XTI Aerospace Inc (XTIA) 2021 Q3 法說會逐字稿

Good afternoon, and welcome to Inpixon's Business Update Call. (Operator Instructions) Participants on 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 November 22, 2021.

I would now like to turn the call over to Alexandra Schilt, Director of Account Management at Crescendo Communications, LLC, the company's Investor Relations firm. Please go ahead, ma'am.

Thank you. Good afternoon, and thank you for joining today's conference call to discuss Inpixon's corporate developments and financial results for the third quarter ended September 30, 2021. 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 third quarter ended September 30, 2021. 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 regarding the valuation attributed to any of our securities instruments; 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 in the public periodic reports the company files with the Securities and Exchange Commission. Investors and potential investors should read these risks. Inpixon assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and it 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 will now turn the call over to Nadir Ali, Inpixon's CEO. Please go ahead.

Thanks, Ali, and hello, everyone. Thank you for joining us today. We're here to discuss our recent business activities and financial results for the third quarter of 2021. We've got a lot of good information to share with you. So why don't we get started?

First off, we've continued to maintain a strong balance sheet and substantial cash position, as you probably saw in the earnings press release today. We've been pursuing an aggressive growth strategy over the last few years, allowing us to increase our product and solution offerings from multiple use cases, generate sales leads and close deals with many Fortune 500 and Global 2000 companies while deploying our technologies and solutions around the world. So I want to dig into some of that revenue and customers that I'm referring to.

We've continued to substantially increase our revenue for the first 3 quarters of 2021. We've generated year-over-year and sequential revenue growth. In fact, 74% -- we saw a 74% increase in revenue for the 3 months ended September 30, 2021, and a 100% increase in revenue for the 9 months ended September 30.

Our revenue growth continued even during one of the most challenging and unprecedented times of economic uncertainty because we pivoted and adjusted as the pandemic hit in March '22 and going forward. Now some of our products fared better than others as a result of global supply chain constraints and the effects of the ongoing pandemic and its restrictions that limited or delayed deployments of certain product lines.

And within our hardware portfolio, we also saw increased costs as a result of a need to substitute suppliers who couldn't meet our needs and had higher logistics and shipping costs. On-site installation and deployment plans for our sensor and mapping technologies were sometimes delayed or stalled as a result of the shutdown. And of course, the Delta variant earlier this year has continued to impose some challenges and delayed reopenings.

But despite all this, our software-based solutions and newly acquired technologies helped us offset the impact of these challenges and still resulted in continued substantial growth.

The CXApp acquisition, which expanded our offerings this year to include a location-aware employee app, focused on enhancing the workplace experience, and an events platform able to manage physical, virtual and hybrid events has proven to be a strong addition to Inpixon's suite of Indoor Intelligence solutions and allows us to drag along our maps and on-device positioning products as well, increasing our average sales price with customers.

Since closing on CXApp, we've generated a pipeline of approximately $20 million in revenue for this solution alone, which also includes approximately $9 million of total contract value that's already been signed in contracts to date. And as we've talked about in the past, we're building our reoccurring or ARR model versus upfront revenue growth.

So as you hear about these numbers and in terms of the total contract value or the pipeline, you'll know that we have some upfront revenue in the form of professional services or sometimes if we're shipping hardware in some of these other products. But we really are counting on building that solid recurring revenue base. And that's where most of the revenue comes from. And you'll see that we're building these -- or signing these contracts for, on average, 3 years. And so we're building a long-term reoccurring revenue stream that should be valuable for us and our shareholders.

Along those lines, we've increased our ARR to 75% for the 9-month period ended September 30, 2021, as compared to the same period last year. And we've even grown close to 20% in ARR just from Q2 to Q3 of 2021. This percentage will vary as new sales do have some upfront professional services, so depending on the sales mix. But the overall trend on an annual basis is going to show that we're growing ARR. And that's one of the most important metrics that I'm tracking and hopefully so are you.

And we're winning because we're meeting the new demands for the workplace environment that requires technologies with attributes of responsiveness, adaptability and scale to meet our customers' needs. We're not only adding new customers to an already impressive customer base of leading top-tier enterprise organizations across various industries, but we're also expanding existing customer relationships. You'll hear me mention that a lot through the call today, and I'll give you some specific examples.

