XTI Aerospace Inc (XTIA) 2022 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Inpixon First Quarter 2022 Business Update Call. (Operator Instructions) At this time, it is my pleasure to turn the floor over to your host, David Waldman, Investor Relations. Sir, the floor is yours.

Thank you, and good afternoon, everyone. Thank you for joining today's conference call to discuss Inpixon's corporate developments and financial results for its first quarter ended March 31, 2022. 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 first quarter ended March 31, 2022, 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 relating to future events and expectations. These statements are based on expectations and assumptions as of the date of this conference call and are subject to numerous risks and uncertainties and 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, 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 financial measures in our discussion. The company believes that these non-GAAP numbers provide meaningful supplemental information, 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.

Thanks, David. Hello, everyone, and thanks for joining us today. Let's get started. So first of all, I'm pleased to report that Inpixon's strong growth trajectory has continued through the first quarter of 2022 across multiple fronts. We saw a 77% increase in revenue over the same period of last year, primarily driven by an increase in sales related to our Indoor Intelligence segment, and particularly our enterprise employee experience app. We also saw continued high gross profit margins in the 73% range, and we expanded our customer base as compared to the same period last year, leveraging our Indoor Intelligence products to drive enhanced more connected employee experiences and smarter, safer, more secure work environments.

Many of these customers are among some of the largest organizations in the world, and you can see some of them listed on our website. So today, what I want to do is talk about where we are focusing our attention, both in order to capitalize on where we see the greatest opportunities and also to address some of our challenges. But before I expand on this further, I do want to address a couple of things regarding the market impact on our stock price and NASDAQ compliance. So I know many of you are frustrated with the stock price, and I share your frustration. It's the #1 thing that keeps me up at night because I know we're executing on the business and yet it's not reflected in the stock price, given all of the macroeconomic trends that are happening.

So what I've told my team is to focus on executing our business plan and our growth plans, let's control what we can. And that a lot of what is happening has nothing to do with us. right? The overall market in tech stocks, in particular, have been hammered by a number of macroeconomic headwinds, including the war in Ukraine, COVID-19, supply chain challenges, inflation, increasing labor costs, et cetera, et cetera. So we're focusing on what we can do and what we can control.

And as I said, what we're seeing isn't unique to Inpixon or even to microcap companies. It's everything from large caps to microcaps we've seen valuations go down for private and public companies for crypto, for SPACs. So everything across the board is being hammered these days to varying degrees. And certainly, microcap stocks are even more challenged with market volatility, right? So that is where -- what the reality is, we believe the trends are -- what we're seeing in our stock price doesn't really reflect the successes we've realized in the execution of our business plan or the opportunities in front of us. I certainly believe that growth, and you'll hear this from a lot of analysts as well, the growth in value stocks like Inpixon are an opportunity. So let's talk a little bit more about what those Inpixon growth opportunities are here in a few minutes.

But while we're on the subject to stock price, I do want to just make sure everyone knows that in terms of our NASDAQ listing, we did receive a letter from NASDAQ on April 26, 2022, granting us an additional 180 calendar day extension. So that gets us to October 24 to regain compliance with the minimum bid price requirement. So we will be working diligently to resolve this during the next 6 months.

All right. So let's go on to the opportunities and what really is happening with the business. Our Indoor Intelligence segment has really 2 drivers of growth for redefining experiences and for bridging the gap between our digital and physical worlds. We refer to them as enterprise apps. This includes our CXApp acquisition from last year, the events business, executive briefing business, et cetera. And then the industrial apps is a second one. And that includes the most recent acquisition of IntraNav in December last year on the front end, coupled with the hardware from our sensors, tags, chips, et cetera, that we've been building over the last couple of years.

