Q3 2024 NextNav Inc Earnings Call
The
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Speaker Change: Hello and welcome to the next NAV third quarter 2024 earnings 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 and if you would like to ask a question at that time simply press star 1 on your telephone keypad. I would now like to turn the conference over to Erica Bartsch. You may begin.
Erica Bartsch: Good afternoon, everyone, and welcome to NextNav's third quarter 2024 earnings conference call.
Erica Bartsch: Forward-looking statements may be identified by the use of words such as may, anticipate, believe, expect, intend, might, plan, possible, potential, aim, thrive, predict, project,
Erica Bartsch: 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.
Erica Bartsch: Such forward-looking statements, which may relate to next-next forecasts of future results, future prospects, development,
Erica Bartsch: and business strategies are subject to known and unknown risks, uncertainties, assumptions, and other important factors, many of which are outside NextMath's control that could cause actual results to differ materially from the results discussed in the four statements.
Erica Bartsch: In particular, such forward-looking statements include the achievement of certain FTC-related milestones and FTC approvals, the ability to realize the broader spectrum capacity, and the advancement of NextNav's terrestrial 3D PNT services.
Nesna's position to drive growth in its 3D geolocation business.
and expansion of its next generation terrestrial 3D PNC technology.
Speaker Change: The Business Plans, Objectives, Expectations, and Intentions of NextNav, and NextNav's Estimated and Future Business Strategies, Competitive Positions, Industry Environment, Potential Growth Opportunities, Revenue, Expenses, and Profitability.
Speaker Change: These statements are based on NextNav's management's current expectations and beliefs, as well as a number of assumptions concerning future events.
Speaker Change: 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.
Speaker Change: For additional information regarding risk factors, see Part 1, Item 1A, Risk Factors of the Company's Quarterly Reports on Form 10-Q and Part 1, Item 1A, Risk Factors
Speaker Change: of the NXNAV annual report on Form 10-K for the year ended December 31, 2023, as well as those otherwise described, are updated from time to time in our other filings with the Securities and Exchange Commission.
Speaker Change: 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 NexNav. Please go ahead.
Mariam Sorond: Thank you, Erica. Good afternoon and thank you everyone for joining us today. I would like to begin today's call with an update on the business and our latest steps with the FCC and key stakeholders.
Mariam Sorond: I will then turn things over to Chris to provide an update on our financials.
Speaker Change: It's been an exciting few months for NextNav. We are energized by the early momentum as we advance our strategic vision and address the critical need for a terrestrial complement and backup to GPS.
Speaker Change: Following the release of the FCT's August 6th public notice, the entire NexNov team has been hard at work.
Speaker Change: We submitted formal comments on September 5th, followed by reply comments on September 20th in support of our petition to reconfigure the lower 900 MHz band.
Speaker Change: As we shared in our filings, our petition offers a unique opportunity to address a national security problem.
Speaker Change: specifically the lack of a wide-scale terrestrial PNC backup and complement to GPS.
Speaker Change: We are confident that the FCC understands the importance and urgency of this need. This was evident in the thorough public notice they issued back in August. We were pleased to see the FCC asking the right questions and placing a specific focus on P&T.
Speaker Change: validating the national security needs which we highlighted in our own proposal.
Speaker Change: In response to the public notice, over 1,800 filings were submitted to the FCC. A vast majority, over 1,500, were from amateur operators who typically file on an individual basis.
Speaker Change: We saw support from select stakeholders, including those in the public safety arena who are close to the issue and understand the impact of not having a backup and complement to GPS.
Speaker Change: We also heard from some of the licensed operators who continue to express concerns about the effects of NextNav's NextGen system on their current operations.
Speaker Change: As with any ban, license operations are critical, and we are committed to coexistence with site-based licensees and providers. We are committed to working with you.
Speaker Change: and to minimizing any impact on these licensees. We see the NTIA being active as a positive sign for a timely resolution and an outcome that makes available much-needed commercial spectrum for 5G broadband.
Speaker Change: The NTIA filing acknowledges the importance of terrestrial PNT capabilities to backup and complement GPS and calls for additional testing to ensure that the operations of railroads and tolling entities are protected.
