NextNav Q2 2024 Earnings Report

NextNav EPS Results

• Actual EPS: -$0.21
• Consensus EPS: -$0.14
• Beat/Miss: Missed by -$0.07
• One Year Ago EPS: -$0.15

NextNav Revenue Results

• Actual Revenue: $1.11 million
• Expected Revenue: $1.63 million
• Beat/Miss: Missed by -$520.00 thousand
• YoY Revenue Growth: N/A

NextNav Announcement Details

• Quarter: Q2 2024
• Date: 8/7/2024
• Time: After Market Closes
• Conference Call Date: Wednesday, August 7, 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 Q2 2024 Earnings Call Transcript

Key Takeaways

• FCC issued a public notice on NEXNAP’s petition for rulemaking in the lower 900 MHz band, marking the first formal step toward new spectrum rules.
• Department of Transportation awarded $1.9 million to test NextNav’s 3D PNT technology as a GPS backup, reinforcing its leadership in terrestrial positioning services.
• Q2 revenue rose to $1.1 million (up $0.3 million YoY), with additional revenue from the DOT contract expected to begin in Q3.
• Net loss expanded to $24.4 million in Q2, driven by higher operating expenses of $16.4 million and a $6.6 million non-cash warrant fair-value charge.
• Exercise of warrants generated $21 million in cash during Q2 and an additional $5 million post-quarter, leaving cash and equivalents at $86.3 million.

Presentation

[Operator]

Thank you for standing by. My name is Prila, and I will be your conference operator today. At this time, I would like to welcome everyone to the NextNav second quarter 2024 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 would like to ask a question during this time, simply press a star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press a star one again. Thank you. I would now like to turn the conference over to Erica Bartsch. You may begin.

[Analyst]

Good afternoon, everyone, and welcome to NextNav's second quarter 2024 earnings conference call. Participating on today's call are Mariam Sorond, NextNav's Chief Executive Officer, and Chris Gates, NextNav'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, strive, predict, project, should, could, would, will, and similar expressions may identify forward-looking statements, but the absence of these words do not mean that a statement is not forward-looking.

[Analyst]

Such forward-looking statements, which may relate to NextNav'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 NextNav's control that could cause actual results to differ materially from the results discussed in the forward-looking statements. You are cautioned not to place undue reliance upon any forward-looking statements which speak only as of the date made, and NextNav undertakes no commitment to update or revise the forward-looking statements, whether as a result of new information, future events, or otherwise.

[Analyst]

For additional information regarding risk factors, see Part 2, Item 1A, Risk Factors of the Company's Quarterly Reports on Form 10-Q and Part 1, Item 1A, Risk Factors of NextNav's Annual Report on Form 10-K for the year ended December 31st, 2023, as well as those otherwise described or updated from time to 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. Mariam Sorond, Chief Executive Officer of NextNav. Please go ahead.

[Mariam Sorond, CEO at NextNav]

Thank you, Erica. Good afternoon, and thank you for joining us. On the call today, I will provide an update on the business, including the ongoing process surrounding our filing with the SEC, as well as other strategic operating highlights. I will then hand things over to Chris to review our financials. It was another busy quarter for NextNav as we continue to push forward towards our strategic vision. We are seeing good momentum in the business and making tangible progress. Notably, this week, the SEC issued a public notice seeking comments on NextNav's petition for rulemaking. This action is the standard first step in a longer-term SEC rulemaking process. While I will discuss the details of the notice and next steps in a moment, we appreciate the SEC's prompt public notice as this is an important step in delivering an innovative spectrum solution in the lower 900 MHz band.

[Mariam Sorond, CEO at NextNav]

Our vision enables next-gen terrestrial 3D PNT as a complement and backup to GPS with a 5G solution that is easily integrated into the existing ecosystem and enables additional spectrum for 5G broadband. I've had the opportunity to speak with many of you since we introduced this vision, and I am excited by the strong investor sentiment and confidence in what we have presented. This is evident not only in our share price over the past several weeks but also in the recent exercise of additional warrants. While Chris will provide greater detail, in Q2, 9.7 million warrants were exchanged for an aggregate of $21 million in cash. This action further validates the market's confidence in our business and our go-forward strategy. As a reminder, we are focused on developing a complement and backup to GPS with additional spectrum for broadband services.

