NextNav Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
March 12, 2025

There are 5 speakers on the call.

Operator

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 NextNav Fourth Quarter twenty twenty four 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 session.

Operator

Thank you. And I would now like to turn the conference over to Nevan Reilly. You may begin.

Speaker 1

Good afternoon, everyone, and welcome to NextNav's fourth quarter conference call. Participating on today's call are Maryam Saran, NextNav's Chief Operating Officer and 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 use of the 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 NxNav's forecast 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 forward looking statements.

Speaker 1

In particular, such forward looking statements include the achievement of certain FCC related milestones and FCC approvals, the ability to realize and broaden spectrum capacity and the advancement of Nexnav's terrestrial three d PNT services, Nexnav's position to drive growth in its three d geolocation business, and expansion of its next generational terrestrial three d PNT technologies. The business plans, objectives, expectations and intentions of NxNav's and NxNav's estimated and future business strategies competitive position industry environment potential growth opportunities revenue expenses and profitability. These statements are based on NxNav management's current expectations and beliefs as well as a number of assumptions concerning future events. You are cautioned not to place undue reliance upon the forward looking statements, which speak only as the date of made, and and NextNav 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 II, Item 1A, Risk Factors of the company's quarterly reports on Form 10 Q, Part one, Item 1A, Risk Factors of NextNav's annual report on Form 10 ks for the year ended 12/31/2024, as well as those otherwise described or updated from time to time in our other filings with the Securities and Exchange Commission.

Speaker 1

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. Miriam Sarand, Chief Executive Officer of NextNav. Please go ahead, Miriam.

Speaker 2

Thank you, Nevan. 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. 2024 was a transformational year for next month and I am pleased with all that we have accomplished.

Speaker 2

We have made significant progress in advancing our vision for a threshold complement and backup to GPS, leveraging strategic regulatory, technological and financial milestones to strengthen our position. Following our agreement to acquire spectrum licenses covering an additional four MHz and lower 900 MHz band last March, we moved quickly to file a petition for rulemaking with the FCC. Our petition, which seeks to unlock spectrum for a nationwide threshold PNT network, took a crucial step forward in August when the FCC issued a public notice inviting public comment. Since that time, we have 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 nine eleven filed in support of the next NAV petition and the Texas nine eleven Alliance 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.

Speaker 2

NEXNAP has been actively holding engineer to engineer discussions to address concerns and refine its proposals. Notably, we are actively engaged with key stakeholders, including the NTIA, the Association of American Railroads and towing operators to address coexistence concerns and technical considerations. To date, these conversations have been highly productive. We are working with MXV, a subsidiary of the Association of American Railroads, to gather the necessary information about railroad equipment and developing a joint test plan. We are working with E ZPass and IBTTA towards a joint testing approach with the tolling entities.

Speaker 2

And finally, in late February, we filed a detailed technical analysis of coexistence with unlicensed operations with the FCC. The study provides a real world deployment comparison and in-depth technical assessments that find coexistence is feasible and that replacement of legacy operations, the bandwidth five gs would not cause unacceptable interference to Part 15 devices. The findings demonstrate that by updating decades old rules, the FCC can address a major national security and public safety threat without causing unacceptable interference on licensed devices. Beyond these conversations, public advocacy for a viable U. S.

Speaker 2

PNT solution continues to grow. This past fall, retired Rear Admiral David Simpson published a white paper on PNT resiliency. The Brattle Group released a report quantifying the economic value of the next NAV proposal as a backup for GPS. While former representatives Greg Walden and Loretta Sanchez highlighted the benefits of terrestrial PNT in a broadband breakfast op ed. More recently, Diane Reynaldo, a leading The paper The paper underscores the growing capabilities of US adversaries and advocates for a system of systems approach to PNT modernization, fortifying GPS while diversifying backup solutions across space and terrestrial based systems.

Speaker 2

The SEC released an NOI last week. This is an exciting and critical development and we are pleased to see Chairman Parr's prompt leadership in advancing initiatives supporting national security. This reflects the urgent need for a terrestrial backup to GPS as part of a system of systems, including multiple technologies in space and on the ground. We are eager to continue working with the Chairman, Commissioners and staff at the FCC. An NOI allows the Commission to solicit input and feedback from the public.

Speaker 2

Chairman Carr has made it clear that he is action oriented and that he views NOIs as a serious indicator of the direction he is heading. We welcome this filing and its importance to all stakeholders as it signals Chairman Carr's active and engaged leadership at the FCC, a positive development for consumers, businesses in the nation. There are five points of significance I want to point out. Number one, Chairman Carr has been the leader of the FCC for less than two months. And the presence of the PNTNOI on the agenda for a second commission meeting is an indication that he takes GPS limitations and vulnerabilities seriously and wants to take action in this area.

Speaker 2

This early focus is a significant win for the prospects of a terrestrial complement and backup to GPS and therefore for NEXMAF. 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 Chairman Carr is using NOIs to advance his agenda with a bias towards action. Number three, the PNTNOI is the first acknowledgement by the FCC of the seriousness of GPS vulnerabilities and limitations and the need for a system of system approach that includes terrestrial PNT. The NOI notes that terrestrial based PNT technologies can receive stronger signals than space based PNT technologies, be less vulnerable to intentional interference and space environment events and function in certain locations where satellite signals aren't available. This is a level set on PNT issues and the findings are foundational to NEXNOPS desired result.

