XTI Aerospace Inc (XTIA) 2020 Q2 法說會逐字稿

Good afternoon, and welcome to the Inpixon earnings conference call for the 3 months ended June 30, 2020. (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 August 20, 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.

Good afternoon, and thank you for joining today's conference call to discuss Inpixon's corporate developments and financial results for the 3 months ended June 30, 2020. The 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 3 months ended June 30, 2020. 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 or solutions; 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 international markets; any statements regarding future economic conditions or performance, including, but not limited to the impact of COVID-19 on our operations; any 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 safe harbor section of today's press release and 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 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. Thank you for taking the time to join our conference call today. Let us begin by addressing how similar to all of you, we have continued to manage through the pandemic over the last few months, including its impact on our employees and our ability to meet customer needs.

After a quick and efficient transition of all of our employees from offices to working from home, most of our employees continue to work remotely. In spite of the challenging situations experienced by all, both personally and professionally, I remain proud of the entire Inpixon team, which continues to be highly productive and fully engaged.

While the pandemic generally had a minimal effect on our day-to-day operations and customer support efforts, we have experienced certain obstacles. In this regard, we have seen supply chain constraints and shipping delays of various components resulting from supplier factory shutdowns or a lack of on-site customer staff available to process orders and receive products.

In turn, this has hampered certain activities like sensor installation and user acceptance testing. As a result, in certain cases, customer orders and bookings originally anticipated to be realized during the second quarter were delayed to Q3. In other cases, customers delayed planned expenditures during the second quarter as they continue to assess the impact of the ongoing pandemic on their own business needs.

While our revenue for the second quarter declined on a year-over-year basis, we did not see any material impact on revenue received from our subscription-based products and other services that could be performed remotely. And for the 6 months ended June 30, revenue remained flat as compared to the same period of last year.

While businesses throughout the country and globally slowly reopen, we expect that we will continue to contend with some of these challenges. The ultimate impact that they will have on our results of operations for the remainder of the year is uncertain. However, for the reasons I will discuss today, we continue to remain optimistic that we will be able to show meaningful year-over-year revenue growth and believe we will emerge from the pandemic in an even stronger position as the importance of Indoor Intelligence and our products becomes more evident to current and potential customers.

Let me explain. During the period of unprecedented times, our engineering, sales and marketing teams were proactive and quickly pivoted our development resources to design, develop and introduce our workplace-readiness dashboards, built on our Inpixon Indoor Intelligence Platform to offer government and enterprise organizations, solutions to help ensure the safety of their visitors and employees as they prepare and begin to bring employees back to the office within the backdrop of a pandemic.

Our Workplace Readiness solutions provide live analytics to help organizations with their efforts to implement appropriate safety precautions by showing trends and changes in people flow and occupancy density by zones. This information is critical to organizations as it provides the ability to monitor and communicate key insights for building and zone health and to identify areas that need increased cleaning efforts, crowd management or contact tracing.

Our APIs and upload capabilities allow customers to integrate data collected from external sources, such as temperature readings, thermal camera counts or customizable health assessment questionnaire responses within the same dashboard, offering a single platform to assess and monitor workplace readiness across a variety of use cases.

With an ability to deploy our solutions remotely by leveraging existing Wi-Fi access points, businesses that use our technology within their premises have ready-to-use access to our Workplace Readiness dashboards with the essential tools I've described. For those customers who are looking to issue tags for asset tracking or identify identity badges to visitors and employees for managing occupancy and to adhere to best practices, we will be offering ultra-wideband or UWB technology, with centimeter-level positioning accuracy. Earlier this week, we announced the receipt of FCC certification for our UWB module, which is a very exciting milestone.

UWB is a radio technology that can enable a more precise measure of radio frequency signals, allowing for centimeter-level accuracy and location measurements. This technology can be implemented in a broad range of applications and the increased location accuracy allows for contextual decision-making, reduced operating costs, increased safety and greater security for assets and data communication.

