UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from _____ to _____
Commission File Number:
(Exact name of registrant as specified in its charter)
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
There were
NEXTNAV INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2024
Unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q to “NextNav,” the “Company,” “we,” “us,” and “our” include NextNav Inc. and its subsidiaries.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include, but are not limited to, statements regarding our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future, projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, and are not guarantees of future performance. The words “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 does not mean that a statement is not forward-looking. These statements may relate to, but are not limited to: expectations regarding our strategies and future financial performance, including future business plans or objectives, expected functionality of our geolocation services, anticipated timing and level of deployment of our services, including our TerraPoiNT system, anticipated demand and acceptance of our services, prospective performance and commercial opportunities and competitors, the timing of obtaining regulatory approvals, ability to finance our research and development activities, commercial partnership acquisition and retention, products and services, pricing, marketing plans, operating expenses, market trends, revenue, liquidity, cash flows and uses of cash, capital expenditures, and our ability to invest in growth initiatives; our ability to evolve our technology to be compatible with 5G NR (as defined below), and realize the technical benefits of such proposed evolution; our ability to realize the anticipated technical and business benefits associated with the acquisition of NextNav France (as defined below), and any subsequent mergers, acquisitions, or other similar transactions, which may be affected by, among other things, competition, and the ability of the combined business to grow and manage growth profitably; factors relating to our future operations, projected capital resources and financial position, estimated revenue and losses, projected costs and capital expenditures, prospects and plans, including the potential increase in customers on our Pinnacle network, the expansion of our services in Japan through MetCom (as defined below), and expectations about other international markets; our belief that continuing integration of our Pinnacle service into devices and applications will support revenue growth over the coming year; projections of market growth and size, including the level of market acceptance for our services; our ability to adequately protect key intellectual property rights or proprietary technology; our ability to maintain our Location and Monitoring Service (“LMS”) licenses and obtain additional LMS licenses as necessary; our ability to maintain adequate operational financial resources or raise additional capital or generate sufficient cash flows, including the adequacy of our financial resources to meet our operational and working capital requirements for the 12-month period following the issuance of this report and our ability to meet longer term expected future cash requirements and obligations; our ability to develop and maintain effective internal controls; our success in recruiting and/or retaining officers, key employees or directors; expansion plans and opportunities; costs related to being a public company; our ability to maintain the listing of our securities on Nasdaq; macroeconomic factors and their effects on our operations; and the outcome of any known and unknown litigation and regulatory proceedings, as well as assumptions relating to the foregoing.
Forward-looking statements are based on information available as of the date of this quarterly report on Form 10-Q, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
For additional information regarding risk factors, see Part II, Item 1A, “Risk Factors” of this quarterly report on Form 10-Q, and Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023, as well as those otherwise described or updated from time to time in our other filings with the Securities and Exchange Commission (the “SEC”).
Item 1. Financial Statements
NextNav Inc.
CONDENSED Consolidated Balance Sheets
(IN THOUSANDS, EXCEPT SHARE DATA)
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March 31, 2024 (unaudited) |
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December 31, 2023 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable |
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Other current assets |
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Total current assets |
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$ |
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$ |
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Network under construction |
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Property and equipment, net of accumulated depreciation of $ |
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Operating lease right-of-use assets |
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Intangible assets |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Operating lease current liabilities |
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Deferred revenue |
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Total current liabilities |
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$ |
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$ |
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Warrants |
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Operating lease noncurrent liabilities |
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Other long-term liabilities |
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| Long term debt, net of debt issuance cost and discount | ||||||||
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Total liabilities |
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$ |
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$ |
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Stockholders’ equity: |
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Common stock, authorized |
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Additional paid-in capital |
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Accumulated other comprehensive income |
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Accumulated deficit |
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Common stock in treasury, at cost; |
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Total stockholders’ equity |
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$ |
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$ |
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Non-controlling interests |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See accompanying notes.
| 1 |
NextNav INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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Three Months Ended March 31, |
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2024 |
2023 |
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Revenue |
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Operating expenses: |
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Cost of goods sold (exclusive of depreciation and amortization) |
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Research and development |
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Selling, general and administrative |
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Depreciation and amortization |
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Total operating expenses |
$ | $ | ||||||
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Operating loss |
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Other income (expense): |
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Interest income (expense) |
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Change in fair value of warrants |
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Other loss, net |
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Loss before income taxes |
$ | ( |
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Benefit (Provision) for income taxes |
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Net loss |
$ | ( |
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Foreign currency translation adjustment |
( |
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Comprehensive loss |
$ | ( |
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| Net loss | ( |
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Net loss attributable to common stockholders |
$ | ( |
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Weighted average of shares outstanding – basic and diluted |
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| Net loss attributable to common stockholders per share - basic and diluted | $ | ( |
) | $ | ( |
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See accompanying notes.
NEXTNAV INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
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Common Stock |
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Additional Paid-In |
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Accumulated |
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Accumulated Other Comprehensive |
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Treasury stock, |
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Stockholders’ (Deficit) |
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Non- controlling |
Total |
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Shares |
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Value |
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Capital |
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Deficit |
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Income |
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at cost |
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Equity |
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interests |
Equity |
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| Balance, December 31, 2023 | $ | $ | $ | ( |
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) | $ | $ | $ | ||||||||||||||||||||||||
| Vesting of RSUs | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
| Issuance of RSAs | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
| Exercise of common stock options | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Reclassification of warrant liability to Common Stock warrants | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( |
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) | — | ( |
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| Foreign currency translation adjustment | — | — | — | — | ( |
) | — | ( |
) | — | ( |
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| Balance, March 31, 2024 | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||||
See accompanying notes.
| 3 |
NextNav INC.
CONDENSED Consolidated Statements of Changes in Stockholders’ equity
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
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Common Stock |
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Additional Paid-In |
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Accumulated |
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Accumulated Other Comprehensive |
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Treasury stock, |
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Stockholders’ (Deficit) |
Non- controlling |
Total |
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Shares |
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Value |
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Capital |
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Deficit |
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(Loss) |
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at cost |
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Equity | interests |
Equity |
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Balance, December 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
( |
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$ | $ |
$ |
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| Vesting of RSUs | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
| Issuance of RSAs | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
| Exercise of common stock options | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( |
) | — | — | ( |
) | — | ( |
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| Foreign currency translation adjustment | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||||
See accompanying notes.
| 4 |
NextNav INC.
CONDENSED Consolidated Statements of Cash Flows
(UNAUDITED)
(IN THOUSANDS)
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Three Months Ended March 31, |
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2024 |
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2023 |
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Operating activities |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Equity-based compensation |
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Change in fair value of warranty liability |
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Realized and unrealized gain on short term investments |
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Equity method investment loss |
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Asset retirement obligation accretion |
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| Amortization of debt discount | ||||||||
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Other current assets |
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( |
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( |
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Other assets |
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( |
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Accounts payable |
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( |
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Deferred revenue |
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( |
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( |
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Accrued expenses and other liabilities |
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Operating lease right-of-use assets and liabilities |
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Net cash used in operating activities |
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$ |
( |
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$ |
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Investing activities |
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Capitalization of costs and purchases of network assets, property, and equipment |
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( |
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( |
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| Purchase of marketable securities |
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| Sale and maturity of marketable securities | ||||||||
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Purchase of internal use software |
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Net cash (used in) provided by investing activities |
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$ |
( |
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$ |
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Financing activities |
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| Payments towards debt | ( |
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Proceeds from exercise of stock options |
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Net cash provided by (used in) financing activities |
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$ |
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$ |
( |
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Effect of exchange rates on cash and cash equivalents |
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( |
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Net decrease in cash and cash equivalents |
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( |
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( |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Non-cash financing information |
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Capital expenditure included in accounts payable |
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$ |
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$ |
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See accompanying notes.