So both of these segments do support and leverage our maps, our augmented reality, our on-device positioning analytics, et cetera. And they're both being impacted positively with some of these trends that are happening in the marketplace. So let's -- I want to touch on a few of these trends and how that's affecting our business and why that's driving the growth that we're seeing? So the first 2 trends that I want to talk about is the back-to-office and the employee experiences. And these are somewhat intertwined, although remote employee experience is also important and something that our employee experience app does help address to create equity across employees that are in the office versus working remotely entirely.

So when you think about back-to-office and the employee experience, there's a few things that are going on. Obviously, we don't know -- it's debatable whether the pandemic has ended or if we move on to an endemic state, some people might say. But it's clear that organizations have to move on and be prepared to bring their employees back to work. The pandemic has changed what going to work looks like, right, in terms of the number of days you might be in the office or 100% remote versus in the office locations. People are working from various locations, and there's a lot of moving going on. And the office space itself is changing, right? And how those spaces are being utilized, more and more collaboration spaces are opening up.

So what companies are looking for hybrid solutions that allow for flexible environments, and these things are here to stay. And we believe they're necessary in a post-pandemic world, right? Some of the other things that are going on, ABC News reported more than 47 million Americans quit their job last year, the most ever on record and that resignation rates are continuing to set records even in 2022 with over 4.5 million U.S. workers quitting in March. And 1 of the reasons employees are quitting is because of the lack of the right technology. Harvard Business Review recently published an article by Unisys a couple of weeks ago saying exit interviews revealed that a lack of technology that enables seamless communication and collaboration among teams is often a factor in resignations. They sit in a historic shift, employees are abandoning companies that don't prioritize the employee end user experience or more specifically, they're ditching the leadership that doesn't provide the technologies and infrastructure required for their workforce to succeed in this new digital workplace. They closed the article with a validation that digital employee experience has become paramount to an enterprise bottom line.

Talent acquisition and retention can be 1 of the most significant challenges a company faces. And those that choose to value their employees are the ones that will succeed. I've talked about the value of making sure that you focus on the employee experience and why that -- putting your people first is important, that will get you the results in terms of the products, in terms of the profitability, in terms of your customers, et cetera. So the companies that are focused on that, those are the types of companies that are our customers that we want as customers, companies like Adobe, Aruba, Warner Media, Pfizer, Clorox and many more.

Our enterprise app platform delivers to these modern enterprise organizations that are focused on its people by providing a smart, innovative and connected space, with technologies that provide end-to-end logistics, management tools, analytics for the workplace for events and customer experience programs. Over the last 2 years, the effects of the pandemic have created some challenges with customers adjusting open dates as a result of various COVID-19 variants that have emerged and the competition in this arena certainly increased. But we at Inpixon can deliver an experience in a way that we believe our competitors cannot.

Our customers want an amazing experience for their employees with an intuitive UI UX experience that aligns to our customers' brands, we believe we deliver the best employee app experience in the market today from news feeds to surveys to polls and notifications. We're simplifying the modes of employee communication and making it simpler and easier for employees to communicate -- employers to communicate with their employees and for employees to find, communicate and connect with each other no matter where they may be.

And they want a platform that's rich with lots of features that's already integrated with all of their existing enterprise software. We have an enterprise-level platform with over 150 workplace features and partnerships that allow for over 75 enterprise software integrations. This allows for 1 mobile app for all employees to access all of these various things. And that's a huge differentiator for us. They also want something that's easily -- easy to scale globally, right? So our platform allows customers to start with 1 campus and then scale quickly by adding additional campuses, desks, rooms and buildings all within the same app. So you have the same experience across all of your locations across all of your entities. This also provides management visibility in 1 location or across all the locations to better understand what's happening in their space, space utilization and how better to serve their employees.

