Q4 2024 Nextnav Inc Earnings Call
Ladies and gentlemen, thank you for standing by my name is Abby and I'll be your conference operator today.
At this time I would like to welcome everyone to the next now fourth quarter 2024 earnings Conference call.
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After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question during that time simply press. The star key followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star one a second time.
Speaker Change: Thank you and I would now like to turn the conference over to Nevin Riley you may begin.
Yeah.
Myriam Serrano: Good afternoon, everyone and welcome to <unk> fourth quarter conference call participating on today's call are Myriam Serrano next naps, Chief operating officer and.
Speaker Change: Chief Executive Officer, and Chris Gates next NAFTA, 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 maybe identified by use of the words such as May.
We anticipate believe expect intend might plan possible potential and 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 the statement is that forward look.
Speaker Change: King.
Speaker Change: Such forward looking statements, which may relate to next nabs forecast that feature 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 <unk> control that could cause actual results to differ materially from the result.
Speaker Change: As discussed in forward looking statements.
In particular, such forward looking statements include the achievement of certain FCC related milestones and FCC approvals, the ability to realize and broadened spectrum capacity and the advancement of <unk> terrestrial <unk> AT&T services next.
Speaker Change: Now in a position to drive growth in <unk> geolocation business and expansion of its next generational terrestrial three D. PMT technologies, the business plans objectives expectations and intentions at <unk> estimated.
Speaker Change: And future business strategies competitive position.
Industry environment potential growth opportunities revenue expenses and profitability. These statements are based on <unk> 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 forward looking statements, which speak only as the date abate and next day of 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 the part two item <unk> risk factors of the Companys quarterly reports on Form 10-Q, part one item <unk> risk factors of <unk> annual report on Form 10-K for the year ended December 31, 2024, as well as those otherwise described are updated from time to time.
Speaker Change: 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.
Speaker Change: Now I'd like to turn the call over to MS. Marion Boucheron, Chief Executive Officer of <unk>. Please go ahead <unk>.
Speaker Change: Thank you and 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 I will then turn things over to Chris to provide an update on our financials.
Speaker Change: 2024 was a transformational year for <unk> and I am pleased with all that we have accomplished we have made significant progress in advancing our vision for a trustful complement and backup to GPS leveraging strategic regulatory and technological and financial milestones to strengthen our position.
Speaker Change: Following our agreement to acquire spectrum licenses covering an additional form beggars and more 900 megahertz band last March we moved quickly to file a petition for rule, making with the FCC, our petition which seeks to unlock spectrum for a nationwide threshold TNT network took a crucial step forward in August when the FCC issued a public notice.
Speaker Change: Inviting public comments since that time, we've received strong support from public safety organizations industry stakeholders and government agencies, recognizing the urgent need for a resilient complement and backup to GPS recently convey 911 filed in support of the next slot petition in the Texas 911 of the lines.
Speaker Change: And the Nevada Division of Emergency management, each recently filed in support of the commission moving forward to explore solutions that address the limitations of GPS next now theres been actively holding engineer to engineer discussions to address concerns and refine its proposals, notably we are actively engaged with key stakeholders, including.
Speaker Change: NTIA The association of American railroads, and tolling operators to address coexistence concerns and technical considerations to date. These conversations have been highly productive we are working with <unk> a subsidiary of the association of American railroads to gather the necessary information about railroad equipment.
Speaker Change: And developing a joint test plants.
Speaker Change: We are working with EZ pass and IDT ta towards a joint testing approach with the tolling entities and finally in late February we filed a detailed technical analysis of coexistence with unlicensed operations with the FCC.
Speaker Change: This study provides a real world deployment in comparison and in depth technical assessments of fine coexistence is feasible and that replacement of legacy operations. The bandwidth five G would not cause unacceptable interference support 15 devices. The findings demonstrate that by updating decades old rules the FCC can address.
Speaker Change: A major national security and public safety threat without causing unacceptable interference on license devices.
Speaker Change: These conversations public advocacy for a viable U S. PNT solutions continues to grow this past fall retired rear Admiral Steve Simpson published a white paper on PMT resiliency. The Bravo Group released a report quantifying the economic value of the next now proposal as a backup for G. P. S.
Speaker Change: The former Representatives, Greg Walden, and Laredo Sanchez highlighted the benefits of threshold PMT in a broadband breakfast I'll bet.
Speaker Change: More recently, Diane Ronaldo, a leading expert in five G and telecommunications security followed the literature review with the FCC emphasizing the severe risks of prolonged prolonged G. P. S disruptions to national security and infrastructure with the paper underscores the growing capabilities of U S adversaries and advocates for he says.
Hmm of systems approach to PMT modernization, fortifying GPS, while diversifying backup solutions across space and terrestrial based systems.
