NextNav Q4 2023 Earnings Report

NextNav EPS Results

• Actual EPS: -$0.15
• Consensus EPS: -$0.14
• Beat/Miss: Missed by -$0.01
• One Year Ago EPS: N/A

NextNav Revenue Results

• Actual Revenue: $1.21 million
• Expected Revenue: $1.19 million
• Beat/Miss: Beat by +$20.00 thousand
• YoY Revenue Growth: N/A

NextNav Announcement Details

• Quarter: Q4 2023
• Date: 3/13/2024
• Time: N/A
• Conference Call Date: Wednesday, March 13, 2024
• Conference Call Time: 5:00PM ET

NextNav (NASDAQ:NN), Inc. is a provider of advanced 3D geolocation infrastructure and positioning services in the United States. The company operates a nationwide network designed to deliver real-time horizontal and vertical location data for consumer, enterprise and public safety applications. By leveraging spectrum holdings in the 900 MHz band, NextNav’s network offers precise altitude and position information that complements GPS and other satellite systems, particularly in urban canyons, indoors or underground environments where traditional signals struggle.

At the core of NextNav’s offering is its TerraPoiNT platform, which enables developers, carriers and emergency response centers to integrate high-accuracy vertical location into their applications and workflows. Service tiers range from basic device-location APIs to advanced precision layers that support indoor/outdoor transition detection and sub-meter altitude determination. In addition to location services, NextNav provides managed network solutions—marketed under the Pinnacle vertical network brand—that allow enterprises and wireless operators to deploy local or regional positioning services using NextNav’s infrastructure technology.

NextNav’s network covers all 48 contiguous states, offering continuous service to public safety agencies, wireless carriers, IoT solution providers and verticals such as utilities, logistics and facility management. The company has pursued regulatory approvals and commercial partnerships to integrate its vertical location data into emergency call centers (E911), asset-tracking platforms and smart-building systems. Headquartered in Santa Clara, California, NextNav continues to expand its infrastructure footprint and develop enhanced location products to meet evolving precision-geolocation requirements.

NextNav Q4 2023 Earnings Call Transcript

Key Takeaways

• NextNav agreed to acquire 4 MHz of additional lower 900 MHz spectrum, expanding its portfolio to 3.5 billion MHz-pop and paying up to $50 million in cash and stock.
• New CEO Miriam Sarond, with over 30 years in spectrum and technology, will drive next-generation PNT solutions leveraging 5G to achieve single-digit accuracy indoors and outdoors.
• Fourth-quarter revenue rose 50% year-over-year to $1.2 million, fueled by increased recurring services contracts with commercial customers.
• Net loss widened to $16.4 million in Q4 and $71.7 million for full-year 2023, driven by higher operating expenses and interest costs despite a $70 million debt raise.
• NextNav is engaging with multiple government agencies, including responding to a Department of Transportation RFQ, to test complementary PNT solutions against GPS disruptions.

Presentation

[Operator]

Good afternoon. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to NextNav's Q4 and full year 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during that time, simply press Star, followed by the number one on your telephone keypad. If you'd like to withdraw your question, again, press Star one. Thank you. I would now like to turn the conference over to Erica Bartsch. Erica, you may begin your conference.

[Erica Bartsch, Head of Investor Relations at NextNav]

Good afternoon, everyone, and welcome to NextNav's Q4 and full year 2023 results earnings conference call. Participating on today's call are Mariam Sorond, NextNav's CEO; Gary Parsons, NextNav's chairman; and Chris Gates, NextNav's Chief Financial Officer. Before we begin, please note that during today's presentation, the company may make forward-looking statements, either in our prepared remarks or in the associated question and answer session. In particular, such forward-looking statements may include statements about NextNav's business plans, objectives, expectations, and intentions to drive growth in its 3D geolocation businesses and expansion of its next generation GPS platform to maximize the value of its IP portfolio and spectrum, its international business, as well as NextNav's partnerships and the potential success thereof, NextNav's estimated and future business strategies, competitive position, industry environment, and other potential growth opportunities. These statements are based on current expectations or beliefs.