NextNav INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
For the three months ended March 31, 2024
1. Organization and Business
Principal Business
NextNav Inc. and its consolidated subsidiaries (collectively “NextNav” or the “Company”) deliver next generation positioning, navigation and timing (“PNT”) solutions designed to enable a high-quality, terrestrial complement and backup to the U.S. Global Positioning System (“GPS”). NextNav’s solutions are built on a robust asset platform, including 8 MHz of nearly nationwide wireless spectrum in the Lower 900 MHz band, intellectual property and deployed network systems. The Company, subject to appropriate regulatory approvals, has signed an agreement to acquire licenses for an additional 4MHz of spectrum in the Lower 900MHz band. Additionally, on April 16, 2024 NextNav filed a petition for rulemaking with the FCC to update the Lower 900MHz band plan to utilize a 15MHz nationwide configuration for both PNT and 5G broadband. The Company’s Pinnacle system provides “floor-level” altitude service to any device with a barometric pressure sensor, including most off-the-shelf smartphones. The Company’s TerraPoiNT and NextGen systems are designed to overcome the limitations inherent in the space-based systems through a network of wide area terrestrial location transmitters that broadcast a PNT signal over the Company’s licensed spectrum, with NextGen intended to utilize standards-based 5G broadband technologies.
Since its inception, NextNav has incurred recurring
losses and generated negative cash flows from operations and has primarily
relied upon debt and equity financings to fund its cash requirements. During the three months ended March 31, 2024 and 2023, the Company incurred net losses of $
Managing liquidity and the Company’s cash position is a priority of the Company. The Company continually works to optimize its expenses in light of the growth of its business and adapt to changes in the economic environment. The Company believes that the cash and cash equivalents and marketable securities as of March 31, 2024 will be sufficient to meet its working capital and capital expenditure needs, including all contractual commitments, beyond the next 12 months from the filing of this Quarterly Report on Form 10-Q. The Company believes it will meet longer term expected future cash requirements and obligations through a combination of its existing cash and cash equivalents balances and marketable securities, cash flows from operations, and issuance of equity securities or debt offerings. However, this determination is based upon internal financial projections and is subject to changes in market and business conditions.
2. Summary of Significant Accounting Policies
Basis of Presentation
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in these condensed consolidated financial statements.
Unaudited Interim Financial Information
The condensed consolidated financial statements as of March 31, 2024 are unaudited. These interim financial statements of NextNav have been prepared in accordance with U.S. General Accepted Accounting Principles (“GAAP”) and SEC instructions for interim financial information and should be read in conjunction with NextNav’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”), which the Company filed with the SEC on March 13, 2024.
The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and reflect, in management’s opinion, all adjustments of a normal, recurring nature that are necessary for the fair statement of the Company’s financial position as of March 31, 2024, results of operations for the three months ended March 31, 2024 and 2023, and changes in stockholders’ equity and cash flows for the three months ended March 31, 2024 and 2023, but are not necessarily indicative of the results expected for the full fiscal year or any other period.
There have been no changes to the Company’s significant accounting policies described in the 2023 Form 10-K that have had a material impact on these condensed consolidated financial statements and related notes.
| 6 |
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period and accompanying notes. These estimates include those related to the useful lives and recoverability of long-lived and intangible assets, valuation of common stock warrants, income taxes and equity-based compensation, among others. NextNav bases estimates on historical experience, anticipated results and various other assumptions, including assumptions of future events, it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets, liabilities, equity, revenue and expenses, that are not readily apparent from other sources. Actual results and outcomes could differ materially from these estimates and assumptions.
Cash and Cash Equivalents and Marketable Securities
Cash and cash equivalents include all cash in banks and highly liquid investments with an original maturity of three months or less when purchased. The combined account balances held on deposit at each institution typically exceed Federal Deposit Insurance Corporation (“FDIC”) insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. The Company seeks to reduce this risk by maintaining such deposits with high quality financial institutions that management believes are creditworthy. Further, the Company seeks to minimize its exposure to banking risk by limiting the amount of uninsured deposits and investing its excess cash in U.S. government and government agency bonds, and money market funds.
The Company invests excess cash
primarily in U.S. government and government agency bonds and money market funds,
and began investing in U.S. treasury bills in 2024.
The Company classifies all marketable securities that have stated maturities of
three months or less from the date of purchase as
cash equivalents, and those that have stated maturities of over three months as short-term investments on the Condensed
Consolidated Balance Sheets. The Company determines the appropriate
classification of investments in marketable securities at the time of purchase
and reevaluates such designation at each balance sheet date. Marketable
securities that are held for resale are classified as "trading
securities" and are measured at fair value with the related gains and
losses, including unrealized, recognized in interest income (expense). Marketable
securities not classified as held to maturity or as trading securities are
classified as "available-for-sale securities" and the fair value
option (“FVO”) was elected, for which related gains and losses, including unrealized
gains and losses and interest, are recognized in interest income (expense). The
FVO election allows the Company to account for the marketable securities at
fair value, which is consistent with the manner in which the instruments are
managed. For the three months ended March
31, 2024, the Company recorded $
Revenue
The following table presents the Company’s revenue disaggregated by category and source:
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Three Months Ended March 31, |
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2024 |
2023 |
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(in thousands) |
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Commercial |
$ | $ | ||||||
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Government contracts |
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Total revenue |
$ | $ | ||||||
| 7 |
Contract Balances
Accounts receivable are billed and unbilled amounts related to the Company’s rights to consideration as performance obligations are satisfied when the rights to payment become unconditional but for the passage of time. As of March 31, 2024 and December 31, 2023, the Company’s accounts receivable balances were comprised of $
Contract liabilities relate to amounts billed in advance, or advance consideration received from customers, for which transfer of control of the good or service occurs at a later point in time. As of March 31, 2024 and December 31, 2023, the Company’s contract liabilities were $
Equity-Based Compensation
Measurement of equity-based compensation with employees is based on the estimated grant date fair value of the equity instruments issued. The fair value of stock options is determined using the Black-Scholes option pricing model. The fair value of restricted awards is based on the closing price of NextNav’s common stock on the date of grant. NextNav recognizes equity-based compensation on a straight-line basis over the requisite service period of the grant, which is generally equal to the vesting period. NextNav accounts for forfeitures as they occur.