As noted in our reply comments,
Speaker Change: NextNav previously contacted more than 110 stakeholders, including incumbent tolling entities, railroads, unlicensed users, and amateurs to understand opposition views
Speaker Change: from an engineer to engineer technical point of view. Our goal was and is to find solutions that minimize potential disruptions to existing license operations and leave licensees at least as well off.
while enabling the benefits of our proposed terrestrial PNT system.
Here's our outreach.
Speaker Change: Several stakeholders have been responsive and engaged in active dialogue. For example, NexNav is in discussions with the Association of American Railroads, or AAR, and representatives from tolling operators to evaluate the full scope of their operations and address harmful interference concerns.
Speaker Change: Furthermore, we regard the NCIA's call for testing as a helpful procedural tool to induce incumbents to engage and be responsive. As a reminder, the FCC has broad authority to revise its rules and modify licenses when it determines that doing so would promote the public interest.
Speaker Change: As we move forward, we are committed to continuing engineer-to-engineer dialogue with the appropriate stakeholders in support of our petition. We believe that collaborative analysis is essential to achieving an outcome that best serves the public interest and addresses a national security problem.
Speaker Change: As we expected, and is typical, a portion of filings were from unlicensed stakeholders in opposition. As a reminder, NextNav is already a spectrum license holder in the 900-megers band, though it was clear that many opposition commenters were unaware of this fact.
Speaker Change: For the unlicensed community, their assertions appear to exaggerate the potential effects on unlicensed use from our next-gen system.
with many other users in the band.
Speaker Change: This is precisely because unlicensed technologies are designed and built to coexist with both unlicensed and licensed users operating in the band.
Speaker Change: It is also important to point out that those in opposition failed to put forth viable alternative solutions that meet the pressing need for a wide-scale terrestrial PNT service that can be broadly adopted.
Speaker Change: Even those who oppose our petition acknowledge that a terrestrial complement and backup to a satellite-based PNT service is critically important to safeguarding U.S. national security, public safety, and our economy.
Speaker Change: only serves to further highlight the lack of another wide-scale P&T service solution available that can both operate in consumer devices and serve government entities.
Speaker Change: As a result, there could not be a more critical time to address the important need for a terrestrial complement and backup to GPS.
Speaker Change: As noted by retired Rear Admiral David Simpson in his recent white paper published by Virginia Tech University on PNT Resiliency.
Speaker Change: A day without accurate and available PNT services is a scenario the U.S. cannot afford, and the country needs to identify a terrestrial complement and backup to GPS.
Speaker Change: Today, NexNav offers the only concrete opportunity to enable a wide-scale threshold PNT service, one that has a clear path to availability in consumer devices such as cell phones with no cost to taxpayers.
Thank you. Bye.
Speaker Change: This is why we believe we have a compelling proposal and feel confident about our path forward. Since the completion of the comment period in September, the team has remained focused on execution.
Speaker Change: Leveraging feedback garnered during the comment period, we are actively engaged in engineer-to-engineer dialogue with the appropriate stakeholders. This includes ongoing conversations with the toll companies, railroads, and other licensed incumbents.
Speaker Change: In late October, we also followed a detailed economic analysis conducted by the Brattle Group.
Speaker Change: The filing details how NextNav's proposal would prevent hundreds of millions of dollars in losses in the event of a global GPS outage.
Speaker Change: Based on initial assessment, the Brattle Group found that a one-day global GPS outage could cost the American economy $1.6 billion.
Speaker Change: while our proposal could prevent a loss of $663 million for a one-day outage.
Speaker Change: For a 30-day outage, the loss could be as large as $58.2 billion.
Speaker Change: But our proposal could prevent nearly $31.9 billion of that loss.
Speaker Change: Given the probability of a potential outage event in the U.S., NextNap's proposal is the equivalent of offering the American economy a $10.8 billion insurance policy to protect against GPS outages.
plus additional benefits of $3.8 billion from increased resiliency.
Speaker Change: Taken together, the total quantified value of a GPS backup is $14.6 billion.
Speaker Change: based on the Brattle Group's analysis. This is a powerful impact in why we believe our proposal offers an enormous public benefit.
