Good morning, everyone. We're pleased to have Anterix join us at the Gateway Conference this year and present to you today. Anterix is leading the way to enable the modernization of critical infrastructure by delivering transformative private broadband across multiple key sectors of the economy, including energy, utility, transportation, and logistics. They are the largest holder of licensed spectrum in the 900 MHz band throughout the contiguous U.S. Presenting today will be Anterix CFO, Tim Gray. Tim, the floor is yours.
Thank you very much, and thank you to the Gateway team for having us here today. I appreciate the time. Just real quickly, please refer to our safe harbor comments in our SEC filings, particularly around forward-looking statements. So sorry, just got to get that one out of the way. But, thank you- thanks for the intro. I think you hit on some of the key points there. But Anterix, you know, our main mission is to support and partner with our nation's utilities. We're setting up and developing a whole new market opportunity, not just for the core spectrum asset that we have at 900 MHz, but also for the technology evolution that's designed to support and address everything that our nation's utilities are facing today.
You know, those examples include the energy transition that's going on, decentralization, electrification, you know, with a growing regulatory focus on clean energy goals. And last but not least, as an example, increasing demand. For the first time in a long time, the utility sector is seeing, you know, increasing demand, as I talked about, electrification, and growing data center demand that's out there. So how do these utilities manage and deal with these issues? Now, one of the key focus areas on the technology front is to change the communication systems that they've got in place to do things like manage the massive amounts of data now that they've got to flow through their systems in a real-time basis.
This is an amazing opportunity for not only, you know, Anterix, but for the utility sector, for our vendor partners, and ultimately, our shareholders. Everything I have said is, you know, important for us as we partner with these utilities to drive home these new communication systems. We've done seven transactions to date, with different utilities across the United States, totaling a contract value in the aggregate of about $375 million, which leads us really to a cash flow story. We're very different in that perspective because one of the things that's very important for our utility partners and customers is for them to be able to capitalize costs. So when we do these transactions, which are quite often long-term, 20 or 30 year leases, we get prepaid.
We get paid in the first several years of that lease, which causes a decoupling with GAAP revenue, which, of course, is recognized over time. But all of that cash flow comes in right up at the beginning, which has enabled us to put those dollars back to work with our share buyback program, you know, of which, since we've started doing that, we've spent roughly $50 million to date buying back shares of our stock. So we're not simply a wireless company. We're a technology company driving a cash flow story, that's helping the utility industry meet the challenges and new focuses that they've got on a day-to-day basis. And everything that I've said is embodied in things that we've put together and developed in this marketplace.
So we have a hundred and fifteen members of our Anterix Active Ecosystem. Those are vendors and partners to utilities that are putting time and effort at 900 MH z. They range from the big, you know, infrastructure providers like Nokia and Ericsson, all the way down to very small device makers who are marketing, you know, small devices that work at 900 MHz and see how to kind of have that, you know, instead of that Intel Inside sticker. They've got that, you know, Works on Anterix sticker with their product.
You know, we've also got an advisory board, which we call our USAB, which has utility C-suite leaders focusing on what their needs are on a day-in and day-out basis, so that we can make sure that we, you know, as we work on different technology solutions for them, can provide those with our 900MHz spectrum. We've also got a lot of work going on with, you know, organizations like EPRI, that are leading the way in forward-thinking about the technology demands that utilities are going to have. We've also got multiple experiments going on at national labs around the country, to show the utilities that these technology solutions are going to work for them on a day-in and day-out basis. So, with that, I'm gonna head it back out to, to...
When I give that quick overview, back out to the audience, you know, and our moderator for questions, you know, so I could tell more about our Anterix story.
We'll come around for the audience. Go ahead.
So as I understand, you're, you have 900 MHz spectrum, which is very good propagation. You own the spectrum, you're leasing it out is your business model, long-term leases to utilities. Could you talk about your pipeline, and how much of your spectrum is already committed, you know, via current leases? How much is still available to lease out? So, you know, what kind of a forward-looking, information can you give us, please?
Yeah, no, that, that's a great question, and I appreciate that, and one of the things I missed out in my opening remarks. But so we've got roughly a pipeline that's got about 60 plus utilities in it, which we think make up about 90 plus% of the nationwide value of the spectrum that we've still got remaining, which make up about $3 billion worth of value. So to date, on the $375 million that we put out, it's about, you know, 12 to 12.5 to 13% of the spectrum value from a nationwide perspective in those first few customers.
But the remaining value is about $3 billion of what we see available, kind of in an addressable market opportunity that we're moving forward on a day in and day out basis. One of the things that we've spent time talking about, because, you know, one of the issues that we have is it's hard to explain when utilities are exactly going to sign with us as they move through the pipeline. Utilities have a very painstaking decision-making process as they work through these very large projects. Keep in mind when we're working with utility, it's not just the spectrum transaction that we're talking to them about. That's often a very small pie of a very large project that they're putting through, which is to build out a wireless network.