The following details the amount of stock-based compensation included in cost of goods sold, research and development, and selling, general and administrative expenses:
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Three Months Ended March 31, |
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2024 |
2023 |
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(in thousands) |
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Cost of goods sold |
$ | $ | ||||||
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Research and development |
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Selling, general and administrative |
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Total stock-based compensation expense |
$ | $ | ||||||
Basic and Diluted Net Loss per Share
Basic loss per share (“EPS”) excludes dilution for common share equivalents and is computed by dividing net loss available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is based on the weighted-average number of shares of common stock outstanding during each period, adjusted for the effect of dilutive common share equivalents.
Restricted shares are included in the computation of basic EPS as they vest and are included in diluted EPS, to the extent they are dilutive, determined using the treasury stock method. Outstanding options and warrants are included in the computation of diluted EPS, to the extent they are dilutive, determined using the treasury stock method.
| 8 |
The determination of the diluted weighted average shares is included in the following calculation of EPS:
|
|
Three Months Ended March 31, |
|||||||
|
|
2024 |
2023 |
||||||
|
|
(in thousands, except per share amounts) | |||||||
|
Numerator |
||||||||
|
Net loss attributable to common stockholders |
$ | ( |
) | $ | ( |
) | ||
|
|
||||||||
|
Denominator |
||||||||
|
Weighted average shares – basic and diluted |
||||||||
| Basic and diluted loss per share | $ | ( |
) | $ | ( |
) | ||
The following details anti-dilutive unvested restricted stock units and unvested restricted stock awards, as well as the anti-dilutive effects of the outstanding warrants and stock options:
|
|
Three Months Ended March 31, |
|||||||
|
Antidilutive Shares Excluded |
2024 |
2023 |
||||||
|
|
(in thousands) |
|||||||
|
Warrants |
||||||||
|
Stock Options |
||||||||
|
Unvested Restricted Stock Units |
||||||||
|
Unvested Restricted Stock Awards |
||||||||
Equity Method Investment
The Company applies the equity method of accounting to investments when it has significant influence, but not controlling interest, in the investee. Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions.
The initial carrying value of equity method investment is based on the amount paid to purchase the interest in the investee entity. Subsequently, the investment is increased or decreased by the Company’s proportionate share in the investee’s earnings or losses and decreased by cash distributions from the investee. The Company eliminates from its financial results all significant intercompany transactions to the extent of its ownership interest, including the intercompany portion of transactions with equity method investee. The Company’s share of the investee’s income or loss is recorded on a one quarter lag.
The Company evaluates equity method investment for impairment based upon a comparison of the fair value of the equity method investment to its carrying value, when impairment indicators exist. If the Company determines a decline in the fair value of an equity method investment below its carrying value is other-than-temporary, an impairment is recorded.
Leases
NextNav leases office spaces under non-cancellable leases as well as site leases for towers and shelters under operating leases related to its network. Site leases are entered into throughout the United States under which NextNav receives the rights to install equipment used to transmit its services over its licensed spectrum. The Company, at the inception of the contract, determines whether a contract is or contains a lease based on assessment of the terms and conditions of the contract. The Company classifies leases with contractual terms longer than twelve months as either operating or finance. The Company has elected not to recognize lease assets and liabilities for its short-term leases, which are defined as leases with an initial term of twelve months or less.
| 9 |
The Company’s leases may include options to extend or terminate the lease. The option to renew may be automatic, at the option of NextNav or mutually agreed to between the landlord and NextNav. Lease terms include the non-cancellable term and periods under options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.
The Company’s lease agreements generally contain lease and non-lease components. Payments under the lease arrangements are primarily fixed. Non-lease components primarily include payments for utilities and maintenance. The Company combines fixed payments for non-lease components with lease payments and accounts for them together as a single lease component which increases the amount of the Company’s lease assets and liabilities. Certain lease agreements contain variable payments, which are expensed as incurred and not included in the lease assets and liabilities. These amounts include payments for common area maintenance.
Lease assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is the Company’s incremental borrowing rate, because the interest rate implicit in the Company’s leases is not readily determinable. The Company’s incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. Lease assets are reduced by landlord incentives, plus any direct costs from executing the leases or lease prepayments reclassified from “Other current assets” upon lease commencement. Operating lease expense is recognized on a straight-line basis over the lease term. Monthly rent expense includes any site related utility payments or other fees such as administrative or up-front fees contained in the lease agreements that are determinable upon execution of the lease agreement.
Acquired finite-lived intangible assets
Acquired finite-lived intangible assets primarily includes proprietary technology and software. See Note 4 — Intangibles.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in a business combination. Goodwill is not amortized but is tested for impairment annually in the fourth quarter or more frequently if events or changes in circumstances indicate that the asset may be impaired. The Company operates as one reporting unit. When testing goodwill for impairment, the Company may first perform an optional qualitative assessment. If the Company determines it is not more likely than not the reporting unit’s fair value is less than its carrying value, then no further analysis is necessary. If the Company determines that it is more likely than not that the fair value of its reporting unit is less than its carrying amount, then the quantitative impairment test will be performed. Under the quantitative impairment test, if the carrying amount of the Company’s reporting unit exceeds its fair value, the Company will recognize an impairment loss in an amount equal to that excess but limited to the total amount of goodwill.
|
|
Three Months Ended March 31, |
|||||||
|
|
2024 | 2023 | ||||||
|
|
(in thousands) |
|||||||
|
Beginning Balance |
$ | $ | ||||||
|
Changes in foreign exchange rates |
( |
) | ||||||
|
Ending Balance |
$ | $ | ||||||
Long term debt
In conjunction with the issuance of senior secured notes in May and July of 2023, the Company issued warrants to the lenders. The Company allocated the proceeds from its debt issuance to long term debt and equity classified warrants based on relative fair value as determined by the Discounted Cash Flow approach and Monte Carlo simulation model, respectively. The portion of proceeds allocated to equity-classified warrants and direct debt issuance costs are classified as debt discounts. The carrying value of long term debt in the Company’s condensed consolidated balance sheet consists of principal amount of debt, net of debt discounts. Debt discounts are amortized to interest expense based on the related debt agreements primarily using the effective interest method.
| 10 |
Non-controlling Interests
The non-controlling interest in the Company’s condensed consolidated financial statements represents the warrants for Nestwave, SAS (as subsequently renamed, “NextNav France”) shares that were owned by the selling shareholders of NextNav France. Holders of the warrants do not have the right to income or obligation to losses, and the Company did not attribute any net loss to the non-controlling interests for the three months ended March 31, 2024 and 2023.
Foreign Currency Translation
The functional currency of NextNav’s foreign subsidiaries is generally the local currency. Assets and liabilities are translated into U.S. dollars at the exchange rate in effect at the Condensed Consolidated Balance Sheet date. Operating accounts are translated at an average rate of exchange for the respective accounting periods. Translation adjustments resulting from the process of translating foreign currency financial statements into U.S. dollars are reported as a component of accumulated other comprehensive loss. Transaction gains and losses reflected in the functional currencies are charged to income or expense at the time of the transaction.
Net transaction gains (losses) from foreign currency contracts recorded in the Condensed Consolidated Statements of Comprehensive Loss were immaterial for the three months ended March 31, 2024 and 2023. The only component of other comprehensive loss is currency translation adjustments for all periods presented. No income tax expense was allocated to the currency translation adjustments.