Speaker Change: We were also pleased to see that in late October, the Flex Association filed in support of the FCC considering Nexops' proposal.
Speaker Change: Flux represents U.S. rideshare and delivery platforms including companies such as Uber, Lyft and DoorDash.
Speaker Change: The association's filing emphasized the crucial role NextNav's enhanced geolocation technology could play in boosting the app-based rideshare and delivery industry community's annual contribution of over $212 billion to the U.S. economy.
Speaker Change: This activity, coupled with continued dialogue with the appropriate stakeholders, leave us energized as we chart our path forward.
Speaker Change: Concurrently, the FCC is moving forward, reviewing and summarizing the over 1,800 files' comments.
Speaker Change: The next key milestone could be an NPRM or Notice of Proposed Rulemaking.
Speaker Change: However, there's also the possibility that the FCC will ask for additional data or pose additional questions prior to issuing an NPRM. This is all standard procedure and something we are prepared for should it arise.
Speaker Change: As a reminder, we do not anticipate that the FCC will adopt an NPRM in 2024.
Speaker Change: Finally, with former President Trump re-elected to the presidency last week, we would remind everyone that this is a bipartisan issue. Both Republicans and Democrats care about national security and public safety.
Speaker Change: From the beginning, our advocacy has been designed to be bipartisan.
Speaker Change: We have been talking to all commissioners' offices at the FCC and majority and minority members and staffers in the Senate and the House.
Speaker Change: We look forward to continuing our work with the current FCC commissioners, leadership, and staff, including Chairwoman Jessica Rosenworcel, through the remainder of their terms.
Speaker Change: We also continue our discussions with the senior sitting Republican Commissioner, Brendan Carr, and we expect to engage with the additional leadership and staff once appointed in 2025.
Speaker Change: Moving forward, we feel confident in our ability to work closely with the relevant government agencies to address the critical need for a terrestrial complement and backup to GPS.
In closing, this is an exciting time for our business.
Speaker Change: We believe that few challenges are more pressing than incorporating greater resiliency into life-saving and mission-critical terrestrial PNT technologies and more spectrum to make wireless broadband services more accessible for consumers.
Speaker Change: Though there is more work ahead, our team is ready to advance our mission and work closely with stakeholders. We look forward to ongoing engagement with the FCC and keeping our investors updated on our progress.
Speaker Change: With that, let me turn things over to Chris for a discussion of our financials.
Chris: Thanks, Mariam, and good afternoon, everyone. NextNav's revenue in the third quarter was $1.6 million, a $0.6 million increase from $1.0 million in the prior year period.
Chris: For the nine-month period, revenue was $3.8 million, a $1.1 million increase from $2.7 million in 2023. The increase in both the three- and nine-month periods was driven by an increase in service revenue from technology and services contracts with government and commercial customers.
Chris: Operating expenses for the third quarter were $15.5 million, down approximately $0.1 million versus the same period last year.
Chris: Operating expenses included $1.3 million in depreciation and amortization, and $3.3 million in equity compensation, compared to $1.3 million in depreciation and amortization and $4.4 million in equity compensation in the third quarter of 2023.
Chris: In the nine-month period, operating expenses were $49.1 million, as compared to $46.3 million in 2023.
Chris: excluding stock-based compensation expense and depreciation and amortization operating expenses were $34 million in the first nine months and $30.1 million in the prior year period.
Chris: Net loss for the third quarter was $13.6 million, which included a $2.5 million gain associated with the change in the fair value of warrants and liability associated with the Telesaurus Asset Purchase Agreement.
Chris: This is compared to a net loss of $23.2 million in the third quarter of 2023, which included a loss of $6.7 million associated with a change in the fair value of warrant liability.
For the nine-month period, net loss is $69.6 million.
Chris: including a $17.3 million loss associated with a change in the Fair Value of Warrant Liability net of a gain associated with the change in liability associated with the Telesource Asset Purchase Agreement.
Chris: compared to a net loss of $55.3 million in the first nine months of 2023, including $9.8 million associated with the change in the Fair Value of Warrant liability.
