Anterix Inc

Previous wording

A discussion and analysis of the primary factors contributing to our results of operations are presented below. The following tables summarize our results of operations and financial data for the three months ended June 30, 2024 and 2023. The following data should be read in conjunction with our Notes to the Unaudited Consolidated Financial Statements contained within this Quarterly Report.

Current wording

A discussion and analysis of the primary factors contributing to our results of operations are presented below. The following tables summarize our results of operations and financial data for the three and six months ended September 30, 2024 and 2023. The following data should be read in conjunction with our Notes to the Unaudited Consolidated Financial Statements contained within this Quarterly Report.

Previous wording

Our net loss for the three months ended June 30, 2024 increased by approximately $13.4 million, or 633%, to $15.5 million from $2.1 million for the three months ended June 30, 2023. The increase in net loss was primarily due to the following:

Current wording

Our net loss for the three months ended September 30, 2024 increased by approximately $14.8 million to $12.8 million net loss from $2.1 million net income for the three months ended September 30, 2023. The increase in net loss was primarily due to the following:

Previous wording

•Spectrum revenues increased by $0.9 million, or 151%, to $1.5 million for the three months ended June 30, 2024 from $0.6 million for the three months ended June 30, 2023. The increase in our spectrum revenue was primarily attributable to revenue recognized in connection with our agreement with Xcel Energy of approximately $0.8 million.

Current wording

•Spectrum revenues increased by $0.5 million, or 47%, to $1.6 million for the three months ended September 30, 2024 from $1.1 million for the three months ended September 30, 2023. The increase in our spectrum revenue was primarily attributable to revenue recognized in connection with our agreement with Xcel Energy of approximately $0.4 million and our agreement with Evergy of approximately $0.1 million.

Previous wording

•Product development expenses increased by $0.7 million, or 64%, to $1.8 million for the three months ended June 30, 2024 from $1.1 million for three months ended June 30, 2023. The increase primarily resulted from $0.5 million higher contract consulting fees and $0.2 million in IT-related costs.

Current wording

•Product development expenses increased by $0.6 million, or 55%, to $1.8 million for the three months ended September 30, 2024 from $1.1 million for three months ended September 30, 2023. The increase primarily resulted from $0.4 million higher headcount related costs and $0.2 million in IT related costs.

Previous wording

•Interest income increased by $0.3 million, or 80%, to $0.7 million for the three months ended June 30, 2024 as compared to $0.4 million for three months ended June 30, 2023. The increase was primarily attributable to a higher cash balance.

Current wording

•Interest income increased by $0.2 million, or 48%, to $0.6 million for the three months ended September 30, 2024 from $0.4 million for three months ended September 30, 2023. The increase was primarily attributable to a higher average cash balance during the period.

Previous wording

•Sales and support expenses increased by $0.6 million, or 45%, to $1.9 million for the three months ended June 30, 2024 from $1.3 million for three months ended June 30, 2023. The increase primarily resulted from $0.4 higher headcount costs and commissions and $0.3 million fees related to the Oncor Agreement partially offset by $0.1 million lower contract consulting fees.

Current wording

•Sales and support expense increased by $0.6 million, or 24%, to $3.2 million for the six months ended September 30, 2024 from $2.6 million for six months ended September 30, 2023. The increase primarily resulted from $0.5 million higher headcount related costs, $0.3 million fees related to the Oncor Agreement, partially offset by $0.2 million in lower contract consulting fees.

Previous wording

•Gain from disposal of intangible assets, net decreased by $10.7 million, or 99%, to $0.1 million for the three months ended June 30, 2024 from $10.8 million for the three months ended June 30, 2023. During the three months ended June 30, 2024, we exchanged our narrowband license for a broadband license in 1 county. In connection with the exchange, we recorded an estimated accounting cost basis of $0.1 million for the new broadband license and relinquished to the FCC narrowband license for the same 1 county with de minimis value. As a result, we recorded a $0.1 million non-monetary gain from disposal of the intangible assets on our Consolidated Statements of Operations. During the three months ended June 30, 2023, we exchanged our narrowband licenses for broadband licenses in 9 counties. In connection with the exchange, we recorded an estimated accounting cost basis of $13.3 million for the new broadband licenses and disposed of $2.5 million related to the value ascribed to the narrowband licenses we relinquished to the FCC for those same 9 counties. As a result, we recorded a $10.8 million non-monetary gain from disposal of the intangible assets on our Consolidated Statements of Operations.

