XTI Aerospace Inc (XTIA) 2019 Q4 法說會逐字稿

Good afternoon, and welcome to the Inpixon earnings conference call for the 2019 fiscal year ended December 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 telephone replay of the call will be available approximately 1 hour after the end of the call through March 10, 2020.

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.

Thank you for joining today's conference call to discuss Inpixon's corporate developments and financial results for the 2019 fiscal year ended December 31, 2019. With us today are Nadir Ali, the company's CEO; and Wendy Loundermon, the company's Chief Financial Officer.

On March 3, 2020 Inpixon released financial results for the year ended December 31, 2019. If you have not received Inpixon's earnings release, please visit the company's investor Relations page at ir.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 completed or planned acquisitions or strategic partnerships and the anticipated impact of those transactions on our business, any statements concerning proposed new products, any statements regarding anticipated new customers, relationships or agreements, any statements regarding expectations for the success of the company's products in the U.S. and in 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 yesterday'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 historical and future performance. A table reconciling the GAAP information to the non-GAAP information is included in the company's financial release.

I'll now turn the call over to Nadir Ali, Inpixon's CEO. Please go ahead.

Thank you, David. And good afternoon, everyone. We are pleased to be here with you today to discuss our 2019 annual results and business accomplishments as well as provide an update as to where we intend to focus our efforts in 2020.

In addition to our strong revenue growth and improved gross profit margin, 2019 was a pivotal year for us during which we completed a number of acquisitions that are allowing us to expand our footprint in the industry as one of the only companies offering end-to-end solutions for indoor intelligence that encompasses mapping, positioning and analytics.

During the early half of 2019, we enhanced our analytics capabilities to include radio frequency augmentation of video surveillance systems with the acquisition of Locality and its technology. This technology correlates Wi-Fi device presence and analytics to the security video frame generated by our customers' existing video management systems in order to better understand how a device detected in 1 frame has moved throughout a venue and can provide security-based alerts.

Following the Locality acquisition, we expanded our intellectual property portfolio and solutions to include GPS technologies, bridging the market's indoor/outdoor gap with the ability to deliver seamless indoor and outdoor positioning services.

Most notably, we also added a dynamic and interactive mapping platform with the acquisition of Jibestream in the second half of 2019. This solution provides enterprise organizations with the tool to add intelligence to complex indoor spaces by integrating business data with indoor maps. Our indoor mapping platform offers the flexibility and control to create tailored map-enabled solutions that address multiple use cases with a single platform.

In October, we received a Notice of Allowance from the U.S. Patent and Trademark Office, allowing our patent application covering a method of storing and analyzing variable with data, further strengthening our IP portfolio. This process allows us to store vast sums of disparate data efficiently and makes retrieval of data faster and closer to real time.

Collectively, the addition of these technologies and solutions has allowed us to expand our customer base to include marquee customers, such as the Mall of America, The Pentagon, Westfield World Trade Center and San Francisco International Airport, among others.

We also deployed our indoor mapping solution with a leading national retailer, which allows shoppers to search and locate products within the retailer stores using digital directories and were selected by American Dream, one of the largest entertainment and retail centers in North America as its indoor mapping partner.

The acquisition of these technologies has increased our pipeline and created additional opportunities to expand our relationships with our existing customers through upselling and cross-selling, evidenced in part by the additional business received from a customer with the U.S. federal government following a successful pilot of our GPS technologies.

These efforts allowed us to expand the capabilities of our intelligence platform to offer what we believe is an agnostic, versatile and integrated indoor intelligence platform with the ability to ingest data from various sources, including sensors, video and IoT devices that can be blended with our positioning algorithms, mapping intelligence and behavioral analytics to deliver insights about indoor locations for a multitude of use cases.

Earlier this year, we were recognized by Gartner, a highly respected independent research firm in the industry, identifying Inpixon as a visionary in their 2020 Magic Quadrant for indoor location services. This is an upgrade from our position in Gartner's 2019 Magic Quadrant as a niche player. The visionary quadrant includes many large elite players and recognizes those players in the space that have a clear understanding of the market needs and expectations or otherwise have a vision for changing market rules.