Chris: Turning to our balance sheet, we finished the quarter with $86.8 million in cash, cash equivalents, and short-term investments. This is a result of our continued disciplined use of our cash, and we enjoyed the benefit of $6.9 million in proceeds from additional warrant exercises in the quarter.
Chris: September 30th we had 53 million in debt net of unamortized discount attributed to transaction costs in the issuance of warrants with a gross value of 70 million dollars
Chris: As we've mentioned in the past, we continue to carefully manage our use of capital, taking a disciplined approach to any spend. Overall, it's been another productive quarter for NexNet. We believe our vision offers an innovative spectrum solution in the lower 900 MHz band, and we are excited for what lies ahead.
Speaker Change: With that, I will turn the call back to the operator for questions. Operator?
Speaker Change: Thank you. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again. One moment, please, for your first question.
Speaker Change: Your first question comes from the line of Mike Crawford with B. Riley. Your line is open.
Speaker Change: Thank you. And it's good to hear that you're in active discussions with people that have commented on your petition. You did mention railroads.
Speaker Change: toll lane operators, anything to of note to convey regarding discussions with others like
Edison Electric Institute or the NTIA
Speaker Change: Thank you, Mike, for the question. So, as I mentioned, we've contacted over 110 stakeholders in the past, and these would include the tolls, railroads, unlicensed users, amateurs, to understand their opposition views.
Speaker Change: So and we're going to moving forward we're committed to continuing this dialogue with them What's very key for us is to make sure Excuse me
Speaker Change: that the conversations are fact-based, that we have engineer-to-engineer dialogue, and that we move forward with the progress as we anticipate.
Okay, Mariam, and thank you.
Speaker Change: Thoughts on, you know, just to take one position, like the NTIA.
Speaker Change: you know, recommends the FCC grants a short-term experimental license so you can test, uh, field test, um, operations. Is that something that you see happening in the near future or not?
Speaker Change: So generally speaking, we actually regard the NTIA's call for testing as a very helpful procedural tool, right, to induce incumbents to engage and be responsive.
Speaker Change: Now for us, we've done testing in the past and we're moving forward to a phase of collaborative analysis.
Speaker Change: that includes this engineer-to-engineer dialogue, and it could also include testing.
Speaker Change: Okay, thank you. And then it's also great to see all the comments in favor of terrestrial PNT, especially for urban areas where signals in space are hard to reach, but there's also movement to create more resilient LEO space-based PNT. In fact, with
Speaker Change: Four companies picked by the Space Force to put up some
Speaker Change: potentially put up satellites in that regard. And I think that would be complementary to your service, but are you talking to L3Harris or Saranis or any of those companies that that are involved in that that effort to provide some more resilience from space?
Speaker Change: So we're actually in agreement with the DOT's view that the Complementary Action Plan, their Complementary Action Plan, that is a system of systems.
Speaker Change: which means that a system of systems of backup and complement really could have a satellite element but it must also include a ground-based terrestrial network.
Speaker Change: So far, we're the only viable wide-scale terrestrial PNT proposal that is on the table.
Speaker Change: but the vision of the system of systems is the most more comprehensive solution for a back-off and complement. We talk to many industry stakeholders, our support our opposition and the broader partnership opportunities.
Well, it's...
There's a change to him.
Is there any kind of precedence whether the outgoing commissioner
Speaker Change: would put forth an NPRM or is this something we would need to wait for the actual transition before we should start actively anticipating potential NPRM action in 2025?
Speaker Change: So Mike, you're correct, the recent news coverage post-election, it does include predictions that Brendan Carr is likely to be named the next FCC chair. Ultimately, President-elect Trump will name a new FCC commissioner once he is in office.
Speaker Change: in 2025. We will continue our work with Chairwoman Rosa Wurzel, and then we will continue the work also with Brendan Carr, who is the senior sitting Republican commissioner.
Speaker Change: As we've said in the past, we don't anticipate an NPRM in 2025.
Speaker Change: In 2024, I apologize for that, but we're not going to speculate on timing for the current or future administration on an NPRF.
OK, that makes sense. Thank you very much.
Speaker Change: The next question is from Tim Horan with Oppenheimer. Your line is open.
