NEXTNAV INC. (NN)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying quarterly unaudited condensed consolidated financial statements and our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”). Our 2025 Form 10-K includes additional information about our significant accounting policies, practices, and the transactions that underlie our financial results, as well as a detailed discussion of the most significant risks and uncertainties associated with our financial condition and operating results. In addition to historical financial information, some of the information contained in the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Actual results and outcomes could differ materially for a variety of reasons. You should review “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this Quarterly Report on Form 10-Q, as well as Item 1A, “Risk Factors” in our 2025 Form 10-K, as well as those otherwise described or updated from time to time in our other filings with the SEC, for a discussion of important factors that could cause our actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are the market leader in delivering resilient, next generation, complementary positioning, navigation and timing (“PNT”) solutions designed to overcome the limitations and vulnerabilities of existing space-based Global Navigation Satellite Systems (“GNSS”), including the Global Positioning System (“GPS”).  PNT services are used in nearly every facet of our economy. Cellular and electrical distribution systems depend on GPS-based timing, and the mobile app economy relies on location to create innovative services and to drive data and advertising revenue.  Public safety and enhanced 911 (“E911”) save lives every day with the use of location services. GPS has powered the global economy for nearly 40 years. Without high-precision timing from GPS, cellular systems would fail, the distribution of electricity would be impacted, and other aspects of everyday life would be adversely affected.  Recent international events have demonstrated that having viable systems to backup and complement GPS is a national security issue.

Our PNT solutions address these needs and issues in several ways.  Our technology consists of a ground-based transmitter network operating on low-band spectrum assets in a manner similar to the function of GPS satellites.  Unlike satellites, our network signals are designed to be much stronger and extremely difficult to jam or spoof.  In addition, because the signals are terrestrial and low-band, they can penetrate buildings.  As a result, our technology can act as a complement to satellite-based GPS, especially in urban canyons or deep indoors, and as a backup in case traditional GPS fails due to jamming, spoofing, technical failures, solar flares or other risks to satellite-based services.  In addition, our location-based services are three-dimensional. Our core Pinnacle technology uses barometric sensors in smartphones and other communications devices and a network of sensors to determine vertical, or “z-axis”, location.  This technology can provide accurate vertical location data to assist first responders, dispatchers and others, or could be used for autonomous systems, such as drones, in need of precise 3D mapping in urban areas, among other uses.

Our complementary PNT solutions are built on our asset base of FCC licenses that cover 12 MHz of low-band spectrum available for use.  This spectrum consists of a contiguous 8 MHz block of 900 MHz spectrum covering over 90% of the U.S. population and an additional 4 MHz of complementary spectrum covering part of the U.S. population that was transferred to us in 2025 as a result of a transaction with Telesaurus and Skybridge Spectrum Foundation. That transaction also gave us potential rights to an additional 2 MHz of related spectrum covered by terminated Skybridge Spectrum Foundation licenses.  These licenses are subject to a Skybridge and Telesaurus petition for reconsideration seeking reinstatement of these licenses. For more information, refer to Note 5 to our condensed consolidated financial statements for the three months ended June 30, 2026 included in this Quarterly Report on Form 10-Q. We are evolving our PNT solutions to use 5G New Radio (“5G NR”) positioning reference signals (“PRS”), under the 3GPP global standard, to determine location and timing - a platform we refer to as NextGen.  We believe the evolution of our existing technologies and services to a 5G NR PRS capability will improve the efficiency, flexibility, and scale of our operations. 5G NR technologies drive enhanced network performance, capacity, and efficiency across multiple industry verticals. 5G NR enables low-latency, high-throughput connectivity and also improves spectral efficiency, which allows operators to increase returns on investment in licensed spectrum and, with respect to our technology, to improve both the density and availability of PNT signals. 5G NR can also support many different applications, including ultra-reliable low-latency communications (URLLC), enhanced mobile broadband (eMBB), and massive machine-type communications (mMTC). These capabilities permit 5G NR to support high-performance broadband services as well as emerging use cases in autonomous systems, industrial automation, and the Internet of Things (IoT).  As a result, spectrum that can support 5G technologies and services is important to broadband providers and their customers.