According to the Gartner report, there continues to be evolving and complex use cases that are driving vendor requirements for global indoor location solutions for new and existing markets and vendors should be evaluated based on their ability to meet multiple end user opportunities with the ability to address new relevant usage scenarios.

We believe the recognition of Inpixon as a visionary is a significant acknowledgment of the capabilities of our indoor intelligence platform and the enhancements we have made to date in furtherance of addressing market expectations to be able to offer solutions for our customers that can meet a variety of use cases across a multitude of industries.

In 2020, we intend to continue to invest resources and efforts towards optimizing our products and capabilities. Specifically, our product road map plans include expanding the use of ultra-wideband technology for asset tracking, furthering our efforts towards the voice assisted and analytics interface, understanding worldwide 5G deployments and enhancing our positioning capabilities to offer even better and richer indoor experiences.

Ultimately, we are striving for widespread interoperability where any company in the indoor intelligence ecosystem can leverage Inpixon products and platform to serve their customers and integrate our solutions with their own to offer a more comprehensive solution.

We believe greater accuracy is the most desirable attribute in positioning. And UWB technology, ultra-wideband, has been increasingly gaining popularity due to its high accuracy and reliability with low to no radio signal interference. In order to address this market requirement, we recently announced plans to offer an ultra-wideband module and tags built to provide accuracy under 30 centimeters. When utilized in conjunction with our indoor location data platform, this UWB module is anticipated to provide customers and other indoor location vendors, the ability to build new applications or to enhance their existing systems. This USB-enabled device is expected to operate independently with other sensors or third-party access points or port into existing Inpixon hardware to identify and locate cellular, Wi-Fi and BLE in addition to the UWB tags in devices.

We believe this offering will enable us to pursue new sales opportunities within the real-time location system or RTLS market, which MarketsandMarkets forecast will reach approximately $8.8 billion by 2023. UWB is being embraced by Apple and others.

Notably, we have already begun seeing interest as we recently announced expanding our collaboration activities with Mist, a Juniper Networks Company. Mist has not only collaborated with us on a number of indoor mapping and mobile application development projects, but is also working with us to integrate our ultra-wideband capability into Mist enterprise wireless infrastructure solutions. Collaborations in our ecosystem, such as the one with Mist, provide large enterprise customers with the ability to expand their total solutions for capturing indoor data and delivering actionable indoor intelligence.

We also want to enhance our solution offerings to optimize the use of our products on their devices. Specifically, we expect to leverage our existing patented portfolio of algorithms and technology to explore additional solutions to enhance the indoor navigational experience by allowing users to track their indoor movements through an app or SDK on their device. We intend to continue study worldwide 5G deployments to build a robust hardware and software solution to detect and position new handsets based on this technology and explore software-defined radio solutions as well as enhancements in antenna technology to provide our customers with additional capabilities in the security field.

In addition, in 2020, we expect to increase our sales and marketing efforts, including the number of sales -- of our sales personnel and channel partners. We are aggressively working to increase Inpixon's exposure in the market by attending premier trade shows, exploring media coverage and participating in webinar programs. We also intend to continue to evaluate and pursue where appropriate, strategic M&A transactions that will allow us to continue our growth and build upon and enhance our business as a provider of end-to-end solutions for indoor intelligence with technologies that enhance our ability to collect data from a variety of sources and to deliver insights from that data with a particular focus on securing, digitizing and optimizing premises with our indoor positioning, mapping and analytic solutions for businesses and governments.

In 2020, we look forward to continuing to build on the opportunities for continued growth that our achievements of 2019 have positioned us for. We will talk more specifically about our financial results in a moment, but I'd like to highlight that we achieved a 68% increase in revenue for the 2019 fiscal year compared to the same period last year. At the same time, our gross profit margin increased to 70% (sic) [74%] for fiscal year 2019, ending December 31, compared to 71% for the same period last year.

