Nextnav Inc. Q3 FY2022 Earnings Call

Good afternoon, everyone, and welcome to NextNav's Third Quarter 2022 Earnings Conference Call. Participating on today's call are Gary Parsons, NextNav's Chairman; Ganesh Pattabiraman, NextNav's Co-Founder and CEO; and Chris Gates, NextNav's Chief Financial Officer. Before we begin, please note that during today's presentation, the company will make forward-looking statements, either in our prepared remarks or in the associated question-and-answer session. These statements involve risks and uncertainties related to analyses and other information based on forecasts of future results and estimates that are not yet determinable. They may also pertain to NextNav's future prospects, developments, and business strategies. Specifically, these forward-looking statements include comments about NextNav's ability to drive growth in its 3D geolocation businesses and its next-generation GPS platform, its business plans, objectives, expectations, intentions, partnerships and their potential success, as well as NextNav's estimated future business strategies, competitive position, industry environment, and growth opportunities. These statements are based on current expectations or beliefs and are subject to various risks and uncertainties that may lead to actual results differing materially. Such forward-looking statements face known and unknown risks, uncertainties, assumptions, and other significant factors, many of which are beyond NextNav's control, which could result in actual results differing significantly from those discussed in the forward-looking statements. These factors include, but are not limited to, NextNav's ability to continue gaining traction in key markets and with notable platforms and partners, both in the U.S. and internationally; its ability to grow and manage that growth profitably, maintain relationships with partners, customers, and suppliers, particularly regarding NextNav's Pinnacle 911 solution and TerraPoiNT network, and retain its management and key employees; its ability to maintain balance sheet flexibility and generate and effectively deploy capital according to its business strategies; potential adverse effects from economic and competitive factors, including the ongoing COVID-19 pandemic; and other risks detailed in documents filed with the Securities and Exchange Commission by NextNav. New risks and uncertainties can arise, making it difficult to predict events or their potential impacts. You are advised not to place undue reliance on forward-looking statements, which reflect conditions only as of the date made. NextNav does not commit to updating or revising these statements based on new information, future events, or otherwise. Risk factors that may impact our performance are outlined in our most recent SEC filings. After the prepared remarks, the company will host an operator-led question-and-answer session. Following today's call, a replay of our discussion will be available on the company's Investor Relations website. With that, I'll turn the call over to NextNav's Chairman, Gary Parsons. Please, go ahead.

Thank you, operator, and good afternoon, everyone. We're pleased to have all of you with us here today to discuss our third-quarter results. And joining me on the call today, as you heard, are NextNav's CEO, Ganesh Pattabiraman; and NextNav's CFO, Chris Gates. It was another eventful quarter for our business and I'm excited about the new opportunities that are in front of us. Before we dive into the discussion of the quarter specifically, I want to step back to frame how we view our business and how we drive shareholder value. Specifically, we've oriented our efforts around three key strategic priorities. Those include being the industry leader in resilient PNT; unleashing the full value of our spectrum; and finally, expanding our global reach. Prior to the acquisition of Nestwave, these objectives were longer-term goals that we understood would take significant time and investment to bring to fruition. Nestwave's synergistic technology, however, significantly accelerates our ability to achieve these goals by improving our underlying spectral efficiency and data-carrying capability, dramatically reducing our future capital and network operating expenses and enabling global 3D positioning, navigation, and timing or PNT capabilities even prior to securing dedicated spectrum allocation. The combination of NextNav's technology and Nestwave's LTE 5G capabilities allows us to intelligently combine signals from existing terrestrial LTE 5G networks with our own highly synchronized TerraPoiNT system, and therefore to deliver near nationwide resilient 3D PNT capabilities along with dramatically lowering TerraPoiNT deployment cost. Ganesh and Chris will provide more color around the technology synergies and the resulting cost savings. We also know that this market for backup to GPS and resilient PNT services is ready. There continues to be significant, in fact, growing government interest both in the United States and internationally around the need for resilient PNT services to address well-known GPS vulnerabilities. Because Nestwave is based in France, it also helps us to establish a strong foothold in the critical European market and along with our existing presence with MetCom in Japan to scale in additional markets globally. Notably, with our Pinnacle deployment already now in place in select international markets like Japan and the integration of this new Nestwave technology, we can deliver a 3D PNT service and timing solution that will allow us to move forward internationally even without those initial spectrum allocations we expect. Ganesh will expand more on that in a moment. And then, finally, the acquisition and technology integration also enables us to drive greater spectral efficiency from our underlying spectrum asset. As a reminder, NextNav owns an 8 megahertz contiguous low band spectrum asset covering 2.5 billion megahertz pops and 93% of the U.S. population, including almost all urban areas. As Ganesh will discuss, by leveraging Nestwave's unique software technology and the LTE 5G waveform compatibility, NextNav can gain significant spectral efficiency and release the underlying spectrum capacity for high-speed data-oriented services. As an additional benefit of standard LTE 5G waveform also enables much broader penetration of NextNav's applications and technology across the global handset and device ecosystem. With that, let me turn it over to Ganesh to provide a review of the quarter. Ganesh?