Speaker 2

Number four, the NOI also discusses the general consideration for solutions that are nationwide can be implemented in consumer devices and use spectrum resources. Next Snap agrees with the system of systems approach. Solving national security problem is an industry wide effort and everybody brings something different to the table. For example, some bring just timing or other aspects. Some bring space.

Speaker 2

Next Snap's terrestrial solution is unique in that it addresses both positioning and timing, is wide scale and is in consumer devices. And very significantly, number five, the comment cycle in the draft NOI is quite compressed and paves the way for prompt action on this topic in the future. The quick action and comment cycle set the pace for this process and gives a strong indication that the next steps will be as prompt. I am pleased that NextMaths has contributed to the discussion on how to address GPS vulnerabilities. Executive Order 13,905 was released at the end of the first Trump administration.

Speaker 2

Additionally, Chairman Ted Cruz and Senator Ed Markey through letters and hearings during the first Trump administration have clearly laid out the need for solutions and remain longtime supporters of this issue. Next application, along with other PNT technologies, is a subject of this notice of inquiry. The NOI follows Chairman Carr's staff appointments in late January, including the historic naming of Adam Chan as the FCC's first National Security Council, underscoring the agency's commitment to security to securing critical U. S. Infrastructure including terrestrial PNT.

Speaker 2

Meanwhile, Commerce Secretary, Howard Glutnick signaled a rigorous, balanced approach to spectrum policy at his confirmation hearing considering national security, commercial applications and taxpayer impact. With the administration prioritizing national security, we believe these developments position NEX NAV well in 2025 and beyond. Moving forward, we remain committed to constructive collaboration with the FCC, NTI and other agencies to advance our spectrum and terrestrial PNT initiatives. Beyond the FCC results from a 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. This support beyond the FCC is critical and great additional backing for NextNav and the broader market.

Speaker 2

We also reached a significant milestone in our next gen technology. As we announced in February, NextNav successfully demonstrated its NextGen technology incorporating PRS based positioning and timing in its labs. We also completed successful timing synchronization field tests, leveraging a prototype network powered by NextNOPS current spectrum in Palo Alto, California. These successful demonstrations validate the effectiveness of NextNav's five gs PRS based PNT solutions and paves the way for next steps on leveraging five gs infrastructure to advance terrestrial three d PNT commercialization. Building on this momentum, we recently put agreements in place with outside suppliers to develop an over the air network to showcase a five gs based three d terrestrial positioning, navigation and timing capability using standards compliant equipment.

Speaker 2

Through these collaborations, NexNav will demonstrate interoperability with commercial five gs infrastructure and device platforms and existing 3GPP standards to rapidly develop three d PNT capabilities powered by five gs. Before turning over to Chris, I want to highlight a key addition to our leadership team. In February, Renee Gregory joined Nxt Ave as VP of Regulatory Affairs, leading our FCC approval and compliance efforts. With twenty plus years of experience across government and the private sector, she's held senior advisory roles at the White House, NTIA and FCC. We are thrilled to have her on board working with our top notch team of DC Consultants to help advance FCC engagement and address national security needs.

Speaker 2

And finally, an exciting development for our capital structure. We also announced today that we have signed a note purchase agreement for a private offering of $190,000,000 led by EMCOR Capital and Fortress Investment Group alongside other new and existing investors. We look forward to benefiting from their wide ranging expertise across strategy, finance and national security. 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.

Speaker 2

Chris will provide more details on this shortly. As we look ahead, Naxnab is committed to advancing cutting edge geolocation 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 terrestrial GPS backup, strong national security focus from the new administration and continued industry collaboration, we are well positioned for momentum in 2025. Our team remains focused on executing our strategic roadmap and driving innovation in geolocation technology.

Speaker 2

With that, let me turn things over to Chris for a review of our financials. Chris?

Speaker 3

Thanks, Mary, 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 Marianne just referenced. Beginning with the top line, Naxnab's revenue in the fourth quarter was $1,900,000 a $700,000 increase from $1,200,000 in the prior year period. For the twelve month period, revenue was $5,700,000 a $1,800,000 increase from $3,900,000 in 2023. The increase in both the three and twelve month period was primarily driven by our previously announced one year DOT contract and a one time license fee earned in the fourth quarter of our soft GPS technology.

Speaker 3

Operating expenses for the fourth quarter were $16,700,000 down approximately $4,500,000 versus the same period last year. Operating expenses included $1,300,000 in depreciation and amortization and $2,700,000 in equity compensation compared to $1,300,000 in depreciation and amortization and $9,200,000 in equity compensation in the fourth quarter of twenty twenty three. In the twelve month period, operating expenses were $65,800,000 as compared to $67,400,000 in 2023. Excluding stock based compensation expenses and depreciation and amortization, operating expenses were $46,700,000 in 2024 and $40,700,000 in 2023. Net loss for the fourth quarter was $32,300,000 which included a 14,900,000 loss associated with the change in the fair value of warrants and liability associated with the Telesource asset purchase agreement.