Our revenue growth reflects revenue from our acquisitions as well as organic growth as we continuously expand our customer base and ecosystem of partners and distributors globally.

To summarize, we believe we have developed the most comprehensive, flexible, scalable and interoperable architecture available in the indoor positioning market. Our platform is able to interface with disparate data sources, both internal and external, meaning customers can leverage existing data sources like their wireless infrastructure, beacons, RFID or ultra-wideband tags, IoT sensors and combine it with sensor data, video management systems, point-of-sale data and public databases like weather and traffic.

In turn, this information can be digested and analyzed for a wide range of applications, including visitor analytics, customer experience enhancement, wayfinding, navigation, student safety, first responders, security, theft prevention, evacuation, precise asset tracking, workforce productivity, facility management, building energy efficiency, location sharing, intelligent parking and many more. We believe that the potential applications are virtually endless, and we have barely scratched the surface of this enormous addressable market.

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

Thank you, Nadir. And thanks to everyone for joining us today.

Revenues for the fiscal year ended December 31, 2019, were $6.3 million compared to $3.8 million for the comparable period in the prior year for an increase of $2.5 million or approximately 68%. The revenue increase was mainly due to the increase in our IPA product and services revenues and an increase in our mapping revenue during the year ended December 31, 2019.

Gross profit for the fiscal year ended December 31, 2019, was $4.7 million compared to $2.7 million for the comparable period in the prior year for an increase of 75%, while gross margin for the year ended December 31, 2019, was 74% compared to 71% for the year ended December 31, 2018. This increase in margin is primarily due to the sales mix of products and services sold in 2019.

Loss from operations for the year ended December 31, 2019, was $20.8 million, as compared to $18.4 million for the comparable period in the prior year. This increase of approximately $2.4 million was primarily attributable to the higher operating expenses during the year ended December 31, 2019, including acquisition-related expenses, the addition of Jibestream's operating expenses as well as noncash items, including amortization of intangibles and stock-based compensation.

Net loss attributable to stockholders for the year ended December 31, 2019, was $34 million or a loss of $47.52 per share compared to a loss of $24.6 million or a loss of $2,600.77 per share for the comparable period in the prior year. This increase in loss of $9.4 million was primarily attributable to higher operating and interest expenses and a full valuation allowance associated with the note receivable from Sysorex due to the uncertainty of repayment, which is offset by higher margin IPA revenues during the year ended December 31, 2019. The valuation allowance associated with the note is based on a variety of factors, including Sysorex' performance and will be periodically evaluated. It will also be reduced as amounts are paid against the note.

Non-GAAP adjusted EBITDA for the year ended December 31, 2019, was a loss of $11.1 million compared to a loss of $15 million for the prior period of 2018. Non-GAAP adjusted EBITDA is defined as net income or loss before interest, provision for income taxes and depreciation and amortization plus adjustments for other income or expense items, nonrecurring items and noncash items, including stock-based compensation.

Pro forma non-GAAP net loss per basic and diluted common share for the year ended December 31, 2019, was a loss of $18.75 per share compared to a loss of $1,087.67 per share for the prior period in 2018. Non-GAAP net loss per share is defined as a net loss per basic and diluted share, adjusted for stock-based compensation, amortization of intangibles, provision for doubtful accounts, severance costs, acquisition costs, cost associated with public offerings and onetime charges, including the loss on exchange of debt for equity and provision for valuation allowance on a held for sale loan. Cash on hand at December 31, 2018, was $4.8 million.

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

Thank you, Wendy. I'd like to thank everyone for participating on our 2019 fiscal year-end conference call. As I mentioned earlier, we're pleased with our fiscal year results, including the increase in revenue as well as improved gross profit margins, and we are aggressively working towards our goal to be cash flow positive. Our products and services are geared towards large enterprise organizations worldwide, government agencies and educational institutions who are using indoor intelligence to improve lives and experiences and enhance safety and security for employees, customers and visitors. We believe using a rich set of data collected from various sources enables our customers to take advantage of the insights within their indoor spaces that we're missing until now. I'd like to thank all of you and our investors for your continued support. We'd like -- we look forward to providing additional updates in the weeks and months ahead.

