NextNav Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 8, 2024

There are 7 speakers on the call.

Operator

At this time, I would like to welcome everyone to the NexNav First Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer Thank you.

Operator

I would now like to turn the call over to Erica Bartz. Please go ahead.

Speaker 1

Good afternoon, everyone, and welcome to NextNav's Q1 2024 Earnings Conference Call. Participating on today's call are Miriam Sarond, Nexnaz's Chief Executive Officer and Chris Gates, Nexnaz's Chief Financial Officer. Before we begin, let me remind everyone that this call will include certain statements that constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward looking statements may be identified by the use of words such as may, anticipate, believe, expect, intend, might, plan, possible, potential, aim, drive, predict, project, should, could, would, will and similar expressions may identify forward looking statements, but the absence of these words does not mean that a statement is not forward looking. Such forward looking statements, which may relate to NEXNOV's forecasts of future results, future prospects, developments and business strategies, are subject to known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside NEXMAD's control that could cause actual results to differ materially from the results discussed in the forward looking statements.

Speaker 1

You are cautioned not to place undue reliance upon any forward looking statements, which speak only as of the date made, and NexNav undertakes no commitment to update or revise the forward looking statements, whether as a result of new information, future events or otherwise. For additional information regarding risk factors, see Part 2, Item 1A, Risk Factors, of the company's quarterly reports on Form 10Q and Part 1, Item 1A, Risk Factors of NextNav's Annual Report on Form 10 ks for the year ended December 31, 2023, as well as those otherwise described or updated from time time in our other filings with the Securities and Exchange Commission. 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. I'd now like to turn the call over to Ms.

Speaker 1

Maryam Sarong, Chief Executive Officer of Nxnap. Please go ahead.

Speaker 2

Thank you, Erica, and good afternoon, everyone. I am pleased to have you join us for our Q1 call. On today's call, I would like to run through some of the recent strategic updates on the business and will then turn things over to Chris for a review of our financials. While this is only my second earnings call as Nexnaz's CEO, I am particularly excited to be speaking with you today given the activity over the last few weeks. As I noted on our last call, I have been working closely with the team since I arrived to develop my strategic vision for the future of NextNet.

Speaker 2

Today, I am thrilled to be able to share in greater detail what we have been working on and our strategy for moving forward. To get right to the point, the team and I are focused on presenting a new vision for complement and backup to GPS with additional spectrum for broadband services. The country's principal PNT system, GPS, is foundational to national security, the U. S. Economy and powering critical infrastructure, but has coverage limitations indoors and in urban canyons and is vulnerable to jamming and spoofing.

Speaker 2

We see our vision as an innovative solution that enables next gen terrestrial PNT by leveraging 5 gs broadband. Our goal is single digit accuracy everywhere, creating a terrestrial PNT solution that provides 3 d location and timing that is highly accurate is available indoors as well as outdoors and in urban canyons. On April 16, many of you know that we filed a petition for rulemaking asking the FCC to enable this innovative spectrum solution in the lower 900 megahertz band. This was a significant milestone for the business and a big step forward in advancing our strategic vision. This action follows the March 28th court approval for our previously announced agreement to acquire spectrum licenses, covering an additional 4 megahertz in the lower 900 megahertz stand.

Speaker 2

In receiving court approval, we then had the green light to move forward with obtaining FCC approval in mid April. In terms of our petition, at a high level, we are asking the FCC to reconfigure the BAM plan and update the rules to: 1, enable a high quality terrestrial PNT complement and backup to GPS on which the nation relies for essential PNT services and 2, provide 15 megahertz of low band spectrum for use by 5 gs broadband networks. We believe this new vision for the lower 900 megahertz band will unleash spectrum for essential PNT solutions as well as 5 gs broadband, while ensuring incumbent operations are appropriately protected. More importantly, our proposal does not require taxpayer money or legislation. I will offer more on that in a moment.

Speaker 2

As many of you know, NEXMAb is already the main geographic licensee in the lower 900 Megahertz band. Our existing licenses are being used to develop industry leading PNC expertise and products. However, the Lower 900 Vendor band is underutilized, primarily due to band fragmentation and legacy technical and service rules that limit use of the band. As part of our proposal, Nexnab would commit to enabling a terrestrial 3 d PNT service as a necessary backup and complement to GPS. Today, GPS plays a pivotal role in the US PNCR's culture.

