XTI Aerospace Inc (XTIA) 2019 Q1 法說會逐字稿

Good afternoon, and welcome to the Inpixon Earnings Conference Call for the First Quarter Ended March 31, 2019.

(Operator Instructions)

Participants of this call are advised that the audio of this conference call is being broadcast live over the Internet and is also being recorded for playback purposes.

A replay of the call will be available approximately 1 hour after the end of the call through June 15, 2019.

I would now like to turn the conference over to Scott Gordon, President of CORE IR, the company's Investor Relations firm.

Please go ahead, sir.

Thank you, Gary.

Thank you all for joining today's conference call to discuss Inpixon's corporate developments and financial results for the first quarter ended March 31, 2019.

With us today are Nadir Ali, the company's CEO; and Wendy Loundermon, VP Finance.

At 4:05 p.m.

Eastern Time today, Inpixon released financial results for the first quarter ended March 31, 2019.

If you have not received Inpixon's earnings release, please visit the Investors page at www.inpixon.com.

During the course of this conference call, the company will be making forward-looking statements.

The company cautions you that any statement that is not a statement of historical fact is a forward-looking statement.

This includes any projections of earnings, revenues, cash or other statements relating to the company's future financial results; any statements about plans, strategies or objectives of management for future operations; any statements regarding planned acquisitions or strategic partnerships; any statements concerning proposed new products; any statements regarding anticipated new relationships or agreements; any statements regarding expectations for the success of the company's products in the U.S. and international markets; any statements regarding future economic conditions or performance; statements of belief; and any statements of assumptions underlying any of the foregoing.

These statements are based on expectations and assumptions as of the date of this conference call and are subject to numerous risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.

Some of these risks are described in the section of today's press release titled Cautionary Note on Forward-looking Statements, and in the public periodic reports the company files with the Securities and Exchange Commission.

Investors or potential investors should read these risks.

Inpixon assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so.

In addition, to supplement the GAAP numbers, the company has provided non-GAAP adjusted net loss and net loss per share information in addition to non-GAAP adjusted EBITDA information.

The company believes that these non-GAAP numbers provide meaningful supplemental information and are helpful in assessing our historic and future performance.

A table reconciling the GAAP information to the non-GAAP information is included in the company's financial release.

It is now my pleasure to turn the call over to Nadir Ali, Inpixon's CEO.

Nadir?

Thanks, Scott, and good afternoon, everyone.

Welcome to our first quarter 2019 earnings call and corporate update.

I am happy to report that we just posted year-over-year revenue growth in this quarter as well as sequential growth in revenue in each of the last 3 quarters since our separation from Sysorex.

Our Q1 year-over-year revenue increased by approximately 65% over Q1 2018, which was revenue of $849,000.

Our revenue for the first quarter of 2019 was $1.4 million versus $1.1 million in the fourth quarter of 2018, a 27% increase sequentially.

This follows our fourth quarter of 2018 revenue growth of 20% as compared to the third quarter of 2018.

I am confident that we will continue to build on this trend, as we focus our efforts and resources on the growth and development of our IPA business.

I want to take a moment here to reflect and bring to your attention the significance of these numbers.

As a reminder, in 2018, when we completed the spin-off of Sysorex from Inpixon, resulting in 2 separate independent companies, each focused on their own core competencies, for Inpixon stakeholders, this was a new beginning.

In prior quarters following the spin-off, there has been some confusion among our shareholders and analysts who have been evaluating financial results with a comparison to historical estimates determined on a consolidated basis with the legacy Sysorex business.

This comparison fails to account for the effect of the spin-off of that business, which is represented in the deconsolidated operations line in our year-over-year comparisons for the prior year period.

The consistent growth over the last 3 quarters is representative of the independent performance of Inpixon's IPA business.

Inpixon is now a pure play in the rapidly growing indoor positioning analytics industry.

The indoor positioning systems, or IPS, market is currently where GPS, or global positioning systems, was 30 years ago.

As IPS technology continues to mature, more and more use cases, applications and opportunities will emerge for companies like Inpixon, just as we have seen with GPS technology.

We are actively working to increase our indoor positioning analytics revenue among both commercial and government customers with a focus towards achieving positive cash flow results.

I believe that the results of the past 3 quarters validate the strategic decisions we have made and support the painstaking efforts that we have put forth over the last 1.5 year to achieve this pure-play status.