The FCC released in Hawaii last week. This is an exciting and critical development and we were pleased to see chairman parse pumped leadership in advancing initiatives supporting National Security. This reflects the urgent need for each restaurant backup to GPS as part of a system of systems.
Speaker Change: Including multiple technologies in space and on the ground. We are eager to continue working with the chairman commissioners and staff at the FCC.
And I know why allows the commission to sell.
Speaker Change: I looked at input and feedback from the public Chairman car has made it clear that he is action oriented and that he views N O wise is a serious indicator of the direction. He is heading we welcome this filing in its importance to all stakeholders as it signals chairman cars active engaged leadership at the FCC a positive development.
Speaker Change: For consumers businesses and the nation there are five points of significance I'll point out number one.
Speaker Change: Chairman car has been the leader of the FCC for less than two months and the presence of the PNT NOI on the agenda for a second commission meeting is an indication that he takes GTS limitations and vulnerabilities seriously and wants to take action in this area.
Speaker Change: This early focus is a significant win for the prospects of a terrestrial complement and backup to GPS and therefore for next steps.
Speaker Change: Number two the C band NOI adopted at the February meeting is a clear message that the FCC is focused on the C band and therefore, we conclude the German car is using NOI advances agenda with a bias towards action number three.
The PMT NOI is the first acknowledgment by the FCC of the seriousness of GTS vulnerabilities and limitations and the need for a system of system approach that includes terrestrial PNT. The NOI notes the terrestrial based P&G technologies can receive stronger signals and space based P&C technologies.
Speaker Change: Less vulnerable to intentional interference and space environment events and function in certain locations, where salaries signals aren't available.
Speaker Change: This is a level set on PNT issues and the findings are foundational to next knives desired result.
Speaker Change: Number four NOI also discusses the general considerations for solutions that are nationwide can be implemented in consumer devices.
Speaker Change: Use spectrum resources that snap agrees with the system of systems approach solving national security problem is an industry wide effort and everybody bring something different to the table. For example, some bring just timing or other aspects. Some bring space next half truths terrestrial solution is unique in that it addresses both the physician.
Speaker Change: And timing is wide scale and isn't consumer devices and very significantly number five the comment cycle and the draught, NOI is quite compressed and paves the way for prompt action on this topic in the future the quick action and common cycle set the pace for this process and gives us strong indication.
Speaker Change: The next though wont be as pumps.
Speaker Change: I am pleased that maximizes contributed to the discussion on how to address G. P. S. Vulnerabilities Executive Order 13, 905 was released at the end of the first Trump administration. Additionally, chairman Ted Cruz and Senator at Marquis through letters and hearings during the first Trump administration has clearly laid out the need for solutions and remain.
Speaker Change: Longtime supporters of this issue.
Speaker Change: <unk> petition along with other P&C technologies is a subject of this notice of inquiry.
Speaker Change: The NOI falls Chairman car staff appointments in late January including the historic naming of Adam Chinn is the FCC's first National Security Council underscoring the agency's commitment to security to securing critical U S infrastructure, including terrestrial P&C. Meanwhile, Commerce Secretary Secretary Howard Lutnick.
Speaker Change: Signaled a rigorous.
Speaker Change: The approach to spectrum policy and his confirmation hearing.
National security commercial applications and taxpayer impact with.
Speaker Change: With the administration prioritizing National Security. We believes these developments position next nine well in 2025 and beyond moving forward, we remain committed to constructive collaboration with the FCC MTI and other agencies to advance our spectrum and terrestrial PNT initiatives.
Speaker Change: Beyond the FCC results from our new National Public policy polling survey also showed overwhelming bipartisan support for a complement and backup to GPS in order to support National Security public safety global competition and economic stability.
Speaker Change: This support beyond the FCC is critical and great additional backing for next half and the broader market.
Speaker Change: We also reached a significant milestone in our Nextgen technology as we announced in February next have successfully demonstrated the Saxon nextgen technology, incorporating P rsp's positioning and timing and it's swaps.
Speaker Change: We also completed successful timing synchronization field test leveraging our prototype network powered by next ops current spectrum in Palo Alto, California.
Speaker Change: These successful demonstrations validate the effectiveness of next five GPRS based but phase.
Speaker Change: Phase PNT solutions and paves the way for next as next steps on leveraging five G insurer isn't infrastructure to advance terrestrial three D. P N T commercialization.
Speaker Change: Building on this momentum we recently put agreements in place with outside suppliers devote to develop an over the air network to showcase a five G base three D terrestrial positioning navigation and timing capability using standards compliant equipment through these collaborations next novel demonstrated interoperability with commercial.
