Anterix Inc.

Good afternoon, ladies and gentlemen, and welcome to the Antarex first quarter fiscal year 2023 earnings call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Natasha Veccarelli. Ma'am, the floor is yours.

Good afternoon, everyone, and welcome to the Antarex first quarter fiscal year 2023 investor call. I'm Natasha Vaccarelli, Vice President in Best Relations and Corporate Communications at Antarex. Joining me on the call today are Rob Schwartz, our President and CEO, Ryan Gerbrandt, our COO, Tim Gray, our CFO, and Chris Gutman-McCabe, our Chief Regulatory and Communications Officer. Before we begin, please note that during today's presentation, we may make forward-looking statements. either in our prepared remarks or in the associated question and answer session. These statements are based on current expectations or beliefs and are subject to risks and uncertainties that may cause actual results to differ materially. Risk factors that may impact our performance are identified in our most recent SEC filing. Our SEC filings can be found on our website or on the SEC's website. Investors are questioned not to place undue reliance on forward-looking statements, and we disclaim any obligation to update or revise these forward-looking statements after the date of this presentation. Following our prepared remarks, we will have an operator-led question and answer session. In addition, at the conclusion of today's call, a replay and transcript of our discussion will be posted to our investor relations website. With that, I'll turn the call over to Antarex's President and CEO, Rob Schwartz.