For utility, it's important to them to capitalize costs, as I said about earlier, so not just the spectrum lease, but when they build out, that's the entire network. For example, they may have a $1 billion project to put a new wireless network in place, which is going to encompass, you know, cell sites, backhaul, the core that's in place for a network to cover their service territory. The spectrum lease may be a very small percentage of that, sometimes 10%-20%. It's that enormous project that's making its way through their decision-making process, and so we're working with them every step of the way to go through that process, and it's hard to say exactly when they're going to sign, so we've started talking about the utilities that are making the...
Moving forward with the most steps forward, which we call our Demonstrated Intent. And those utilities that have the highest level of Demonstrated Intent, of that $3 billion, is about $1 billion with 18 utilities, that are, you know, that have hit a kind of a highest score of Demonstrated Intent. They've taken a bunch of steps, which we mathematically score, of things like, they've put out RFPs for spectrum. They've gone through and joined boards for different, organizations that are talking publicly about broadband. They're negotiating with us. Those are all things that take place, some of which are private, some of which are not. And so we feel like that is the next group that's going to move forward.
When exactly they're going to sign, it's very hard for us to say, as we've learned through this process, because of that, that decision-making process they go through. But we feel very strong, we feel very good and strong about the pipeline that we've got and it advancing and continuing to move forward.
Is there something unique about the utility industry, or are there other industries that must fall under the 900 MHz ?
Yeah. So, one of the reasons why utilities... a couple of reasons why utilities were a sweet spot for us as we worked through this marketplace, keeping in mind that we've really developed this market over the past four years. We didn't have a product until the FCC gave us approval in May of 2020 to advance the spectrum that we owned from narrowband technologies to broadband. So to do the things like you could do on your cell phone or, or get massive packets of data, you couldn't do with the spectrum before May of 2020. So it's really been kind of a four-year journey that we've been on. One, there are a number of utilities that own spectrum at 900 MHz that use it for two-way voice and things like that.
So we had to talk to a lot of them as we moved through our original FCC process and get to know them and understand what their issues were and how they were thinking about things moving forward. And so in those discussions, we learned a couple of things that became aha moments for us. One is all of the things that, the litany of issues that they've got, that broadband spectrum can help them solve, but two, their desire to have their own networks. Utilities, for a long, long time, have had their own communications networks, and oftentimes, they were very much one-offs to solve one problem, and then they'd develop another network to solve another problem. So you may have one network that does voice to workers who are out in the field. You may have another one that does meter reading.
You may have another mesh network that, you know, sends data back from certain transformers that are out in the field, and all of these things are completely disparate and create and support different parts of the organization, but as you face things like, you know, having to put massive amounts of sensors out into your network, while now power is generated in so many different places. You know, it used to be you'd have your one coal or natural gas plant, everything would go out one way. Now it, you know, everybody's got solar panels on their roofs. You know, so the network that they've got is now having to measure power flow going back and forth from thousands and thousands or tens of thousands of different endpoints that didn't exist 15 or 20 years ago.
So they've got all these changes going on. They like to maintain and control their own networks, their own infrastructure. That's very important for them from a security standpoint, you know, so that they can be up when they want to be up, which is all the time. They know where power's gone out real time, and so they have that versus some of the things that they've got today, where they don't find out until a customer calls in and says, "Hey, my power's out." So those things are all very important to them. And so, you know, we learned about all the different challenges that they have, and then there became some financial things that became, you know, important for us and kind of good in the long term.
One is long-term leases, you know, very long-term contracts and commitments that they want to make. Two is the capitalization, where they want to pay up front. They also want to build out the network themselves, so it's not our capital that's going into that, it's theirs. And so all of those things were kind of why utilities became our sweet spot. That doesn't mean there aren't other opportunities. We've already done a contract with the Lower Colorado River Authority, LCRA, in Texas, which is a quasi-governmental agency that does both power and a lot of water management of the Colorado River in Texas. A lot of their use cases that they're going to be providing on a for themselves and their network on a go-forward basis are directly related to water management.
And so, you know, we're our sweet spot is kind of those big electric utilities. But that doesn't rule out conversations that we've got ongoing with different water or gas utilities across the United States that meet a lot of the same characteristics and have a lot of the same needs on a day in and day out basis from a use case perspective.
It looks like you've hit a couple bumps over the last two years. Can you just explain what's happened and, why, why it won't happen again, I guess?
So, by bump, what do you mean?