Recent Accounting Developments Not Yet Adopted
During the fourth quarter of 2023, the Financial Accounting Standards Board issued two Accounting Standards Updates (“ASUs”) that require additional disclosures related to reportable segments under ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”) and income taxes under ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-07 is effective for the Company's annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted. It requires the Company to disclose information about significant expenses on an interim and annual basis for each reportable segment. ASU 2023-09 is effective for the Company's annual periods beginning January 1, 2026 with early adoption permitted, and requires the Company to disclose additional information on the rate reconciliation and income taxes paid. The Company is currently evaluating the potential effect that the updated standards will have on the financial statement disclosures.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed consolidated financial statements.
3. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
|
|
|
March 31, 2024 |
|
|
December 31, 2023 |
| ||
|
|
|
(in thousands) |
| |||||
|
Accrued salary and other employee liabilities |
|
$ |
|
|
|
$ |
|
|
|
Accrued legal and professional services |
|
|
|
|
|
|
|
|
| Accrued interest | ||||||||
| Asset purchase agreement liability(1) | ||||||||
|
Other accrued liabilities |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
(1)
4. Intangibles
Intangible assets as of March 31, 2024 and December 31, 2023 consist of following (in thousands):
| March 31, 2024 |
December 31, 2023 | |||||||||||||||||||||||
| Gross Amount |
Accumulated Amortization |
Net Carrying Value | Gross Amount |
Accumulated Amortization |
Net Carrying Value | |||||||||||||||||||
| Indefinite-Lived intangible assets | $ |
$ | $ | $ | $ | $ | ||||||||||||||||||
| Acquired Software | ||||||||||||||||||||||||
| Acquired Technology | ||||||||||||||||||||||||
| Internal Use Software | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
The weighted average remaining useful lives of acquired software and acquired technology were
Amortization expense on intangibles assets was $
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 and thereafter | ||||
| $ |
5. Asset Purchase Agreement
On March 7, 2024, the Company and its wholly-owned subsidiary Progeny LMS, LLC entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Telesaurus Holdings GB and Skybridge Spectrum Foundation to acquire (1) certain Multilateration Location and Monitoring Service licenses (the “M-LMS Licenses”) issued by the Federal Communications Commission (“FCC”) and (2) rights to a petition for reconsideration, dated December 20, 2017, which, if granted, may reinstate additional M-LMS Licenses owned by the sellers and terminated by the FCC in 2017 (the "Transaction"). The closing (“Closing”) of the Transaction is subject to customary conditions as well as the approval of the Superior Court of the State of California, County of Alameda (“Alameda Court Approval”) and approval of the FCC of the application seeking the transfer and assignment of the M-LMS Licenses to the Company by final order (“FCC Approval”) and will occur upon the assignment of the M-LMS Licenses following the FCC Approval.
The consideration for the Transaction is payable as follows:
· $
· $
· $
The Company subsequently received the Alameda Court Approval on March 28, 2024 and accrued the $
The Asset Purchase Agreement provides for contingent consideration in the amount of $
6. Equity Method Investment
As of March 31, 2024, the Company’s total ownership of MetCom Inc., a privately-owned Japanese joint stock company (kabushiki kaisha) (“MetCom”), consisted of
The Company holds a warrant (the “MetCom Warrant”) issued by MetCom which entitles the Company to purchase additional shares at an exercise price of JPY
7. Fair Value
NextNav uses observable and unobservable inputs to determine the value of its assets and liabilities recorded at fair value. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. The three-tier hierarchy for inputs used to measure fair value, which prioritizes the inputs used in the methodologies of measuring fair value for assets and liabilities, where applicable, is as follows:
- Level 1 — Quoted prices in active markets for identical assets or liabilities
- Level 2 — Observable inputs other than quoted prices in active markets for identical assets and liabilities
- Level 3 — No observable pricing inputs in the market
Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. NextNav’s assessment of the significance of a particular input to the fair value measurements requires judgment and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy. NextNav effectuates transfers between levels of the fair value hierarchy, if any, as of the date of the actual circumstance that caused the transfer.
The following table presents the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis:
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
| ||||
|
|
|
(in thousands) |
| |||||||||||||
|
March 31, 2024 |
|
|
|
|
|
|
|
|
|
|
||||||
| Cash and Cash Equivalents - Money Market Funds | $ | $ | $ | $ | ||||||||||||
| Cash and Cash Equivalents - Available-for-sale debt securities with fair value option election | ||||||||||||||||
| Short term investments - Available-for-sale debt securities with fair value option election | ||||||||||||||||
|
Private Placement Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash and Cash Equivalents - Money Market Funds | $ | $ | $ | $ | ||||||||||||
| Cash and Cash Equivalents - Trading debt securities | ||||||||||||||||
| Short term investments - Trading debt securities | ||||||||||||||||
|
Private Placement Warrants |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
| 13 |
The carrying values of cash and cash equivalents, accounts payable, accrued expenses, amounts included in other current assets, and current liabilities that meet the definition of a financial instrument, approximate fair value due to their short-term nature.
Assets, liabilities, and equity instruments that are measured at fair value on a nonrecurring basis include fixed assets and intangible assets. The Company recognizes these items at fair value when they are considered to be impaired or upon initial recognition. The fair value of these assets and liabilities are determined with valuation techniques using the best information available and may include quoted market prices, market comparables and discounted cash flow models.
Level 3 Liabilities
The Company engaged a third-party valuation firm to assist with the fair value analysis of the Private Placement Warrants (as defined below). The analysis used commonly accepted valuation methodologies and best practices to determine the fair value of the equity, in accordance with fair value standards and U.S. GAAP. For the Private Placement Warrants that were outstanding as of March 31, 2024 and December 31, 2023, NextNav used a Monte Carlo simulation model. The following table shows the assumptions used in each respective model:
|
|
|
March 31, 2024 |
|
|
December 31, 2023 |
| ||
|
|
|
Values |
|
|
Values |
| ||
|
Stock Price |
|
$ |
|
|
|
$ |
|
|
|
Strike price |
|
$ |
|
|
|
$ |
|
|
|
Holding Period/Term (years) |
|
|
|
|
|
|
|
|
|
Volatility |
|
|
|
% |
|
|
|
% |
|
Expected dividends |
|
|
|
|
|
|
|
|
|
Risk-Free Rate |
|
|
|
% |
|
|
|
% |
|
Fair value of warrants |
|
$ |
|
|
|
$ |
|
|
The table below provides a reconciliation of the beginning and ending balances for the liabilities measured at fair value using significant unobservable inputs (Level 3).
|
Warrants: |
|
(in thousands) |
| |
|
Balance as of December 31, 2023 |
|
$ |
|
|
|
Fair value adjustment of Private Placement Warrants |
|
|
|
|
| Reclassification of warrant liability to Common Stock warrants | ( |
) | ||
|
Balance as of March 31, 2024 |
|
$ |
|
|
8. Long term debt, net
On May 9, 2023 (the “Initial Closing”), pursuant to the terms of the Note Purchase Agreement (the “NPA”) and Indenture Agreement (the “Indenture”), the Company issued $
Under the NPA, the Lenders had the right, but not the obligation, to purchase additional Notes (the “Additional Notes” and, together with the Original Notes, the “Notes”), on a pro rata basis, in an aggregate principal amount of $
| 14 |
In conjunction with the issuance of Original Notes, the Company issued
The carrying value of the Notes was $
Additional Interests
The Notes are subject to additional interest of up to
Redemption and Early Repayment
The Company may redeem the Notes, in whole or in part, at any time on or after
In the event of certain non-ordinary course asset sales, including sales of certain intellectual property or spectrum licensed by the FCC to the Company or its subsidiaries, the Company must make a mandatory repurchase offer for a portion of the Notes outstanding with the proceeds of such sale, at a price equal to
In the event of a change of control, each holder has the right, at such holder’s option and subject to the limitations set forth in the Indenture, to require the Company to repurchase for cash all or any portion of such holder’s Notes at a price equal to
Debt Covenant Compliance
The Notes are guaranteed on a first lien senior secured basis by NextNav’s domestic subsidiaries and secured by substantially all of the assets of the Company and its domestic subsidiaries.