[Erica Bartsch, Head of Investor Relations at NextNav]

However, such forward-looking statements are subject to known and unknown risks, uncertainties, assumptions, and other important factors, many of which are outside of NextNav's control, that could cause actual results to differ materially from the results discussed in the forward-looking statements.

[Erica Bartsch, Head of Investor Relations at NextNav]

These statements may relate to, but are not limited to, expectations regarding our strategies and future financial performance, including future business plans or objectives, expected functionality of our geolocation services, anticipated timing and level of deployment of our services, anticipated demand and acceptance of our services, prospective performance and commercial opportunities and competitors, the timing of obtaining regulatory approvals, commercial partnership, acquisition, and retention, products and services, pricing, marketing plans, and our ability to realize the anticipated technical and business benefits associated with acquisitions and any subsequent mergers, acquisitions, or other transactions, factors relating to our future operations, projected capital resources and financial position, estimated revenue and losses, projected costs and capital expenditures, and expectations about international markets,

[Erica Bartsch, Head of Investor Relations at NextNav]

projections of market growth and size, including the level of market acceptance for our services, our ability to adequately protect key intellectual property rights or proprietary technology, our ability to maintain our location and monitoring service licenses and obtain additional LMS licenses as necessary, our ability to maintain adequate operational financial resources, including for research and development, or raise additional capital or generate sufficient cash flows, our ability to develop and maintain effective internal controls, our success in recruiting and/or retaining officers, key employees or directors, expansion plans and opportunities, costs related to being a public company, our ability to maintain the listing of our securities on Nasdaq, macroeconomic factors and their effects on our operations, and the outcome of any known and unknown litigation and regulatory proceedings, as well as assumptions relating to the foregoing.

[Erica Bartsch, Head of Investor Relations at NextNav]

Accordingly, forward-looking statements should not be relied upon as representing our views of any subsequent date, and we do not undertake any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws. Following our prepared remarks, the company will host an operator-led question and answer session. In addition, at the conclusion of today's call, a replay of our discussion will be posted to the company's Investor Relations website. With that, I'll turn the call over to NextNav's chairman, Gary Parsons. Please go ahead.

[Gary Parsons, Chairman at NextNav]

Well, thanks very much, and good afternoon, everyone, and welcome to NextNav's Q4 and full year 2023 earnings call. Joining me on today's call are Mariam Sorond, NextNav's Chief Executive Officer, and Chris Gates, NextNav's Executive Vice President and CFO. You know, 2023 proved to be a year of major progress for NextNav. We furthered our position, navigation, and timing, or PNT technology, increased our financial flexibility with $70 million in additional funding, providing a multi-year liquidity profile. We expanded our wireless carriers and handset customer base for E911, 3D location and first responder situational awareness, landed PNT contracts with government agencies and tier-one chipset manufacturers. Most significantly, from my viewpoint, we recruited an extraordinary Chief Executive Officer to lead us to the next stage of NextNav's evolution.

[Gary Parsons, Chairman at NextNav]

As you know, Mariam brings over three decades of technology, spectrum, and product leadership across wireless, wireline, satellite, and cloud companies. She is renowned for her technical and regulatory expertise and has hit the ground running during her first 100 days at the helm.... So now let me turn it over to Mariam to introduce herself, tell you what attracted her to this opportunity, and give you a preview of her vision for NextNav's technology, products, and spectrum assets. Mariam?

[Mariam Sorond, CEO at NextNav]

Thank you, Gary, and good afternoon, everyone. It is a pleasure to be on my first earnings call as the CEO of NextNav. Having the chance to take over the reins of the company is truly an exciting opportunity. For years, I've built my career in technology powered by spectrum, and I've seen various companies and technologies come and go, witnessing both what has worked and what hasn't. Having now been with NextNav for just over 100 days, I can easily say that this opportunity is truly unique. What ultimately attracted me to this role was the potential of the NextNav portfolio. First and foremost, NextNav is a growing company with an impressive set of assets and solutions. Specifically, PNT solutions that span both the private and public sectors and are powered by a valuable spectrum asset.