Thanks, Gary, and good afternoon, everyone. We're happy to be here to provide an update on the business. As Gary mentioned, we're focused on three key strategic objectives that we believe will accelerate our resilient PNT capabilities and drive long-term shareholder value. In my remarks today, I would like to expand on what Gary had shared and provide context around our strategy following the acquisition of Nestwave. First, as we've said before, we're committed to being the leader in resilient PNT services. Our technology has proven to be at the cutting edge of advanced PNT solutions as evidenced by the 2021 U.S. Department of Transportation test results. From day one, we work diligently to bring our technology to market quickly and in a capital-efficient manner. Our Pinnacle service is already deployed in 4,400 cities and towns across the country and select markets internationally, and we continue to build our industry-leading next-gen 3D, GPS equivalent and terrestrial network TerraPoiNT. While both of these technologies are significant by adding the unique technological capability that Nestwave brings to us, we have an even more compelling opportunity ahead of us as a combined entity. As Gary mentioned, the federal government is increasingly energized around finding viable solutions to address GPS interference in order to protect critical assets and national security. With this acquisition, we incorporate a unique technology that will allow us to rapidly meet the growing needs for PNT resilience for the government-critical infrastructure, public safety, and other sectors. By combining TerraPoiNT's technology with existing LTE and 5G cellular network signals, we create a highly accurate and highly synchronized resilient PNT network, utilizing full TerraPoiNT transmitters only in locations with the greatest need. As a result, we have enormous flexibility in our future deployment. We believe that a full resilient PNT service will now be achievable across the United States at a fraction of the initial CapEx deployment cost, in fact, a reduction of approximately 75% or in excess of $250 million from our prior estimates. This would also include a commensurate reduction in associated network operating costs. By combining these technologies, some services including basic timing may be achieved even without a separate TerraPoiNT signal, thus facilitating early global services initiatives ahead of new spectrum allocation. We continue to see the issue of critical GPS interference, not just overseas, but also here in the U.S. For example, as recently as two weeks ago on October 18 and 19, Dallas-Fort Worth airport experienced GPS jamming impacting air traffic safety and rerouting flights. As I noted, governments in both the U.S. and globally are putting increasingly more time and attention towards finding actionable solutions to address PNT resilience. Notably in the U.S., we anticipate that Executive Order 13905 will be released in the spring of 2023. After completing interagency review, the order is expected to direct key federal agencies to begin including PNT resilience requirements in their procurements. As a reminder, the order seeks to require the current users of GPS in certain critical applications to incorporate resilient PNT technologies as the solutions they use, thereby acquiring broader usage across many sectors. We believe this would also enable state and local governments to tap into a portion of the infrastructure bill grants for resiliency. The acquisition also increases the spectrum efficiency of our underlying spectrum asset. As we talked about on our last quarterly call, we're committed to unleashing the full value of this asset. By deploying TerraPoiNT transmitters only in places that are critical to meet PNT resiliency requirements, more locations become available where the NextNav spectrum could be leveraged for additional use such as private networks. As we think about optimizing our spectrum moving forward, we intend to utilize our experimental license to evaluate these new configurations, including LTE and 5G waveforms in the coming months to facilitate widespread adoption of a more optimized network. Use of the LTE 5G waveforms will allow dramatically expanded data-carrying capacity in addition to TerraPoiNT's core 3D PNT functionality. Regarding our Pinnacle service, to-date, we see continued traction in signing new partnerships, especially within public safety. In Q1 of this year, we announced an agreement with one of the nation's largest wireless carriers for E911, and we expect them to make Pinnacle 911 commercially available later in the fourth quarter. With our Pinnacle technology and increased awareness of vertical location, we expect additional carrier handset adoption to follow. As you may know, there is a wide variety of handsets, particularly feature phones, which don't use Android or Apple iOS operating systems as affordable consumer devices including, Kyocera, Sonim, and Alcatel to name just a few. We're closely working with many of these handset manufacturers to ensure they have our Pinnacle 911 capabilities embedded in their devices. One example is our recent agreement with Hot Pepper Mobile to bring our Pinnacle technology to their upcoming feature phone on a Tier 1 carrier's network. The phone is scheduled for release in 2023. Our partnership with Hot Pepper is yet another step towards bringing Pinnacle highly accurate Z access to your location capabilities to 911 emergency services. Search and rescue and loan worker safety with several of our existing partners moving forward with implementation and are expected to launch their solutions in the first quarter of 2023. We're also pushing ahead with our Pinnacle services internationally, notably, just yesterday, MetCom celebrated the commercial launch of the Pinnacle system on National Firefighter Day in Tokyo, Japan. This partnership is our first large-scale commercial deployment of NextNav's Pinnacle technology outside of the U.S. and leverages MetCom and NextNav's deep history and management expertise in the globalization of wireless industry standards and technology. It's an exciting milestone for our Pinnacle service. In addition, we're seeing continued traction for our Pinnacle services globally and are in active trials with various parties as we speak today. But what is even more exciting is how our Pinnacle service combined with LTE 5G technology, we can further amplify our international expansion and deliver resilient 3D PNT services and timing solutions not necessarily even without immediate spectrum allocation. If you recall, the European Union conducted a trial of alternate PNT solutions earlier in the year. We were one of the seven companies in the test, and we expect the European Union to publish its final report in the first quarter of 2023. Overall, we feel very confident that we are on the right path towards bringing PNT resilience to market in a time- and cost-efficient manner. We believe we have the right team, the right technology, and the right implementation plan to get us there as we move forward. With that, let me turn it over to Chris for a review of the financials. Chris?