To enable our evolution to 5G NR, we have filed a Petition for Rulemaking (the “Petition”) asking the FCC to optimize the Lower 900 MHz radio spectrum band to enable 5G NR operations, the delivery of  PNT via a 5G broadband network and in turn support such 5G technologies and services.  Our Petition requests the FCC allow us to use a single, nationwide 15 MHz spectrum configuration for both PNT and 5G broadband.  The Petition is subject to an ongoing FCC regulatory review process, and was referenced in the FCC’s March 27, 2025 PNT Notice of Inquiry.

Under our proposal, the FCC would create a 5 MHz uplink and 10 MHz downlink suitable for 5G operations. We believe

modernizing the Lower 900 MHz band will simultaneously enable a high-quality terrestrial PNT network to complement and back up GPS, addressing a critical national security vulnerability, and add 5G broadband capacity.  As such, our NextGen capability is being designed with the goal of enabling one or more mobile network operators or other partners to integrate this optimized Lower 900 MHz spectrum into their 5G network deployments. We expect that these partnerships would result in wide-scale availability of our complementary PNT services and, for our potential partners, additional 5G broadband capacity.

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The backbone of wireless data services, electromagnetic spectrum, is a finite resource. Our spectrum licenses, which lie in the Lower 900 MHz band, are referred to as “low-band spectrum.” There is a finite amount of low-band spectrum available, and low-band spectrum has favorable coverage characteristics compared to higher frequencies, including the ability to provide services indoors and over greater distances. These characteristics result in its ability to be used for coverage and to be deployed more economically, with higher-frequency spectrum often used to provide additional capacity in targeted locations. The transition to 5G NR for our PNT services will provide a technical capability to support broadband data services, which, subject to appropriate regulatory approvals, would allow the spectrum to be used to help meet the continued, growing demand for wireless data capacity.

A core element of our strategy is to pursue such partnerships to offset the costs of deploying and operating a widescale, terrestrial PNT network that can act as a complement and backup to GPS. While GPS is fully supported by the U.S. government, we believe it is unlikely that the U.S. government would subsidize an extensive, standalone terrestrial PNT network and other revenue-generating opportunities are limited, given existing use of GPS. However, there is a financially viable path to a widescale terrestrial PNT network that meets critical national security needs through the spectrum optimization proposed by our Petition that would allow it to be used for 5G.

Macroeconomic Factors

Macroeconomic conditions, including changes in overall economic growth and broader business and government spending priorities, could affect our business, financial condition and results of operations. While our business is not highly sensitive to changes in interest rates, inflation or general capital market conditions, adverse macroeconomic developments may reduce or delay spending by wireless carriers, public sector and other commercial customers for our terrestrial PNT services and may affect the timing of planned projects and deployments. In addition, broader economic uncertainty, including the potential for federal government shutdowns, could delay administrative and regulatory actions by governmental agencies, including the Federal Communications Commission, that are important to the commercialization and expansion of our services. We continue to monitor macroeconomic developments and adjust our execution timelines as appropriate; however, prolonged or worsening economic conditions could negatively affect the timing of our initiatives and the pace of adoption of our solutions.

Key Components of Results of Operations

Revenue

We have generated limited revenue since our inception. We derive our revenue from PNT products and services. Our revenue includes revenue generated through services contracts with wireless carriers, services with applications developers, technology demonstration, assessment and support contracts with government customers, sales of equipment, and licensing of proprietary technology. We recognize revenue when an arrangement exists, services, equipment or access to licensed technology are delivered, the transaction price is determined, the arrangement has commercial substance, and collection of consideration is probable.

Operating Expense

Cost of Goods Sold

Cost of goods sold (“COGS”) consist of personnel-related expenses, including salaries, benefits and stock-based compensation, and allocated facility costs for our operations and manufacturing teams. COGS also includes expenses for site leases, cost of equipment, software license costs, including cloud hosting costs, and professional services related to the maintenance of the equipment at each leased site. Our COGS may fluctuate from period to period based on changes in operating scale.

Research and Development

Research and development expenses consist of personnel-related expenses, including salaries, benefits and stock-based compensation, and allocated facility costs for our research and development functions. Research and development costs also include outside professional services for software and hardware development, and software license costs, including cloud hosting costs. We expect our research and development costs to increase for the foreseeable future as we continue to invest in research and development for our current and future products, including our NextGen platform.