Good afternoon, everyone, and thank you for joining the call. With our last call being just several weeks ago, I'm going to focus today's discussion on providing an update on our contract progress, customer pipeline, and industry movement. And then we'll open it up for questions. As we have said, our Antarex mission is to be the de facto private broadband solution for utilities. We fully recognize that continuing to close individual deals is a near-term imperative. Our goal is to capture the sector. While accomplishing this goal will take time, I remain confident that we are uniquely built to succeed in this effort. Let me share three reasons for my confidence. First, we have the right team, with our Nextel lineage experienced in successfully pioneering a disruptive and transformative effort. Nextel was the first nationwide wireless platform and drove a range of industries, public safety, construction, utilities, and more, to adopt a single, unified wireless solution. And at the time, it was also difficult to predict how long it would take to execute on that mission. With our focus at Enterix on the utility sector, we have added considerable utility knowledge and experience to our seasoned wireless team to support and advance our efforts. We believe this combination of wireless and utility experience is unmatched. and best positions us to continue to win customers and execute on our business plan. Second, our solid financial position is a core element of our strategy, designed to ensure that we have the time it can take to define a new market, move an industry, and secure our de facto mission. We own a unique and valuable nationwide spectrum asset. We have a strong and debt-free balance sheet, operate a lean organization, and are a prudent steward of capital. At the end of the quarter, we had $86 million in cash and roughly $50 million in remaining contracted proceeds due to be paid in the next few years. Our capital-efficient model allows the vast majority of contracted proceeds to result in free cash flow. And we have multi-decade customer lease contracts with renewals with little to no churn, providing significant value well into the future. And third, we have the right unique product at the right unique time. Enterix is purposely positioned to help solve growing critical and complex challenges for utilities, including grid modernization, renewable energy integration, a new environmental reality, including wildfires and massive storms, expanding cyber and physical security risks, and a growing focus on energy equity and more. These realities provide strong tailwinds of support for the necessity of private broadband networks. Accordingly, attention is expanding across the sector, reflected in the continuous growth and maturation of all three phases of our pipeline, as well as forward movement for a number of our larger, more complex deals. The public industry focus on private LTE and Enterix is measurable. There is over 50% of our nationwide spectrum value represented in the combined participation from the C-level leaders of our new Utility Strategic Advisory Board, the utilities that have pursued experimental licenses at 900 megahertz, and the membership of the independent Utility Broadband Alliance that we helped found. And it should not come as a surprise that these are the utilities that we are aggressively working with to help them finalize their 900 megahertz private LTE plans. Add to that our 80-plus member Antarex Active Ecosystem Program, and our three early adopters, and you can see the tremendous movement across the sector towards 900 megahertz broadband for utilities. So with that, let's dive into some details of our pipeline. We've heard from investors the request to provide more color on specific pending opportunities in addition to the pipeline stages and LOI status that we previously shared. In response, within the limitation of our NDAs, I'm going to take you through four deals presently in phase three of our pipeline, as well as provide a few additional updates. To start, we've agreed to commercial contract terms, including price, term, deployment schedule, and more, with a large multi-state, multi-operating company utility. I'm pleased to say that we are presently working through the utility's internal approval process with C-level support, which we believe will lead to a final sign-off on good contract terms. We are confident that we are on a solid path towards our next contract with what would be our largest customer to date. Through this experience, we continue to learn that, like all pioneers, it's difficult to predict the exact timing of when these deals close, as paths can and often do evolve as they proceed. As Morgan likes to remind me that Aristotle once said, patience is bitter, but its fruit is sweet. In our second example involving a large multi-state utility, the customer's private LT network is part of a much larger grid hardening effort, which involves their transmission system, the significant integration of renewable energy, and the overall enhancement of resilience. This broad and complex scope of this project prolongs the duration of their executive review, which is well underway. This relationship began as a 900 megahertz pilot where the entity explored multiple use cases and has now evolved to include enterics engaged up to their president while simultaneously helping their third party expert to develop a strong private LT network business case. Our third example involves a multi-state IOU with several operating companies, resulting in an increased complexity but in turn a significantly larger scope of opportunity. Comparable historical commitments like this would have been achieved over many sequential years one operating company at a time. For this utility, however, Private LT is proving a different model, demonstrating a set of strategic benefits best realized across the entire unified service territory. They've developed a comprehensive plan, which has now been validated by multiple third parties, and demonstrating, among other benefits, significant OPEX savings throughout the program life. This prospective customer has strong C-level support across their holdings and operating companies. The final opportunity that I'll highlight today is developing at the operating company level of a large multi-state holding company. This utility has successfully developed its strategic, technical, and capital plans to support their private LTE network build out. We've worked with this utility to align the goals of their deployment with state regulatory priorities and cybersecurity initiatives. They too have C-level involvement given the strategic importance of the solution. These are four great examples. pulled from our current pipeline of over 60 prospective customers, demonstrating the growing demand for 900 MHz private LTE, our role in these strategic decisions, and the value we can bring to the sector. Looking more broadly, I'm pleased to share that there are multiple utility RFPs under development, where our 900 MHz spectrum is being specified. And additionally worth noting, based on inbound requests, we are now seeing interest from a number of entities that were previously opposed to private LTE, which to us is another strong sign of progress towards our de facto mission. And while we continue to stay laser focused on the utility sector and our mission to become the de facto provider of private broadband solutions for our nation's utilities, we are receiving interest from a range of organizations in other sectors. This inbound interest is reflective of the private broadband network demand, we are seeing across critical infrastructure verticals, including pipelines, gas companies, freight rail operators, and government installations. We believe the majority of these entities and the use cases they are pursuing could fit well within a utility private broadband deployment supported by our nationwide network of networks platform strategy. So when you cut through it all, We are pioneering the transformation of the utility sector's communication capabilities, as well as the monetization of our nationwide spectrum asset. We are creating an even more valuable, unique platform that supports the critical need to revolutionize our nation's electric grid, a process that we believe will be well worth the time invested. And while there is considerable and growing attention in the marketplace regarding private broadband networks, we aren't just talking about it. we are uniquely converting large multi-state customers to commit to build the largest of private broadband networks in our nation. Additionally, the activity we have seen in Congress and with the administration, from bipartisan infrastructure legislation to the recent Inflation Reduction Act, supports our efforts and confirms the importance of the issues we're helping utilities address. With the growing tailwinds of demand for private networks across sectors, the requirements to address our nation's decarbonization and grid modernization goals, and with an increasing focus on mitigating the risks to our grid caused by natural and manmade disasters, we remain confident that we can achieve our mission to become the de facto provider of private broadband solutions to utility and critical infrastructure sectors, leveraging our 900 megahertz spectrum asset. With that, I'll turn it over to the operator for questions.

Certainly. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We do ask that while posing your question, please pick up your handset, if you're listening on speakerphone, to provide optimum sound quality. Once again, if you have any questions or comments, please press star 1 on your phone. Please hold while I poll for questions. Your first question is coming from George Sutton from Craig Hallam. Your line is live.

Hey, thank you. This is Adam on for George. Thanks for taking my question. Rob, great to hear about the fourth contract under LOI. Is there an updated contract and proceeds to go along with that?