Thanks, Ganesh. Good afternoon, everyone. Let me start by discussing the financials related to our acquisition of Nestwave. We acquired Nestwave for an enterprise value of $18 million, with an aggregate consideration of $19.3 million, which includes $4.3 million in cash and $15 million in NextNav common stock. The transaction involved the issuance of 4 million shares of NextNav common stock at closing, and up to 1.1 million shares of common stock will be granted upon the exercise of certain employee options from Nestwave. These shares will be locked up until the first anniversary of the transaction's closing. Although we anticipate this transaction will only slightly increase our operational costs, it is expected to significantly lower our future capital requirements by reducing the capital and operating expenses needed for a broad TerraPoiNT deployment in the U.S. by about 75%, compared to our earlier estimates, which Ganesh and Gary have indicated could be over $250 million. This acquisition also supports our global expansion strategy. Now, turning to our third-quarter and year-to-date results, we recognized revenue of $503,000 this quarter, with an operating loss of $17.9 million. This loss includes depreciation and amortization of $891,000, stock-based compensation expenses of $6.6 million, and $200,000 in non-cash network operations expenses. Our total operating expenses for the quarter were $18.4 million, resulting in a net loss of $18.7 million. Aside from the aforementioned non-cash charges, the net loss also included a non-cash expense of $1 million related to changes in the fair value of our warrant liability. For the first nine months of 2022, we reported revenue of $3.1 million and an operating loss of $51 million, which included $2.7 million in depreciation and amortization, $20.6 million in stock-based compensation, and $600,000 in non-cash network operation expenses. Our net loss for this nine-month period ending September 30 was $27.6 million, which included a non-cash income of $23.2 million tied to changes in the fair value of our warrant liability. For this quarter, our operating expenses, excluding depreciation, stock compensation, non-cash network operations expenses, and one-time acquisition-related costs, were $10.2 million, consistent with our second quarter. Managing liquidity and our cash position remains a priority as we work to optimize expenses while aligning with our business growth and responding to economic changes. As we've mentioned, while managing our expenses, we maintain strong capital flexibility, a debt-free balance sheet, and around $72 million in cash, cash equivalents, and short-term investments as of September 30. As we noted in our first earnings call back in 2021, we still expect our revenue to fluctuate as new customers start using our products. We're committed to capturing the significant value in our unique PNT capabilities, which are even more appealing given the reduced capital requirements from our Nestwave acquisition, the government initiatives highlighted by Ganesh, and the 2.4 billion megahertz pops to spectrum. Now, I'll turn the call over to the operator for questions. Operator?

