NextNav Inc. — Q1 2024 Form 10-Q
Business context and period: Unaudited results for the three months ended March 31, 2024, compared with Q1 2023. NextNav develops terrestrial positioning, navigation and timing (PNT) services, including Pinnacle and TerraPoiNT, as a complement and backup to GPS. It reported limited revenue and continued operating losses.
Financial performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $1.046 million | $0.830 million |
| Operating expenses | $17.196 million | $14.780 million |
| Operating loss | $16.150 million | $13.950 million |
| Net loss | $31.610 million | $16.349 million |
| Net loss per share, basic and diluted | $0.28 | $0.15 |
| Cash used in operations | $6.985 million | $7.427 million |
- Revenue rose 26%, primarily from higher recurring commercial service revenue. One customer generated 75% of Q1 2024 revenue and another 14%; one customer represented 86% in Q1 2023.
- Cost of goods sold was $2.761 million, exceeding revenue; selling, general and administrative expense rose 39.5% to $8.446 million. Research and development was $4.670 million. The filing does not present a gross-margin percentage.
- The larger net loss included a $13.176 million noncash increase in the fair value of warrant liabilities, versus $2.800 million in Q1 2023. Net interest expense was $2.168 million, compared with $0.469 million of net interest income a year earlier.
- Cash and cash equivalents were $73.317 million and short-term investments were $5.922 million at March 31, 2024, totaling $79.239 million. Cash and investments decreased from $85.832 million at December 31, 2023.
- Long-term debt, net of discount and issuance costs, was $49.890 million. The company had issued $70 million principal amount of senior secured notes bearing 10% interest, due December 1, 2026. Total liabilities were $108.361 million; stockholders’ equity was $55.907 million.
Material changes and notable items
- SG&A increased by $2.392 million, mainly due to higher payroll, stock-based compensation and professional services. Depreciation and amortization increased 17.2%, largely reflecting TerraPoiNT assets placed in service after Q1 2023.
- Accrued expenses included a $12.284 million liability related to the March 2024 asset purchase agreement for M-LMS licenses and related rights. The agreement includes $2.5 million cash consideration and $7.5 million in shares payable regardless of closing; an additional $20 million in shares is contingent on closing and specified FCC flexibility. FCC and court approvals and other conditions remain relevant to completion.
- After quarter-end, through May 3, 2024, 7.7 million debt warrants were exercised for $16.6 million cash proceeds. Common shares outstanding were 120,700,334 as of May 3.
Outlook, risks and contingencies
- Management expects additional losses and higher operating expenses as it invests in research and development and PNT networks. It stated that March 31 cash and investments should cover working capital, capital expenditures and contractual commitments for more than 12 months from the filing date; longer-term funding may include operating cash flows and additional debt or equity. This assessment depends on internal projections and market conditions.
- NextNav filed an FCC petition on April 16, 2024 seeking a rulemaking to enable a 15 MHz nationwide Lower 900 MHz configuration for PNT and 5G broadband. The company also has an agreement to acquire additional 4 MHz spectrum licenses, subject to regulatory approvals. These initiatives are not assured.
- Management cited potential deployment delays or cost increases from tight field-services labor supply and continued monitoring of financial-market disruption. It expects macroeconomic effects to continue through 2024.
- The notes are secured, contain restrictive covenants and customary events of default; the company reported covenant compliance at March 31. The company reported no legal matters it believed would have a material adverse effect. Disclosure controls were assessed as effective.
Important facts for investors to verify
- Whether revenue growth can continue and customer concentration can decline.
- Cash burn, operating expense trends and the assumptions behind management’s liquidity outlook.
- Warrant-related noncash valuation volatility, warrant exercises, resulting dilution and the terms of the secured notes.
- FCC and court approvals, timing and economics of the M-LMS license transaction, and progress on the spectrum petition and additional licenses.
- Deployment progress, customer adoption and commercialization of Pinnacle, TerraPoiNT and NextGen/5G NR, including anticipated licensing contributions.