NextNav(NN) - 2023 Q2 - Quarterly Report

Part I. FINANCIAL INFORMATION Financial Statements H1 2023 unaudited financials report a $32.1 million net loss, with assets at $161.5 million and liabilities at $66.4 million from new debt Condensed Consolidated Balance Sheets | Balance Sheet Item | June 30, 2023 ($ thousands) | December 31, 2022 ($ thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | 52,784 | 47,230 | +11.8% | | Total current assets | 89,775 | 61,190 | +46.7% | | Total assets | 161,468 | 123,788 | +30.4% | | Total current liabilities | 9,676 | 8,887 | +8.9% | | Long term debt, net | 34,042 | — | N/A | | Total liabilities | 66,390 | 19,924 | +233.2% | | Total stockholders' equity | 91,231 | 100,017 | -8.8% | Condensed Consolidated Statements of Comprehensive Loss Metric ($ thousands) - Q2 Comparison | Metric ($ thousands) | Q2 2023 | Q2 2022 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | 800 | 1,421 | -43.7% | | Operating loss | (15,030) | (17,016) | +11.7% | | Net income (loss) | (15,770) | 827 | N/A | Metric ($ thousands) - H1 Comparison | Metric ($ thousands) | H1 2023 | H1 2022 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | 1,630 | 2,620 | -37.8% | | Operating loss | (28,980) | (33,064) | +12.3% | | Net loss | (32,119) | (8,884) | -261.5% | - The significant difference in net income/loss between the periods is largely driven by the change in fair value of warrants, which was a $3.1 million expense in H1 2023 versus a $24.2 million gain in H1 2022[15][21] Condensed Consolidated Statements of Cash Flows Cash Flow Activity ($ thousands) | Cash Flow Activity ($ thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | (15,919) | (16,774) | | Net cash used in investing activities | (26,659) | (785) | | Net cash provided by financing activities | 48,146 | 47 | | Net change in cash | 5,554 | (17,554) | - The primary driver of financing cash flow in H1 2023 was the $50 million proceeds from senior secured notes, while investing activities increased due to the purchase of marketable securities[21] Notes to Condensed Consolidated Financial Statements - The company's Pinnacle system provides "floor-level" altitude service, while its TerraPoiNT system is a terrestrial-based, encrypted network designed to overcome GPS limitations[23] - Management believes that cash, cash equivalents, and marketable securities of $85.0 million as of June 30, 2023, will be sufficient to meet working capital and capital expenditure needs for the next 12 months[24][25] - On May 9, 2023, the Company issued $50.0 million in senior secured notes with a 10% fixed interest rate, maturing in December 2026, and in conjunction, 18,518,520 warrants were issued to the lenders[80][83] Management's Discussion and Analysis of Financial Condition and Results of Operations Q2 2023 revenue fell 44% due to lower integration services, operating expenses decreased, and new debt bolstered liquidity Overview - NextNav is a leader in next-generation PNT solutions, leveraging its 8MHz of 900MHz spectrum, with its Pinnacle network providing "floor-level" altitude data and the TerraPoiNT system offering a terrestrial-based alternative to GPS[104] - Key customers and partners for the Pinnacle service include FirstNet®, Verizon for E911, and various public safety and commercial app development platforms like Unity Engine and Qualcomm[105] - The October 2022 acquisition of Nestwave is expected to reduce capital and operating expenditures for the national deployment of the TerraPoiNT network and improve spectral efficiency[108] Results of Operations Q2 2023 revenue fell 44% to $0.8 million, and H1 2023 revenue decreased 38% to $1.6 million, primarily from lower integration services Comparison of Three Months Ended June 30, 2023 and 2022 | Metric ($ thousands) | Q2 2023 | Q2 2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | 800 | 1,421 | (621) | (43.7)% | | Cost of Goods Sold | 3,142 | 3,001 | 141 | 4.7% | | Research and Development | 4,994 | 4,170 | 824 | 19.8% | | Selling, General & Admin | 6,516 | 10,382 | (3,866) | (37.2)% | Comparison of Six Months Ended June 30, 2023 and 2022 | Metric ($ thousands) | H1 2023 | H1 2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | 1,630 | 2,620 | (990) | (37.8)% | | Cost of Goods Sold | 6,165 | 6,038 | 127 | 2.1% | | Research and Development | 9,572 | 8,158 | 1,414 | 17.3% | | Selling, General & Admin | 12,570 | 19,722 | (7,152) | (36.3)% | - The decrease in SG&A for both the three and six-month periods was primarily driven by a significant reduction in stock-based compensation expense ($2.7 million for Q2 and $5.7 million for H1)[124][133] Liquidity and Capital Resources The company holds $85.0 million in cash, cash equivalents, and marketable securities and issued $50.0 million in senior secured notes in May 2023 - As of June 30, 2023, the company had $85.0 million in cash, cash equivalents, and marketable securities[138] - In May 2023, the company issued $50.0 million in senior secured notes with a 10% fixed interest rate, maturing in December 2026, and lenders exercised an option to purchase an additional $20.0 million in notes, which were issued on July 6, 2023[140] - Management believes its current cash and marketable securities are sufficient to meet working capital and capital expenditure needs for the next 12 months[139] Quantitative and Qualitative Disclosures About Market Risk No material changes in market risks were reported compared to the 2022 Annual Report on Form 10-K - There have been no material changes in market risks from those disclosed in the 2022 Form 10-K[151] Controls and Procedures Management concluded disclosure controls were effective as of June 30, 2023, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[153] - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[155] Part II. OTHER INFORMATION Legal Proceedings The company is not involved in any legal matters expected to materially adversely affect its business or financials - The company is not involved in any legal proceedings expected to have a material adverse effect on its business[158] Risk Factors Investors are directed to review risk factors in the 2022 Form 10-K and Q1 2023 10-Q, as no new material risks are disclosed - Investors are directed to review the risk factors detailed in the Annual Report on Form 10-K for the year ended December 31, 2022, and the Q1 2023 10-Q[159] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or issuer purchases of equity securities occurred during the period - There were no unregistered sales of equity securities or issuer purchases of equity securities in the quarter[161] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[162] Other Information No other information required to be disclosed under this item was reported - None[164] Exhibits This section lists exhibits including governance documents and agreements related to the May 2023 debt financing - Exhibits filed with the report include the Note Purchase Agreement, Indenture, and Warrant Agreement related to the May 2023 senior secured notes offering[167]