[Mariam Sorond, CEO at NextNav]

Positioned in the lower 900 megahertz band with excellent propagation characteristics, NextNav's existing spectrum is ideally positioned to unleash opportunities to develop next-generation solutions. That said, I believe the value potential of this asset has long been underappreciated. Today, the need for PNT solutions powered by low-band spectrum with optimized use is a powerful opportunity. It can address many of the problems we face in both the public and private sectors, including in areas like national security and public safety. As a result, I am confident that there is significant potential in NextNav's ability to explore various options to enhance next-generation PNT technology through spectrum. This is why I'm excited by our recent acquisition of additional spectrum licenses covering 4 megahertz of non-contiguous spectrum.

[Mariam Sorond, CEO at NextNav]

Announced earlier this week, the licenses are in the same lower 900 megahertz band as our current spectrum and were acquired after a recent opportunity to buy them from the receiver. We moved quickly, and as we move forward to take advantage of our full spectrum portfolio, all of these licenses will be part of the mix. What has me even more excited about this opportunity is just how well it dovetails with my background. As Gary mentioned, I have devoted my career to advancing and commercializing innovation and technology. I spent several years working at DISH, where I oversaw spectrum technology, standards development, and negotiation of agreements across government agencies and industry partnerships. I created spectrum band plans towards a 5G Open RAN cloud-native architecture design, which is currently deployed at DISH.

[Mariam Sorond, CEO at NextNav]

I also led technology and strategy efforts for telco cloud platforms, mobile and wired convergence, and satellite technologies at other companies. In short, this type of work is embedded in my DNA. Moving forward, my priority is on ensuring that the entire organization is laser-focused on advancing our path forward. Specifically, we are committed to developing next-generation technology for PNT that will take advantage of 5G. Our primary goal is single-digit accuracy everywhere. This means creating a 3D positioning solution that provides location that is highly accurate and is available indoors as well as outdoors and in urban corridors. It also means wireless distribution of timing everywhere. It's within this framework that we will be looking to advance next-gen PNT in a timely and efficient manner.

[Mariam Sorond, CEO at NextNav]

As part of this process, I want to stress that we plan to take a fresh look at all components of the business with an eye toward taking full advantage of our spectrum assets. To do this, I have assembled a top team, combining in-house technical talent with consultant expertise in PNT and spectrum-based services to help advance our vision. This group nicely complements the existing NextNav team of experts and will be invaluable to us at our management as we chart our path forward. As part of this effort, we will be looking at how best to leverage our spectrum, including the recently acquired licenses I referred to earlier. As a reminder, NextNav currently owns licenses covering a contiguous 8 megahertz of valuable low-band spectrum, covering 2.4 billion MHz-pops.

[Mariam Sorond, CEO at NextNav]

With the addition of new licenses, NextNav's full-spectrum portfolio will total 3.5 billion MHz-pops of low-band spectrum, an impressive portfolio of assets. In terms of next steps, we need the court to approve the transaction, and assuming that happens, we will promptly seek FCC approval. Until that time, our primary focus remains on developing next-generation technology for PNT that will take advantage of 5G. We expect all of NextNav's licenses will be a part of the mix as we consider how best to take advantage of our spectrum.... We have an exciting path ahead, and I look forward to providing additional updates as we progress over the coming months. Finally, before handing things over to Chris, I want to quickly provide an update on our PNT activities.

[Mariam Sorond, CEO at NextNav]

Accurate PNT continues to be necessary for the functioning of critical infrastructure in civil, commercial, and military use, all sectors that rely on accurate PNT data to provide their services. More importantly, PNT is a national security topic, and resiliency needs to be considered. We are currently in discussions with several agencies on this exact topic. Specifically, we are planning to respond to a Department of Transportation RFQ that was released last month to test complementary PNT solutions in an operational environment, including testing against GPS disruptions. This follows the DOT's Complementary PNT Action Plan that was issued this past fall. As you can see, it's quite a busy and exciting time at NextNav. We have an incredible path ahead, and I can't wait to share more with you over the coming months.