Speaker Change: <unk> infrastructure and device platforms and existing three GPP standards to rapidly develop three D. P. N T capabilities powered by five G.
Chris Gates: Before turning over to Chris I want to highlight a key addition to our leadership team in February Rene Gregory joined <unk> as VP of regulatory affairs, leading our FCC.
<unk> and compliance efforts with 20 plus years of experience across government and the private sector. She has held senior advisory roles at the White House NTIA and FCC. We are thrilled to have her onboard working with our top notch team of D. C consultants to help advance F C.
Chris Gates: Engagement and an address national security needs.
Chris Gates: And finally.
Chris Gates: An exciting development for our capital structure. We also announced today that we have signed a note purchase agreement for a private offering of 100 million $190 million led by M cord capital and fortress investment group alongside other new and existing investors, we look forward to benefiting from.
Chris Gates: There are wide ranging expertise across strategy finance and national security.
Chris Gates: This deal strengthens our balance sheet positioning us to pursue the opportunity ahead of US. It also demonstrates that the market is enthusiastic about our technology and future Chris will provide more details on this shortly as we look ahead maxed out or is committed to advancing cutting edge geolocation.
Chris Gates: Solutions that strengthen security public safety and economic resiliency. The past year has reinforced the urgent need for a resilient PNT solution and we are leading the charge with increasing recognition of the need for a trustful GPS backup strong national security focus from the New administration and can.
Chris Gates: Tenured industry collaboration we are well positioned from momentum in 2025, our team remains focused on executing our strategic roadmap and driving innovation and geolocation technology with that let me turn things over to Chris for a review of our financials Chris.
Chris Gates: Thanks, Barry and good afternoon, everyone I'll first address our financial performance for the fourth quarter and fiscal year 2024, and then provide some details on the note purchase agreement Marion just reference.
Chris Gates: Beginning with the top line next as revenue in the fourth quarter was $1 $9 million.
Chris Gates: $7 million increase from $1 2 million in the prior year period for the 12 months period revenue was $5 7 million or $1 8 million increase from $3 $9 million in 2023 the.
Chris Gates: The increase in both the three and 12 months period was primarily driven by our previously announced one year D O T contract and a one time license fee earned in the fourth quarter of our soft GPS technology.
Chris Gates: Operating expenses for the fourth quarter was $16 $7 million down approximately $4 5 million versus the same period last year operating expenses included $1 3 million and depreciation and amortization and $2 7 million in equity compensation compared to $1 3 million and depreciation and amortization and $9 2 million of equity compensation in the fourth quarter of 2000.
Chris Gates: <unk> 23.
Chris Gates: In the 12 months period operating expenses were $65 8 million as compared to $67 4 million in 2023.
Chris Gates: Excluding stock based compensation expenses, and depreciation and amortization operating expenses were $46 7 million in 2024 at $40 7 million in 2023.
Chris Gates: Net loss for the fourth quarter was $32 3 million, which included a $14 $9 million loss associated with the change in the fair value of warrants and liability associated with the <unk> asset purchase agreement.
Chris Gates: This is compared to a net loss of $16 4 million in the fourth quarter of 2023, which included a gain on the change of the fair value of our warrant liability of $5 $7 million.
Chris Gates: For the full year net loss was $101 9 million, including a $32 $2 million loss associated with the change in the fair value of warrant liability net of the gain associated with the settlement of liability associated with the <unk> asset purchase agreements compared to a net loss of $71 7 million in the full year of 2023, including $4 1 million.
Chris Gates: The change in the fair value of warrant liability.
Chris Gates: Turning to our balance sheet. We finished the quarter was $80 1 million in cash cash equivalents and short term investments. This is the result of our continued disciplined use of cash and we enjoyed the benefit of $3 5 million in proceeds from additional warrant exercises in the quarter.
Chris Gates: At December 31, we had $54 $6 million in debt net of unamortized discount attributed to transaction cost and the issuance of warrants with a gross value of $70 million as we mentioned in the past we continue to carefully manage our use of capital taking a disciplined approach to any spend.
Chris Gates: Now before wrapping up I want to provide some additional detail on that just side note purchase agreement.
Chris Gates: Disagreement reflects our prudent long term approach to liquidity as Marion highlighted we're very excited to have the opportunity to welcome new strategic capital to our Investor base, while enhancing the liquidity of our balance sheet on attractive terms. We believe that this capital will provide us with significant additional financial flexibility as we pursue our excuse.
Excuse me as we pursue our objectives in 2025 and beyond.
Chris Gates: The agreements for a private offering of $190 million at 5% redeemable senior secured convertible notes maturing on June 32028.
Chris Gates: Ultimately $70 million of the proceeds from this issue will be used to redeem next nabs existing 10% senior secured notes due December one 2026.
