Inpixon
Q3 2020 Earnings Call Transcript

Published: 12 Nov 2020

[Operator:]

Good afternoon and welcome the Inpixon Business Update Call. All participants will be in a listen only mode. I would now like to turn the conference over to David Waldman, President and CEO of Crescendo Communications LLC. The company's Investor Relations firm. Please go ahead sir.

[David Waldman:]

Good afternoon everyone. Thank you for joining today's conference call to discuss Inpixon's corporate developments and financial results for the three and nine months ended September 30, 2020. With us today are Nadir Ali, the company's CEO; and Wendy Loundermon, the company's Chief Financial Officer. Today, Inpixon released financial results for the three months ended September 30, 2020. If you have not received Inpixon's earnings release, please visit the company's Investor Relations page at ir.inpixon.com.

[Nadir Ali:]

Thanks David, hello afternoon and welcome to our Q3, 2020 business update call. Before we get started, I just want to say that I hope you were all staying safe and doing well. As I know the pandemic is surging across many parts of the country. Most of our people are still working remotely from home and that continues to go well. I'd like to thank our amazing employees across the globe, who have adjusted their work and home life to keep us moving forward despite these challenges. I believe we are now better positioned than any time in our company's history to deliver on our business objectives.

[Wendy Loundermon:]

Thank you, Nadir. Revenues for the three months ended September 30, 2020 were $2.55 million, compared to $1.53 million for the comparable period in the prior year, for an increase of a little over a $1 million, or approximately 66%. The increase in revenues in the third quarter of 2020 compared to the prior period in 2019 was primarily attributed to the increase in sales of our Aware and Mapping product line and the addition of sales from the recently acquired Systat licensing product line. Gross profit for the three months ended September 30, 2020 was $1.9 million, compared to $1.2 million for the comparable period in the prior year for an increase of approximately 66%. The gross profit margin for both the three months ended September 30, 2020 and for 2019 was 75%. Loss from operations for the three months ended September 30, 2020 was $6.2 million as compared to a loss of $5.7 million for the comparable period in the prior year. This increase in loss of approximately $500,000 was primarily attributed to higher operating expenses, offset by increase in gross profit for the quarter ended September 30, 2020. Net loss attributable to stockholders of Inpixon for the three months ended September 30, 2020, with $7.5 million, compared to a loss of $6.6 million for the comparable period in the prior year. A higher loss of approximately $900,000 was attributed to the higher operating expenses, valuation allowance adjustments offset by the increased gross profit during the three months ended September 30, 2020. Non-GAAP adjusted EBITDA for the three months ended September 30, 2020, with a loss of $4.6 million compared to a loss of $2.4 million for the prior period in 2019. Non-GAAP adjust EBITDA is defined as net income or loss before interest, provision for income taxes, depreciation, amortization, plus adjustments for other income or expense items, non-recurring items and non-cash items including stock-based compensation. Pro forma non-GAAP net loss for basic and diluted common share for the three months ended September 30, 2020, was a loss of $0.13 per share, compared to a loss of $7.44 per share in the prior period in 2019. Non-GAAP net loss per share is defined as net loss per basic and diluted share, adjusted for stock-based compensation, amortization of intangible, provision for doubtful accounts, severance costs, acquisition costs, our cost associated with public offerings, and then one-time charges including loss in exchange for debt for equity and valuation allowance adjustments. A complete discussion of our nine-month results is available in our Form 10-Q that we'll be filing with the SEC. In terms of our balance sheets, cash on hand at September 30, 2020 was $31.4 million. We have positive working capital of approximately $23 million and total shareholders' equity of $39.4 million, compared to $6 million at the end of 2019. This concludes my comments and I'd like to turn the call back over to Nadir.