The Indenture contains customary covenants limiting the ability of the Company and its subsidiaries to incur or guarantee additional indebtedness; pay dividends or distributions on, or redeem or repurchase, capital stock; make certain investments or other restricted payments; sell assets; enter into transactions with affiliates; and merge or consolidate or sell all or substantially all of its assets. These covenants are subject to a number of important and significant limitations, qualifications and exceptions. The Indenture also contains customary events of default. Failure to comply with such covenants could result in an acceleration of the maturity of indebtedness outstanding and additional interest of up to
As of March 31, 2024,
| 15 |
9. Warrants and Warrant Liability
As of March 31, 2024, NextNav had
The Private Placement Warrants are classified as a liability on the Company’s Condensed Consolidated Balance Sheet as of March 31, 2024. During the three months ended March 31, 2024,
Holders of the Public Warrants, Private Placement Warrants and Debt Warrants are entitled to acquire shares of common stock of NextNav. With respect to the Public Warrants and Private Placement Warrants, each whole warrant entitles the registered holder to purchase
NextNav has
The Private Placement Warrants are identical in all respects to the Public Warrants except that, so long as they are held by the current holder or its permitted transferees: (i) they will not be redeemable by NextNav; (ii) they may be exercised by the holders on a cashless basis; and (iii) they are subject to registration rights.
The Company has the right to redeem for cash the applicable pro rata portion of any Debt Warrant on each of May 1, 2025, September 1, 2025 and December 1, 2025, in each case, at a redemption price of $
| 16 |
10. Common Stock
As of March 31, 2024, NextNav had authorized the issuance of
11. Commitments and Contingencies
Litigation and Legal Matters
From time to time, the Company is party to litigation and other legal matters incidental to the conduct of its business. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. The Company accrues liabilities for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. As of March 31, 2024, the Company was not involved in any such matters, individually or in the aggregate, which management believes would have a material adverse effect on the Company’s business, financial condition, results of operations, or cash flows.
12. Income Taxes
The Company computes its year-to-date provision for income taxes by applying the estimated annual effective tax rate to year-to-date pretax income or loss and adjusts the provision for discrete tax items recorded in the period. A valuation allowance has been established against the Company’s U.S. federal and state deferred tax assets, which results in an annualized effective tax rate for the Company’s U.S. operations of
13. Subsequent Events
The Company has completed an evaluation of all subsequent events through the date of this Quarterly Report on Form 10-Q to ensure that these financial statements include appropriate disclosure of events both recognized in the financial statements and events which occurred but were not recognized in the financial statements. The Company has concluded that no subsequent events have occurred that require disclosure.
| 17 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying quarterly unaudited condensed consolidated financial statements and our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”). Our 2023 Form 10-K includes additional information about our significant accounting policies, practices, and the transactions that underlie our financial results, as well as a detailed discussion of the most significant risks and uncertainties associated with our financial condition and operating results. In addition to historical financial information, some of the information contained in the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Actual results and outcomes could differ materially for a variety of reasons. You should review “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this Quarterly Report on Form 10-Q, as well as Item 1A, “Risk Factors” in our 2023 Form 10-K, as well as those otherwise described or updated from time to time in our other filings with the SEC, for a discussion of important factors that could cause our actual results to differ materially from the results described or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are the market leader in delivering resilient, next generation positioning, navigation and timing (“PNT”) solutions designed to complement and back up existing Global Positioning System (“GPS”) and Global Navigation Satellite Systems (“GNSS”) by addressing the limitations and vulnerabilities inherent in space-based systems. Our complementary PNT solutions are built on a deep asset base, which we are evolving to utilize 5G New Radio (“5G NR”) technologies. We expect NextGen, the evolution of our technology platform to 5G NR, to significantly improve the efficiency and flexibility of our operations, technically enabling the delivery of high-quality PNT based on a 5G broadband deployment. Since the inception of NextNav, LLC in 2007, we have secured valuable Federal Communications Commission (“FCC”) licenses for a contiguous 8 MHz band of Lower 900 MHz spectrum covering over 90% of the U.S. population, subject to appropriate regulatory approvals have signed an agreement to acquire licenses for an additional 4MHz of Lower 900MHz spectrum, been granted more than 190 patents related to our systems and services, and standardized our TerraPoiNT technology in 3GPP, the global telecommunications standards-setting body.
On April 16, 2024 we petitioned the Federal Communications Commission (the “FCC”) to commence a rule making to update the Lower 900MHz band plan to allow the Company to utilize a 15MHz nationwide configuration for both PNT and 5G broadband. The Company believes that modernizing the Lower 900 MHz Band will simultaneously enable a high-performing terrestrial PNT network to complement and back up GPS, a critical national security imperative, and add 5G mobile broadband capacity, a substantial public interest benefit. NextNav’s NextGen technology will allow one or more partners to integrate our Lower 900MHz spectrum into their 5G networks, while NextNav implements, operates and manages additional PNT-optimized infrastructure over the 5G network.
We currently deliver differentiated PNT solutions through our network-based Pinnacle and TerraPoiNT solutions. Our Pinnacle service provides accurate altitude to any device with a barometric pressure sensor, including most off-the-shelf smartphones., We launched our Pinnacle network in partnership with AT&T Services, Inc. (“AT&T”) for FirstNet®, the nationwide, interoperable public safety broadband network, and our network covers over 90% of commercial structures over three stories in the U.S. In addition to public safety applications and FirstNet®, our network is being used for enhanced 911 (“E911”) by Verizon Communications, Inc. (“Verizon”), and a growing set of devices operating on the remaining national cellular network providers. Our Pinnacle network is also an important component of our PNT resiliency services, and is being evaluated as a persistent PNT characterization platform.