Providing customers seeking solutions that offer premier employee experiences with a custom-branded app is really critical as they return to work and look at a hybrid workplace environment. Some of the specific contract wins that I want to get into -- since as you guys know, a lot of times, we don't get to share the names and details of our orders. But I do want to give you a sense of what we're talking about. So let's talk about a few of these contract wins. So you can see the types of industries, the types of customers and what we're selling.

So we signed 5 new contracts with one of our existing Fortune 500 customers, the leading provider of creativity and productivity software for the implementation of our smart office app and mapping solutions for their workplace campuses. And in fact, today, my sales team told me they added 13 more campuses. So this land-and-expand opportunity that -- or strategy that we've been implementing is working.

We also had a customer that added 3 new contracts, and they're a leading network technology company. And that's for our event platform. So again, depending on which products, smart office, events, EBC, we've got a variety of products that we continue to expand our footprint with these customers.

We're expanding the scope of an existing contract with a leading medical device manufacturer to implement our smart office solution into additional campuses, including some international campuses for them. We've added new customers, one of the largest gaming producers and are currently building out our smart office solution for over a dozen of their offices.

We've expanded our engagement with an existing customer to integrate CRM and chat robot features into the EBC product that we've already deployed for them. And another large IT company customer has upgraded their executive briefing or EBC solution, again, touching on that event side of our capabilities, and I'll talk about that in a bit. A collaboration partner of ours just executed a contract with us to implement our smart office app to cover over 40 of their workplace locations around the world.

On the RTLS side, we've closed new orders from a large distributor in the EMEA region. And we sold a substantial number of our proprietary IoT sensors on our Aware product line to our partners for integration into their products. And we continue to receive new orders for software licenses, firmware upgrades and services at one of our large technology customers in the social media space.

We're implementing our smart office app at a leading health care testing technology company. And most recently, we also contracted to implement our smart office app with a new electric vehicle manufacturer for several of their workplace locations.

So as you can see, there's a variety of these contracts across multiple verticals with global presence, right? And most of these, again, are 3-year contracts with some upfront revenue but good, solid recurring revenue over multiple number of years.

And as you can see, our sales strategies are working. We're landing and expanding. We're cross-selling. We're upselling. And of course, this creates stickiness and increases our average sales price or ASP. And that's been the goal, right, in our strategy of bringing all these products together and really owning these customers from the front end to the back end.

I just want to make a note here and thank our team because they've been working extremely long hours, weekends, juggling multiple hats because a lot of our customers are looking to deploy and get these products out all at the same time. So across the company in every department, we've been managing and addressing this growth and keeping our customers happy. So I just want to give a shout out to our employees for executing so well.

I also now want to shift towards the experience part of this. You've heard me talk about this before, and that's why we're winning with customers and why we're continuing to expand in the installed base. Experience that we deliver to our users to their employees is really important. And I believe that's -- the momentum we're seeing is driven by our focus on delivering not just a product but an exceptional employee user experience.

Data supports that companies with engaged employees outpace other organizations that don't prioritize the employee experience or struggle connecting with the employee. It's more critical now than ever as employees are thinking about going back to the office, do they feel safe? How will that interaction work?

It's a hybrid model. Sometimes they're going to be working from home, sometimes in the office. And so employers are leveraging the Inpixon Indoor Intelligence solutions not just to enable productivity but also seeking to redefine the indoor experience with smarter, safer and more secure workplace environments.

We're providing a positive experience to the employees using our app. We're providing analytics and intelligence to their management teams and to developers and integrators using our core offerings.

In addition to that strong sales momentum, we also continue to focus on enhancing our platform with new features and the latest and innovative technologies. In case you missed or couldn't attend our Demo Day, which we held on September 8, I encourage you to watch the replay on our website because the video goes into details about our products, including our smart office app, event solution and demonstrate specific use cases for our technologies.

Our strategy over the last couple of years has been to acquire and develop a comprehensive suite of Indoor Intelligence solutions. The goal has been to position Inpixon as a one-stop shop, again, to create more stickiness and build our ASP but also giving us the ability to offer all of the core technological components required to deliver Indoor Intelligence. So that includes mapping, positioning and analytics.

A lot of our competitors in this fragmented market are doing pieces of this, right? Some have the map. Some have the positioning pieces and the hardware. Some are just focused on the front end. And so we've been able to bring all of those things together.