[Mariam Sorond, CEO at NextNav]

I also want to make clear that as CEO, I plan to be very engaged with our shareholders and the financial community. My goal is to ensure that all of you have a clear understanding of our pathways to growth and the milestones we need to achieve along the way. As you know, our company is engaged in numerous conversations with government officials as we lay the groundwork for our future, and there is a sensitive nature to many of these discussions. As I am able, I look forward to sharing information and providing you with regular updates. Though this is a process that will take time, we are committed to seeing it through and hope all of you will join us on this exciting journey. With that, I will turn the call over to Chris to run through our financials. Chris?

[Chris Gates, EVP and CFO at NextNav]

Thank you, Mariam, and good afternoon, everyone. Let me begin with a review of the terms of the spectrum transaction. As noted in our press release on March eleventh, we signed an asset purchase agreement to acquire additional lower 900 megahertz spectrum licenses in our band for a total purchase price of up to $50 million. $2.5 million of the purchase price is to be paid in cash, due within 30 days of the court approving the transaction. The remainder is expected to be paid for with NextNav common stock at the then current stock price, based on the achievement of certain milestones, including appropriate regulatory approvals. I'd refer you to our 8-K filing for specific transaction details. I should also note that we structured this transaction consistent with our conscious efforts to manage the use of capital in our business.

[Chris Gates, EVP and CFO at NextNav]

Recall that we executed a debt financing of senior secured notes last year that yielded gross proceeds of approximately $70 million, along with warrants with an aggregate strike price of $56 million. We were pleased by the positive market reception to this financing, which was a testament to the potential value to be unlocked in our assets and business. Now, turning to our financials. Q4 revenue increased 50% to $1.2 million, compared to $803,000 in the prior year period, primarily due to increased recurring services revenue in the current period from technology and service contracts with commercial customers. For full year 2023, revenue is $3.9 million, flat versus the prior period.

[Chris Gates, EVP and CFO at NextNav]

Our revenue was driven by an increase in recurring service revenue from technology and service contracts commercial customers, offset by a decline in integration revenue from the prior year period. Our operating expenses were $21.1 million in the quarter, up from $15.3 million in the same period last year, due primarily to an increase in equity-based compensation expense, a full period of NextNav France operations, and CEO transition costs. Excluding stock-based compensation and depreciation and amortization, operating expenses were $10.7 million, compared to $8.4 million in the prior period.

[Chris Gates, EVP and CFO at NextNav]

For the full year, operating expenses were $67.4 million, down from $69.5 million in the prior year, with the reduction driven by a decrease in SG&A, partially offset by increases in depreciation and amortization, as well as R&D expenses, primarily related to a full year of NextNav France operations. Excluding stock-based compensation and depreciation and amortization, full-year operating expenses were $40.7 million in the current period and $39.3 million in the prior year. Net loss in the Q4 was $16.4 million, compared to a loss of $12.5 million in the prior year.

[Chris Gates, EVP and CFO at NextNav]

The primary drivers for the increase were net interest expense of $2 million, higher stock-based compensation expenses, and higher payroll costs, partially offset by a gain from the change in the fair value of our warrants of $5.7 million, compared to net interest income of $456,000, and a gain in the change of the fair value of our warrant liability of $1.5 million in the prior year. For full year 2023, net loss was $71.7 million, as compared to a loss of $40.1 million in the prior year period.

[Chris Gates, EVP and CFO at NextNav]

Here again, the primary drivers were net interest expense of $3.7 million and a loss associated with the change in fair value of our warrant liability of $4.1 million, compared to net interest income of $901,000, and a gain associated with the change in fair value of our warrant liability of $24.7 million in the prior year. Looking at our balance sheet, we closed out the year with $81.9 million in cash and cash equivalents and $4 million in short-term investments.

[Chris Gates, EVP and CFO at NextNav]

The company ended the year with $48.4 million in debt, net of unamortized discount attributed to transaction costs and the issuance of warrants, with a gross value of $70 million. As a quick reminder, the warrants issued as part of our debt financing are exercisable for cash and become partially callable beginning in 2025. Whether called or exercised otherwise, these warrants may provide a source of additional liquidity, as they did in the Q3 of 2023. Thank you, and with that, I will turn things over to the operator to open the call for questions. Operator?