Yeah, thanks, Adam. Good to hear from you. One important point, right? Last call, we talked about three LOIs. This call, we gave some illustrative color on four different deals. There's not a complete overlap there, and we're happy to say that because So there isn't really a direct correlation of the numbers from before and this time, but Brian, maybe you want to fill in some color on that.

Yeah, happy to. Yeah, just to correlate, like Rob said, you know, we weren't intentionally drawing a one-to-one relationship between the two, Adam. I'll say specifically, though, you know, of the four examples that Rob walked through, you know, from phase three of the pipeline, two of those do specifically have LOIs and two don't. Again, reflecting what we've said earlier about the optionality and kind of the multiple ways that we've seen customers really participate in these journey, you know, reflecting their unique needs and complications as they work their way through the process. What we're really trying to bring attention to, you know, as we focus in on, you know, kind of the later stages of the pipeline is specifically what some of those, you know, methods are that utilities are going through and being able to demonstrate specifically where some of these customers are in the pipeline You know, so just to highlight again, you know, really what the focus was of the four different examples that we walked through. You know, the first, of course, you know, was really speaking to, you know, a specific example where there's a significant level of maturity in the deal. You know, the contract structure, the deployment timelines, the elements that Rob listed. You know, really getting to the element now of the executive approval cycle that all utilities go through in a similar shape and form, but all have a unique cycle and process that we help stakeholder their way through. The second was really focusing on, you know, how LTE we've found, you know, is a part of a much larger deal that the utility is working on. As we've talked a lot about the macro issues facing utilities today, you know, the focus on grid modernization or, you know, bringing in renewables and clean energy sources, you know, become really macro-level projects that PLT is a relatively small part of, you know, but it speaks to the level of work that the utility needs to do as their stakeholder in those much larger deals excuse me, that we're a relatively small part in. And the third piece was really focusing on something else that we've talked about, the difference between the much larger holding company entities and the operating companies that sit in underneath. We've spent significant effort really trying to develop and capturing some of the C-level interest that really has gravitated over top of the technical details of private LTE and broadband. And, you know, the operating company level discussions have really matured, you know, which are by nature much larger transactions, you know, encompassing the multiple operating companies that sit in underneath, but require a more significant level of due diligence. You know, we're working to educate and drive that stakeholder right now. Think of it in context of, you know, effectively selling and positioning into multiple different operating companies that each have their own unique set of needs and ultimately their own regulatory requirements. But we believe the benefit of going after the approach that way far outweighs kind of the extra time and effort that it takes to be able to get there. And the final one is really the reciprocal of that. We're continuing to see interest even at an individual operating company level who finds a champion in a single utility and then brings that learning back across the holding company with time. And while we believe that opportunity is likely to start at that operating company level, you know, it will with time develop into the rest of the holding company with learnings, you know, in the application of that experience.

That's great. And maybe if I focus just on, you know, phase three of the pipeline, any commentary on the mix there, whether, you know, these are opportunities at a parent company or operating company level?

They're split, you know, frankly. Like I said, these examples kind of capture a few of them, but we're definitely seeing both. You know, but the highlight I'll kind of take out of it as we articulate in a couple of days You know, some of the ones coming through are certainly starting to represent some of the larger opportunities that we're seeing in the pipeline, which we think is, you know, a great example of kind of the next to come in line after the first movers and the early adopters as we start moving more deeply, you know, into some of the larger companies out there in the national utility landscape.

Great. Thanks. I'll hop back in the queue.

Thank you. Your next question is coming from Phil Cusick from J.P. Morgan. Your line is live.

Hey, guys. Thank you. Two, if I can. First, can you give us some idea on the progress on these four deals since the May call? And are we talking about weeks, months, or years to get to the next signing? And then second of all, you talked about a couple of companies that have multi-state in there. Can you give us an idea of how many states we're talking about? Is it sort of a handful or high single digits getting into the double digits? Thank you.

Thanks, Phil. I'm going to let Ryan jump into just one sort of setup on it. As you said, since May, we didn't give color on these four specific deals in May. But what I did say in my comments is that we're seeing progress across the pipeline, meaning that we're seeing advancements and growth in each of the phases of the pipeline. And these are all of the large deals we're talking about now and some of the LOIs we talked about last call. These are multi-state deals that, you know, we're not going to give you the exact number of states, but have a significant impact on sort of the overall footprint of our success. Brian, do you want to comment on the first question?