Thank you. Your first question comes from Mike Crawford with B. Riley. Your line is now open.

Thank you. Can you just expound a little bit further on how NextNav will be able to make more spectrum available for wireless networks given less of a need for TerraPoiNT beacons and such magnitude is previously envisioned?

Let me hit some of that and Ganesh can expand on it technologically if you want to, but the conversion first off the Nestwave technology and I think we've explained even when we made the announcement on Nestwave a few weeks ago, allows us to place fewer pure TerraPoiNT beacons and to integrate that with the signals that are already there from existing 4G and 5G wireless carriers signals. While still maintaining because of our highly synchronized system an ability to correct the inherent timing frailties that exist in those LTE signals, we're able to keep that same level of accuracy that we have become renowned for in our existing TerraPoiNT system. But by moving our own and migrating our own TerraPoiNT signal over to an LTE waveform, then simultaneous with being able to carry this core PNT timing and GPS backup resiliency, we also now have a pretty awesome data carriage machine. Obviously, the GPS waveform that we have been using historically has very limited data-carrying capability and yet, obviously very good PNT or positioning capabilities. So the first element of that is inherently in what we do deploy as a network, we've got a raw data-carrying capability. Secondly, by using the LTE waveform, we're able to utilize the signal and an amount of spectrum that spans all across what a normal LTE capability would be, whether it's 3 megahertz, 5 megahertz, 8 megahertz, whatever we may require. So from that perspective, that gives us additional flexibility and the amount of spectrum that we may be using for the pure PNT signal. And then finally, as I think Ganesh mentioned a little bit in his comments as well too, if we decide to deploy more beacons, maybe in the case of a campus or a private network or something that obviously is an alternate use of our capabilities as long as we're also carrying forward the core PNT functionality that would exist in any case. So it gives us an order of magnitude more capability in the fact that what we'll even deploy now for PNT also is a full LTE channel's worth of data-carrying capability. Is that helpful in any sense, Mike?

It is, Gary. Would you need any regulatory authorization from the FCC or anyone in order to be able to offer these additional services?

There are some important details in the license that investors might find noteworthy, especially regarding the underlying value of the spectrum. While the spectrum is intended for Positioning, Navigation, and Timing (PNT) services, it is not limited to just that. As long as we are providing that capability, there are no restrictions on how we utilize the data transmitted. For instance, the GPS waveforms currently in use contain specific data packets that could be utilized, though our capacity for enforcement is somewhat constrained in terms of throughput and performance. Additionally, our existing system and the waivers we secured allow for two-way capabilities, even though the current Multi-Distribution System (MDS) signal is one-way. This means we can engage in two-way communication under the underlying license. We also have several experimental licenses established for years in different locations across the country, which we've collaborated on with the Office of Engineering and Technology (OET) and the FCC to test various configurations. We anticipate testing new configurations and waveforms to demonstrate our capability to not only carry data but also ensure PNT functionality. While we will need to coordinate with the FCC to confirm that our actions align with our licensing requirements, we have maintained a strong relationship with the FCC and have historically demonstrated compliance. What we are currently working on relates not only to E911 and public safety, but also to a backup GPS system, which several government agencies and the FCC are keenly interested in supporting in a cost-effective manner. We aim to respond to governmental needs under the infrastructure bill and associated grants promptly and economically.