Speaker 2

GPS is an incredible technology that powers much of our nation's critical infrastructure, including electricity, telecommunications, public safety and banking. But it is vulnerable to jamming and spoofing. Look no further than issues happening internationally. Satellite based systems like GPS have coverage limitations indoor and in urban canyons. Current GPS technology can be helpful for emergency services as accurate geolocation can be the difference between life in them.

Speaker 2

However, without GPS, essential functions would be significantly impaired or inoperable. More importantly, spectrum is also a finite resource and we will need more spectrum to power all the wireless services that fuel the economy. As a result, both public and private sector experts have determined that the U. S. Urgently needs a robust terrestrial three d PNT solution to complement and backup GPS.

Speaker 2

Additionally, there is broad consensus that making additional spectrum available for wireless networks would be advantageous to the U. S. Economy and overall global competitiveness. We believe a terrestrial three d PNT backup and complement to GPS will mitigate the risk to the country,

Operator

unleash commercial

Speaker 2

opportunities and help public safety by providing location information and situational awareness indoors and in multi story buildings. However, it has historically not been economically feasible to deploy standalone wide scale terrestrial three d PNT network. The reasons for this are twofold. 1, GPS is free, limiting potential revenue for other PNT offerings. And 2, it is difficult to drive adoption of PNT specific protocols into consumer devices, thus limiting subscribers.

Speaker 2

By reconfiguring the band, we see a direct path to a wide scale terrestrial 3 d PNT network. Leveraging the lower 900 megahertz band in terrestrial, 5 gs networks create a unique economically viable opportunity to help address the urgent need for widespread complementary and backup PNT services. The proposed re banding and related to support terrestrial 3 d PNT and 5 gs broadband. This would include the 8 megahertz of spectrum NexNav already owns, the additional 4 megahertz NxNav is seeking to acquire pending FCC approval and 3 megahertz of largely followed spectrum, much of which is in SCC inventory. NextMav's next gen technology will be a 5 gs based solution, so it is more easily integrated into the existing ecosystem for both deployment and adoption.

Speaker 2

The revised rules would enable NextNav's NextGen terrestrial 3 d PNT network to use 5 gs technology to extend PNT reach in areas where GPS is limited and supplement the country's 5 gs broadband capacity. To advance this, NEX NAV expects to partner with network operators or others interested in commercial deployment in the band for 5 gs. Leveraging a 10 megahertz downlink spectrum block and 5 megahertz uplink, NexNav can reliably supply integrated, highly accurate and consistent three d positioning indoors and outdoors along with precision timing. More importantly, our next gen PNT solution will only use a small portion of capacity allowing network providers to use the vast majority for broadband. We are already in active discussions with various potential partners and are also focused on ensuring that incumbent operations are appropriately protected.

Speaker 2

Overall, we believe this unique path forward addresses the coverage, cost and user device issues that have previously prevented broad terrestrial three d PNT adoption. This is a full commercial solution with no need for government funding or legislation, an attractive proposition. With PNT resiliency already receiving broad bipartisan support, we anticipate continued support from both sides of the aisle as we move forward. In terms of next steps, on April 24, the Federal Communications Commission, including in its weekly public notice of agency actions on wireless license transactions, the application to assign the ABLOC licenses that Nexnap agreed to acquire from Telesource. This is specific to the transaction we announced on March 11, 2024.

Speaker 2

Approval of the license application is also contingent on FCC grant of a waiver request and that request has not yet been placed on public notice. The April 24 public notice is a routine FCC action that does not indicate how the Commission will act. Instead, it initiates a 14 day period during which parties may file petitions on the assignment application. The Commission then has 7 additional days in which it must either grant, deny or defer action on the application. Ultimately, the exact timing of next steps are in the hands of the FCC.

Speaker 2

However, we believe we have presented a petition that explains the urgency to the FCC and provides an economically viable solution to an issue of great importance. As we move forward, we will continue taking this process one step at a time. We believe this is a unique vision that will provide an innovative spectrum solution in the lower 900 microgrid stand. We look forward to continuing to provide an update on our progress as we move forward with the SEC and beyond. Finally, before I turn things over to Chris, I want to highlight a new addition to the NextStaff team.