[Operator]

Thank you. As a reminder, if you would like to ask a question, please press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, again, press star one. Your first question comes from the line of Griffin Boss from B. Riley Securities. Please go ahead.

[Griffin Boss, Associate Analyst at B. Riley Securities]

Hi, thanks for taking my question, and first off, welcome to the team, Mariam. Can you just give some color on your thoughts specifically just high level, the value you saw in these additional 900 megahertz spectrum licenses that NextNav announced they were acquiring a couple days ago, and what that means for the company going forward and just the overall value proposition of the company?

[Mariam Sorond, CEO at NextNav]

Yes, absolutely. So, as you know, that the A Block spectrum has been out there for some time, and we were focused on our existing licenses. One of the reasons I was so excited to join NextNav was the potential of the technology portfolio and the interesting spectrum asset, right? This transaction gives us the opportunity to build on this portfolio. Specifically, NextNav already has a valuable spectrum position in the lower 900 megahertz band. Following the close of this new agreement, NextNav's full spectrum portfolio, as I noted earlier, is going to be 3.5 billion MHz-pops of low-band spectrum. And just layer on top of that, the need for PNT that is powered by low-band spectrum, it's a great opportunity, and it can address many of the problems inherent across both the public and private sectors.

[Griffin Boss, Associate Analyst at B. Riley Securities]

Got it. Great. Thanks for that color. Then maybe either for Gary or Mariam, is there anything you can share regarding progress with testing and where you're at with the FCC process at this point?

[Mariam Sorond, CEO at NextNav]

Yeah, I mean, let me take that, and Gary, you want to add. But first of all, with the testing, you know, we've actually the results of the limited testing that we did in the Bay Area were positive. Now that we have a larger spectrum portfolio to work with, there will be additional testing, and we will be working to include all the licenses in this process as we move forward, right? As a reminder, their internal tests that we conduct as part of the optimization and development of our next generation systems, and I should note, we will not be publishing that data unless it becomes a part of the FCC filing. There is a process at the FCC, and we will work through that process diligently.

[Mariam Sorond, CEO at NextNav]

Having just announced this transaction, we're working on a plan, but it would be premature for us to discuss our efforts at this juncture.

[Griffin Boss, Associate Analyst at B. Riley Securities]

Okay, great. Well, that's, that's good news. Glad to hear that. And then just last one for me, if I could. And, and Mariam, obviously, you mentioned, you know, you're going to be taking a fresh look at all components of the business regarding future opportunities. That makes sense. The company in the past has discussed a certain agreement with a Tier One global chip manufacturer for GPS IoT applications. Just wanted to get some more color on whether that opportunity is still progressing with anticipated revenue starting to ramp up in the back half of this year.

[Mariam Sorond, CEO at NextNav]

Look, PNT continues to be one of our focuses, and advancing our next generation technology in PNT would be a focus. We're talking to multiple industry entities. We're talking to the government agencies, and we are taking a fresh look at how we can advance focusing our portfolio of spectrum as it powers the technology. So, it's all in the mix with a fresh look.

[Griffin Boss, Associate Analyst at B. Riley Securities]

Okay, fair enough. Thanks for taking my questions. I appreciate it.

[Operator]

Your next question comes from the line of Timothy Horan from Oppenheimer. Please go ahead.

[Timothy Horan, Managing Director and Senior Analyst at Oppenheimer]

Hey, thanks, guys, and thanks, Mariam. Could you talk a little bit more about the spectrum you just acquired, maybe the geographic coverage, and exactly, is it contiguous to you guys, or is it in the same exact band? And are there other bands you think in this range that you could potentially, you know, acquire? And then, well, my... Yeah, that's a lot of questions, sorry.