So today, our Enterprise solutions are driving the experience for employees in roughly 300 campuses across more than 50-plus customers and in a number of countries globally. We believe the current number of campuses we've built for our current customers so far represents only a small portion of their total aggregate footprint. So we have an opportunity here to multiply our recurring revenue just by expanding our footprint within our existing customer base, right? I've talked about how it is important for us to keep building that recurring revenue stream, and this is part of what's going on here, right? So we certainly have some upfront nonrecurring revenues -- and certainly, the other segment of our business has onetime sales. But the recurring revenue that we start building in with these customers is very key. And you're going to see that growth as we continue to build here.

And as these customers expand, I touched on this last quarter, we're seeing that we land, we start one campuses or a few campuses, but after initial deployment, we're seeing our bookings with these customers increased by 89% within the first year, right? And so we're seeing -- for every 100,000 for example, 89,000 additional bookings that we're receiving. So the expansion -- land and expand strategy is working, and I expect that number to even grow as we fully roll out to their locations.

Hybrid defense is another piece that I've touched on in the past, but it's important to bring up here. It's another major trend that's resulting from the pandemic, right? Pre-pandemic events were primarily 100% in person. The during the pandemic, the shift was 100% to virtual. So the hybrid event allows for greater reach with potential for massive expansion in audience, not just by number of attendees, but also geographic regions. So whether it's an executive briefing event with 50 people or an industry conference with 50,000 people. They're almost all turning hybrid, and they're looking to use products like Inpixon's award-winning event platform to deliver the best possible experience for attendees in-person or online. And again, all of these products use the enterprise solutions use our products across the board, right? So whether it's the math, whether it's the analytics, whether it's the on-device positioning, they're all integrated and delivering towards a complete solution.

So I want to talk about another trend here. The third trend on the industrial automation side, right? So I talked about enterprise apps and then we -- I mentioned the industrial labs. So this kind of drives the industrial app side and the growth that we're seeing there. We're in the middle of what's being called the fourth industrial revolution, focused on internet connectivity, automation, machine learning, AI and real-time data. with more changes in innovation are coming just behind all of this, right? So it's a continuous evolution here.

Ultimately, this all leads to intelligence. It's all about the data and the intelligence that you get from the data we refer to as Indoor Intelligence, if you will. And for us, this is the driving force for industry, and it's creating new opportunities. And as Accenture puts it -- it's by bringing new life to physical machinery and connected products, allowing us to digitize manufacturing and operations, right? We've been talking about the combination of physical and digital world and how those things are coming together in this connected work.

So with all these new technologies with 5G coming in, it's all becoming more and more of a reality today. And winners using this technology will design things smarter, engineer things safer, manufacture things faster, service things remotely and produce things sustainably, making everything better. Inpixon's industrial IoT RTLS technologies and capabilities are key to this industrial revolution. We have a breadth of software and hardware products that make up our RTLS solutions and make us -- and give us a differentiator in this space. So we've got a broad range of technologies here from ultra-wideband to Wi-Fi to Bluetooth and to our proprietary implementation of Chirp technology. Inpixon's location-aware enterprise-class, multi-technology RTLS solutions are helping organizations deliver on the concept of smart factories, smart warehouses, paperless factories, smart yard management, digital supply chains and the list goes on and on.

And finally, I want to just touch on 1 other trend that is in the news a lot, and we haven't touched on today is obviously the metaverse and the extended reality that encompasses. So a lot of the focus of extended reality, which includes augmented reality, virtual reality and mixed reality and of course, metaverse have been on consumer products, right, in gaming and virtual reality. But as powerful as it can be in the consumer segment, the market has really awakened to the metaverse benefits for B2B, right? So from digital twins that you upload into the metaverse to the use of augmented reality and business operations from factories to hospitals to entertainment venues, the opportunities to profoundly improve business activities is tremendous. And Inpixon delivers the foundational technologies required to make this a reality.

We can leverage our proprietary technologies and skilled employees in the areas of hardware design, software development, wireless communications, mapping, positioning, augmented reality, computer vision, 3D rendering, visualization, et cetera, for delivering on what our customers need in the metaverse, right? So for example, our map creates those digital twins of your physical space to launch into the metaverse, right? And we're already leveraging the augmented reality capabilities that we acquired through Visualix into our maps and into our employee experience app. And soon, all of those -- that functionality will be in the industrial app side as well.

