NextNav Inc. (NASDAQ:NN) Q3 2023 Earnings Call Transcript

And one of the key wedges that they have in order to achieve that is by requiring people that are bidding on government services to prove that they can do that, that they have adopted the technologies to make it happen. So, I never say never when it comes to the government, but I don’t envision the situation where they contract with us to stand up a terrestrial PNT system. I think they do recognize and the DOT testing back a couple of years ago showed, there are places that different technologies provide a different or better service or capability. We talk sometimes about the eLORAN, the old LORAN networks that were principally used by Mariners, and that’s great for out over the oceans, I mean we don’t have beacons out there. And the same thing with satellites like the TELUS system.

That’s great more for rural areas or even some suburban areas, but it doesn’t get deep inside building. So, I think the DOT testing and the government [indiscernible] large, understand that for them to provide their own complementary PNT capability, it would require a deployment of a variety of different technologies and a terrestrial build out, I don’t think that’s in the cards. I think that they –they may build out certain ones, and here, I think Ganesh can maybe kick in to start talking about some of the sandboxes or initial trials and pilots they’re doing, they will be funding those deployments.

Ganesh Pattabiraman: Yes. So, I think, Tim, as Gary mentioned, I mean, I don’t think there’s an appetite in the government to stand up another system that back up to GPS simply because there isn’t really one answer that fits off, right? I think GPS from that perspective was somewhat unique. And I think we’re at a point where there are different applications have different needs, and as Gary mentioned, eLORAN is perfect for the maritime and ocean types of applications, but it’s not going to fit into your cell phone and certainly doesn’t — won’t work in urban areas as well. And I think there’s also a growing recognition that going from one point of failure to another would be a bad system choice. So, I think the government wants to have multiple technologies providing PNT resilience, and that was part of the recommendation from the Department of Transportation.

And I think ultimately, what the government is trying to do right now is really be the first customer for resilient PNT systems across the entire federal government enterprise. And it’s not specific sectors, et cetera, they want this across the board. The government does recognize that they’re not a large purchaser of these types of systems and so, the hope is that by being that first adopter, they can encourage other critical infrastructure providers, wireless operators, electrical grid suppliers, et cetera, to also adopt these resilient PNT systems because it’s very clear from what’s happening around — from around the world, be it the Ukraine conflict or the Israel-Hamas situation, GPS jamming is a standard feature now across the board. I think we saw it at the beginning of October 6th and we’ve continuously seen more activities around that.

And so, there’s a level of urgency to make every industry more resilient to it. And that’s where these test beds come into place where they want to see the end systems being implemented in the ultimate application, be it in a mobile phone or in an automotive or an aviation use case or the electrical grids and telecom systems. And that’s what really the focus of the next 12 to 18 months is going to be. And beyond that, the hope is once the executive order 13905 has been placed, that it will get adopted across the federal government enterprise and then it will also spread into the critical infrastructure sectors. And from there, the hope is it gets to the mass market commercial applications also. And the important thing is the government through the various funding sources made available through the infrastructure bill and now maybe more directly through the executive order, is willing to fund those end-user implementations, both at the trial phase or the initial implementation phase and to some extent, at the more wider adoption phase because they do recognize that in the absence of that funding, it is difficult for critical infrastructure vendors and others to adopt a system when they have a free system that GPS already provides.

So, I think there is a recognition of that and that is where some of these grant programs come into place, is they’re being used to grease the skids to facilitate and enable quicker and faster adoptions.

Timothy Horan: So let’s say, everything goes really, really well, I mean how large of a customer can the government be in four, five years as this is built out? Or how much money could you receive annually from the government, do you think?

Ganesh Pattabiraman: I mean that’s — Chris you want to take — I mean that’s not clear right now. I mean — but I think we can certainly say with the intention where we’re seeing that it would be across the federal enterprise, I mean it touches right from the FAA procuring systems to the health and human services for emergency services, then getting into all the critical infrastructure providers, the telecom operators, the electrical grid folks, all of those users, if they have a need for either timing or position or navigation, would be required to have resiliency. And that obviously can grow to be a very large order of magnitude revenue source for us. I mean we already seeing initial elements of that with our government contract that we just signed.

In this current phase, it’s relatively a nominal amount but if this phase grows to the second phase, that could be our largest contract just in the matter of 12 months, and that can start dominating more broadly as 2025 kicks in.

Timothy Horan: Got it. And sorry, just last question. The — any updated thinking on the highest best use of the spectrum and technology, I mean, do you think you would build out this network yourself and charge for usage on it? Or does it make sense to sell —

Gary Parsons: And I’ll go ahead and take that one. I’m always reluctant to just speculate too widely because depending upon who it is that you may partner with on it, there are different configurations, which may be more desirable to one player versus another. I have mentioned the supplemental downlink is a very important one, but also, if you’re able to get two-way capabilities, it opens up other potential partners. My own guess at this point, and I always hate the caveat as being a guess is that we wouldn’t build it out. I think there’s enough, particularly for dealing with one of the major carriers, it’s far more likely that you would lease them the spectrum and have them building out. We would still be responsible obviously for providing the full PNT and E911 services because that’s an essential part of the function that the government wants us to do.

It’s why we think that the government will be very favorably looking at what we will want to do because we are providing a very critical national security service. But I think because of that, the most efficient way would be either leasing or even if it was for an upfront onetime payment for a multiyear lease. That may be the best way it would be done. I don’t see — it’s not that you couldn’t envision scenarios whereby we would build it out, but I don’t think there’s any chance we would do that without a contracted party that was going to use it. I mean, we don’t see ourselves right now as trying to create another nationwide carrier or something like that.

Timothy Horan: Do you have a sense of how easy it would be for a carrier to add this on to their existing infrastructure? I mean they seem to be doing a lot more carrier aggregation and a lot more so–