I guess some earnings disappointments and-
Yeah. So I think, you know, as I talked about, the biggest issue we face is the utility decision-making process and the time that it takes, and how quickly they move through, you know, their process and how easy it is to predict the timing of that. And it's a difficult, you know, nature for us to be able to say when exactly they're going to sign. So that's why we started to put out things like, you know, Demonstrated Intent and things that are important to us. I think the other thing that's important to note, as I mentioned earlier, is this really is a cash flow story. It's not a pure P&L play.
You know, there are things like, the economic difference between when we're going to get cash flow from a deal and the way we're going to recognize that revenue from a GAAP financial statement perspective, where we do a long-term lease, we get cash flow in the first, say, three to four years of that lease, but we're recognizing it over a 20 or 30-year timeframe. So, you know, it doesn't, you know, economically tie together. We've also had, you know, our business model is based on doing long-term leases. We've also had some sales transactions. Those flow through our P&L a little bit different, you know, than the way that the analysts look at it, because when they're thinking about those, they're putting those into our revenue line item.
However, when we do a sales transaction, again, we're going to get paid up front for that transaction, like the one we just did with Oncor, our biggest deal to date, $102.5 million, our first nine-figure deal, where we're going to recognize a gain when we deliver the spectrum to the end user, to Oncor in this case, that's not going to flow through the revenue line item on a recurring basis, which is different than analysts model it. So I think those are a couple of things, but I think the biggest driver, when you say, you know, big quotes around the word hiccup, is more around, you know, the timing and being the predictability of when to talk about with customers that we've got coming in.
But again, let me go back to a strong pipeline that's got over $3 billion worth of value in it. You know, highest level of Demonstrated Intent that we've talked about, that's got over $1 billion from 18 different companies that are making strong steps forward and showing that both publicly and privately to us, that they're taking the steps to get there to get a contract done.
Tim, you mentioned the Oncor deal. Just wanted to get your thoughts around that as it relates to how did that stack up relative to comps, and other auctions? Just any more details on that, given the significance of it.
Yeah, you know, great deal. Now, so just before I get to some of the financial detail on it, you know, now with the Oncor deal that we've done, in addition to LCRA and some Xcel counties and territory in Texas, we now cover, you know, with what's going to be Anterix spectrum networks, 80% of the counties in the state of Texas. You know, which is still, you know, very hard to believe that we cover that much size just in that different transaction. You know, now we've got spectrum across 15 different states.
If you were to combine the spectrum that we've got that's going to be put into use, by customers that we've already gotten done across the seven transactions that we've done, if you said, you know, and compared that to a wireless carrier, it would now be the fourth largest wireless carrier in the United States. There's a lot going on in the private networks, area that we at Anterix are specifically delivering and driving. On the Oncor deal, specifically, again, $102.5 million, our first nine-figure deal, the largest one that we've done to date, I think is a proof point that there are large figure deals out there. We've got multiple other nine-figure deals that are within the $3 billion of pipeline that I talked about, opportunities, and so we're excited about those.
When we talk about spectrum value, we are charging customers what we call fair market value for the spectrum. And when we look at pricing, we're looking at a variety of different aspects that go into that. One is recent transactions that have taken place in the marketplace for comparable spectrum. Auctions that have taken place in the not-too-distant future. You know, we've talked about being between the 600 MHz auction that took place not so long ago, and the AWS-3 auction, again, that the FCC did not too long ago, being our sweet spot. We've continued to drive every transaction that we've done between those two goalposts. We've crept up more towards the higher end of that, because what's happening now with the value of spectrum is it just continues to go up.
Some of the recent private transactions that have taken place at 600 MHz have been twice the value of what was paid at auction. And those were deals that T-Mobile has done across a couple of different things that they've done in the last year, with Comcast and with some other folks that bought the spectrum at the 600 MHz auction. So, you know, spectrum on a day-to-day basis continues to go up. We got a nice premium to 600 MHz on the Oncor deal for that respective sales territory or service territory that they've got. So, we continue to feel good that fair market value is moving in the right direction and for us, you know, as it's happening in different transactions going on across the country.
And maybe when you think about your vision for the future, t alking about opportunities to maybe partner with complementary assets or technologies in the utility space, maybe you can speak about that a little bit?
Sure, yeah. And so one example of something that's going on that we're starting to see is, so when I talked about the advisory board that we've put in place, which is again, you know, technology C-level leaders at different utilities, there's I think ten of them now that are in our USAB. Some are current customers, and some are, you know, hopefully future customers with utilities that are in our pipeline. And they're specifically talking about things that they need and that they see as opportunities, you know, as they're moving forward with all of the issues that I talked about.
