NextNav Inc. — Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing; separate fourth-quarter results are not provided in the supplied filing text. The company develops complementary positioning, navigation and timing (PNT) services, including Pinnacle altitude positioning and TerraPoiNT terrestrial PNT, and is working to evolve its platform to 5G New Radio (5G NR).
Financial results and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $3.9 million | $3.9 million |
| Operating expenses | $67.4 million | $69.5 million |
| Operating loss | $63.5 million | $65.5 million |
| Net loss | $71.7 million | $40.1 million |
| Net loss per share, basic and diluted | $0.66 | $0.40 |
| Cash used in operating activities | $35.4 million | $37.1 million |
| Cash and cash equivalents | $81.9 million | $47.2 million |
| Cash, cash equivalents and short-term investments | $85.8 million | $55.4 million |
Revenue declined 1.6%. Commercial revenue increased to $3.8 million from $3.5 million, but lower integration revenue and equipment sales offset the increase. Two customers generated 75% and 10% of 2023 revenue, compared with 83% and 10% in 2022. The filing does not provide a clear headline gross-margin figure.
Net loss widened despite a lower operating loss, primarily reflecting the shift from $24.5 million of other income in 2022 to $4.3 million of other expense in 2023, chiefly due to changes in warrant fair value. Net interest expense was $3.7 million in 2023, compared with $0.9 million of interest income in 2022. Stock-based compensation was $21.8 million, down from $26.5 million.
Investing activities provided $1.1 million in 2023, versus $15.7 million used in 2022; financing activities provided $69.0 million, primarily from debt issuance. At year-end, current assets were $91.2 million and current liabilities were $9.8 million. Management believes available cash and marketable securities will cover working capital, capital expenditures and contractual commitments beyond the next 12 months; this assessment depends on internal projections and market conditions.
The company issued $70 million principal amount of senior secured notes in 2023 at a fixed 10% interest rate, due December 1, 2026. The balance-sheet carrying amount was $48.4 million, net of discounts and issuance costs. The notes are secured, impose operating and financing covenants, and may permit up to half of accrued interest to be paid in common stock. The company reported covenant compliance at year-end.
Material changes and business developments
- Revenue was broadly flat year over year, while operating expenses fell 3.0%. Research and development rose 14% and cost of goods sold rose 8%; lower selling, general and administrative expense, including reduced stock compensation, more than offset those increases.
- Operating cash use improved modestly, but net loss increased substantially because of financing costs and warrant valuation changes.
- TerraPoiNT was deployed metro-wide in the San Francisco Bay Area, with selected services in 92 U.S. markets as of March 2024. Pinnacle coverage includes more than 90% of U.S. commercial buildings over three stories, according to the company.
- Integration of NextNav France was completed during 2023. The company licensed its low-power “soft GPS” technology to chipset vendors and expects licensing arrangements to begin contributing results in 2024.
- On March 7, 2024, after the reporting period, NextNav agreed to acquire additional 900 MHz M-LMS spectrum licenses and related rights for consideration of up to $50 million, subject to court and FCC approvals and other conditions. Some consideration is payable even if the transaction does not close; additional stock consideration depends on future FCC spectrum-use flexibility.
Outlook, risks and contingencies
No quantified revenue, earnings or cash-flow guidance is provided. Management expects continued investment in research and development and network expansion, and expects operating costs to rise over the foreseeable future. It believes greater integration of Pinnacle into devices and applications can support revenue growth, and expects to begin seeing results from NextNav France licensing in 2024. Management said labor-supply constraints and financial-market disruption could continue to affect operations through 2024.
- Adoption and execution: The business has limited revenue and a history of losses; commercial adoption depends heavily on customers, carriers, device makers and application platforms integrating and distributing its services. TerraPoiNT’s 5G NR evolution and hybrid architecture remain subject to technical, ecosystem, cost and timing risks.
- Regulatory and spectrum exposure: FCC renewal of the company’s LMS licenses remains pending. Some license build-out showings and extension requests also remain pending, and third-party objections could affect licenses. FCC approval is needed for expanded spectrum uses, including potential non-PNT data services.
- Funding and dilution: Management anticipates needing operating cash flows and/or additional equity or debt for longer-term needs. Notes contain restrictive covenants and default provisions. Warrants, stock compensation and potential future financing may dilute shareholders; 44.3 million warrants were outstanding at year-end.
- Customer and supplier concentration: Revenue is highly concentrated, and the business relies on AT&T for Pinnacle hosting and FirstNet distribution, as well as on Verizon, device platforms, AWS and a limited number of component vendors. The AT&T hosting agreement runs to October 2026; the FirstNet services agreement runs to October 24, 2025.
- Other risks: Competition includes free location services; network expansion requires capital and infrastructure; privacy, cybersecurity, export-control, government-contracting, supply-chain and geopolitical risks could raise costs or disrupt service. The company reported no material cybersecurity incidents in the last year and no legal matters believed likely to have a material adverse effect.
The independent auditor issued an unqualified opinion on the financial statements. Management concluded disclosure controls and internal control over financial reporting were effective at December 31, 2023; the auditor did not attest to internal control effectiveness because of the company’s emerging-growth-company status.
Most important facts for investors to verify
- Progress on FCC license renewal, pending build-out showings and extension requests, third-party objections, and approvals needed for additional spectrum uses.
- Whether the March 2024 spectrum transaction closes, its final consideration and funding impact, and any resulting dilution.
- Revenue growth, customer concentration and customer adoption of Pinnacle, TerraPoiNT and NextNav France licensing.
- Cash burn relative to management’s liquidity outlook, required network investment and the 10% secured notes’ interest and maturity obligations.
- Technical and regulatory milestones for 5G NR evolution, and actual customer, device and partner integration.
- Potential dilution from the 44.3 million outstanding warrants, other equity awards and any future financing.