Current wording

•Gain on disposal of intangible assets, net decreased by $19.2 million, or 100%, to $0.1 million for the six months ended September 30, 2024 from $19.3 million for the six months ended September 30, 2023. During the six months ended September 30, 2024 we exchanged our narrowband license for a broadband license in 1 county. In connection with the exchange, we recorded an estimated accounting cost basis of $0.1 million for the new broadband license and relinquished to the FCC narrowband license for the same 1 county with de minimis value. As a result, we recorded a $0.1 million non-monetary gain on disposal of the intangible assets on our Consolidated Statements of Operations. During the six months ended September 30, 2023, we exchanged our narrowband licenses for broadband licenses in 14 counties. In connection with the exchange, we recorded an estimated accounting cost basis of $24.1 million for the new broadband licenses and disposed of $4.8 million related to the value ascribed to the narrowband licenses we relinquished to the FCC for those same 14 counties. As a result, we recorded a $19.3 million non-monetary gain on disposal of the intangible assets on our Consolidated Statements of Operations.

Previous wording

•Income tax increased by $1.5 million, or 609%, to $1.2 million for the three months ended June 30, 2024 as compared to income tax benefit of $0.2 million for three months ended June 30, 2023. The increase was primarily attributable to higher state effective tax rate due to taxable income related to customer milestone payments.

Current wording

•Income tax expense increased by $1.0 million, or 259%, to $1.5 million for the six months ended September 30, 2024 from $0.4 million for six months ended September 30, 2023. The increase was primarily attributable to higher state effective tax rate due to taxable income related to customer milestone payments.

Previous wording

Our principal source of liquidity is our cash and cash equivalents generated from customer contract proceeds. At June 30, 2024, we had cash and cash equivalents of $51.7 million.

Current wording

Our principal source of liquidity is our cash and cash equivalents generated from customer contract proceeds. At September 30, 2024, we had cash and cash equivalents of $43.1 million.

Previous wording

Net cash used in operating activities

Current wording

Net cash (used in) provided by operating activities

Previous wording

Our principal source of cash provided by operating activities is our customer contract proceeds in the form of advanced payments. For spectrum revenue agreements, we record these advanced payments as deferred revenue on our Consolidated Balance Sheets and recognize revenue over the term of the lease, which is typically 20 to 30 years. For spectrum sale agreements, we record advanced payments as a contingent liability on our Consolidated Balance Sheets and derecognize this liability upon closing of the sale along with recording a gain or loss on sale. In addition, our cash flows reflect a non-cash gain or loss on disposal of intangible assets for the difference in cost basis as we exchange narrowband licenses for broadband licenses. We expect net cash provided by (used in) operating activities to be affected by the progress on our customer agreements as well as changes in other operating assets and liabilities. The following represents our changes in net cash used in operating activities for the three months ended June 30, 2024 and 2023.

Current wording

Our principal source of cash provided by operating activities is our customer contract proceeds in the form of advanced payments. For spectrum revenue agreements, we record these advanced payments as deferred revenue on our Consolidated Balance Sheets and recognize revenue over the term of the lease, which is typically 20 to 30 years. For spectrum sale agreements, we record advanced payments as a contingent liability on our Consolidated Balance Sheets and derecognize this liability upon closing of the sale along with recording a gain or loss on sale. In addition, our cash flows reflect a non-cash gain or loss on disposal of intangible assets for the difference in cost basis as we exchange narrowband licenses for broadband licenses. We expect net cash provided by (used in) operating activities to be affected by the progress on our customer agreements as well as changes in other operating assets and liabilities. The following represents our changes in net cash (used in) provided by operating activities for the six months ended September 30, 2024 and 2023.

Previous wording

Net cash used in operating activities was approximately $2.4 million for the three months ended June 30, 2024. The net cash used in operating activities for the three months ended June 30, 2024 was primarily due to the following:

Current wording

Net cash used in operating activities was approximately $5.0 million for the six months ended September 30, 2024. The net cash used in operating activities for the six months ended September 30, 2024 was primarily due to the following:

Previous wording

•$15.5 million decrease related to our operating loss, which includes $5.9 million of non-cash items (refer to the Results of Operations);

Current wording

•$28.3 million decrease related to our operating loss, which includes $10.2 million of non-cash items (refer to the Results of Operations);

Previous wording

•$1.6 million decrease in accounts payable and accrued expenses primarily due to annual bonus payments;

Current wording

•$1.5 million decrease in accounts payable and accrued expenses primarily due to annual bonus payments;

Previous wording

Net cash used in operating activities was approximately $8.2 million for the three months ended June 30, 2023. The net cash used in operating activities for the three months ended June 30, 2023 was primarily due to the following:

Current wording

Net cash provided by operating activities was approximately $2.2 million for the six months ended September 30, 2023. The net cash provided by operating activities for the six months ended September 30, 2023 was primarily due to the following:

Previous wording

•$2.1 million decrease related to our operating loss, which includes $6.3 million of non-cash items (refer to the Results of Operations); and

Current wording

•$45 thousand decrease related to our operating loss, which includes $17.1 million of non-cash items (refer to the Results of Operations); and

Previous wording

•$1.5 million decrease in deferred revenue due to revenue recognition in connection with the delivery of cleared 900 MHz Broadband Spectrum; and

Current wording

•$19.5 million increase in deferred revenue due to $21.2 million cash proceeds from our 900 MHz Broadband Spectrum customer prepayments offset by $1.7 million in revenue recognition in connection with the delivery of cleared 900 MHz Broadband Spectrum.

Previous wording

Our principal outflow of cash used in investing activities is our purchases of intangible assets, including refundable deposits, retuning costs and swaps, which represent our spectrum clearing efforts as we work toward the conversion from narrowband to broadband spectrum. The purchases of intangible assets may be offset by current period cash proceeds from the sale of intangible assets, with a potential non-cash derecognition of the contingent liability for any proceeds received and recognized in operating activities in a prior period. We expect net cash provided by (used in) investing activities to be affected by the timing of our spectrum clearing efforts and the closing of our sale transactions and the related transfer of broadband licenses. The following represents our changes in net cash used in investing activities for the three months ended June 30, 2024 and 2023.

Current wording

Our principal outflow of cash used in investing activities is our purchases of intangible assets, including refundable deposits, retuning costs and swaps, which represent our spectrum clearing efforts as we work toward the conversion from narrowband to broadband spectrum. The purchases of intangible assets may be offset by current period cash proceeds from the sale of intangible assets, with a potential non-cash derecognition of the contingent liability for any proceeds received and recognized in operating activities in a prior period. We expect net cash provided by (used in) investing activities to be affected by the timing of our spectrum clearing efforts and the closing of our sale transactions and the related transfer of broadband licenses. The following represents our changes in net cash (used in) provided by investing activities for the six months ended September 30, 2024 and 2023.

Previous wording

Net cash used in investing activities was $5.4 million and $5.2 million for the three months ended June 30, 2024 and 2023, respectively. For the three months ended June 30, 2024, net cash used in investing activities was from $5.4 million payments made to acquire, swap or retune wireless licenses in markets across the United States. For the three months ended June 30, 2023, net cash used in investing activities was primarily from $5.2 million payments made to acquire, swap or retune wireless licenses in markets across the United States.

Current wording

Net cash used in investing activities was $10.9 million for the six months ended September 30, 2024, as compared to net cash provided by investing activities of $14.9 million for the six months ended September 30, 2023. For the six months ended September 30, 2024, net cash used in investing activities was primarily from $10.9 million payments made to acquire, swap or retune wireless licenses in markets across the United States. For the six months ended September 30, 2023, net cash provided by investing activities was primarily from $25.2 million sale of spectrum related to our transfer of the San Diego County broadband license to SDG&E partially offset by $10.1 million payments made to acquire, swap or retune wireless licenses in markets across the United States.

Previous wording

Our principal outflow of cash used in financing activities is a result of our equity transactions, including repurchases of common stock and taxes and fees associated with the issuance of restricted stock awards, offset by proceeds from stock options exercised in the period. We expect net cash used in financing activities to be affected by the timing of future equity transactions including the timing of our repurchases of common stock. The following represents our changes in net cash used in financing activities for the three months ended June 30, 2024 and 2023.

Current wording

Our principal outflow of cash used in financing activities is a result of our equity transactions, including repurchases of common stock and taxes and fees associated with the issuance of restricted stock awards, offset by proceeds from stock options exercised in the period. We expect net cash used in financing activities to be affected by the timing of future equity transactions including the timing of our repurchases of common stock. The following represents our changes in net cash used in financing activities for the six months ended September 30, 2024 and 2023.

Previous wording

Net cash used in financing activities was $1.1 million and $0.7 million for the three months ended June 30, 2024 and 2023, respectively. For the three months ended June 30, 2024, net cash used in financing activities was primarily for the repurchases of common stock of $2.0 million, payments of withholding tax on net issuance of restricted stock of $0.7 million, partially offset by the proceeds from stock option exercises of $1.6 million. For the three months ended June 30, 2023, net cash used in financing activities was primarily for payments of withholding tax on net issuance of restricted stock of $0.8 million, partially offset by the proceeds from stock option exercises of $7 thousand.