Chris Gates: The new notes, while the conversion price of $12 50, 656 cents per share based on a 20% premium to the trailing 10 day closing price average prior to March 11th.
Chris Gates: Notes may not be redeemed for one year after which new notes will be redeemable. If next half stock is greater than 160% of the new note's conversion price conversion will be at the option of the notebook.
Chris Gates: The company is providing a conditional notice of redemption to redeem the existing 10% notes at 101% of the principal amount of the existing notes plus accrued and unpaid interest conditioned upon closing of the transaction and then finally associated with the transaction, we are issuing warrants to both EMCORE and fortress.
Chris Gates: Including one 5 million shares of <unk> common stock to each exercisable at $20 per share warrants to purchase 950000 shares of common stock at an exercise price of $17 per share and warrants to purchase 1.45 million shares of common stock at an exercise price of $12 56 per share and again, that's for each of the REIT investors in the Transat.
Chris Gates: The transaction is expected to close on or about March 31, 2025.
Chris Gates: With that I'll turn the call back over to the operator for questions operator.
Chris Gates: Thank you and we will now begin the question and answer session if.
Speaker Change: If you have dialed in and would like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue.
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Speaker Change: We ask that you please limit yourself to one question and one follow up.
Again, it is star one if you would like to join the queue.
And your first question comes from the line of Mike Crawford with B Riley Securities. Your line is open.
Speaker Change: Thank you that's a lot to digest today, but just to look at the bigger picture can you talk about what.
Speaker Change: Might be capital cost to deploy.
Speaker Change: Of the five G network with time and signal propagated prior your IP as you're pursuing in the N. P. R M.
Speaker Change: Who and who who might bear this capital Trust.
Speaker Change: Hi, Mike. Thanks for the question as we've said previously in our petition there'll be five G. Operator, who will be building this network and because we are using a standards based five GPRS solution.
Speaker Change: We don't see major.
Speaker Change: Cost in addition to what the five G network cost would be for the operator deploy that spectrum to their bands all the times they need five G spectrum and it. This is this is standards based.
Speaker Change: Our solutions software sitting on top of it.
Speaker Change: Right so could the software.
Speaker Change: Sit on top of an existing.
Speaker Change:
Speaker Change: Radios on towers or would there need to be all new infrastructure put in.
Speaker Change: By the operator.
Speaker Change: The operators have existing towers and radio equipment, but every time that an operator adds a new spectrum band.
New radios to be added they do this all the time I mean theyre going to continue to build out more spectrum is capacity demand grows and theyre going to continue to add whatever the there is there needs to be added to their existing towers and infrastructure our software is completely.
Speaker Change: Capable and this is what actually we just demonstrated through our technology trials, so that could take an existing five GPRS based signal those transmitting from the operator's network as they would deploy any five G new spectrum and provide accurate positioning and timing.
Speaker Change: Okay. Thank you and then my one follow up question would be.
Speaker Change: What.
Speaker Change: Potential.
Speaker Change: Uses of capital what do you have beyond <unk>.
Speaker Change: Hum.
And and legal et cetera, as you progress toward getting.
A report and order.
Chris Gates: Chris do you want to take that one yeah.
Yeah, absolutely yeah. Thanks, Mike I think youre getting to some extent of course that the financial flexibility that we that we're building into our balance sheet with this new notes issue that we just we just signed obviously one of the things that we've been able to achieve.
Chris Gates: Is to move the maturity of any potential notes.
Chris Gates: Well enter into mid 2028.
Chris Gates: But at the same time, we've significantly enhanced the flexibility of capital on our balance sheet.
And of course provides us with substantial long term liquidity.
Chris Gates: And it also allows us to approach not only our existing capital structure, but our business opportunities as we kind of look into 2025 and pursue our objectives with a great deal of degree.
Chris Gates: A great deal of flexibility and I'm going to use that word a couple a couple of different times there.
The other the other thing that I would highlight and I think Marion mentioned this is that our business plan continues to not require the deployment of a network by ourselves we intend to partner.
Speaker Change: With third parties in the future for network deployment and so we're not provisioning in advance of.
Chris Gates: Like a major network Capex build out program.
Speaker Change: Alright, Thank you very much.
Okay.
Speaker Change: And ladies and gentlemen that concludes our question and answer session. I will now turn the conference back over to Miriam Surang for closing remarks.
Speaker Change: Thank you all for joining us today and as we look ahead, we are committed to advancing geolocation services that will enhance national security public safety and economic resilience and we are Super excited for 2025 is our momentum propels US forward. We are looking forward to connecting with you next.
Quarter.
Speaker Change: And ladies and gentlemen, this concludes today's call and we thank you for your participation you may now disconnect.
Speaker Change: Please wait the conference will begin shortly.
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