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Selling, General and Administrative

Selling, general and administrative expenses consist of personnel-related expenses, including salaries, benefits and stock-based compensation, and allocated f

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes thereto and other financial information included elsewhere in this Annual Report on Form 10-K. In addition to historical information, some of the information contained in the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Actual results and outcomes could differ materially for a variety of reasons. You should review “Cautionary Note Regarding Forward-Looking Statements” and “Item 1A. Risk Factors” of this Annual Report on Form 10-K for a discussion of important factors that could cause our actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

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Overview

We are the market leader in delivering resilient, next generation, complementary positioning, navigation and timing (“PNT”) solutions designed to overcome the limitations and vulnerabilities of existing space-based Global Navigation Satellite Systems (“GNSS”), including the Global Positioning System (“GPS”).  PNT services are used in nearly every facet of our economy. Cellular and electrical distribution systems depend on GPS-based timing, and the mobile app economy relies on location to create innovative services and to drive data and advertising revenue.  Public safety and enhanced 911 (“E911”) save lives every day with the use of location services. GPS has powered the global economy for nearly 40 years. Without high-precision timing from GPS, cellular systems would fail, the distribution of electricity would be impacted, and other aspects of everyday life would be adversely affected.  Recent international events have demonstrated that having viable systems to backup and complement GPS is a national security issue.

Our PNT solutions address these needs and issues in several ways.  Our technology consists of a ground-based transmitter network operating on low-band spectrum assets in a manner similar to the function of GPS satellites.  Unlike satellites, our network signals are designed to be much stronger and extremely difficult to jam or spoof.  In addition, because the signals are terrestrial and low-band, they can penetrate buildings.  As a result, our technology can act as a complement to satellite-based GPS, especially in urban canyons or deep indoors, and as a backup in case traditional GPS fails due to jamming, spoofing, technical failures, solar flares or other risks to satellite-based services.  In addition, our location-based services are three-dimensional. Our core Pinnacle technology uses barometric sensors in smartphones and other communications devices and a network of sensors to determine vertical, or “z-axis”, location.  This technology can provide accurate vertical location data to assist first responders, dispatchers and others, or could be used for autonomous systems, such as drones, in need of precise 3D mapping in urban areas, among other uses.

Our complementary PNT solutions are built on our asset base of FCC licenses that cover 12 MHz of low-band spectrum available for use.  This spectrum consists of a contiguous 8 MHz block of 900 MHz spectrum covering over 90% of the U.S. population and an additional 4 MHz of complementary spectrum covering part of the U.S. population that was transferred to us in 2025 as a result of a transaction with Telesaurus and Skybridge Spectrum Foundation. That transaction also gave us potential rights to an additional 2 MHz of related spectrum covered by terminated Skybridge Spectrum Foundation licenses.  These licenses are subject to a Skybridge and Telesaurus petition for reconsideration seeking reinstatement of these licenses.   For more information on this transaction, refer to Note 3 to our consolidated financial statements for the twelve months ended December 31, 2025 included elsewhere in this Annual Report on Form 10-K.

We are evolving our PNT solutions to use 5G New Radio (“5G NR”) positioning reference signals (“PRS”), under the 3GPP global standard, to determine location and timing - a platform we refer to as NextGen.  We believe the evolution of our existing technologies and services to a 5G NR PRS capability will improve the efficiency, flexibility, and scale of our operations. 5G NR technologies drive enhanced network performance, capacity, and efficiency across multiple industry verticals. 5G NR enables low-latency, high-throughput connectivity and also improves spectral efficiency, which allows operators to increase returns on investment in licensed spectrum and, with respect to our technology, to improve both the density and availability of PNT signals. 5G NR can also support many different applications, including ultra-reliable low-latency communications (URLLC), enhanced mobile broadband (eMBB), and massive machine-type communications (mMTC). These capabilities permit 5G NR to support high-performance broadband services as well as emerging use cases in autonomous systems, industrial automation, and the Internet of Things (IoT).  As a result, spectrum that can support 5G technologies and services is important to broadband providers and their customers.

To enable our evolution to 5G NR, we have filed a Petition for Rulemaking (the “Petition”) asking the FCC to optimize the Lower 900 MHz radio spectrum band to enable 5G NR operations, the delivery of  PNT via a 5G broadband network and in turn support such 5G technologies and services.  Our Petition requests the FCC allow us to use a single, nationwide 15 MHz spectrum configuration for both PNT and 5G broadband.  The Petition is subject to an ongoing FCC regulatory review process, and was referenced in the FCC’s March 27, 2025 PNT Notice of Inquiry.

