NextNav Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. NextNav develops positioning, navigation and timing services, including Pinnacle floor-level altitude location and TerraPoiNT terrestrial positioning. The filing compares results with 2021; the business combination closed in October 2021, and prior-period financial statements reflect the predecessor business.
Key financial results
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $1.4 million | $0.2 million | $2.6 million | $0.5 million |
| Operating loss | $17.0 million | $8.6 million | $33.1 million | $21.2 million |
| Net income (loss) | $0.8 million | $(39.0) million | $(8.9) million | $(66.0) million |
| Operating cash flow | Not separately provided for the quarter | $(16.8) million | $(21.7) million | |
| Cash and cash equivalents at June 30 | $82.5 million | — |
Revenue growth reflected increased commercial technology and services contracts. Commercial revenue was $1.3 million of Q2 revenue and $2.5 million of six-month revenue. One customer represented 83% of Q2 revenue and 90% of six-month revenue. Cost of goods sold exceeded revenue in both periods, implying a negative gross contribution before other operating expenses.
Q2 net income was not representative of operating performance: it included $17.8 million of other income, primarily a noncash gain from remeasuring warrant liabilities. The six-month period included a $24.2 million warrant fair-value gain. Stock-based compensation was $6.8 million in Q2 and $14.0 million for six months.
Financial position and liquidity
- Cash declined from $100.1 million at December 31, 2021 to $82.5 million at June 30, 2022. Six-month investing cash outflow was $0.8 million; financing provided $0.05 million.
- No debt was outstanding at June 30, 2022. The prior senior secured loan was repaid and terminated in connection with the October 2021 business combination.
- Current assets were $85.5 million and current liabilities $7.7 million. Stockholders’ equity was $104.5 million; accumulated deficit was $657.3 million.
- Management stated that cash on hand was expected to fund working capital and capital expenditure needs for the next 12 months. Longer-term funding may depend on cash flows and additional equity or debt financing.
- Operating lease liabilities totaled $8.9 million; the company also disclosed $2.3 million of future lease commitments for leases not yet commenced.
Changes, outlook and risks
- Compared with Q2 2021, revenue rose 558%, while operating expenses more than doubled to $18.4 million. SG&A growth included higher stock compensation, headcount, insurance and professional fees. For the first half, COGS fell 37%, mainly because 2021 included contingent rent expense associated with warrants.
- Management expects operating expenses and losses to continue increasing as it invests in research and development and expands Pinnacle and TerraPoiNT. No quantified revenue or earnings guidance was provided.
- TerraPoiNT was available in San Francisco and select services in 51 U.S. markets as of June 2022. Management described expansion and broader adoption as opportunities, but execution, customer uptake and financing remain uncertain.
- Key disclosed risks include strong competitors offering free location services, uncertainty about additional wireless-carrier adoption for E911, potential FCC acceptance of competing solutions, and dependence on device-platform approval. Customer concentration is also significant.
- The company said COVID-related supply-chain, labor and cost effects were expected to continue through the rest of 2022. It noted possible indirect risks from the war in Ukraine, including supply-chain, cybersecurity and currency effects, but did not expect a direct material impact at that time.
- AT&T exercised its warrant through net settlement in May 2022 and received 4.3 million shares. The company also committed to a $1.1 million investment in MetCom; the purchase closed after quarter-end on July 15, 2022.
Important facts for investors to verify
- Whether commercial revenue growth continues and customer concentration decreases.
- Whether competing E911 solutions, FCC decisions, carrier choices or platform approvals affect Pinnacle adoption.
- Cash burn, network expansion costs and the timing of any need for additional financing.
- The extent to which reported earnings are affected by noncash warrant revaluations and stock-based compensation.
- Whether TerraPoiNT deployments and commercial partnerships convert into recurring revenue at scale.