[Mariam Sorond, CEO at NextNav]

Leveraging the spectrum we have acquired, our proposal combines NextNav's current spectrum holdings with what is otherwise fallow spectrum and puts it to use for public benefit and addresses a major national security issue. Providing a complement and backup to GPS is critical for safeguarding the things we need daily, from locating emergency callers to addressing critical infrastructure and national security needs. Our proposal creates abundance from scarcity in this band by unleashing much-needed spectrum for wireless technology. These common-sense solutions can benefit consumers and our national interests at no cost to taxpayers and will appropriately protect incumbent operations. More importantly, it bears highlighting that spectrum below 1 GHz that is usable for broadband is scarce and extremely valuable to carriers because it penetrates walls and propagates over long distances. Additionally, having a new contiguous 10 MHz low-band block suitable for broadband downlink is an exceptional opportunity.

[Mariam Sorond, CEO at NextNav]

As a result, this low-band spectrum has become the most capital-efficient way to provide coverage inside buildings. This is also why it is a strong fit for deployment of our 5G-based PNT service. I will touch on that more in a moment. Because of the recent focus on mid-band spectrum, which naturally has greater bandwidth, it's easy to forget that most low-band spectrum is in 5 + 5 MHz blocks, while NextNav expects to have a 10 MHz downlink. The Big Four mobile network operators, or MNOs, have on average around 25 MHz of low-band downlink spectrum, with some variation across geographies. So adding an additional 10 MHz downlink would increase an MNO stock of low-band downlink spectrum by roughly 40%, a material addition to their spectrum portfolio.

[Mariam Sorond, CEO at NextNav]

This is why we believe we have a powerful proposal that creates a unique and economically viable opportunity to help address the urgent need for widespread complementary and backup PNT services. It is also why I was pleased to see the SEC issue the PN for rulemaking this week, helping to move us another step forward in the process. This follows the April 24th PN issued by the SEC regarding the application to assign A-block licenses that NextNav agreed to acquire from Telesaurus. We received only two comments back on the A-block assignment request during the 14-day comment period and feel good about where things stand. Regarding the PN on the petition for rulemaking, the SEC has requested comments from the public on this proceeding within the next 30 days, followed by a 15-day reply comment period. All comments will be public.

[Mariam Sorond, CEO at NextNav]

The Commission then considers the comments and reply comments in developing proposed rules. We expect the next Commission action would be a notice of proposed rulemaking, or NPRM, followed by another period of public comment, and then a final order adopting new rules for the band. As a general rule, an NPRM would not happen for some time after the public notice comment period ends. Typically, after comments and reply comments for the PN are filed, it can take a considerable amount of time for the record to be evaluated and the subsequent NPRM to be drafted, reviewed, and released. Overall, we feel good about where things stand and are pleased with our progress to date. As I have said many times before, this is a process. We plan to continue working closely with the SEC and are focused on taking this one step at a time.

[Mariam Sorond, CEO at NextNav]

While we work through the process with the SEC, we simultaneously received some exciting news out of the Department of Transportation. On July 3rd, the DOT issued a press release announcing that NextNav was awarded a purchase order to test the company's 3D PNT technology, a terrestrial solution that delivers PNT as a complement and backup to GPS. The award comes from the DOT Volpe Center and is a part of its complementary PNT action plan. As you may recall, in 2021, the DOT recognized NextNav's technology as the best-performing PNT technology in all applicable use cases. This new award is significant because it's aligned with the DOT's complementary PNT action plan to conduct field testing of technologies with critical infrastructure providers. Further, it validates NextNav's strength and leadership position in PNT services as we were awarded the largest dollar value from the DOT.

[Mariam Sorond, CEO at NextNav]

The award will provide nearly $1.9 million in funding to NextNav and will test our 3D PNT technology, a terrestrial solution that delivers PNT as a complement and backup to GPS. This program aligns well with our technology and spectrum path with the SEC. NextNav's terrestrial PNT technology creates a complete 3D solution for positioning in outdoor, urban, and indoor environments, including highly accurate vertical location. Our solution also includes a timing source that can serve as backup if GPS is unavailable. We are excited to partner with the DOT to demonstrate our PNT capabilities and to develop technology solutions to address national security, economic, and public safety needs. Complementing these efforts, we have also made several strategic moves internally to ensure that we have the right team in place to execute our vision. At the board level, we recently announced that Nicki Palmer joined the NextNav Board of Directors.

