efforts are beginning to bear fruit. In December, the Energy Act was included as part of the COVID relief package that was signed into law. It requires the Department of Energy to investigate the intersection of new technologies, communications, and grid modernization with a specific focus on cybersecurity. Multiple sections of the Act align with our efforts and our mission to deliver a secure, broad broadband solution for utilities. In addition to the legislation adopted in December, the administration's focus on environmental issues also aligns with our goals. The President is calling for a clean energy revolution to address the climate emergency. To realize the energy future envisioned by the administration, utilities will need to implement communications networks that are robust, secure, and support the integration and management of new and distributed energy sources. Through our combined efforts, policymakers at the national level are beginning to recognize the integral role that private secure communications will play in helping the country reach its clean energy goals. Before I conclude, I can't say enough positive things about our expanding team and the trusted position they have established for Enterix throughout the utility sector. We are becoming an integral part of our prospective customers. And when combined with our industry leaders and our advisory council, we are proving ourselves as compelling industry force striving to establish the Enterix name as synonymous with private LTE. Together, we are laser-focused on achieving our mission of what is now a collective movement towards private LTE network adoption. That concludes our prepared remarks. I'll now turn it over to the operator for questions.