Speaker 3

This is compared to a net loss of $16,400,000 in the fourth quarter of twenty twenty three, which included a gain on the change in the fair value of our warrant liability of $5,700,000 For the full year, net loss was $101,900,000 including a $32,200,000 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 Telesource asset purchase agreement, compared to a net loss of $71,700,000 in the full year of 2023, including $4,100,000 associated with the change in the fair value of warrant liability. Turning to our balance sheet, we finished the quarter with $80,100,000 in cash, cash equivalents and short term investments. This is a result of our continued disciplined use of cash and we enjoyed the benefit of $3,500,000 in proceeds from additional warrant exercises in the quarter. At December 31, we had $54,600,000 in debt net of unamortized discount attributed to transaction costs and the issuance of warrants with a gross value of $70,000,000 As we mentioned in the past, we continue to carefully manage our use of capital, taking a disciplined approach to any spend. Now before wrapping up, I want to provide some additional detail of the just signed note purchase agreement.

Speaker 3

This agreement reflects our prudent long term approach to liquidity. As Maryam 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 objectives in 2025 and beyond. The agreements for a private offering of $190,000,000 of 5% redeemable senior secured convertible notes maturing on 06/30/2028. Approximately $70,000,000 of the proceeds from this issue will be used to redeem NextNav's existing 10% senior secured notes due 12/01/2026.

Speaker 3

The new notes will have a conversion price of $12.56 per share based on a 20% premium to the trailing ten day closing price average prior to March 11. The new notes may not be redeemed for one year, after which new notes will be redeemable if NextNav stock is greater than 160% of the new notes conversion price. Conversion will be at the option of the noteholder. The company is providing a conditional notice of redemption to redeem the existing 10% notes at 101 percent 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 EMCOR and Fortress, including 1,500,000.0 shares of ExNav common stock, to each exercisable at $20 per share, warrants to purchase 950,000 shares of common stock at an exercise price of $17 per share and warrants to purchase 1,450,000.00 shares of common stock at an exercise price of $12.56 per share.

Speaker 3

And again, that's for each of the lead investors in the transaction. The transaction is expected to close on or about 03/31/2025. With that, I'll turn the call back over to the operator for questions. Operator?

Operator

Thank you. And we will now begin the question and answer session. And your first question comes from the line of Mike Crawford with B. Riley Securities. Your line is open.

Speaker 4

Thank you. That's not to digest today. But just to look at the bigger picture, can you talk about what might be capital cost to deploy a five gs network with the timing signal propagated per your IP as you're pursuing in the NPRM? And who might bear this capital cost?

Speaker 2

Hi, Mike. Thanks for the question. As we've said previously in our petition, it will be a five gs operator who will be building this network. And because we are using a standards based five gs PRS solution, we don't see major cost in addition to what the five gs network cost would be for the operator deploy. They add spectrum to their bands all the time, they need five gs spectrum and this is standards based.

Speaker 2

Our solution is software sitting on top of it.

Speaker 4

Right. So could the software sit on top of existing radios and towers or would there need to be all new infrastructure put in by the operator?

Speaker 2

I mean, the operators have existing towers and radio equipment, but every time that an operator adds a new spectrum band, there's new radios to be added. They do this all the time. I mean, they're going to continue to build out more spectrum as capacity demand grows and they're going to continue to add whatever there needs to be added to their existing towers and infrastructure. Our software is completely capable and this is what actually we just demonstrated through our technology trials that it could take an existing five gs PRS based signal that is transmitting from the operator's network as they would deploy any five gs new spectrum and provide accurate positioning and timing.

Speaker 4

Okay. Thank you. And then my one follow-up question would be, what potential uses of capital would you have beyond just, headcount and legal etcetera as you progress toward getting a report in order?

Speaker 2

Chris, do you want to take that one?

Speaker 3

Yes, absolutely. Thanks, Mike. And I think you're getting to some extent, of course, that the financial flexibility that we're building into our balance sheet with this new notes issue that we just signed. Obviously, one of the things that we've been able to achieve is to move the maturity of any potential notes well into mid-twenty twenty eight. But at the same time, we've significantly enhanced the flexibility of capital in our balance sheet.

Speaker 3

That of course provides us with substantial long term liquidity, 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 flexibility. And I'm going to use that word a couple different times there. The other thing that I would highlight, and I think Marian mentioned this, is that our business plan continues to not require the deployment of a network by ourselves. We intend to partner with third parties in the future for network deployment. And so we're not provisioning in advance of like a major network CapEx build out program.

Speaker 4

All right. Thank you very much.

Operator

And ladies and gentlemen, that concludes our question and answer session. I will now turn the conference back over to Maryam Serran for closing remarks.

Speaker 2

Thank you all for joining us today. And as we look ahead, we're committed to advancing geolocation services that will enhance national security, public safety and economic resilience. And we are super excited for 2025 as our momentum propels us forward. We are looking forward to connecting with you next quarter.

Operator

And ladies and gentlemen, this concludes today's call and we thank you for your participation. You may now disconnect.

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