Our TerraPoiNT systems is a terrestrially-based network designed to address the limitations and vulnerabilities inherent in space-based PNT systems, and our NextGen technology, through the adoption of 5G NR, will simultaneously support both PNT and 5G broadband capabilities. Space-based PNT systems transmit a faint, unencrypted signal, which is often unavailable indoors, distorted in urban areas, and vulnerable to both jamming and spoofing. TerraPoiNT and its NextGen evolution overcome these limitations through the terrestrial transmission of a PNT signal on licensed Lower 900 MHz spectrum. Unlike space-based signals, the TerraPoiNT and NextGen signals can be reliably received indoors and in urban areas, are difficult to jam or spoof, and can support robust authentication. TerraPoiNT and NextGen signals can embed Pinnacle information to provide a full 3D PNT solution, and can be configured to provide NIST timing distribution services. Because our NextGen technology will be built on 5G NR, we expect significantly increased geographic coverage, more rapid network availability and expanded device availability for PNT services when combined with one or more 5G broadband partners’ networks. We believe that these capabilities are an essential complement and backup in the event of GPS disruptions, and are a critical need due to the economy’s reliance on GPS for location and precision timing. GPS resiliency is increasingly a U.S. national security priority, and is rising in priority in the European Union, non-European Union countries in Eastern Europe and in other parts of the world due to both the demonstrated vulnerability and lack of local control of space-based signals and systems, highlighted by recent events in Ukraine, the Middle East and elsewhere. Critical infrastructure, including communications networks and power grids, require a reliable GPS signal for accurate timing. A failure of GPS could be catastrophic, and there is no comprehensive, terrestrial backup that is widely deployed today.
Simultaneously, demand for wireless data services continues to grow. The backbone of wireless data services, electromagnetic spectrum, is a finite resource. Our spectrum licenses in the Lower 900 MHz band are referred to as “low-band spectrum”. There is a finite amount of low-band spectrum available, and it has favorable coverage characteristics compared to higher frequencies, including the ability to provide services indoors and at greater distances. These characteristics result in its ability to be used for coverage and to be deployed more economically, with higher-frequency spectrum often used to provide additional capacity in targeted locations. Our transition to 5G NR as the basis for our PNT services will provide a technical capability for simultaneous broadband data in our band, in addition to our PNT services, and, subject to appropriate regulatory approvals, may allow us to utilize our spectrum to help meet the continued, growing demand for wireless data capacity while making more efficient use of our Lower 900MHz spectrum licenses.
As of March 2024, TerraPoiNT is deployed and available, with metro-wide service in the San Francisco Bay Area and select services available in 92 total markets nationally. It is also in use by the National Aeronautics and Space Administration (“NASA”) at its Langley Research Center in Hampton, VA for drone operations research and at its Ames facility in Mountain View, CA, leveraging our network in the Bay Area.
On October 31, 2022, we acquired Nestwave, SAS, a French société par actions simplifiée (as subsequently renamed, “NextNav France”), a privately held global leader in low-power geolocation, and completed integrating the NextNav France team into our existing engineering and technology organization during 2023. NextNav France provides advanced geolocation solutions to IOT modem and digital signal processor vendors and end IOT users. We believe that the combination of our technology with NextNav France’s LTE/5G capabilities will assist us in evolving our system to align with 5G NR.
NextNav France’s intellectual property also included a “soft GPS” capability, allowing GPS processing on LTE and 5G NR chipsets, reducing the cost and power requirements for certain types of GPS services for IOT devices. We have licensed this technology to chipset vendors, including a global Tier 1 LTE and 5G NR modem vendor. We expect to start to see the results of these licensing arrangements in 2024.
Macroeconomic Factors
We are aware that network deployment projects are experiencing delays in schedules and potential cost increases due to a tight labor supply in the field services market. While the impact of this supply constraint is not material to our network projects at this time, we continue to carefully manage labor and materials supply matters. Additionally, there is an increased risk of financial market disruption. Management continues to actively monitor our financial condition, liquidity, operations, suppliers, industry and workforce. We expect these macroeconomic factors and their effects on our operations to continue through the remainder of 2024.
Key Components of Results of Operations
Revenue
We have generated limited revenue since our inception. We derive our revenue from PNT products and services, including “floor-level” altitude location data, and related products and services. Our revenue includes revenue generated through services contracts with wireless carriers, services with applications developers, technology demonstration, assessment and support contracts with government customers, sales of equipment, and licensing of proprietary technology. We recognize revenue when an arrangement exists, services, equipment or access to licensed technology are delivered, the transaction price is determined, the arrangement has commercial substance, and collection of consideration is probable.
Operating Expense
Cost of Goods Sold
Cost of goods sold (“COGS”) consist of personnel-related expenses, including salaries, benefits and stock-based compensation, and allocated facility costs for our operations and manufacturing teams. COGS also includes expenses for site leases, cost of equipment, and professional services related to the maintenance of the equipment at each leased site. We expect our operations costs to increase for the foreseeable future as we continue to invest in our Pinnacle and TerraPoiNT networks in domestic U.S. and international markets.
Research and Development
Research and development expenses consist of personnel-related expenses, including salaries, benefits and stock-based compensation, and allocated facility costs for our research and development functions. Research and development costs also include outside professional services for software and hardware development, cloud hosting costs, and software licensing costs. We expect our research and development costs to increase for the foreseeable future as we continue to invest in research and development for our current and future products.
Selling, General and Administrative
Selling, general and administrative expenses consist of personnel-related expenses, including salaries, benefits and stock-based compensation, and allocated facility costs for our business development, marketing, corporate, executive, finance, legal, human resources, IT and other administrative functions. Selling, general and administrative expenses also include expenses for outside professional services, including legal, auditing and accounting services, recruitment expenses, travel expenses and certain non-income taxes, insurance and other administrative expenses.
We expect our selling, general and administrative expenses to increase for the foreseeable future with the growth of our business, and as a result of operating as a public company, including compliance with the rules and regulations of the SEC, legal, audit, and additional insurance expenses, investor relations activities, and other administrative and professional services. As a result, we expect our selling, general and administrative expenses will increase in absolute dollars, subject to fluctuations in the volume of stock-based compensation granted, but may fluctuate as a percentage of total revenue over time.
Depreciation and Amortization
Depreciation and amortization expense results from depreciation and amortization of our property and equipment and intangible assets that is recognized over their estimated useful lives.
Interest Income (Expense)
Interest income consists of interest earned from our cash and cash equivalents balance and on marketable securities. Interest expense relates to interest and amortization of debt discounts on our senior secured notes.
Other Income (Expense)
Other income (expense) consists of miscellaneous non-operating items, such as change in fair value of warrants, equity method income (loss), and foreign currency gains (losses).