[Mariam Sorond, CEO at NextNav]

Nicki comes to us with deep expertise in the strategic development, operation, and expansion of ecosystems powered by 5G technology and the development of products and services to advance 5G growth. She spent the majority of her career with Verizon. While there, her leadership role spanned engineering, operations, and technology supporting advanced data and wireless products, serving as CTO, Chief Engineering Officer, and Head of Wireless Networks. We are thrilled to have Nicki on board and believe she will be invaluable to our team as we advance our vision for an innovative spectrum solution in the lower 900 MHz band. We also recently restructured our internal workforce to better align our org structure with our strategic objectives and drive greater operational efficiency. This resulted in a roughly 20% reduction in headcount, primarily from within our software engineering teams.

[Mariam Sorond, CEO at NextNav]

In addition, we also have made several strategic hires, including our new COO, Sanyogita Shamsunder, that brings the necessary skills and background to help advance our strategic vision. I feel confident that we are putting together a powerful group to help us move forward. We have a strong and capable team here at NextNav, and I am thrilled to have the opportunity to work with them every day. I look forward to all that we can achieve together. In closing, we are seeing solid momentum across the business, and I am excited by our progress. We have more work ahead of us, but I believe we are putting together the right team and the right resources to position us for success. I look forward to bringing you with us on this exciting journey. With that, let me turn things over to Chris to discuss our financials. Chris?

[Chris Gates, CFO at NextNav]

Thanks, Mariam, and good afternoon, everyone. NextNav's revenue in the second quarter was $1.1 million, a $0.3 million increase from $0.8 million in the prior year period. For the first half of 2024, revenue was $2.1 million, a $0.5 million increase from $1.6 million in 2023. The increase in both the three and six month periods was driven by an increase in service revenue from technology and services contracts with commercial customers, including in support of government opportunities. Staying on the topic of revenue, as Mariam noted, we were recently awarded a $1.9 million purchase order from the Department of Transportation. This one year order started in July 2024, and we anticipate seeing the revenue impact from this beginning in the third quarter of this year.

[Chris Gates, CFO at NextNav]

The government has the option to extend this order by up to six months under the current terms and has the option to extend the order for up to two years to allow for additional testing. Operating expenses for the second quarter were $16.4 million, up from approximately $15.8 million in the same period last year. Operating expenses included $1.3 million in depreciation and amortization and $3.7 million in equity compensation, compared to $1.2 million in depreciation and amortization and $4.4 million in equity compensation in the second quarter of 2023. For the first half of the year, operating expenses were $33.6 million, compared to $30.6 million in 2023. Excluding stock-based compensation expense and depreciation and amortization, operating expenses were $23.1 million in the first half of 2024 and $20.1 million in the first half of 2023.

[Chris Gates, CFO at NextNav]

Net loss for the second quarter was $24.4 million, which included a $6.6 million loss associated with the change in the fair value of warrants, net of the gain associated with the change in liability associated with the Telesaurus asset purchase agreement. This is compared to a net loss of $15.8 million in the second quarter of 2023, which included a loss of $0.3 million associated with the change in the fair value of warrant liability. For the first half of the year, net loss was $56 million, including a $19.8 million loss associated with the change in the fair value of warrant liability, net of the gain associated with the change in liability associated with the Telesaurus asset purchase agreement, compared to a net loss of $32.1 million in the first half of 2023, including $3.1 million associated with the change in the fair value of warrant liability.

[Chris Gates, CFO at NextNav]

From a balance sheet perspective, we finished the quarter with $86.3 million in cash, cash equivalents, and short-term investments. Our use of cash for the quarter included payment of expenses, associated taxes, and accrued compensation of approximately $1.5 million related to the restructure I mentioned earlier in the call. Our cash balance also includes two significant non-operating elements. As I noted on last quarter's call, our use of cash in 2Q 2024 following court approval included the payment of $2.5 million in cash in April per the terms of our asset purchase agreement. As Mariam highlighted, we enjoyed the benefit of $21 million in proceeds from additional warrant exercises in the quarter. I'm also pleased to report that following the close of the quarter, warrants continued to be exercised, with an additional $2.3 million exercised through July 31st, 2024, for an additional $5 million in proceeds.