[Nadir Ali:]

Thanks, Wendy. So as we talked about today, Inpixon has transformed financially and operationally to position itself to become the leader in indoor intelligence. We've expanded our IP portfolio, our product offerings, and customer base in diverse geographies and verticals to drive growth, and minimize risks. Our use cases range from safety and security to asset tracking to intelligent wayfinding. And what COVID has certainly created awareness around the value of indoor data, our customers are seeing the value beyond just contact tracing and reopening their offices. From provisioning assets for employees to visitor management, or optimizing building management systems, indoor data will continue to add value for customers. While our revenues were up 66% over the same period last year, we are still in the early innings of a massive addressable market. We're building a scalable business model with high gross margins focus on increasing our annual recurring revenue, which will help us get to positive cash flow and we believe create shareholder value. I'd like to thank all of our shareholders, investors for your continued support. We look forward to providing additional updates in the weeks and months ahead. With that, I'll turn the call back to David Waldman, Investor Relations, who will read some questions that were submitted in advance. David?

[A - David Waldman:]

Thank you, Nadir. So just to give everyone a heads up, some of the questions were duplicative. So we did our best to combine these questions where possible. If you have any questions after the call, feel free to follow up with Investor Relations. And we'll be sure to respond as quickly as possible. So our first question is congrats on a strong quarter, given the weakness in the share price would management or board members consider buying stock?

[Nadir Ali:]

So let me start by saying we share our investors frustration over the share price. And we don't believe it reflect the fundamental value we've created. We're doing better than ever, and yet we've had significant erosion in the share price. While I'm not at liberty to comment on specific plans for myself or other members of the team or the board, I can say this is something that we have looked at subject to certain blackout restrictions, and will provide further updates if and when appropriate.

[David Waldman:]

Okay, thank you. Our next question, what is management doing to keep the stock above $1 and does Inpixon plan to do a reverse split?

[Nadir Ali:]

We have no plans for a reverse split. I would say that our ability to continue to execute our growth plans and increase our market share in all the ways we discussed today, which continues to result in strong revenue growth year over year, even during such a challenging time, is reflective of the effort that management is really taking to increase the stock price. We expect continued strong financial performance and are fully focused on increasing shareholder value. Well, we expect that the market probably ultimately recognizes the long-term value we are creating for our shareholders and I hope to that'll help mitigate any concerns around the share price.

[David Waldman:]

Okay, thank you. Our next question. Clearly, revenue is growing very fast when do you expect the company to achieve profitability?

[Nadir Ali:]

Good question. I mean, so we haven't given any specific guidance, but as I mentioned earlier, we're focused on building scalable, business moving forward, and we're moving more and more towards a fast or annual recurring revenue business model. So as revenue continues to grow, we expect to generate high incremental margins. So we believe like other high-tech companies, it's important to invest in the business, we strongly believe that growing revenue, and capturing market share should be our number one priority at this stage, given the size of the market, and as we do that that will get us to profitability.

[David Waldman:]

Okay, thank you. You mentioned you're working with fortune 500 companies, can you give a better sense of the types of companies and some examples of the work we're doing for them?

[Nadir Ali:]

Yes, I mean, look, this is a question I get periodically. And most of our customers don't allow us to use their names. But I can certainly share types of companies. So for example, we're working with a multibillion-dollar technology company, looking at managing employees and visitors. You know, they started that initially for security purposes. But now we're also leveraging that for contact tracing, as they reopen their offices. We're in discussions and pilot with a pharmaceutical company for mapping and asset tracking capabilities. We also have an international hardware manufacturer that's looking to use our mapping and wayfinding on their campus as they implement desk booking and hoteling for their office space. I'd also add that our pipeline is growing pretty significantly, as companies look to come back and reopen their offices, we're engaged in discussions with a variety of companies in technology, manufacturing, hospitality, government agencies, and others. And I've been listening into some of these customer calls, and it's clear, customers have some real pain points that we can solve for them as a reopening, such as contact tracing and social distancing, but also some that are more long term with the wayfinding. We've talked about our asset tracking and other security use cases. So I'm very optimistic about where we're headed and what I'm hearing from customers.

[David Waldman:]

Okay, thank you. Next question, does the company plan to raise money again?