Results of Operations
The following table sets forth our statements of operations for the periods indicated:
|
|
|
Three months ended March 31, |
||||||
|
|
|
2024 |
|
|
2023 |
|||
|
|
|
(in thousands) |
||||||
|
Revenue |
|
$ |
1,046 |
|
|
$ |
830 |
|
|
Operating expense: |
|
|
|
|
|
|
|
|
|
Cost of goods sold (1) |
|
|
2,761 |
|
|
|
3,023 |
|
|
Research and development (1) |
|
|
4,670 |
|
|
|
4,578 |
|
|
Selling, general and administrative (1) |
|
|
8,446 |
|
|
|
6,054 |
|
|
Depreciation and amortization |
|
|
1,319 |
|
|
|
1,125 |
|
|
Total operating expenses |
|
|
17,196 |
|
|
|
14,780 |
|
|
Operating loss |
|
|
(16,150 |
) |
|
|
(13,950 |
) |
|
Interest income (expense) |
|
|
(2,168 |
) |
|
|
469 |
|
|
Other expense |
|
|
(13,248 |
) |
|
|
(2,881 |
) |
|
Loss before income taxes |
|
|
(31,566 |
) |
|
|
(16,362 |
) |
|
Benefit (Provision) for income taxes |
|
|
(44 |
) |
|
|
13 |
|
|
Net loss |
|
$ |
(31,610 |
) |
|
$ |
(16,349 |
) |
|
(1) |
Cost of goods sold, research and development, and selling, general and administrative expense for the periods do not include depreciation and amortization, which is presented separately in the Condensed Consolidated Statements of Comprehensive Loss, but include stock-based compensation as follows: |
| 20 |
|
|
|
Three months ended March 31, |
||||||
|
|
|
2024 |
|
|
2023 |
|||
|
|
|
(in thousands) |
||||||
|
Cost of goods sold |
|
$ |
73 |
|
|
$ |
538 |
|
|
Research and development |
|
|
1,508 |
|
|
|
1,600 |
|
|
Selling, general and administrative |
|
|
2,663 |
|
|
|
1,728 |
|
|
Total stock-based compensation expense |
|
$ |
4,244 |
|
|
$ |
3,866 |
|
Comparison of the Three Months Ended March 31, 2024 and 2023
Revenue
|
|
|
Three months ended March 31, |
|
|
|
|
|
|
| |||||||
|
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
| ||||
|
|
|
(in thousands) |
| |||||||||||||
|
Revenue |
|
$ |
1,046 |
|
|
$ |
830 |
|
|
$ |
216 |
|
|
26.0 |
% | |
Revenue increased by $0.2 million, or 26.0%, to $1.0 million for the three months ended March 31, 2024 from $0.8 million for the three months ended March 31, 2023. The increase was driven by an increase in recurring service revenue from technology and services contracts with commercial customers. For the three months ended March 31, 2024, one customer accounted for 75% of total revenue and another customer accounted for 14% of total revenue. For the three months ended March 31, 2023, one customer accounted for 86% of total revenue.
Operating Expense
Cost of Goods Sold (COGS)
|
|
|
Three months ended March 31, |
|
|
|
|
|
|
| |||||||
|
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
| ||||
|
|
|
(in thousands) |
| |||||||||||||
|
COGS |
|
$ |
2,761 |
|
|
$ |
3,023 |
|
|
$ |
(262 |
) |
|
|
(8.7) |
% |
COGS decreased by $0.3 million, or 8.7%, to $2.8 million for the three months ended March 31, 2024 from $3.0 million for the three months ended March 31, 2023. The decrease was primarily driven by a $0.5 million decrease in stock-based compensation, and a $0.1 million decrease in outside consulting expenses. The decreases were partially offset by a $0.2 million increase in site rent expense due to deployment of new sites after the first quarter of 2023, and a $0.1 million increase in payroll-related expenses.
Research and Development
|
|
|
Three months ended March 31, |
|
|
|
|
|
|
| |||||||
|
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
| ||||
|
|
|
(in thousands) |
| |||||||||||||
|
Research and development |
|
$ |
4,670 |
|
|
$ |
4,578 |
|
|
$ |
92 |
|
|
2.0 |
% | |
Research and development expenses increased by $0.1 million, or 2.0%, to $4.7 million for the three months ended March 31, 2024 from $4.6 million for the three months ended March 31, 2023. The increase was primarily driven by a $0.4 million increase in payroll-related expenses driven by headcount. The increases were partially offset by a $0.1 million decrease in software license expenses, a $0.1 million decrease in outside consulting expenses, and $0.1 million decrease in stock-based compensation.
| 21 |
Selling, General and Administrative
|
|
|
Three months ended March 31, |
|
|
|
|
|
|
| |||||||
|
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
| ||||
|
|
|
(in thousands) |
| |||||||||||||
|
Selling, general and administrative |
|
$ |
8,446 |
|
|
$ |
6,054 |
|
|
$ |
2,392 |
|
|
39.5 |
% | |
Selling, general and administrative expenses increased by $2.4 million, or 39.5%, to $8.4 million for the three months ended March 31, 2024 from $6.1 million for the three months ended March 31, 2023. The increase was primarily driven by a $1.1 million increase in payroll-related expenses driven by headcount, a $0.9 million increase in stock-based compensation, a $0.4 million increase in professional services, a $0.1 million increase in outside consulting expenses, and a $0.1 million increase in other operational expenses. The increases were partially offset by a $0.2 million decrease in directors’ and officers’ insurance, and a $0.1 million decrease in marketing and recruiting cost.
Depreciation and Amortization
|
|
|
Three months ended March 31, |
|
|
|
|
|
|
| |||||||
|
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
| ||||
|
|
|
(in thousands) |
| |||||||||||||
|
Depreciation and amortization |
|
$ |
1,319 |
|
|
$ |
1,125 |
|
|
$ |
194 |
|
|
17.2 |
% | |
Depreciation and amortization expenses increased by $0.2 million, or 17%, to $1.3 million for the three months ended March 31, 2024 from $1.1 million for the three months ended March 31, 2023. The increase in depreciation and amortization expense is primarily attributable to placing TerraPoiNT network assets in service after the first quarter of 2023.
Interest Income (Expense)
|
|
|
Three months ended March 31, |
|
|
|
|
|
|
| |||||||
|
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
| ||||
|
|
|
(in thousands) |
| |||||||||||||
|
Interest income (expense) |
|
$ |
(2,168 |
) |
|
$ |
469 |
|
$ |
(2,637 |
) |
|
|
(562.3 |
)% | |
Interest expense for the three months ended March 31, 2024 was $3.2 million whereas interest income was $1.0 million resulting in net interest expense of $2.2 million for the three months ended March 31, 2024 compared with interest income of $0.5 million for the three months ended March 31, 2023. The increase in interest expense was due to interest and amortization of debt discounts on our senior secured notes issued during second and third quarters of 2023.
Other Expense
|
|
|
Three months ended March 31, |
|
|
|
|
|
|
| |||||||
|
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
| ||||
|
|
|
(in thousands) |
| |||||||||||||
|
Other expense |
|
$ |
(13,248 |
) |
|
$ |
(2,881 |
) |
|
$ |
(10,367 |
) |
|
|
359.8 |
% |
Other expense was $13.2 million for the three months ended March 31, 2024 compared with other expense of $2.9 million for the three months ended March 31, 2023. The change was primarily driven by the change in the fair value of warrants.
| 22 |
Liquidity and Capital Resources
We have incurred losses since our inception and to date have generated only limited revenue. We have primarily relied upon debt and equity financings to fund our cash requirements. During the three months ended March 31, 2024 and 2023, we incurred net losses of $31.6 million and $16.3 million, respectively. During the three months ended March 31, 2024, our net cash used in operating activities and investing activities was $7.0 million and $2.1 million, respectively. During the three months ended March 31, 2023, our net cash used in operating activities and investing activities was $7.4 million and $4.0 million, respectively. As of March 31, 2024, we had cash and cash equivalents and marketable securities of $79.2 million and an accumulated deficit of $791.8 million. We expect to incur additional losses and higher operating expenses for the foreseeable future. Our primary use of cash is to fund our operations as we continue to grow our business. We will require a significant amount of cash for expenditures as we invest in ongoing research and development and our PNT networks.