[Chris Gates, CFO at NextNav]

Finally, our balance sheet showed $51.4 million of debt net of unamortized discount attributed to transaction costs in the issuance of warrants, with a gross value of $70 million. With that, I'll turn the call back to the operator. Operator?

[Operator]

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star followed by the number one on your cell phone keypad to raise your hand and join the queue. If you would like to withdraw your question, please press star one again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, please press star one to join the queue. Your first question comes from the line of Matthew Maus with B. Riley Securities. Please go ahead.

[Analyst at B. Riley Securities]

Good afternoon. Thanks for taking my question. I was just wondering if you can give some color on where NextNav is at regarding the assignment of the additional 4 MHz of spectrum licenses acquired from Telesaurus and Skybridge. Has the SEC made a decision yet to approve, deny, or defer this assignment?

[Mariam Sorond, CEO at NextNav]

Hi, yeah, thanks for the question. So the SEC did put the PN out on the application, and that was released through an automated process. We are actually, at this point, waiting for the SEC to make a decision on it. We have not received any further updates so far.

[Analyst at B. Riley Securities]

All right. That was helpful. That was it for me. Thank you.

[Operator]

Your next question comes from the line of Jaime Perez with R.F. Lafferty. Please go ahead.

[Jaime Perez, Senior Research Analyst at R.F. Lafferty]

Hey, everybody. Thanks for taking my question. Regarding yesterday's filing and the petition, there's a list of unlicensed users and users that might pose maybe an objection to the plan. I mean, are you participating? What are the plans? So let's say like the amateur radio or the unlicensed as far as maybe creating an option for the company. I mean, are you going to, according to the filing, you're going to work with this plan? I mean, how does that work? Do you guys have a different part of the lower sideband or upper sideband section you're going to share, or is it encrypted? I mean, maybe give a little bit of color on how that's going to work out.

[Mariam Sorond, CEO at NextNav]

Yeah, thanks. Hi, Jamie. Actually, we're not going to speculate on comments with respect to the PN, right? We're going to wait to see the comments. We're going to read them really carefully, and we're going to reply to all the comments. That's our plan right now. We intend to, and we've done reach-outs. We intend to work with all the parties and the stakeholders where it's reasonable and appropriate to work with them. And we look forward to the dialogue and working with them through the process.

[Jaime Perez, Senior Research Analyst at R.F. Lafferty]

All right. I think my next question. Now, the DOT project. I mean, what's the timeframe on that? I said it might be a while, but also, what are the metrics or the benchmarks the DOT is sort of looking at?

[Mariam Sorond, CEO at NextNav]

Well, they've selected, first of all, they've awarded about nine in the testing phase. They have a plan out on what the phases are going to be. I think that, Chris, maybe you can share some of the details. If not, we can get you that offline on what exactly their phases are.

[Chris Gates, CFO at NextNav]

Yeah. Jamie, we'll come back to you on some of that kind of inside the contract detail.

[Jaime Perez, Senior Research Analyst at R.F. Lafferty]

Oh, okay. All right. Yeah, that's all the questions I have. Thanks for taking my question.

[Operator]

Thank you. Once again, if you would like to ask a question, simply press star followed by the number one on your telephone keypad. There are no further questions at this time. I would like to turn it back to Mariam Sorond for closing remarks.

[Mariam Sorond, CEO at NextNav]

Thank you all for joining us today. As you can see, the entire NextNav team is hard at work executing against our vision. We believe our unique vision will provide an innovative spectrum solution in the lower 900 MHz band. We're excited for what lies ahead, and we'll continue to provide an update on our progress as we move forward. Thank you all.

[Operator]

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you all for participating. You may now disconnect.

Participants

Executives

• Chris Gates, CFO
• Mariam Sorond, CEO

Analysts

• Jaime Perez, Senior Research Analyst at R.F. Lafferty
• Analyst
• Analyst at B. Riley Securities