I'll now turn the call over for questions. Christy?

(Operator Instructions) We'll take our first question from [Ellen Litbach] with Forest Capital.

Definitely congratulations on the year-over-year revenue growth and margin improvement. Can you comment on the status of the integration of the recent acquisitions, specifically, are you starting to benefit from the cross-selling opportunities?

Thanks for the question, [Ellen]. That's a great question. Yes. I mean immediately after the Jibestream acquisition in August, we held a leadership summit to initiate the planning and execution of the integration process. And I'm happy to say that we are on track on all fronts, including engineering, sales, marketing and administration. We've integrated the messaging in our marketing, webinars, Google ads, social media and websites, our sales and customer teams are being cross-trained in introducing a broader range of solutions to prospects and customers. Soon, all of our customers will also have a similar point of access to the Inpixon indoor intelligence platform. So then no matter what the use case they want to begin with, whether it's mapping, asset tracking, device detection or visitor analytics, our customers will utilize the same integrated solution platform, and then they'll be able to easily select more pieces of our solution from that integrated interface in the future as they need.

We're also integrating externally not just internally. For example, Jibestream has several relationships with other indoor positioning vendors in the market and channel partners, and we welcome them into our ecosystem since the acquisition. So Mist is one example. A vendor that we recently announced, who is not only using our mapping platform but is also working with us on our ultra-wideband sensor. These partners in our ecosystem provide us an opportunity to scale and grow our pipeline. So in the coming quarters, you'll see more examples of how our customers are growing from one of our products to the next as a result of the integration. I hope that answers the question.

Yes, that's very helpful. I just have actually one more question. Can you just comment on the sales pipeline heading into 2020? I mean, I understand how your technology impacts retail, but can you also comment on how you see this rolling out within the enterprise and government sectors?

Yes, sure. Yes, I agree. Retail is a simpler case to understand and visualize, but our offering is definitely very suitable for enterprise and government spaces when you think about digitizing the physical space. And it's one of our -- I mean one of the best markets for us. Our pipeline is really encouraging and growing exponentially there. We've been serving the federal sector for a few years now and have been seeding the market with awareness campaigns, partnerships, proof of concepts, and all of that is starting to bear fruit. For example, the Department of Energy recently came out with a directive that restricts use of mobile devices within National Nuclear Security Administration secure spaces. So our solution is really well positioned to help these types of agencies comply with the directive.

The thing is that everyone is bringing their own device, right? BYOD and IoT is a fact of life now, and facilities find it difficult to prevent people from bringing their devices into buildings. And those devices are also essential productivity tools. So the administrations of these agencies need to figure out a solution, and we fit the bill in terms of being able to identify known devices versus unknown devices and potential devices that could pose a security risk. It's also similar with enterprise customers, which is another piece of the pipeline that we're seeing demand in for use cases that address both efficiency as well as safety of employees. So in the case of efficiency, customers are seeking to optimize building management systems using location data, using smart maps to find meeting rooms, track company assets and more. And on the safety side, we can provide real critical real-time information to first responders in the event of emergencies or some sort of security threat. We can also ensure that security of confidential information and equipment such as sensitive prototypes within the secure building or space where mobile phones might be restricted, we can help secure those zones or areas. So we believe both these markets and the security use case are going to continue to be a strong growth sector for Inpixon and our pipeline in 2020 and beyond.

That does conclude our question-and-answer session for today. So I'd like to turn the call back over to Nadir for any closing remarks.

Thanks, Christy. I just wanted to thank our shareholders, investors again one more time for joining us on the call and for your support. We look forward to talking to you again when we announce our Q1 results from 2020. Thank you, everyone.

And that does conclude today's teleconference. We appreciate your participation. You may now disconnect your lines and have a great day.