NextNav Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Unless stated otherwise, amounts below are in U.S. dollars; financial statement amounts have been converted from thousands to millions.
Business context
NextNav develops positioning, navigation and timing solutions, including Pinnacle, which provides floor-level altitude location, and TerraPoiNT, a terrestrial-based PNT network intended to complement GPS. The company reported that Pinnacle service was commercially launched and TerraPoiNT had been deployed in 51 markets. The October 2021 business combination was accounted for as a reverse recapitalization, with Holdings as the accounting acquirer.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $1.20 million | $0.25 million |
| Operating loss | $(16.05) million | $(12.61) million |
| Net loss | $(9.71) million | $(27.07) million |
| Net loss per share, basic and diluted | $(0.10) | $(4.80) |
| Cash used in operating activities | $(6.10) million | $(8.45) million |
| Cash used in investing activities | $(0.21) million | $(0.91) million |
- Revenue consisted of $1.18 million commercial, $0.01 million government-contract and $0.01 million equipment-sales revenue. One customer represented 97% of quarterly revenue.
- Operating expenses were $17.25 million. The filing does not present gross margin; revenue less cost of goods sold was a gross loss of approximately $1.84 million.
- Cash and cash equivalents were $93.78 million at March 31, 2022, down from $100.08 million at year-end 2021. Current assets were $96.73 million and current liabilities $9.11 million.
- The company had no debt outstanding at quarter-end; its senior secured facility was repaid and terminated in connection with the 2021 business combination. Total liabilities were $39.20 million, including a $22.49 million warrant liability and $9.75 million of operating lease liabilities.
- Management stated that cash at March 31, 2022 was expected to fund working capital and capital expenditure needs for the next 12 months. The company had an accumulated deficit of $658.09 million.
Changes versus the prior-year quarter
- Revenue increased $0.95 million, or 378%, primarily from commercial technology and services contracts.
- Operating loss widened by $3.44 million. R&D increased $1.61 million, SG&A increased $6.60 million and depreciation and amortization increased $0.54 million; lower cost of goods sold partly offset these increases.
- Net loss improved by $17.36 million, largely reflecting a $6.39 million noncash gain from the change in warrant fair value versus an $11.66 million expense in Q1 2021, as well as the absence of $2.78 million of interest expense after debt repayment. The net loss improvement did not reflect improved operating results.
- Stock-based compensation rose to $7.20 million from $0.39 million, including $4.76 million in SG&A. Cost of goods sold fell 59%, chiefly because Q1 2021 included $5.3 million of contingent rent expense related to warrants.
- Operating cash use decreased to $6.10 million from $8.45 million. Investing cash use was also lower; Q1 2022 included $0.21 million of investing outflows.
Outlook, risks and notable items
- No specific revenue, earnings or cash-flow guidance was provided. Management expects losses and operating expenses to rise in the foreseeable future, including costs for R&D, network expansion and public-company requirements.
- Management said significant cash will be needed for operations, R&D and TerraPoiNT expansion. It expects operating, R&D and SG&A costs to increase as the business scales.
- COVID-19-related supply-chain and labor effects remained uncertain; management expected related factors to continue through the remainder of 2022. The filing added that the Ukraine conflict could heighten supply-chain, cybersecurity and foreign-currency risks, while stating that no direct material impact was then expected.
- Revenue concentration is high, with one customer accounting for 97% of Q1 2022 revenue. The company also cited risks involving commercial adoption, financing, regulatory approvals and maintaining required spectrum licenses.
- Warrants are valued using significant unobservable inputs (Level 3). The $6.39 million fair-value gain reduced reported net loss but was noncash. The company had 18.75 million public and private warrants outstanding, exercisable at $11.50 per share.
- Adoption of the lease standard on January 1, 2022 added operating lease assets and liabilities; the filing reported $9.75 million of lease liabilities at quarter-end. Additional leases with $2.1 million of future payments had not yet commenced and were not recorded on the balance sheet.
- The company reported no legal matters believed to have a material adverse effect and no material subsequent events. Management concluded disclosure controls were effective; development of the internal-control-over-financial-reporting framework was ongoing.
Important facts for investors to verify
- Whether commercial deployments and customer adoption translate into sustained revenue growth, and whether customer concentration decreases.
- Cash use, spending plans and the assumptions supporting management’s stated 12-month liquidity outlook.
- Operating cost trends, particularly stock-based compensation, public-company expenses and network expansion costs.
- Warrant valuation assumptions and potential dilution from outstanding warrants, options and equity awards.
- Timing, costs and obligations associated with planned network and lease expansion, including uncommenced leases.