[Mariam Sorond, CEO at NextNav]

Okay. Thanks for the question, Tim. So, our current portfolio is 8 megahertz of contiguous spectrum, and it covers 2.4 billion MHz-pops, right? And the A Block is non-contiguous spectrum that brings our total portfolio up to 3.5 billion MHz-pops. So that's what the spectrum, and they're both located in the lower 900 megahertz. As far as other spectrum, right now, we're very laser-focused on our current licenses, and once approved, and once we have discussions at the FCC with the future licenses that we just acquired, and that's where our focus will be. But of course, we'll take a look at everything that's going out there as well.

[Timothy Horan, Managing Director and Senior Analyst at Oppenheimer]

Are they covering this 4 MHz? Is it covering, like, 200- or 250 million pops? Is that what you're saying? And it's not in the same exact spectrum band as yours, it's adjacent?

[Mariam Sorond, CEO at NextNav]

... It isn't the same. It's so the range is between 902-928 megahertz. The A Block falls on the lower portion of that spectrum, and our current 8 megahertz licenses fall in the upper portion of that same spectrum. So they're all in the same spectrum band.

[Timothy Horan, Managing Director and Senior Analyst at Oppenheimer]

Got it.

[Mariam Sorond, CEO at NextNav]

And-

[Timothy Horan, Managing Director and Senior Analyst at Oppenheimer]

Yeah. And the geographic or the pop coverage that they have?

[Mariam Sorond, CEO at NextNav]

So the pop coverage for the 8 megahertz is 2.4 billion MHz-pops, and then the A Block would give us an additional 1.1. That brings us up to 3.5 billion MHz-pops.

[Gary Parsons, Chairman at NextNav]

Hey, hey, and Tim, this is Gary. So, you know, as you appropriately noted, if you, you know, do the math on that, yeah, their actual pop coverage is something like 270 billion.

[Timothy Horan, Managing Director and Senior Analyst at Oppenheimer]

Right.

[Gary Parsons, Chairman at NextNav]

Whereas this is like 3 billion. So yeah, that's how you get to the numbers.

[Timothy Horan, Managing Director and Senior Analyst at Oppenheimer]

Does it become a lot more valuable by combining their spectrum with your spectrum? Is it, you know, an exponential increase instead of just, you know, 1 + 1 being 2, 1 + 1 being 5, or, you know, any color around that? What you can do with it would be great.

[Mariam Sorond, CEO at NextNav]

Look, we can share more, but we have to wait for our FCC process. At this point, I can tell you that we need to work with the, with the FCC for the approval, and talking about how this would look in the future is a little bit premature until we go through that process. But it is, it's exciting combination of assets and technology that we're talking about over here. So but we will, we are going to be diligent in the FCC process, and we actually don't want to prematurely be discussing what that looks like.

[Timothy Horan, Managing Director and Senior Analyst at Oppenheimer]

Got it. And so do you have a rough idea of when the transaction might close? And, are there any collars on your stock, you know, at all, for paying the remainder of the, for the $50 million of the company?

[Mariam Sorond, CEO at NextNav]

So in terms of timing, the court must approve the transaction, and assuming that happens, we will also need FCC approval. Okay? But right now, our primary focus is on developing the next generation technology while that's going on, that will take advantage of 5G.

[Timothy Horan, Managing Director and Senior Analyst at Oppenheimer]

Great. Thanks a lot, guys.

[Mariam Sorond, CEO at NextNav]

Sure.

[Operator]

We have no further questions in our queue at this time. I will now turn the call back over to Mariam Sorond for closing remarks.

[Mariam Sorond, CEO at NextNav]

Thank you, everyone, for joining us today. I want to reiterate how excited I am about the technology and the opportunity I see at NextNav. As we advance forward, we'll have more to share on our progress, and I look forward to speaking with all of you again on our Q1 earnings call. Thank you.

[Operator]

This concludes today's conference call. Thank you for your participation, and you may now disconnect.

Participants

Executives

• Chris Gates, EVP and CFO
• Erica Bartsch, Head of Investor Relations
• Gary Parsons, Chairman
• Mariam Sorond, CEO

Analysts

• Griffin Boss, Associate Analyst at B. Riley Securities
• Timothy Horan, Managing Director and Senior Analyst at Oppenheimer