Speaker 2

Yesterday, we announced that Doctor. Sanyogita Shyamsundar is joining Nxnab as Chief Operating Officer effective May 9. Sanyogita was recently the Head of Edge Network Infrastructure at Google and prior to that spent several years at Verizon in various roles, including serving as the VP of Product Strategy and Operations, where she led early 5 gs network technology development and trials. We are thrilled to have someone of Sanigira caliber joining the team and I look forward to her contributions as we continue to advance our strategic vision. With that, I will turn things over to Chris for a review of our financials.

Speaker 2

Chris?

Speaker 3

Thanks, Miriam, and good afternoon, everyone. First quarter revenue was $1,000,000 a $200,000 increase compared to $830,000 in the prior year period. The year over year increase was driven by an increase in recurring service revenue from technology and services contracts with commercial customers. Operating expenses for the quarter were $17,200,000 up from $14,800,000 in the same period last year. Operating expenses included $1,300,000 in depreciation and amortization and $4,200,000 in equity compensation expense compared to $1,100,000 in depreciation and amortization and $3,900,000 in equity compensation in the Q1 of 2023.

Speaker 3

Net loss for the Q1 of 2024 was $31,600,000 which included a $13,200,000 loss associated with the change in the fair value of warrants compared to a loss of $16,300,000 in the Q1 of 2023, which included a $2,800,000 loss on change in the fair value of warrants. From a balance sheet perspective, we finished the quarter with $79,200,000 in cash, cash equivalents and short term investments. Our balance sheet showed $49,900,000 in debt net of unamortized discount attributed to transaction costs and the issuance of warrants with a gross value of $70,000,000 After the close of the quarter, following the approval of the ABLOC transaction by the Alameda Court on March 28, and per the terms of the asset purchase agreement, we made the $2,500,000 cash payment under the contract. As a reminder, any future payments under this agreement will be satisfied with shares of our common stock, with the number of shares based on the price of our stock at the time of the payment. Finally, in the past, I've mentioned that the warrants we issued in conjunction with our debt financing may be a source of additional liquidity.

Speaker 3

I'm pleased to report that since the end of Q1 and as of May 3, dollars 7,700,000 of those warrants were exercised for an aggregate of $16,600,000 in cash. With that, I'll turn the call over to the operator for questions. Operator?

Operator

Your first question comes from the line of Griffin Bose with B. Riley Securities. Please go ahead.

Speaker 4

Hi, good afternoon. Thanks for taking my questions. So first off, there was a time not too long ago where the CapEx expectations for NxNav were a lot higher than they are now when you were contemplating deploying TerraPoint and Pinnacle. Can you give us a better sense of what your expectations are today for the CapEx requirements of the business going forward given this new vision you're beginning to lay out?

Speaker 2

Thanks, Griffin, for the question. Currently, our path is to partner and we believe that what we're presenting to the FCC and upon their approval will actually unleash 15 megahertz of broadband spectrum for 5 gs build. And we believe that this is attractive to potential partners who can incorporate the spectrum into their networks. So yes, you are correct that their CapEx is very different than what we have previously mentioned about a standalone P and T network, which we have highlighted that it is not feasible earlier in our comments.

Speaker 4

Okay. All right. Thanks for the color. And then just on the FCC, you received court approval. That's obviously great to see.

Speaker 4

Did I hear you correctly that you said on April 24, that kicked off that 14 day period for comments on the assignment of the licenses, which would imply that ended today and then opens up to 7 additional days?

Speaker 2

That is correct. Today is the deadline for that 14 day comment period, and the parties could file comments or petitions in response to that and deadline would be tonight.

Speaker 4

Okay. Understood. And so the FCC would have 7 additional days to make a decision. Is that correct?

Speaker 2

That is correct. They have these 7 days in which the grant deny or defer action on the application.

Speaker 4

Okay. All right, great. Understood. And then, Chris, I missed it when you were just talking about the initial $2,500,000 payment. Was that made subsequent to the end of the Q1?

Speaker 3

Correct. Yes. The terms of the asset purchase agreement or that payment to be made within 30 days of the court approval, which is on March 28. And so we made that payment consistent with the terms of the contract.

Speaker 4

Okay, got it. Understood. And then the next milestone on that, I know it's the earlier of either the FCC approval of the transfer or November. So I guess theoretically, my question is that next $7,500,000 payment in stock could either come this quarter if the FCC approves it or next quarter or I guess Q4?

