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The following segment was excerpted from this fund letter.
Anterix Inc (NASDAQ:ATEX)
The Partnership’s top position continues to be Anterix, which is the largest owner of 900 MHz spectrum in the United States. The company is in the process of monetizing its spectrum through sales and leases to utilities to support their ever-growing data and communication needs.
ATEX just provided an investor update several days ago. I dialed into the call with an elevated degree of anxiety/fear that we were about to repeat the debacle of September 2020. At that time, expectations were running high for a contract announcement that hadn’t materialized by the time of the call and shares were subsequently clobbered. Going into the call this past week, the company still had not delivered on its guidance to sign at least $200 million worth of contracts by 3/31/2022, and any material shift around this guide would have undoubtedly caused a repeat of the late 2020 price action.
While management opened the door to some slippage beyond their 3/31/2022 target, they also very bullishly framed contract execution as a matter of “when and not if” and backed-up their confidence with commentary that their “Phase 3” pipeline – which comprises contracts in the “closing phase” – has expanded to ~$400 million in value. Frankly, I couldn’t care less if the contracts are announced on 3/15 or 4/15 (as long as it’s this calendar year). What’s important to me is the certitude of “when and not if.”
Management also committed to returning the net proceeds of future contracts to shareholders through an expansion of the existing buyback program and other “tax-efficient” means. Would they really be talking up increased capital returns if there was concern around contract execution? Probably not. A deluge of capital could soon be coming back to shareholders.
The math is as follows: Management reaffirmed its guidance for the receipt of $300-$500 million of contracted proceeds through the end of FY’24 (ended 3/31/2024). Approximately $75 million has already been received, leaving $225-$425 million of proceeds during the next two years. Over this same period of time, combined OpEx and CapEx will run at ~$70 million p.a. Including the balance of expenditures this fiscal year, this sums to ~$165 million of future outflows. Cash on hand is ~$127 million. Netting everything together, ATEX should have anywhere from $190-$390 million of potential capital to return to shareholders over the next several years compared to a $985 million market cap.
And it’s important to remember:
- This is before future cash proceeds from deals contemplated in guidance (proceeds received after 3/31/2024) which should be in the ballpark of $1.0 billion.
- Future spectrum sales not included in guidance.
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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