The seismic adoption of the Internet of Things is already beginning to include UWB transmitting technology in several consumer and industrial applications that will require mission-critical transmissions of high quantity data with accurate locational context. We expect that UWB will be significant in our future offerings, along with the work we are doing in 5G cellular detection, next-generation BLE and Wi-Fi 6. Our sensor fusion capabilities have long been a differentiator for us, and we expect to continue to show our leadership and innovation in this space.

In addition to the significant product development work, our marketing and sales team embarked on a nationwide Reclaim Your Workplace advertising campaign designed to increase awareness of the value of our offerings, including our Workplace Readiness solutions. The campaign is targeted at key decision-makers at Fortune 500 and other large enterprises and government agencies via a series of print and digital ads, online videos, radio spots and podcast sponsorships. We delivered over 15 million impressions throughout the campaign via well-known online and print media, including the Wall Street Journal, New York Times, Washington Post, LinkedIn, the TED Radio Hour and Planet Money.

In addition, we launched a new corporate website that complements our ad campaign. The website provides existing and potential customers a comprehensive and informational platform that highlights our vast capabilities as well as best practices for companies during the ongoing pandemic. The website includes a clean modern design with advanced search engine optimization around our Workplace Readiness solutions. Since the launch, the website traffic has increased dramatically by more than 12x and is already climbing the search rankings, surpassing most of our competitors.

Looking ahead, we intend to aggressively pursue efforts over the coming months to create awareness around the utility and value of our technology to organizations around the world. Our offering around our core competencies encompass visitor analytics, wayfinding, navigation, security, theft prevention, evacuation, asset tracking, workforce productivity, facility management, building energy efficiency and much more. We believe the work we are doing provides customers with significant value as global businesses address new realities.

During the quarter, we signed a collaboration and reseller agreement with Lenovo, a leading multinational technology company. In connection with this collaboration, Lenovo is incorporating our Workplace Readiness dashboard with physical distancing and contact tracing capabilities into its Think IoT Back to Work solutions. Lenovo will market and sell Inpixon Workplace Readiness solutions through its sales channels and deployments and will be facilitated by Lenovo's field network of more than 20,000 technicians. We are excited about the opportunities for this partnership, which is already leading to conversations with Fortune 500 organizations.

As we continue to explore multiple organic growth opportunities, we are expanding our team with new hires throughout our organization, including in sales and marketing, product development and customer success. During the second quarter, we also welcomed Tyler Hoffman as our new Chief Revenue Officer. Tyler has served more than 20 years in revenue leadership positions at prominent companies, including PayPal, Google, Visa, eBay and CNET Networks. He has deep experience in enterprise software and Software as a Service, spanning Fintech, e-commerce, security, data, media and retail sectors and we believe that he will be instrumental to our progression and growth.

In connection with our acquisition growth activities, at the end of the second quarter, we completed the acquisition of a global distribution and development license for CESTAT and SigmaPlot software suites, where we acquired the right to market, distribute and develop a suite of data analytics, statistical and visualization tools. This transaction brings a significant number of large, well-known corporate enterprises, universities and government agencies into our customer base. We expect this transaction to be accretive to earnings and contribute approximately $3.5 million in revenue annually.

Additionally, we will continue to actively evaluate and pursue, where appropriate, strategic M&A opportunities that will allow us to build upon and enhance our overall platform as we are determined to establish ourselves as a leader in the Indoor Intelligence market. In connection with our acquisition strategy, we intend to explore a multitude of opportunities. Some of these opportunities may offer us the ability to enhance our technology and product offerings, expand our verticals and/or international presence and global footprint.

For example, we are looking at opportunities to be on devices through mobile phone apps with on-device navigation and other functionality, including incorporating our Workplace Readiness solution on the device. Others may expand our capabilities around security, artificial intelligence, AR/VR or other high-growth sectors. We look forward to providing more information around these opportunities as and if they arise.