Yeah, I'll add a little bit more culture. I mean, we're seeing progress all the time, I think, is the right way to think about it. You know, certainly, as Rob said, while we didn't specifically focus on these deals individually at May, you know, we're progressing all these activities in parallel with our growing sales and support teams every single day. And, you know, see momentum moving forward. Sometimes it's faster than other times, you know, like you see with any kind of complex transaction. But, you know, we're continuing to see them move forward as the developments are working forward. In terms of the specifics on the states, as Rob said, you know, these cover a variety of different scenarios. Can't get into the specifics on how many are in them. But, you know, definitely span some of the larger companies, you know, and utilities, you know, in the U.S.,

And any idea of weeks, months, a year before we're going to see one of these signed? Maybe the rule out a shorter term rather than a longer term.

Yeah, so I appreciate the question. I think as we re-emphasized in my comments earlier, we're confident we're on a great path, especially in the first example that I talked about. But if anything, we've learned our lesson about predicting the precision of that is not a good place to be, but the overall movement and that specific transaction that we highlighted, we're confident we'll see that moving forward at a good pace. Got it. Thanks, Rob. Thank you.

Thank you. Your next question is coming from Simon Flannery from Morgan Stanley. Your line is live.

Great. Thank you very much. Good evening. Thank you for the color on those four examples. What's the status of the third LOI that was not in those four deals?

Look, I think as we said in the prior call, those LOIs were comprised of both phase two and three. So you can use your imagination that like every one of these deals, we use an LOI as a tool. As Ryan said, it's not a necessity in every deal, but it's a tool to get alignment of commitment, right? It's a letter of intent. It states the intention of the parties. And so in one of those three cases, we used it earlier in a pipeline to be able to align on our priorities. In the other two, it was used later. So What I can tell you is that every one of our deals, you know, nothing has fallen out. Everything remains in the pipeline and moves forward, and that's pretty important given our mission of being a de facto standard. It's not that we're losing deals to competition or to utilities not moving forward, just the opposite. Everything progresses. As Ryan said, there are good days and bad days about the speed of that progress, but we continue to push them all forward.

Yeah, just to highlight one other point there too, you know, I think the most notable thing from the pipeline that – I don't want to overlook, you know, is the comment that we're seeing development in all phases of the pipeline. So that means we're seeing overall growth in the pipeline. You know, we're seeing the development of accounts work their way through. And obviously that's inclusive of deals that we're working under the construct of LOIs and ones that we're not. You know, and we're seeing the kind of movement that I would hope to be seeing, you know, kind of, you know, into this phase of the process, you know, and the level of education and the momentum, the comments that Rob was making earlier about the activities in the markets. it's resonating its way down into the activities we're seeing in the day-to-day activities that the sales team are driving. And it excites me at kind of the volume of that activity that we're seeing and puts us still on good track to keep the total market moving forward, which is the necessary objective to achieve the de facto standard goal that we set.

Great. And I think, Wes, you don't want to give specific forecasts. I think you did reiterate your confidence in the $1.8 billion on or around fiscal 24. Is that still the case?

Yeah, Simon, it remains our target. It doesn't bother us if we're plus or minus a quarter or two in that target. For us, it's about the long-term value opportunity that I talked about earlier. It's about driving the industry adoption holistically. Clearly, we've got to deliver on deals, and we know that, and we will continue to do so. The precision of that target, it remains our target, and we're sticking with it.

Great. And the big carriers are all starting to talk about the B2B opportunities, private networks, standalone 5G. You've got the hyperscalers in there as well. What are you seeing on the competitive landscape, and are they trying to compete against your... and your utilities and maybe try to win some of those customers away from you.

Yeah, look, Simon, from our view, and when we talked about being a pioneer, as you know, when we filed our FCC petition now over six, seven years ago, it was about pioneering private networks as a concept, which then it was unheard of. Now, absolutely, there's no shortage of people talking about it. I think what's important is, as I said, what we're achieving. I mean, I really think we are the leading private LT movement. We're leading the movement at this time. The footprint that we've established with just our existing customers already, I think, is bigger probably than everybody else combined from a scale standpoint. And as you can see by what we talked about in the pipeline, right, all of the people who have publicly spoken in some way, right, I went through, you know, the the folks who are involved in our advisory board for our platform, the experimental licenses, those who are now members of ABBA and which continues to grow, that's half of the nation, you know, half of the value of our spectrum in the nation at least. And so just as far as the, you know, the impact we are having on private LTE overall, yes, there's other, I would say, you know, others who are talking about it, but I don't think it's from a competitive standpoint. I'm really talking about the wide area coverage that we're talking about when you measure it, whether it's on pops or square miles or otherwise. I'm confident we have a far more substantial position and see a lot more opportunity for growth. Great. Thank you.