Thank you. I have one more question on this topic and then I'll move on. Gary, considering that you can now broadcast your spectrum over LTE, does that increase or decrease the likelihood of you moving forward with broadcasting your entire 8 megahertz block instead of the 5 megahertz block, and possibly repurposing 3 megahertz for something else?

Mike, that's a very insightful question. The answer will become clearer in the future. We aim to use the experimental license to explore all configurations. You’ve identified that there is a greater chance we would utilize the entire 8 megahertz with a full LTE or 5G payload. We plan to test both of those waveforms instead of allocating PNT to one set of licenses and trying to surplus another set. Both options are available, but we don’t know yet which would be the most effective implementation or which partner we would collaborate with. It’s important to note that it doesn’t necessarily mean we will only use 5 megahertz and surplus 3. There’s a possibility that we could use 3 and surplus 5, or we might use all 8 with a full payload.

Okay. Thank you. And then, just a final question. Clearly, our CapEx and depreciation, amortization estimates come way down with the improved, I would say, business plan enabled by Nestwave. But 18 months ago in the Spartacus de-SPAC, I mean, there was a slide of 'robust, incredible long-term projections that had revenue numbers well in advance of where you are today.' And so I'm wondering what if any comments you can make about long-term revenue projections given that you previously issued such projections in the 2028.

You are referring to our earlier presentations prior to the SPAC merger. Yes, I will address this from that perspective. During our initial earnings call as a public company, we made it clear that we anticipated our revenue would fluctuate. This was not expected to follow a typical pattern of consistent recurring revenue from new customers, as it would be notably affected by integration and adoption costs from our partners, some of which are outside our control. Consequently, we have refrained from providing forward-looking guidance over the past year, and that remains our stance today. However, we are actively working on the Pinnacle service and short-term revenue. Adoption is strong within public safety, our AT&T partnership, FirstNet, and with Tier 1 carriers for 911 services, as well as upcoming handset deals. Our team is diligently focused on this progress and we will pursue it as vigorously as possible. It's also important to note that our largest shareholders encourage us to emphasize the bigger picture. They recognize the potential value in realizing the underlying spectrum and tapping into government revenues, along with the unique prospects associated with backup GPS and resilient PNT services. Therefore, this remains our strategic focus. While we are committed to driving revenue growth as swiftly as we can, we want to stay focused on our long-term goals.

Your next question comes from the line of Timothy Horan with Oppenheimer. Your line is now open.

Thanks, guys. And just to be clear on the spectrum, do you own all 8 megahertz? And does all 8 megahertz have to meet the requirements for the location-based services? And once you meet those requirements, you can kind of do what you want with the rest of the spectrum?

We do own all 8 megahertz. Just as a reminder to folks listening who may not be as aware of it, it's generally side-by-side licenses in most of these markets. Both the B block, which is like a 3 megahertz and the C block, which is like a 5 megahertz. It's somewhat more nuanced than that, but they're co-located, I mean, they're side-by-side continuous. And we do have permission from the FCC to use those either separately or together, consistent with the answer that I gave to Mike on the prior question. So now that is an understanding that when we brought those into service, that was for the purpose of location 911 services and position navigation and timing. That's what we are using them for. And that is what we would continue to expect to have as an underlying corollary. It may not be, for example, it may not even end up being the primary revenue generator from that spectrum potentially. But it certainly needs to be something that consistent with the license that we have right now, that that is a usage that is being used for.