Turning to our financials. While we did experience a decrease in revenue during the second quarter compared to Q2 2019, as mentioned at the beginning of the call, our revenue for the 6-month period ending June 30, 2020, was relatively unchanged, which we believe reflects the long-term stability of the business. In addition, we remain encouraged by the outlook for continued growth and anticipate that we will continue to see growth on a year-over-year basis.

Additionally, during the second quarter of this year, we were able to access capital resources from our at the market or ATM facility. We ended the quarter with approximately $39 million of cash and cash equivalents and have reduced our debt. As a result, our balance sheet is stronger than ever, providing us with the ability to execute and continue to invest in our organic growth strategy as well as explore other potential strategic transactions to increase shareholder value.

With that, I will now turn the call over to Wendy to discuss our financial results for the 3 months ended June 30, 2020, and then I will wrap up with a few closing comments. Wendy?

Thank you, Nadir, and thanks to everyone for joining us today. Revenues for the second quarter ended June 30, 2020, were $1.1 million compared to $1.5 million for the comparable period in the prior year for a decrease of $415,000 or approximately 28%. The decrease in revenues in the second quarter of 2020 compared to the prior period 2019 were primarily attributable to the delay in anticipated customer orders for our sensors from a significant customer that was received subsequent to the quarter end.

Gross profit for the 3 months ended June 30, 2020, was $771,000 compared to $1.1 million for the comparable period in the prior year for a decrease of 30%. While gross margin for the 3 months ended June 30, 2020, was 72% compared to 74% for the second quarter ended June 30, 2019, this decrease in margin is primarily due to lower margins associated with Inpixon's mapping services during the second quarter ended June 30, 2020.

Loss from operations for the 3 months ended June 30, 2020, was $5.1 million as compared to $4.7 million for the comparable period in the prior year. This increase in loss of approximately $400,000 was primarily attributable to the decrease in revenue during the second quarter of 2020 as compared to the same period of last year.

Net loss attributable to stockholders of Inpixon for the 3 months ended June 30, 2020, was $7.3 million compared to $5.2 million for the comparable period in the prior year. The higher loss of approximately $2.1 million was primarily attributable to the lower revenue, additional interest expense and debt discount on promissory notes and a $1.4 million of valuation allowance adjustments.

Non-GAAP adjusted EBITDA for the 3 months ended June 30, 2020, was a loss of $3.9 million compared to a loss of $1.9 million for the prior period in 2019. 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 for basic and diluted common share for the 3 months ended June 30, 2020, was a loss of $0.21 per share compared to a loss of $13.33 per share for 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 intangibles, provision for doubtful accounts, severance costs, acquisition costs, costs associated with public offerings and onetime charges, including the loss on the exchange of debt for equity and valuation allowance adjustments. Cash on hand at June 30, 2020, was approximately $39.5 million.

This concludes my comments, and I'll now turn it back -- turn the call back over to Nadir.

Thanks, Wendy. So I'd like to thank everyone for participating in our second quarter conference call. While we identified certain challenges that we, along with our customers and the rest of the world, have had to navigate as a result of the COVID-19 pandemic, it's also important to recognize that during the second quarter of 2020 we have been able to make progress towards improving our overall financial condition in a significant way. This progress has well positioned us to be able to continue to invest in and execute on our growth strategy for the longer term.

As a result, we have rapidly enhanced and expanded our product offerings geared towards filling a critical need in today's world. These solutions will help our customers create a safer, healthier environment for their employees and visitors to support efforts to comply with best-practice recommendations.

I look forward to the remainder of the year in providing further updates as we continue to expand overall awareness, not just on our Workplace Readiness solution, but across all of our capabilities, which we believe make us a leader in Indoor Intelligence with an ability to offer a comprehensive suite of solutions that is almost incomparable in the market today with a single organization.

In addition to all of you, I'd like to thank our shareholders, customers and partners and our amazing employees across the globe for your continued support.