And so we're continuing to see increased adoption of these complementary products in delivering our solutions. So for example, our mapping platform is core to many of those campus app deals right? I talked about how that drags in our mapping and -- on device positioning capabilities.

Employees have access to a dynamic interactive map of their corporate facilities through the app. And that serves as a digital twin of all the facilities' key places and things like entrances and exits, valid pathways, conference rooms, restrooms, elevators, cafeterias and more.

We're also seeing cross-sales on our on-device positioning. We can calculate the user's position to deliver the Blue Dot to allow for navigation in turn-by-turn directions with little or no infrastructure requirements. Just like you would use Google Maps or Waze for the outdoors, we deliver for the indoors.

And complementary to our mobile app and technology ecosystem, we have an enhanced events platform and executive briefing solution. These solutions are becoming of more importance to organizations as in-person and hybrid events are taking place. And to execute these events, companies need a platform that can address the various restrictions or capacity requirements implemented by different cities, states or countries.

Utilization of our platform to host conferences and large employee events provides easier access to information with key features like attendee registration, travel logistics and nearby accommodations, customization of an event agenda, monitoring sessions and speaker bios offering maps with navigation to key destinations like conference rooms and breakout rooms in a private venue or a large convention center.

For smaller events or meetings, we offer our Executive Briefing solution. These are geared towards hosting events with less people like a sales pitch meeting or an executive meeting. And these are custom-branded platforms that clients and team members don't even realize that there's use of an external platform. And we allow displaying and sharing of videos, PowerPoints, documents, et cetera, all within a secure virtual setting.

Corporate events will be an area that we'll invest more in 2022, especially on the sales and marketing side. We're really good at events. And we've done online events with over 50,000 attendees recently for a Fortune 500 company as well as in real life events that CXApp has done in its past that were even larger. So we're a great fit for companies that want both or what we all call now hybrid events. So I'm really looking forward to growing this business in '22 with our installed base as well as new customers.

And last but not least, we continue to invest in resources in developing our augmented reality technology and are pursuing exciting partnerships and collaborations, leveraging the latest and wearable displays. So for example, in August, we announced our collaboration with Ostendo, a leader in quantum photonics and augmented reality technologies. Ostendo has developed QPI, a full microdisplay that delivers both the immersive and volumetric aspects needed to realize effective and wearable augmented reality smart glasses.

The combination of Inpixon's hybrid workplace experience, coupled with Ostendo's truly wearable AR smart glasses, can help organizations enhance the in real life experience and performance of its employees based on their location, whether at home, in the workplace or in-between completely hands-free.

There's been a lot of buzz around the metaverse recently. And it's our belief that it's not hype. The metaverse is simply the term used to describe the next evolution of the Internet, moving beyond Web 2.0, so where the digital universe is merged with our physical reality. The Internet will not be something you go to but rather something that you are immersed within.

As many of you know, we at Inpixon have also been innovating around the convergence of the physical and digital worlds for years now. But our focus is on augmenting your real-world experiences with digital information in real time as you need it based on who you are and where you are to improve and enhance your experience. That's why we acquired Visualix to build out our AR capabilities on top of our Indoor Intelligence platform.

But we also wanted to be immersive, hence, our partnership with Ostendo on the wearable front. And by the way, there are other leading wearable companies that have also approached us seeking similar partnerships. But location is such an important context for everything that we do. And so this immersive new environment and experience is going to be driven by that.

So just imagine in the near future, you won't need to pull out your phone to look up information in media. The experience will be served up to you automatically, hands-free in truly smart glasses. The vast resource of the Internet, corporate databases and IoT devices will be delivered directly within your field of vision as and when you need it.

There are really some incredible mind-blowing use case this technology will unleash. And we're really excited about the game-changing disruptive software and hardware opportunities in spatial computing. I look forward to sharing more details about our plans and progress in the near future on this front.

As you can see, we continue to innovate and enhance our technologies, bringing us to the forefront of the industry and believe our growth is a reflection of our progress. So I just want to summarize 4 points, and then I'll turn it over to Wendy to go over the financials.

First, we continue to anticipate further significant growth based on the current demand for our solutions. This is truly a growth story and, from our perspective, an attractive investment opportunity given we are currently trading at or below our cash value despite showing 100% year-over-year growth for the 9-month period.

Second, we have more than $100 million available in working capital. And we intend to put this to work, whether that means internal investments or identifying strategic acquisitions that complement and enhance our offerings or otherwise continue to position Inpixon as an innovator and leader.