Based on our growing sales pipeline, continued channel partner momentum, ongoing conversations with customers and other strategic initiatives, we expect the growth will continue in 2019.

In addition, we are offering lower cost entry point solutions to our customers, such as the Inpixon IPA Pod, which will expand the application of our products into more customer verticals and use cases.

I am very excited about our results for the first quarter of 2019 and what it reflects about our growth momentum.

We not only delivered a significant increase in both revenue and gross profit relative to the comparable period in the prior year, we also significantly increased our gross profit margin percentage and decreased our net loss.

Our business continues to be strong in Canada, Europe and the Middle East.

We see more and more companies from a variety of industries, including government, corrections, high-tech, retail, finance and telecom use our technology for a variety of applications and purposes, including security and intelligence.

Indoor positioning and related services are not restricted to any specific industry.

The field of applications appear to be limitless, some of which were discussed during our last earnings call.

Our customer base continues to shift from early adopters to mainstream users.

Our outlook for future growth in our customer base remains strong, as we have developed a robust pipeline of enterprise customers, schools, government agencies and various retail entities.

Ultimately, our goal is to become the leading provider and comprehensive data source for the world of indoors, where people spend over 80% of their time and GPS just does not work.

As I mentioned in the past, M&A is an important part of our growth strategy.

To that end, we recently announced that we entered into a nonbinding term sheet to acquire Locality Systems Inc., a technology company based in Vancouver, Canada.

Locality specializes in wireless device positioning and radio frequency augmentation of video surveillance systems.

Its video management system, or VMS, integration technology, enhances traditional security video feed by overlaying wireless device and tracking.

In plain English, this means where video frames fail to clearly identify the individuals on a given frame, we will be able to identify the unique devices that are present in that location simultaneously and associate them to their owners, hence enabling authorities to use the RF signature to quickly isolate picture frames with the same ID.

Furthermore, we can store that RF information anonymously for future identification.

Strategically, Locality's enhanced video surveillance combines with our sensor fusion and video integration enhancements to deliver a more formidable Security Dome product.

With the acquisition of Locality and its technology, Inpixon will be one of the very few in the global video surveillance market to offer Wi-Fi, Bluetooth and cellular detection integrated into a video security platform.

Also, we anticipate that the -- that integrating the video and RF simulcast capabilities will allow us to create cross-selling opportunities amongst our customers, enhancing their intelligence operations and by making their existing security infrastructures more effective.

Locality's visitor information solution will be an excellent addition to our IPA intelligence product solutions as a Wi-Fi-only offering that will complement our IPA sensors.

Locality's visitor analytics solution utilizes a customer's existing Wi-Fi infrastructure for device detection, and they can leverage Locality's proprietary cloud-based software for analysis and reporting.

This will allow us to offer a lower cost, quicker and easy-to-install solution to a customer base that just wants to get visitor counts, analyze dwell times and visualized visitor flow through the facility.

While we have not entered into a definitive agreement with respect to our proposed acquisition of Locality, and there are no assurances that the transaction will be completed, our discussions continue to progress and are rapidly developing.

We look forward to providing additional information regarding this transaction in the near term.

We will continue to actively evaluate other complementary technology companies that can add to our capabilities.

We target companies that have a growing customer base, complementary products and IP that we believe will allow us to capture more market share faster and to help us become the best and most valuable indoor positioning platform solution in the market.

I want to conclude my opening remarks by reiterating how excited we are about the progress we are making.

We are beginning to realize the results of our focused efforts on our IPA product line and intend to continue to build on that momentum.

We've seen significant uptake in the acceptance of IPA, as the learning curve required for adoption and implementation has decreased.

We anticipate this trend will continue in 2019.

With that, I'll turn the call over to Wendy to discuss our financial results for the quarter ended March 31, 2019, and then I'll wrap up with a few closing comments.

Wendy?

Thank you, Nadir.

Total revenues for the 3 months ended March 31, 2019, were $1.4 million compared to $849,000 for the comparable period in the prior year, or an increase of $551,000 or approximately 65%.

Revenues increased in the first quarter of 2019 over the prior period due to an increase in our IPA revenue, resulting from an increased focus on our IPA product line.

Gross profit for the quarter ended March 31, 2019, was $1 million compared to $584,000 for the comparable period in 2018.

The gross profit margin for the 3 months ended March 31, 2019, was 75% compared to 69% for the 3 months ended March 31, 2018.

This increase in margin is primarily due to the increase in higher margin IPA revenue during the 3 months ended March 31, 2019.