[Nadir Ali:]

So look, we have a strong balance sheet. And while we have access to the ATM, it's been used on minimal occasions over the last few months. We may use it opportunistically or needed in connection with our acquisition strategy. But we're really focused on executing our business plan in generating continued revenue growth. As I mentioned earlier, we believe the shares are very undervalued and we're hopeful that with continued strong financial performance, and the upcoming milestones we have, we can unlock value for our shareholders.

[David Waldman:]

Thank you. Our next question, we see that you have continued to hire, can you expand on if and how these hires are helping to generate additional revenue?

[Nadir Ali:]

Yes. I mean, the short answer is yes. And we are hiring primarily in sales, marketing, customer success, really focused on enterprise and government sales reps, and folks that can help drive growth and revenue. And making sure our customer experience that I talked about earlier, is on track. So we're focused on scaling this business, and that requires some upfront investment in these areas. We're also using an outsourced lead gen firm, which has been very effective in setting up meetings. And, again, what we're hearing from them as priorities from these customer calls and conversations are around contact tracing, occupancy, analytics, and intelligent wayfinding. So as we make progress on the sales front, we also need to make sure we've got the folks here to be able to support those customers. So that's why we continue to hire.

[David Waldman:]

Thanks. Our next question is Nanotron generating revenue right away and has Inpixon added to their projected revenue stream?

[Nadir Ali:]

Yes, so they're not in our Q3 results since the Nanotron acquisition closed in October, but yes, absolutely. They have been generating revenue for years and you'll see that reflected in our fourth quarter results. We're also seeing cross selling opportunities already. So for example, I mentioned cruise line company that wants to do some contact tracing on ship and off the ship. So using Nanotron's Chirp technology could be a great fit there with our ultra-wideband solutions. We're also bringing some of the Nanotron capabilities into a construction project opportunity that was already in our pipeline. So there's definitely revenue impact that you'll see in Q4 and then we're also looking at the cross selling, up selling opportunities.

[David Waldman:]

Great, thank you. Our next question, have you reached out for any COVID related government funding to help your business?

[Nadir Ali:]

So we did not receive any COVID related government funding, we looked at it towards the beginning of the shelter in place directives and, and ultimately determined that we weren't eligible given our access to funding through other sources, as well as the fact that we didn't have any operational cuts, we're continuing to grow, no layoffs, etcetera. So we did not receive any public related government funding.

[David Waldman:]

Okay, thank you. Our final question for the evening. Can you elaborate on specific efforts the company is undertaking in terms of contact tracing, and to position Inpixon on the front line in terms of COVID?

[Nadir Ali:]

Yes, we definitely made significant sales and marketing efforts to create awareness around Inpixon and our workplace readiness solution, which we feel is really an enterprise level contact tracing solution. And it's critical for reopening businesses and governments. To me that's how we're going to reopen, companies will have to have something like this in place, it minimizes transmissions in the workplace among employees, which impact the families, which then impacts communities. And that's why Taiwan has been so successful is because of their contact tracing program. And so to do it here in the US, it at our scale, we need to use technology. And I think even with a vaccine, it will take time to deploy, and there will be flare ups, and mutations and things that we will have to deal with. And so keeping that in mind, I think it's, it's definitely been a way for us to engage with customers and help them think about contract tracing as they get back. But it also has given us an opportunity to talk to these customers about how our indoor data and indoor intelligence can be used for other use cases. And so whether it's the building management optimizations, or asset tracking or intelligent wayfinding, there are other longer-term solutions that this platform offers. And our customers are seeing that when we have these initial conversations around contact tracing. And remember, with Nanotron, we also have a lot more products and new verticals that we're into. So we're in corporate offices, but we're also in mining and livestock and construction, just as a few examples. And so I think that diversifies our risk and reduces our dependencies on any one solution or vertical.

[David Waldman:]

Great, well, thank you, Nadir. And that does conclude our Q&A. I'd like to thank everyone for joining us today.

[Nadir Ali:]

Thank you, everyone.

[Operator:]

This does conclude today's program. Thank you for your participation. You may disconnect at any time.