Thank you. Once again, ladies and gentlemen, if you have any questions or comments, please press star then 1 on your phone at this time. Your next question is coming from Catherine Knope from Beaver Riley Financial. Your line is live.

Hi there. So as you know, NexNav has a contiguous eight megahertz block of 900 megahertz spectrum in the LMS band between the up and down links of your three by three private LTE. So NexNav only needs five megahertz to broadcast the timing signal required for TerraPoint terrestrial GPS network, leaving three megahertz surplus that potentially could be repurposed for communication. Question from me for you guys is, do you think a three by three private LTE Is enough for utilities, or are there some customers that might be better off going to a 5-by-5 if that were possible in the future? Thanks.

Yeah, let me take your second question first, and then I'll go to the earlier part of it. Yes, absolutely. We think, you know, our 3-by-3 as a starting point for a private network is plenty of spectrum. And, you know, there's a lot of good examples of it, not just the customers we've signed to date who have done their deep analysis of capacity planning but Southern Company, you know, who runs a private LT network on that six megahertz of spectrum as well. And they've made the conscious decision to also allow other third parties, other like-minded parties to utilize that network. So they actually have, you know, capacity to handle their own needs as well as others. You know, I just visited a question about NextNav, and we know those folks and have a lot of respect for their business model, you know, serving the vertical aspect of location. I think the spectrum is really not directly comparable to what we have. You know, we have exclusive use of our spectrum specifically for LTE, and I think that there's some different kind of usage. You know, like I said before about other spectrum bands, there's a lot of different bands that the FCC has designated for a lot of different uses. And so for us, starting with the 6 megahertz, and like every good carrier model, there's always opportunities to expand. As we say, that's a rich man's problem. If you're able to fill up the capacity and utilize it all, it means you have such powerful use cases, and you can probably think about adding more spectrum, other layers to that layer cake as you expand the model.

Great. Thanks.

Thank you. Your next question is coming from Walter Pysak from LightShed. Your line is live.

Hey, Rob. What's been the dialogue around CBRS lately from the variety of companies that you're talking to, existing and LOIs and otherwise?

Sure. So thanks, Walt. The CBRS dialogue, I think, continues to grow as a complementary aspect to low band spectrum, right, with 900 being you know, sub one gig serves a very different purpose of what CBRS does as a solution set. CBRS, you know, is great spectrum. You know, I've heard it described by folks in that space as super Wi-Fi, right? It replaces a lot of the use cases that Wi-Fi was okay at but is, you know, more proprietary whether it's licensed or unlicensed. We have numerous both customers and prospective customers that CBRS is part of their either licensed or unlicensed part of their model. and they continue to drive that dual-band solution, right? No different than, you know, everyone's using Wi-Fi in their offices and steps outside and goes on to a wide-area cellular network. CBS will be the same thing for a lot of these customers where in a factory, in an office, in a substation, they can use it for more capacity, and it's going to complement. Another important point about it, though, is that we've got our Enterix active ecosystem that I mentioned earlier with 80 different companies and growing companies. Within that solution set, one of the key things we did was identify the need for communications modules that can bridge the gap between CBRS, our band, and even carrier bands. And one of the opportunities we've done is we've driven that crowdsourcing of vendors to collectively drive a module maker to make a solution set just for that need. It's a really good glowing example of why there needs to be an intermediary like us to help drive the solution set That's one of many examples that you'll see that the ecosystem is driving.

Let me ask a question this way. Do you have, when you're having discussions with your, again, existing licensees or people that you sold to, as well as the four LOIs, as well as other people at different stages of this... Hold on.

I'm trying to slow down. Nope.

Walt, you still with us?

All right, I hope everyone can proceed, and we'll go back to Walt if he calls back in.

Certainly. Thank you, everyone. That concludes our Q&A session. I will now hand the conference back to our host for closing remarks. Please go ahead.

Thanks very much, and thank you, everybody, for your continued interest and time today. We look forward to talking to you all soon. Have a great day.

Thank you, ladies and gentlemen. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.