If you were to send an LTE or a 5G signal, that would really be the best option, as almost every device would be able to receive it.

Yes, actually that is a really, really good point. And I can't remember whether we said that in the remarks earlier, but it's not just that suddenly you go from a number of kilobits of data-carrying capability to megabits and gigabits of data-carrying capability under LTE or 5G. And I use both of those because there are different implementations, which may be favorable to LTE versus 5G. But what the wonderful part is virtually all of the handsets that are out there globally do have those capabilities within them. And this spectrum band is part of the LTE band use plans actually used in Europe currently. So you've already got the antennas and the processing capability for those handsets to pick up LTE signals. Obviously, those LTE signals today aren't very well timed. Matter of fact, they're very poorly timed, that's why they rely upon GPS to even get the timing that they have. What we are doing with ourself going forward is taking our superior atomic clock and disciplining those LTE signals. But the end-user devices, whether it's handsets or other devices, can now be much more effectively and lower cost mass produced to be consistent with that particular waveform.

And I know we don't really know yet, but well, before I ask that, and are you allowed to send a signal out at a stronger power level than what a typical mobile carrier can?

No. In fact, if you examine it closely, the main limitation for RF network design for carriers often lies in the return link from the handset, which operates at milliwatts instead of hertz. We can't transmit large signals, but this typically doesn't hinder network design.

But do you think you built it open on? Yes. Sorry.

Sorry, Tim and Gary, if I may add, I think it is one of those elements we would be experimenting as part of our experimental configurations.

That's actually a good point. We actually previously have had an experimental license that allowed us to go up to higher power levels beyond the 30 that we have. And in fact, slices of our license currently are allowed to go to 300 watts.

300 watts, yes.

So there will be a number of different trials and tests that we will use using the experimental license before we lock in with the final network design.

Right. And even if a small piece of it had a very powerful signal, I mean, that's all you would really need for the massively improved location-based services and hard to reach areas in particular, right?

That would certainly be part of it. However, the key point to understand is that we will be utilizing all existing carriers and wireless signals for our location and PNT services. This does not require a deployment beyond a limited number of beacons to ensure we have accurate clocking and trilateration capabilities.

And so why do you even need your beacons to do that? Is that a requirement? Is mix and matching? Is it like one plus one equals 10 in that process?

It tremendously improves the accuracy levels if we're able to place beacons where a lot of cellular systems don't necessarily have the right angularity of the signals coming in. So you'd like to be able to add that to it. And it's also a way of perpetuating across a very large area the accurate clocking. But I think, and Ganesh maybe then this in a little bit more detail if you'd like, but that's also why we noted that this does provide us now a unique capability to go into another country, which may desperately desire the timing links particularly as a backup timing source without actually having a separate dedicated spectrum allocation from that country. I mean, obviously, right now in Japan, MetCom is using 5 megahertz that the government has provided to them on an initial basis. But if we were able to hit at least some significant portion of the value of this without getting a spectrum allocation and without providing our beacons, that would be a desirable jumpstart to it. We still do believe that the very best capabilities for resilience for accuracy of location as well as for consistent timing and the ability to track that timing back to a central clock source is best done if you do have at least some limited number of TerraPoiNT beacons and a dedicated spectrum allocation. But now, it will not be absolutely essential before you can even start.

Got it. Got it. And how much of an improvement is it if using spectrum and your beacons do you think?

It depends on the location and what is available for it.

I think the way to approach it is that with the TerraPoiNT dedicated network, you can achieve a high-quality solution with timing under 100 nanoseconds across our entire area. However, when combining cellular signals with our systems, you could be looking at timing in the range of 200 to 300 nanoseconds or slightly better. While this isn't as precise, it's still acceptable for many applications, as most only require timing closer to a microsecond. For applications that need higher precision, like automotive or aviation, the dedicated TerraPoiNT system would be necessary to provide the required positioning capability along with the resilience and clocking that standalone LTE systems generally lack.