GAAP net loss for the 3 months ended March 31, 2019, was $5.2 million compared to $6.2 million for the prior year period.

This lower loss of $1 million was primarily attributable to higher margin IPA revenue in the 3 months ended March 31, 2019, and the $1.7 million loss from deconsolidated operations of the spin-off of Sysorex during the 3 months ended March 31, 2018.

GAAP net loss per share for the quarter ended March 31, 2019, was $1.42 per share compared to a net loss per share of $73.88 per share for the comparable period in 2018.

Pro forma non-GAAP net loss per basic and diluted common share for the 3 months ended March 31, 2019, was a loss of $0.71 per share compared to a loss of $49.45 per share for the prior year period.

Non-GAAP net loss per share is defined as net loss per basic and diluted share adjusted for deemed dividends and noncash items, including stock-based compensation, amortization of intangibles and onetime charges including gain or loss in the settlement of obligations, gain on earn-out, acquisition cost, provision for doubtful accounts and the costs associated with the public offering.

Non-GAAP adjusted EBITDA for the 3 months ended March 31, 2019, was a loss of $2.6 million compared to a loss of $3.4 million for the prior year period.

Non-GAAP adjusted EBITDA is defined as net income or loss before interest, provision for income taxes and depreciation and amortization, plus adjustments for deemed dividends and other income or expense items, nonrecurring items and noncash stock-based compensation.

On the balance sheet, we ended the first quarter with cash and cash equivalents of $3.8 million and total current assets of $6.8 million.

Our net cash used in operations was approximately $3.5 million during the first quarter ended March 31, 2019.

This concludes my comments, and I'd now like to turn the call back over to Nadir.

Thank you, Wendy.

As I previously mentioned, Inpixon is, in effect, a new company with great potential and opportunities.

Not only have we made strides to increase revenue, but our cost structure and financial metrics have significantly improved following the divestiture of our historical Infrastructure business, which is no longer incorporated into our reporting.

We are focused on continued growth and getting to profitability.

We thank you for your continued support.

And with that, Gary, we're ready to open up the call to any questions.

(Operator Instructions) Our first question comes from Ross Silver with Sylva International.

Well, first and foremost, congratulations, Nadir and Wendy, on the quarter.

Definitely some pretty exciting progress here.

And also the Locality acquisition looks very promising as well.

But -- so as it relates to your types of customers that are contributing to this 60% year-over-year revenue growth that you experienced on a quarterly basis, can you talk a little bit more about what -- who those customers are, and why you're winning this new business?

Sure.

That's a great question.

So we are continuing to expand into a variety of verticals.

The growth in Q1 was particularly interesting because it was -- a big percentage of that growth was in the enterprise space.

So enterprise customers are starting to want to understand what's happening inside their buildings, inside their facilities and campuses not only from a security perspective, but a variety of other metrics, such as visitors that are coming into their space or building management systems being integrated with where folks are and how much time they're spending in particular areas.

So there's a lot of analytics that are interesting to these customers as well as the security applications for it.

It's further validated by the acquisition of one of our competitors, Euclid Analytics, by WeWork.

WeWork is in all of these office buildings and space and wanted to get some understanding of location data.

So we think this is a vertical that's really going to grow and could be a great opportunity for Inpixon.

So glad to see that we're starting to see that adoption with enterprise customers.

Okay.

And then one follow-up question, as it relates to some of these RFPs.

Are you starting to see the number of RFPs go up as you're seeing more maturation and understanding of the IOP industry -- IPA industry, excuse me.

Yes.

I mean for IPA, so on the government side, we sure are going to see RFPs.

It's not always RFPs, but there's a variety of ways that customers reach out and engage with us.

So whether it's RFPs or some sort of request for quotation, we are definitely seeing an uptick in the sales pipeline and the business development opportunities.

So RFPs makes me think more about our government customers and how they do procurement.

But certainly across the board, I think it goes to my earlier point of, we are seeing a little bit more maturity in the industry taking place, and with that comes some momentum in the RFPs as well as other ways of procuring our solutions.

I'm showing no further questions.

This concludes our question-and-answer session.

I would like to turn the conference back over to Nadir Ali for any closing remarks.

Thanks, Gary.

Thank you, again, everyone for your support and interest in Inpixon.

We look forward to updating you on our continued progress.

The conference has now concluded.

Thank you for attending today's presentation.

You may now disconnect.