Managing liquidity and our cash position is a priority of ours. We continually work to optimize our expenses in light of the growth of our business, and adapt to changes in the economic environment. We believe that our cash and cash equivalents and marketable securities as of March 31, 2024 will be sufficient to meet our working capital and capital expenditure needs, including all contractual commitments, beyond the next 12 months from the filing of this Quarterly Report on Form 10-Q. We believe we will meet longer term expected future cash requirements and obligations through a combination of our existing cash and cash equivalents balances and marketable securities, cash flows from operations, and issuance of equity securities or debt offerings. However, this determination is based upon internal financial projections and is subject to changes in market and business conditions.
In 2023, we issued $70.0 million in aggregate principal amount of senior secured notes with a fixed interest rate of 10% to the lenders thereto. Such notes will mature on December 1, 2026 with interest payable semi-annually in arrears on June 1 and December 1 of each year. We may elect, at our sole discretion, to pay up to 50% of the accrued and unpaid interest on the senior secured notes due with our common stock. Refer to Note 8 to our condensed consolidated financial statements for the three months ended March 31, 2024 included elsewhere in this Quarterly Report on Form 10-Q. Since the end of first quarter and as of May 03, 2024, 7.7 million of Debt Warrants were exercised for an aggregate of $16.6 million in cash.
Cash Flows
The following table summarizes our cash flows for the period indicated:
|
|
|
Three Months Ended March 31, |
| |||||
|
|
|
2024 |
|
|
2023 |
| ||
|
|
|
(in thousands) |
| |||||
|
Net cash used in operating activities |
|
$ |
(6,985 |
) |
|
$ |
(7,427 |
) |
|
Net cash (used in) provided by investing activities |
|
|
(2,113 |
) |
|
|
4,016 |
|
|
Net cash provided by (used in) financing activities |
|
|
516 |
|
|
(1 |
) | |
| 23 |
Cash Flows from Operating Activities
Our cash flows used in operating activities are significantly affected by the growth of our business and are primarily related to research and development, sales and marketing, and selling, general and administrative activities. Our operating cash flows are also affected by our working capital needs to support growth in personnel-related expenditures and fluctuations in accounts payable and other current assets and liabilities.
Net cash used in operating activities during the three months ended March 31, 2024 was $7.0 million, resulting primarily from a net loss of $31.6 million adjusted for non-cash charges of $4.2 million for stock-based compensation, non-cash expense of $13.2 million for change in the fair value of warrant liability, $1.3 million for depreciation and amortization, and $1.4 million for amortization of debt discount. Additionally, there was a net increase in operating liabilities of $4.4 million.
Net cash used in operating activities during the three months ended March 31, 2023 was $7.4 million, resulting primarily from a net loss of $16.3 million adjusted for non-cash charges of $3.9 million for stock-based compensation, non-cash expense of $2.8 million for change in the fair value of warrant liability, $1.1 million for depreciation and amortization and $0.1 million for equity method investment loss. Additionally, there was a net decrease in operating assets of $1.0 million.
Cash Flows from Investing Activities
Net cash used by investing activities during the three months ended March 31, 2024 was $2.1 million, representing the purchase of marketable securities, net of sale and maturity of marketable securities, and cash used for property and equipment primarily related to the deployment of TerraPoiNT network and internal use software.
Net cash provided by investing activities during the three months ended March 31, 2023 was $4.0 million, representing proceeds from the sale and maturity of marketable securities, partially offset by cash used for property and equipment primarily related to the deployment of the Pinnacle and TerraPoiNT network and internal use software.
Cash Flows from Financing Activities
Net cash provided by financing activities during the three months ended March 31, 2024 was $0.5 million, primarily reflecting cash proceeds from exercise of common stock options.
Net cash used in financing activities during the three months ended March 31, 2023 was $1 thousand primarily reflecting repayment of debt partially offset by cash proceeds from exercise of common stock options.
Critical Accounting Policies and Significant Management Estimates
For a discussion of our critical accounting policies and estimates, please refer to Item 7 under Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2023 Form 10-K and Note 2 to our condensed consolidated financial statements for the three months ended March 31, 2024 included elsewhere in this Quarterly Report on Form 10-Q .
Recently Issued and Adopted Accounting Standards
For information regarding new accounting pronouncements, and the impact of these pronouncements on our condensed consolidated financial statements, refer to Note 2 to our condensed consolidated financial statements for the three months ended March 31, 2024 included elsewhere in this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in our market risks from those disclosed in Part II, Item 7A of the 2023 Form 10-K.
Item 4. Controls And Procedures
Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2024. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of March 31, 2024.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the fiscal quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
In the course of our business, we are involved in litigation and legal matters from time to time. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. We accrue liabilities for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. We do not believe that any such matters, individually or in the aggregate, will have a material adverse effect on our business, financial condition, results of operations, or cash flows.
You should carefully consider all of the information included in this Quarterly Report on Form 10-Q before you decide whether to invest in our securities. Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors described in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with SEC on March 13, 2024, as well as those otherwise described or updated from time to time in our other filings with the SEC. You should consult your own financial and legal advisors as to the risks entailed by an investment in our securities and the suitability of investing in our securities in light of your particular circumstances.
| 26 |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) Unregistered Sales of Equity Securities
None.
(b) Use of Proceeds from Sale of Registered Equity Securities
None.
(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Trading Plans
No other officers (as defined in Rule 16a-1(f) of the Exchange Act) or directors or a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (as such terms are defined in Item 408 of Regulation S-K) during the fiscal quarter ended March 31, 2024.
Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report.
|
Exhibit |
|
Description |
|
3.1* |
|
|
|
3.2* |
|
|
| 10.1# | Asset Purchase Agreement, dated March 7, 2024, by and among NextNav Inc., Progeny LMS, LLC, Telesaurus Holdings GB LLC and Skybridge Spectrum Foundation. | |
| 10.2# | Resale Registration Rights Agreement, dated March 7, 2024, by and between NextNav Inc. and Telesaurus Holdings GB LLC. | |
| 10.3+ | Confidential Separation and General Release Agreement, dated March 11, 2024 , by and between NextNav Inc. and David Knutson. | |
|
31.1 |
|
|
|
31.2 |
|
|
|
32.1** |
|
|
|
101.INS |
|
Inline XBRL Instance Document. |
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document. |
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document. |
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
|
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
|
|
* |
Filed previously. |
|
|
** |
Furnished herewith. |
| # | Certain schedules and exhibits have been omitted in accordance with Item 601(a)(5) of Regulation S-K. The Company will furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request. | |
| + | Indicates management contract or compensatory arrangement. | |
| 28 |
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
NEXTNAV INC. | |
|
|
|
|
|
Date: May 8, 2024 |
By: |
/s/ Christian D. Gates |
|
|
Name: |
Christian D. Gates |
|
|
Title: |
Chief Financial Officer and Principal Financial Officer |
|
|
|
|
|
Date: May 8, 2024 |
By: |
/s/ Sammaad R. Shams |
|
|
Name: |
Sammaad R. Shams |
|
|
Title: |
Chief Accounting Officer and |
| 29 |