Got it. Got it. Yes, now I completely get it. And how long's it going to take you to do the trials here before you kind of make a decision which way to go?

I think that's going to be a lot of our activities for the first half of the year. And then I think we would be in a position to sort of make some determinations from there on out.

Can you help with that?

I would say it's important that it's a month, not a years-type of situation on that front, because we pretty well know how to put the capabilities together. Now we want to deploy enough of that in limited areas to be able to truly test it out and prove it.

Can you provide insight into what will drive revenue next year? How many major carriers are currently using Pinnacle and how many are expected to use it next year? Is the revenue from the one carrier fully accounted for in this quarter?

No.

Yes. We have several public safety partners, and some of them are transitioning to carriers that are not currently our partners. This is expected to happen in the first part of 2023, which we believe will contribute positively. Additionally, we have secured numerous public safety deals or partnerships, several of which are set to launch in the first quarter.

When Pinnacle is fully operational, will it generate $10 million per quarter or $100 million per quarter? Can you provide some insight?

Yes. I would love to provide that information. However, we are trying to avoid situations where we give guidance. It's a matter of the unpredictable timing of when these factors will come into play.

I'm not asking about the lumpiness. What I'm trying to find out is when it is fully implemented by all the carriers, will it generate $1 million, $10 million, $100 million, or $1 billion per quarter in revenue? Just a rough estimate for when it is fully implemented. Will it be in the tens of millions, millions, or hundreds of millions? From our perspective, we have no idea.

Cumulatively across all 911, is that sort of what you're asking?

Yes, yes.

You're specifically asking about the 911 aspect. At Pinnacle, we are focused not only on 911 but also on other public safety applications such as lone worker safety, gaming, and similar areas that we anticipate will emerge. However, it's too soon to provide a definitive answer.

Well, I mean, if you can break it down between 911 and everything else, just a rough idea would be really helpful.

Well, I think the only thing that we can have we announced the amounts that we have for the existing Tier 1 carrier that we have in place currently that's rolling out. I don't believe. I don't believe that we have that number out there.

We don't expect that. We anticipate a portion of that will be reflected in the fourth quarter, and it will be fully reflected in the first quarter, assuming the current implementation schedule stays on track. However, we have not publicly disclosed the details of what that looks like.

One carrier will largely have implemented for 911 by the end of the year, and the first quarter will fully reflect that. The rough timing for the other two carriers is still to be determined.

I think as we've mentioned, some of these devices will be rolling out in the first quarter of 2023, but they will be slightly different. They will operate on a per device model rather than a per carrier model. The numbers will skew initially but will aggregate over time. This represents a slight variation from the model that Chris discussed, which is based on a per carrier basis. These will likely be available towards the end of Q1 or possibly in Q2.

Okay. So is the 911 revenue for Pinnacle going to be fully reflected in the like next year's second half run rate?

For 911, that's probably the case.

Okay, and regarding your cash burn at this point, how much do you think you need to raise in order to achieve positive free cash flow?

Some of that depends on the adoption model we pursue, whether we're collaborating with partners in other countries as we have with MetCom, who are covering the capital expenses and potentially buying beacons from us in the future. The original $370 million CapEx program planned for a nationwide TerraPoiNT build-out has now been reduced to $100 million or less. These figures can likely be financed with debt if we choose that route. We are being cautious with our funds currently. However, we believe we can now bring the TerraPoiNT system into operation at a more manageable cost, some of which may be supported by government partners or grants, and some may be funded through debt related to our existing fixed assets. From a capital needs perspective, this is likely the best way to evaluate our situation.

Yes. And sorry, my last question. So when do you think TerraPoiNT gets largely turned on for a majority of the United States?

Ganesh, I'll let you hit that one because we've looked at various implementations of that.

Yes, as I mentioned, we will be evaluating various configurations in the first half of the year. We are hopeful that within the next 12 months, we can implement certain aspects of resilient PNT in the marketplace.