Tim Horan: Thanks guys. The reason you think a threshold basis is required, is that for veteran building penetration and or?
Tim Horan: I'm sorry, there was static. I need a repeat of that question.
Tim's line has disconnected. Okay.
Speaker Change: And our next question will come from the line of Rosemary Sison with Odeon Capital. Your line is open.
Rosemary Sison: Thank you. Hello Mariam and Chris. I just wanted to understand the timeline if you know whenever you do say whenever you do get the NPRN
Rosemary Sison: What would be the timeline after that? What would be the next set of events to happen in order for you to actually get moving and to, you know, to work through the process?
Speaker Change: So the next step of an NPRM could be a report in order. The FCC could also, again, just similar with DAL, also ask for more data and information between the NPRM and the report in order.
Speaker Change: We're not going to speculate on timing of NPRM or, after that, when the report and order is going to be at this point.
Okay, thank you.
Thank you.
Speaker Change: And your next question is from Tim Horan with Oppenheimer. Your line is open.
Tim Horan: Sorry guys that was a first that's ever happened to me and I decided to use a wireline phone. The reason you think terrestrial base is required is that for in-building penetration vertical or you know just you know backup in case satellites are out or all the above?
Speaker Change: Sure, it's all of the above, and just to state that comprehensively, in order to overcome the vulnerabilities of the satellite.
Speaker Change: which cellites themselves have vulnerabilities but also spoofing and jamming as it occurs in GPS today.
You'll actually need a terrestrial network.
Speaker Change: There's more resilience in that perspective, but also it can serve as a complement because of satellite signals, whether they're LEOs, MEOs, or GEOs, they don't penetrate indoors.
Speaker Change: Got it, got it. And just out of curiosity, is the spoofing and jamming easier or harder to do for Leo vs. Geo?
Speaker Change: So jamming is very easy to do with weak signals, and satellites, whether in the LEO space or above, are going to continue to be weak signals.
Speaker Change: and that's why they don't cover indoor and urban canyons. So the weaker signal, the easier to jam.
Speaker Change: Cell phones are on towers and close proximity to us. They're much stronger signals and not easy to jam. They're sort of spread out, and they're over a smaller coverage area per tower than satellites are.
Speaker Change: Very helpful. Can you just remind us, has Brendan Carr made any comments on your proposal or publicly or you know your any thoughts on what he's thinking?
Speaker Change: To my knowledge, he has not made any public comments on our proposal. Now, definitely there have been comments on a focus on national security from the FCC commissioners recently.
Speaker Change: Got it. And lastly, any updated thoughts on the highest and best use of the spectrum?
Speaker Change: You know, have you studied maybe other things it can be used for? I guess, you know, the Leos are looking to do direct-to-device or direct-to-cellphone, you know, type service. Could the spectrum be used for that? Or they're also looking to do IoT? Or do you still think, you know, being part of one of the big three mobile operators might be the best use?
Speaker Change: So our focus continues to be to solve a national security, economic, and public safety need, which is a complement and backup to GPS. And concurrent to that, it would unleash 15 megahertz of spectrum into 5G broadband use.
Speaker Change: especially at a current time where the pipeline is mostly empty. So we continue and will remain focused on that objective.
Very helpful, thank you.
Speaker Change: The next question comes from the line of Jamie Perez with RF Lafferty. Your line is open.
Jamie Perez: Hey everybody, thanks for taking my question. In your proposal you plan to swap the bands. What does that entail? Equipment? Software? Can you describe what exactly that you have to do to swap the bands?
Speaker Change: So, it's not really a swap, it's a tweaking to update the rules and...
actually viable for 5G broadband.
And every time that you have tweaked rules to Spectrum,
Speaker Change: You would need to look at developing new infrastructure, so that's radios that go on towers.
Bye
Speaker Change: You need to have your devices include that spectrum. This is the case with any new spectrum that goes into 5G.
Speaker Change: the radios on the towers, also the handsets need to accommodate from that spectrum, and of course infrastructure for 5G is these days consistent of both hardware and software.
to roll that out.
Speaker Change: As we've mentioned also in prior calls, we remain focused on working with a partner. And we've mentioned that.