Third, we're increasing market share by securing new contracts from both new and existing customers. We're increasing stickiness, growing our ASP and cross-selling, upselling everywhere we can.

We have solid footing within indoor mapping, positioning, smart office apps, security and the RTLS segments. And we're well positioned to exploit the new need for hybrid events with our events platform. We see augmented and mixed reality as a new and potentially huge market for us in the not-too-distant future.

And fourth, we believe we have firmly established ourselves as a leader within the Indoor Intelligence market. We've talked about in the past that there's no 800-pound gorilla in the Indoor Intelligence space. And that's what we're setting our sights on. So we're looking forward to that.

So I'd like to turn the call over to Wendy to discuss our financials. And then I'll come back and answer some questions that have been submitted to our Investor Relations firm.

Wendy?

Thank you, Nadir. Revenues for the 3 and 9 months ended September 30, 2021, were $4.5 million and $10.9 million, respectively, compared to $2.6 million and $5.4 million, respectively, for the comparable periods in the prior year. This represents an increase of approximately $1.9 million or approximately 74% for the comparable 3-month period and $5.4 million or approximately 100% for the comparable 9-month period.

The revenue increase for the 3 months ended September 30, 2021, is primarily attributable to the approximate $1.8 million increase in Indoor Intelligence sales, including our recently acquired smart office app in real-time location-based technologies and an increase of approximately $100,000 of SAVES sales. The revenues increased for the 9 months ended September 30, 2021, is primarily attributable to an approximate $3.8 million increase in Indoor Intelligence sales, also inclusive of our recently acquired location-based technologies and an increase of approximately $1.6 million of SAVES sales.

Gross profit for the 3 and 9 months ended September 30, 2021 and was $3.3 million and $7.9 million, respectively, compared to the $1.9 million and $4 million for the comparable period in the prior year, representing an increase of 71% for the 3 months ended September 30, 2021, an increase of 99% for the 9 months ended September 30, 2021.

The gross profit margin for the 3 months ended September 30, 2021, was 73% compared to 75% for the 3 months ended September 30, 2020. This decrease in margin is primarily due to the sales mix during the quarter. The gross profit margin for the 9 months ended September 30, 2021 and 2020 was 73%.

Net loss attributable to the stockholders of Inpixon for the 3 and 9 months ended September 30, 2021, was $33.6 million and $31.4 million, respectively, compared to a loss of $7.5 million and $20.9 million, respectively, for the comparable periods in the prior year. This increase in loss for the 3 months ended September 30, 2021, of approximately $26.2 million was primarily attributable to the $22.3 million unrealized loss on the Sysorex note and increased operating expenses, offset by the higher gross profit.

The increase in loss for the 9 months ended September 30, 2021, of approximately $10.5 million was primarily attributable to the increased operating expenses of approximately $24.8 million, offset by the $3.9 million higher gross profit and the $7.5 million release of the valuation allowance on the Sysorex note.

Non-GAAP adjusted EBITDA for the 3 and 9 months ended September 30, 2021, was a loss of $6.7 million and a loss of $18.5 million, respectively, compared to a loss of $4.6 million and a loss of $12.4 million, respectively, for the prior year period.

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

Pro forma net GAAP -- pro forma non-GAAP net loss per basic and diluted common share for the 3 and 9 months ended September 30, 2021, was a loss of $0.05 per share and $0.19 per share, respectively, compared to a loss of $0.13 per share and $0.64 per share, respectively, for the prior year period.

Non-GAAP net loss per share is defined as net income or loss per basic and diluted share, adjusted for noncash items, including stock-based compensation, amortization of intangibles and onetime charges or other adjustments, including loss on the exchange of debt for equity, provision for valuation allowances on notes and acquisition costs.

As of September 30, 2021, we had over $100 million in liquidity, including $66.8 million in cash and $43.2 million in short-term investments, which primarily include treasury bills.

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

Thanks, Wendy. Ali, could you please lead us through the Q&A discussion?

Of course. Thanks, Nadir. Like last quarter in our conference call announcement press release, we suggested interested parties submit their questions in advance. We'd like to address those questions for you now. Some of them were duplicative, so we did our best to reconcile those where possible.

If you have any further questions after the call, please feel free to follow up with Investor Relations, and we'll be sure to respond as quickly as possible.