I understand that this timeframe is not something we've shared before. Traditionally, our initial deployment in TerraPoiNT has focused on the top 50 markets, which happen to be the largest ones in the country, representing about half the population. Previously, we mentioned that these implementations would require a significant increase in beacons to achieve our desired accuracy for a final commercial service. However, it's possible that the beacons already set up in these markets may be nearly adequate for us to initiate a PNT service without needing additional installations. As we've indicated previously, we anticipate some moderate capital expenditures in the fourth quarter and the first quarter of next year to expand into additional markets to fulfill our construction milestones with the FCC. Work on this is already in progress, which we believe positions us well for potentially offering a comprehensive service within a year.

Your next question comes from the line of Jaime Perez with RF Lafferty. Your line is now open.

Yes. Thanks for taking my question, and good day, everybody. A key question on TerraPoiNT?

Hey, Jamie.

Hey Gary, how are you doing? Regarding TerraPoiNT, since you're going to be building the infrastructure for the government in defense and national security, will it be a separate network for surveillance use?

No.

Crossover or security? No. So it's all going to be one complete network?

No.

Fortunately, there will be a dual use of that single network capability. In fact, the government, including the military, is directing their procurements towards this integrated approach rather than relying on separate isolated networks. Last year, the Department of Homeland Security provided us with specific grants to enhance the cybersecurity of our beacons, aiming to establish the necessary levels of confidence, resilience, and protection for government services. Currently, the trend is increasingly leaning towards the adoption of commercial services, even for safeguarding critical infrastructure.

Yes. And just let me address that a little bit, Jaime. I think fundamentally there is really just one network, right? I mean, I think that that's the key here. And if you think about it, 80% of critical infrastructure is owned by private entities. It's not owned by the government. And I think the government's view is to secure those elements along with their own needs. And I think that is with domestically and that that is a combination that can be served with this type of a resilient network that serves all of those needs.

Yes. Maybe that's a good thing because give it to a government, they find a way to mess things up a little bit.

Yes.

Regarding the revenues from government contracts, will the government provide you with blanket coverage, or will you be receiving fees from the developers creating apps and solutions for them?

There isn't a single fee that the government pays for PNT resilience. The government, through its federal procurement process and Executive Order 13905, will ensure that procurement needs are met by the fees paid. Additionally, once the order is implemented at the state and local levels, some funds from infrastructure grants will likely be available for PNT resilience, as well as other resilience efforts related to cyber and other purposes. We believe that these types of funds will include capabilities for PNT resilience through the funding mechanisms established in the infrastructure bill.

I'm looking at Page 5 of the slide you provided on the acquisition. Are there any limitations on beacons regarding terrain or sublevels? For example, you have pre-Nestwave and post-Nestwave on Slide 5, but are there limitations in areas like valleys or specific terrain that need to be considered? You mentioned that if there's a campus requiring certain equipment, that could be addressed.

Yes. I think that's two different questions. Regarding the first part, there are some limitations on how far the signal can reach in valleys and other terrains. We are bound by the same physical laws, so the impact is similar. However, the advantage is that we're utilizing ambient LTE signals from various carriers in addition to our own. This allows us to leverage those signals, resulting in fewer limitations. The coverage is likely comparable to cellular coverage, but we don’t rely solely on one carrier. Instead, we consider all operators in the area, which may enhance signal reception by using whatever is available from any operator.

Great.

All right. So that's all the questions I have for tonight, but thanks for taking my questions and have a great evening.

Great. Thanks, Jaime.

Thanks, Jaime.

This concludes our question-and-answer session. I would like to turn the call back to Gary Parsons.

Well, thank you very much, operator, and we appreciate everyone dialing in today. As they say, it is an exciting time for us. We're very, very pleased with the recent acquisition. We can't wait to get that manifested into our full business plan since that we can put forward that resilient PNT capability much more rapidly than what we had expected before. And then hopefully do the right things to make sure that we actualize the value of the underlying spectrum asset. We appreciate everybody's calling in today and look forward to hosting you on our next call. Thanks a lot.

This concludes today's conference call. Thank you for attending. You may now disconnect.