Speaker Change: The likely partner could be an existing M&L, but obviously we are talking to the entire industry about partnership.
Speaker Change: My next question is a little bit on a technical side.
Speaker Change: If the license used, for example, the tow collection vehicle, I mean, the power or the RF frequency was about 150 feet for commercial and 15 feet for the passive. I mean,
Speaker Change: Does that really interfere with the change in spectrum, since it's pretty much, you know, a limited distance? I mean, how does that work?
Speaker Change: Jamie, sorry, I didn't get the first part. What are you referring to that's 150 feet?
Speaker Change: Can you repeat that? I think from the filing, yeah, the signal from the vehicle identification and tow collection was about 15 yards or 150 feet. I forgot what the actual number. I mean, does that interfere, let's say, long distance with the spectrum?
Do the tolls interfere with 5G?
Right, it's all in the Bible, like, yeah.
Speaker Change: We have not come across any interference from tolls to our systems.
Speaker Change: So both companies are in license spectrum and basically our licenses are in license spectrum and there is not an overlap currently.
No, not overlap. All right.
Speaker Change: Some of the amateur operators, I mean, isn't, was it part 97 or part 15, requires them to not cause interference to the primary user, which is you guys, NexNav, is that true?
Speaker Change: I mean, I think I think that's part of the argument of.
Speaker Change: Yes, both amateurs and Part 15 need to operate per the Part 15 rules on a non-interference basis.
Speaker Change: and Amateurs. I don't recall which part they were in the FCC, but they have, I anticipate, similar sort of regime.
Speaker Change: Right. Now, as far as the stakeholders, you know, according to your filings, you had a pretty good chart.
Speaker Change: It's the federal government. Is that the military use followed by non-military use? So would the military use be the primary users? I mean, how does that work in the hierarchy of spectrum users?
Speaker Change: Within the federal government, so the federal use of the spectrum is the primary use of the spectrum. There's also an ISM use, which is industrial scientific and medical use, that is also the primary use. Those are typically all transmitters and non-receiving.
Speaker Change: So, then after that, it is the licensees, which include both, you know, the site-based licensees and the geographic licensees.
Speaker Change: Then it's the unlicensed and amateurs. As far as how the federal government hierarchy is, I mean, the federal use of this band, so far from what we have seen, has been used by the Department of Energy.
Speaker Change: And we're continuously talking to understanding more about the operations, but so far we have not seen any comments.
Now, digging a little bit further, so...
Speaker Change: because what I'm reading is basically your customers will be at a federal level because of the Department of Defense energy mandate for P&T solutions. Is that correct? Is that how best to characterize it?
Speaker Change: So, you mean our complement backup to GPS use will be by the federal agencies? Right. Yes, it could be. It absolutely could be. So, it definitely could be a use case for them.
Speaker Change: Okay, and then you updated the Executive Order 13905, and that's probably too early to mention. I mean, as far as...
Speaker Change: He's named some of his cabinet members, some of them are pretty hawkish as far as military use. You think we could see an escalation of this executive order as he enters into the office because Trump is pretty hawkish on some of the...
Speaker Change: military usage, even sort of the using it internally. I mean what can you describe any more?
Speaker Change: I think the need for a backup and complement to GPS is a completely bipartisan issue. Both Democrats and Republicans care about national security and public safety.
Speaker Change: And from the beginning, our advocacy has been designed to also be very bipartisan.
Thank you.
Speaker Change: So I think the executive order was also, executive order 13-905 was very bipartisan. It came in one administration and followed through by the next administration.
Thank you.
Speaker Change: All right, that's all the questions I have. Thanks for taking my questions.
of course.
Speaker Change: This concludes the question and answer session. I'll turn the call to Mariam for closing remarks.
Mariam Sorond: So thank you all for joining us today. I am very pleased with the progress we've made to date and feel confident in our path forward. And as I have said many times, we're working hard to advance our strategic vision and address the critical need for a terrestrial complement and backup to GPS. We look forward to the opportunities ahead and we'll share additional updates on our next quarterly call. Thank you, everyone.
Speaker Change: This concludes today's conference call. Thank you for joining. You may now disconnect.
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