Under our proposal, the FCC would create a 5 MHz uplink and 10 MHz downlink suitable for 5G operations. We believe modernizing the Lower 900 MHz band will simultaneously enable a high-quality terrestrial PNT network to complement and back up GPS, addressing a critical national security vulnerability, and add 5G broadband capacity.  As such, our NextGen capability is being designed with the goal of enabling one or more mobile network operators or other partners to integrate this optimized Lower 900 MHz spectrum into their 5G network deployments. We expect that these partnerships would result in wide-scale availability of our complementary PNT services and, for our potential partners, additional 5G broadband capacity.

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The backbone of wireless data services, electromagnetic spectrum, is a finite resource. Our spectrum licenses, which lie in the Lower 900 MHz band, are referred to as “low-band spectrum.” There is a finite amount of low-band spectrum available, and low-band spectrum has favorable coverage characteristics compared to higher frequencies, including the ability to provide services indoors and over greater distances. These characteristics result in its ability to be used for coverage and to be deployed more economically, with higher-frequency spectrum often used to provide additional capacity in targeted locations. The transition to 5G NR for our PNT services will provide a technical capability to support broadband data services, which, subject to appropriate regulatory approvals, would allow the spectrum to be used to help meet the continued, growing demand for wireless data capacity.

A core element of our strategy is to pursue such partnerships to offset the costs of deploying and operating a widescale, terrestrial PNT network that can act as a complement and backup to GPS. While GPS is fully supported by the U.S. government, we believe it is unlikely that the U.S. government would subsidize an extensive, standalone terrestrial PNT network and other revenue-generating opportunities are limited, given existing use of GPS. However, there is a financially viable path to a widescale terrestrial PNT network that meets critical national security needs through the spectrum optimization proposed by our Petition that would allow it to be used for 5G.

Macroeconomic Factors

Macroeconomic conditions, including changes in overall economic growth and broader business and government spending priorities, could affect our business, financial condition and results of operations. While our business is not highly sensitive to changes in interest rates, inflation or general capital market conditions, adverse macroeconomic developments may reduce or delay spending by wireless carriers, public sector and other commercial customers for our terrestrial PNT services and may affect the timing of planned projects and deployments. In addition, broader economic uncertainty, including the potential for federal government shutdowns, could delay administrative and regulatory actions by governmental agencies, including the Federal Communications Commission, that are important to the commercialization and expansion of our services. We continue to monitor macroeconomic developments and adjust our execution timelines as appropriate; however, prolonged or worsening economic conditions could negatively affect the timing of our initiatives and the pace of adoption of our solutions.

Key Components of Results of Operations

Revenue

We have generated limited revenue since our inception. We derive our revenue from PNT products and services. Our revenue includes revenue generated through services contracts with wireless carriers, services with applications developers, technology demonstration, assessment and support contracts with government customers, sales of equipment, and licensing of proprietary technology. We recognize revenue when an arrangement exists, services, equipment or access to licensed technology are delivered, the transaction price is determined, the arrangement has commercial substance, and collection of consideration is probable.

Operating Expense

Cost of Goods Sold

Cost of goods sold (“COGS”) consist of personnel-related expenses, including salaries, benefits and stock-based compensation, and allocated facility costs for our operations and manufacturing teams. COGS also includes expenses for site leases, cost of equipment, software license costs, including cloud hosting costs, and professional services related to the maintenance of the equipment at each leased site. Our COGS may fluctuate from period to period based on changes in operating scale.

Research and Development

Research and development expenses consist of personnel-related expenses, including salaries, benefits and stock-based compensation, and allocated facility costs for our research and development functions. Research and development costs also include outside professional services for software and hardware development, and software license costs, including cloud hosting costs. We expect our research and development costs to increase for the foreseeable future as we continue to invest in research and development for our current and future products, including our NextGen platform.

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Selling, General and Administrative

Selling, general and administrative expenses consist of personnel-related expenses, including salaries, benefits and stock-based compensation, and allocated facility costs for our business development, marketing, corporate, executive, finance, legal, human resources, IT and other administrative functions. Selling, general and administrative expenses also include expenses for outside professional services, including legal, auditing and accounting services, recruitment expenses, travel expenses and certain non-income taxes, insurance and other administrative expenses.

We expect our selling, general and administrative ex

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