Current wording

Net cash used in financing activities was $1.4 million and $11.8 million for the six months ended September 30, 2024 and 2023, respectively. For the six months ended September 30, 2024, net cash used in financing activities was primarily for the repurchases of common stock of $2.0 million, payments of withholding tax on net issuance of restricted stock of $1.4 million, partially offset by the proceeds from stock option exercises of $2.0 million. For the six months ended September 30, 2023, net cash used in financing activities was from the repurchase of common stock of $10.7 million and payments of withholding tax on net issuance of restricted stock of $1.0 million.

Previous wording

We are obligated under certain lease agreements for office space with lease terms expiring on various dates from October 31, 2024 through January 31, 2029, which includes a three to ten-year lease extension for our corporate headquarters. We have also entered into multiple lease agreements for tower space related to our spectrum holdings. The lease expiration dates range from November 30, 2024 to June 12, 2031. Total estimated payments for these lease agreements are approximately $6.0 million (exclusive of real estate taxes, utilities, maintenance and other costs borne by us). We also have an obligation to clear the tower site locations, for which we recorded an asset retirement obligation (the “ARO”). Total estimated payments as a result of the ARO is approximately $0.7 million. In addition to the lease payments and ARO for our tower site locations, we entered into agreements with several third parties in multiple U.S. markets to acquire, retune or swap wireless licenses for cash consideration (“deals”). As of June 30, 2024, our total estimated future payments for these agreements with incumbents are approximately $11.1 million.

Current wording

We are obligated under certain lease agreements for office space with lease terms expiring on various dates from October 31, 2024 through January 31, 2029, which includes a three to ten-year lease extension for our corporate headquarters. We have also entered into multiple lease agreements for tower space related to our spectrum holdings. The lease expiration dates range from November 30, 2024 to September 3, 2031. Total estimated payments for these lease agreements are approximately $6.5 million (exclusive of real estate taxes, utilities, maintenance and other costs borne by us). We also have an obligation to clear the tower site locations, for which we recorded an asset retirement obligation (the “ARO”). Total estimated payments as a result of the ARO is approximately $0.7 million. In addition to the lease payments and ARO for our tower site locations, we entered into agreements with several third parties in multiple U.S. markets to acquire, retune or swap wireless licenses for cash consideration (“deals”). As of September 30, 2024, our total estimated future payments for these agreements with incumbents are approximately $9.4 million.

Previous wording

In October 2022, we entered into an agreement with Xcel 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 Xcel Energy’s service territory in eight states (the “Xcel Energy Agreement”). In connection with Xcel Energy Agreement, we entered into a guaranty agreement, under which we guaranteed the delivery of the relevant 900 MHz Broadband Spectrum and the associated broadband licenses in Xcel Energy’s service territory in eight states along with other commercial obligations. In the event of default or non-delivery of the specific territory’s 900 MHz Broadband Spectrum, we are required to refund payments we have received. In addition, to the extent we have performed any obligations, our liability and remaining obligations under the Xcel Energy Agreement will extend only to the remaining unperformed obligations. We recorded $67.1 million in deferred revenue in connection with the prepayments received as of June 30, 2024. We commenced delivery of the relevant cleared 900 MHz Broadband Spectrum and the associated broadband leases in the first quarter of fiscal year 2024 and will continue through 2029. The revenue recognized for the three months ended June 30, 2024, was approximately $0.8 million. As of June 30, 2024, the maximum potential liability of future undiscounted payments under this agreement is approximately $64.4 million.

Current wording

In October 2022, we entered into an agreement with Xcel 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 Xcel Energy’s service territory in eight states (the “Xcel Energy Agreement”). In connection with Xcel Energy Agreement, we entered into a guaranty agreement, under which we guaranteed the delivery of the relevant 900 MHz Broadband Spectrum and the associated broadband licenses in Xcel Energy’s service territory in eight states along with other commercial obligations. In the event of default or non-delivery of the specific territory’s 900 MHz Broadband Spectrum, we are required to refund payments we have received. In addition, to the extent we have performed any obligations, our liability and remaining obligations under the Xcel Energy Agreement will extend only to the remaining unperformed obligations. We recorded

Previous wording

The Inflation Reduction Act of 2022, which was enacted into law on August 16, 2022, imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022. Excise tax accrued for the three months ended June 30, 2024 was approximately $0.1 million.

Current wording

The Inflation Reduction Act of 2022, which was enacted into law on August 16, 2022, imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022. Excise tax accrued for the six months ended September 30, 2024 was approximately $0.1 million.

Previous wording

The following table presents the share repurchase activity for the three months ended June 30, 2024 and 2023 (in thousands, except per share data):

Current wording

The following table presents the share repurchase activity for the three and six months ended September 30, 2024 and 2023 (in thousands, except per share data):