Speaker 3

That's correct. It's the it would be the earlier of November 15 or FCC action.

Speaker 4

Okay, understood. Great. Thanks for taking my questions. I appreciate it.

Operator

Your next question comes from the line of Jamie Perez with RF Lafferty. Please go ahead.

Speaker 5

Hi. Thanks for taking my call and good day everybody. The $1,000,000 of revenue, I know it's not a terrible point, but I mean is it all Pinnacle? And I know it seems like this change of strategy going away from the commercial initiative when you first came out of spec. Could you give a little bit more color on any further commercial initiatives you have?

Speaker 2

So basically, we have only recently filed with the SEC, right, and are taking this process 1 step at a time. And as we move through the process, we'll keep the market updated of the timeline and the key milestones or any revenues associated with it. It would be premature to talk about it right now. We're focusing on the plan and we're looking at a situation where the FCC has an opportunity to deliver an innovative spectrum solution in the lower 900 megahertz band, right. So we're focused on the plan.

Speaker 2

We're very optimistic around our goals and path forward. And we will take this a step at a time.

Speaker 5

All right. Let me see. And then my next question, any update on the executive order that's sort of pending?

Speaker 2

I think there's been a lot of action in the federal government, including the executive order that are all demonstrating the need for a backup and complement to GPS, whether that's through the executive order with talking about the federal agencies having a solution or whether it's us as a country to have a solution. So all of these are good examples and good initiatives by the government that demonstrate the need. And that's why we have proposed this plan, which actually puts a really solid solution that doesn't require government funding. It doesn't require legislation to solve and address the problem on the country's principal PNT system.

Speaker 5

All right. Okay. That's all the questions I have. Thanks.

Operator

Your next question comes from the line of Rosemarie Sison with Odeon Capital. Please go ahead.

Speaker 6

Thank you and thanks for taking the questions. I had a question on liquidity and how you see that working out over the course of the next year or so. Your cash burn during the quarter was about was close with $8,500,000 to $9,000,000 and then you spent another $2,500,000 in cash after the end of the quarter. So just kind of how do you look at that? Is that the right burn rate to think about on a quarterly basis going forward in the near term?

Speaker 6

Hi,

Speaker 4

this is Rick. I'll go ahead

Speaker 3

and address that question. Historically, we haven't provided forward looking guidance. However, I can offer a few remarks about number 1, the strength of our balance sheet. As we've seen, we've attempted to structure transactions that have a favorable liquidity profile for us. For example, our ABLOC transaction is intended to be paid substantially in stock.

Speaker 3

We've made the cash payment associated with that. And with respect to our operating expenses, we're constantly looking at the ability to refine those expenses in line with the achievement of our objectives. I would guide I think if you look at last year in terms of what our OpEx and kind of cash burn looked like for that year, I think that's a reasonable place to start. But in terms of forward guidance on expenses, again, that's something that that we haven't historically provided.

Speaker 2

Okay. All right. Thank you very much.

Operator

I will now turn the call back over to CEO, Maryam Sarand for closing remarks. Please go ahead.

Speaker 2

Thank you. Before we close the call, I want to add one important point. We recently received inbound questions from investors regarding our willingness to sell specific company assets. I want to take a moment to directly respond to those inquiries here. Specifically, we currently have a strategy in place that utilizes our spectrum for both P and T and broadband, which we believe creates tremendous value for our customers and ultimately our shareholders.

Speaker 2

As the CEO of NEXNAP and in coordination with our Board, we have a fiduciary duty to consider any offers that are presented and we will continue to do so. Having said that, I want to reemphasize that we're very pleased with our progress to date. The company is on a strong trajectory and we look forward to working with the SEC in advancing our vision for an innovative spectrum solution in the lower 900 megahertz band to provide a complement and backup to GPS as well as 5 gs broadband spectrum availability. We will continue Q2 posted and updated on our progress, and I look forward to engaging with the financial community on this. And I want to also thank you all for joining us today.

Speaker 2

And everyone, have a great afternoon.

Operator

Ladies and gentlemen, that concludes today's call. Thank you all for joining and you may now disconnect.

Powered by Quartr
Earnings Conference Call
NextNav Q1 2024
00:00 / 00:00