I will now turn the call over for questions. Victor?

(Operator Instructions) Our first question comes from [Nicole Kaufmann] with the Blackbridge Capital.

And first, I'd like to say congratulations on the progress you've made thus far. My question is that you mentioned that certain orders expected in Q2 were delayed to Q3. Could you provide some color on these delays and how they can positively impact Q3?

Sure. Thanks, Nicole, for the question. Yes, as Wendy mentioned, there was a particular significant customer, which had an order that we anticipate in Q2 that did get delayed as a result of the pandemic and we have received it in Q3. We currently anticipate partial shipment of that order in Q3 with the visibility that we have in the supply chain with the balance prior to the end of the year.

So I think it's good news that we've been able to receive that order. The customer is awaiting the delivery of the sensors associated with that order and we'll expect to be able to ship a significant portion in Q3 and the balance in Q4. But given that supply chain challenges continue to be experienced and remain fluid, there is uncertainty, but we're pretty confident that before the end of the year, we should have that order completely fulfilled.

Okay. Great. And just as a follow-up to that, I know you can't mention or give names of the companies that you're in contact with and that are in your sales pipeline. But could you give some broad overview in terms of the size and types of companies that you are talking to?

Sure. Yes. As you can imagine, many of our customers, especially in the security space don't like to have us share their names, but certainly could give you some ideas of types of companies. The significant customer I just mentioned is a top technology company in Silicon Valley and the Fortune 100. We have other Fortune 500 customers, as I mentioned earlier on the call, that we're engaged in for a variety of our solutions.

We continue to build on our government customers. So throughout the U.S. government agencies, both at individual department levels and agency-wide type discussions are happening. And then we do get periodically called from international governments.

And we've had some as retail, hospitality conversations as well from large brand marquee names that you would all recognize. So that will give you a flavor of the types of customers we're engaging with.

Our next question comes from [Ellen Litvack] with Forest Capital.

I mean, you guys did a pretty good job shoring up the balance sheet. How do you plan to deploy some of the cash that you've raised?

Ellen, thank you for the question. Yes. Look, I mean, our focus this year and certainly with the capital is really about growth and growing the company despite the challenges that we and others face as a result of the pandemic, we feel that we can deploy the capital and put it to good use in terms of both organic growth and strategic M&A-type growth.

So specifically on the organic side, as I mentioned, we've increased our sales and marketing efforts with the launch of the marketing campaign, advertising campaign. We are promoting the Workplace Readiness solutions. We're also expanding our sales and marketing workforce. That was part of the reason why we brought Tyler in was to really grow and build our sales organization and help us scale the company.

So we'll be adding to the workforce on both those sides, product development, customer support, and we'll be investing in R&D, just like we did with this UWB announcement that you saw from the SEC. We want to continue to innovate and be a leader in the space. So we'll continue to invest in that, which all will drive our organic growth, which is a priority for the company.

On the strategic M&A-type opportunities, we will put the capital to work to make sure we're creating value and ROI for our shareholders and showing growth. So we'll be looking at additional technology enhancements or offerings that we could add to our portfolio that will really help us scale.

We may look at it adding additional companies into the portfolio that expand our vertical presence or geographic presence and specifically in terms of getting on to the device, right? Mobile device penetration is important for us. So having apps navigation on device as well as the way we provide it indoor premises is an area that we're looking into. So we'll be considering a lot of high-growth sectors around security, AI and AR/VR as it relates to Indoor Intelligence.

Ladies and gentlemen, unfortunately, due to time constraints, that is all the time we'll have today for questions. I'd now like to turn the floor back over to management for any closing remarks.

Thanks, Victor. Thank you, everyone, for joining our call today. We look forward to updating you as the business progresses, and please stay safe. Thank you.

Ladies and gentlemen, this concludes today's webcast. You may now disconnect your lines at this time. Thank you for your participation and have a great day.