Our first question is you recently received a notice from NASDAQ regarding not maintaining stock price compliance. How do you intend to regain compliance with the $1 requirement? And are you exploring reverse split?

Yes. So look, as I discussed on our call, we've got a robust sales pipeline. We're continuing to execute on our business strategy and deploying our solutions. This is a very exciting time for Inpixon. So we have no intentions of implementing a reverse split.

In fact, we have not sought approval for a reverse split for -- during our AGM, our Annual Shareholder Meeting, because we fully intend on curing this price deficit organically. We are very -- working on some very exciting projects and exploring countless opportunities, all of which we expect will drive shareholder value.

So the answer is no, we're not pursuing a reverse split. And as people can see in the shareholder proxy, we've not asked shareholders to approve a reverse split.

Our next question, when you release news regarding contracts, you rarely announced the name of the customer or any financials related to the project. Why is that?

Yes. So as you heard me talk about earlier in the call, I mean, I tried to describe many of our customers and the types of projects because a lot of our customers don't allow us to use their name or the financials related to it. It's just part of the contracts that we signed.

And so -- however, as I said, I did try to elaborate on the types of customers we're working with throughout the call. We're continuing to win these big contracts with companies in pharma, entertainment, in the new gig economy, those types of customers, life sciences, an EV company that is new in the marketplace, a social media company and many, many more.

So I would love to be able to name these and talk more details, but our contracts just prohibit that. And again, what I said on the call was -- and these customers keep coming back. They're happy with our products. You heard me talk about how we're expanding from one campus to another, right?

So we have multiple customers with repeat business, adding more locations. So I think it's important to note here that not only have we gained traction with customers, but we're also retaining and keeping customers. Hopefully, that addresses it.

Great. Our next question, you have sufficient cash. How do you intend on deploying this? And do you intend on exploring more acquisitions?

Good question. Yes. Look, so moving forward, we intend to aggressively penetrate the market with our solutions. This is the time for us to capture market share, especially with the smart office app and event solutions because everyone around the globe is in need of this now, right? And it's going to continue even beyond this pandemic because this is just the new normal.

So we have and will continue to explore strategic opportunities. And at times, that may mean more acquisitions that complement our existing platform. But we're also very focused on growing the business organically and capturing market share with our solutions.

We'll always work to enhance and improve our platform and technologies to provide the best solutions for our customers. But we're looking at growth of all types. And we're going to put our capital to work to make sure that, that happens.

Thank you. What feedback have you received from customers using your solution?

Feedback has been great. It's been tremendous because we're helping our clients solve real pain points with all of our solutions. Many customers talked about the versatility of our platform and how it can be used across a range of use cases, right? So whether it's the smart office or hybrid events or even the asset-tracking capabilities of our RTLS solution, all of these use our core products just in different ways, right? So it leverages off the same platform.

The work environment especially has significantly changed as a result of the pandemic. And so organizations realize the importance of the features we offer on that front. But they also see the benefits of the overall product offerings and solution offerings that Inpixon has. And I think, again, the biggest data point in support of this is that we're expanding with existing customers on a variety of verticals, a variety of use cases, right?

So I mentioned several today. The win today that added 13 more campuses on a customer that has been with us for several years continues to expand the footprint. And so we're seeing that across the board as we start maybe with a building or 2 or 1 or 2 campuses with a client. They quickly see the value and roll it out across the company. So that continues to be the best way to validate the feedback we're getting.

Great. Thank you, Nadir. That concludes the Q&A session. I'll turn it back over to you for the close.

All right. Thanks, Ali. So again, just to highlight for everyone that we continue to gain traction within the market. We believe our revenue growth, secured contracts and growing pipeline are evidence of our strong, established and comprehensive Indoor Intelligence platform.

This progress further validates that we have an excellent scalable solution set that's able to address complex challenges during these changing times. We have a healthy balance sheet. And we expect to continue to see similar growth into 2022 as we work on increasing our profitability to get to cash flow positive.

And lastly, we've not asked shareholders to approve a reverse split, just as a reminder. And we're confident that the market will reward us for the growth we are showing and the potential we have with putting our balance sheet to work. We are in the right space at the right time. And we're ramping up to expand our growth.

My team and I are pumped about the potential. And we see the feedback from our customers on a daily basis. So I'm confident the market will catch up with us sooner than later. But thank you all for joining today and take care.

Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time. Have a great day.