Where, for instance, you know, data and all of the massive amounts of data now that's gonna flow through real time into these networks, you know, being able to analyze that data and make real-time quality decisions, which is really an area that's been lacking, is something that they're faced with and going to be significantly challenged with as we move forward. So they're talking, you know, to Anterix about, "How can you guys help us do that?" These are the things that we feel like we have to investigate. You know, are there opportunities where we can provide technology solutions or help point people in the right direction where we can get a piece of that recurring revenue so that they're able to have that, you know, data flow, data manipulation, data analysis to make those critical real-time decisions?
The question is on, you know, valuing the company, valuing the stock. There's not a lot of publicly traded spectrum leasing companies out there to use as comps. I guess you could look, you know, forward and do DCF, although the cash has already come in, and then another way, maybe you can comment on that, and then another way to think about it is there are great comps, as you mentioned, for the value of the spectrum, and I think in prior years, you have done that math and presented that in slide decks for investors. If you could talk about the valuation from those perspectives. Thank you.
Yeah. So I think, yeah, that's exactly right. There are kind of a couple different ways to look at it. One is just, you know, doing, you know, the view on the cash flow analysis and the DCF to kind of get there. And again, we feel like the multiple ways to look at it, one of the reasons why we're buying back stock is we feel that there's a significant opportunity on the valuation of today's marketplace versus where we think it should be. And of course, there's the underlying asset.
You know, you've got a nationwide chunk of spectrum, you know, that trades, you know, if you're just thinking about, you know, as a telecom investor at a MHz- pop perspective, you know, at less than $0.50 a MHz- pop, when, you know, the 600 MHz auction, not too long ago, took place, you know, almost at $1 a MHz- pop, over $0.90 a MHz- pop. And we're starting to see transactions now that we're double that. So, you know, there, there's obviously significant asset value that underlies what we're trying to do and how we're trying to monetize it. Of course, the core focus for us is to continue to monetize it and continue to bring in that cash flow. And we're going to continue to do that.
We're going to continue to buy back shares with the cash flow that we're bringing in on a day in and day out basis. I think it's important to note, as I think I mentioned earlier, you know, of the $375 million that we've done in transactions, roughly $175 million of that is still to be paid by customers. We're going to get roughly $100 million of that in our next fiscal year, which starts on April first, so it's coming in soon. We're going to be very active as these cash flow payments come in in the marketplace and buying back shares of stock.
You know, so, because of our continued belief that, you know, the valuation is higher than where we currently trade.
Just real quick on the buybacks. Have you regular dividends, I totally understand, but have you thought about special dividends or discussed that at all? And if not, maybe tell me why not.
Yeah. So the question, if people didn't get it, was about, you know, are we looking at things like dividends or ongoing regular dividends or special dividends as we move forward with the cash flow that we've got coming in? And I would say, you know, right now, the priority from you know, giving you know, money back to our shareholders is to buy back shares. However, I would say as cash flows continue to come in, and we really start to drive home some of the larger opportunities that we have on a more consistent basis, we will look at, you know, the special dividend in particular, and regular ongoing dividends as a way to do that. But we're, you know, it's an analysis that we're continually doing.
We're not ready to do that. Again, where our focus is going to be on share buybacks, but, you know, nothing is off the table. I think one of the other questions that I've just got on a recent earnings call is, you know, do you guys want to take on debt to be much more aggressive, from a share buyback perspective? And again, I would say that's, you know, these are things that we look at, that are on the table. We feel very good about kind of the conservative nature that we've had right now to be able to fund the business, to make sure that we've got the ongoing cash flow, to continue to monetize the spectrum asset that we have.
We are unique, but we will look at opportunities as they arise, you know, if the math is right, you know, continue to buy back shares aggressively.
Hey, two questions. How do you price your leases? And then the second question is, earlier you said there's about 60 utilities, but only 18 are close to what you would think are customers. What are the other utilities doing?
Sure. So from a pricing perspective, we're taking all kinds of data, whether it's auction data, you know, real-time trend or current and recent transactions that have taken place. You know, we're looking very specifically at a service territory, because you have to know the value of spectrum is like the value of real estate. It's different in New York City than it is in, you know, the middle of Kansas, for the same, you know, size apartment. Just like that, spectrum is different. You see that in auctions with what service, you know, with what different territories go for. We're taking all of that data real time and analyzing that, to come up with what we think that pricing should be for that specific utility service territory.
And again, trying to come up with what we think is fair market value, you know, for us and for the customer, for that service territory. And then, on the second question that you had, can you remind me again of the second question?
Oh, about the difference between the 60 and 18 and-
Oh, yeah, yeah, the Demonstrated Intent. So, of the 60 customers in the pipeline, 18 have kind of really advanced to a point where they're getting closer and closer to what we think will be contract. Again, timing TBD. The rest are slowly advancing through the pipeline, but they haven't gotten to that point of high level of Demonstrated Intent. So...
Great. Thank you, Tim. I think that's our time for today. Appreciate it.
Thank you.