So we have lots of different ways that we're able to help our customers not only improve the employee experience but also help them launch into the metaverse. And we also have key collaborations and integration partnerships with companies in this ecosystem that we've already established and leveraging to help make the experience as best as possible for our customers. So the way in which our technologies are aligned with all of these huge market trends that we just talked about, I believe, positions us well for what we think will be continued substantial growth in markets that are only just beginning to gain traction.

Now I'll turn the call over to Wendy here to discuss the numbers. But before I do, I'll just note that we achieved $5.2 million in revenue during this first quarter of '22, which, as I mentioned earlier, is a 77% increase compared to the same period of '21. And we've seen a generally consistent revenue growth rate over the last 2 years, primarily due to the execution of our growth strategy, which is a combination of organic revenue growth and the addition of newly acquired complementary products and technologies aimed at ensuring we could offer our customers a one-stop shop, if you will, for their Indoor Intelligence needs.

While we're still open to continuing to explore strategic acquisitions to enhance our business, we've got all the foundation technology pieces already in-house, and we're anticipating continued strong revenue growth, but now with a primary focus on the organic growth over the acquisition growth.

All right. So with that, I'd like to now turn the call over to Wendy to discuss our financials. Wendy?

Thank you, Nadir. Revenues for the 3 months ended March 31, 2022, were $5.2 million compared to $3 million for the comparable period in the prior year for an increase of approximately $2.3 million or approximately 77%. This increase is primarily attributable to the increase in Indoor Intelligence sales particularly the addition of the CXApp product line during the second quarter of 2021. Gross profit for the 3 months ended March 31, 2022, was $3.8 million compared to $2.1 million for 2021, representing an increase of about 86%.

The gross profit margin for the 3 months ended March 31, 2022, was 73% compared to 70% for the 3 months ended March 31, 2021. Net income or loss attributable to stockholders of Inpixon for the 3 months ended March 31, 2022, was a loss of $11.2 million compared to a loss of $12.6 million for the comparable period in the prior year. This decrease in loss of approximately $1.3 million was primarily attributed to the increased gross profit of $1.8 million, lower operating costs of approximately $0.6 million and higher noncontrolling interest of $0.4 million, offset by the $1.5 million unrealized loss in the Sysorex shares.

Non-GAAP adjusted EBITDA for the 3 months ended March 31, 2022, was a loss of $8.8 million compared to a loss of $5.6 million in 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 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 3 months ended March 31, 2022, was a loss of $0.07 per share compared to a loss of $0.08 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 noncash items, including stock-based compensation amortization of intangibles, onetime charges and other adjustments, including loss on the exchange of debt for equity, unrealized gains or losses on notes and acquisition costs. As of March 31, 2022, we had approximately $75.9 million in cash, cash equivalents and treasury securities.

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

All right. Thanks, Wendy. David, would you please lead us through the Q&A discussion.

Great. Thanks, Nadir. Like last quarter, at 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 in Investor Relations, and we'll be sure to respond as quickly as possible.

So our first question in December, the company announced that it received an indication of interest for a potential strategic transaction. Can you provide a status update?

Yes. What I can say there is that the exploration process and discussions are still underway, but we have no new information to share at this time, except to note that we are evaluating strategic opportunities and to the extent we believe they can maximize shareholder value. So we'll continue to evaluate and move forward on those as it makes sense.

Great. Our next question, which division is showing the greatest revenue gains and corporate demand?

Good question. Yes. So we're currently seeing the most traction with our enterprise app solutions, which given the return to office environment that we're in makes sense, and we're witnessing the most revenue growth within that part of our Indoor Intelligence segment. So Indoor Intelligence is obviously in terms of our business segments, the 1 that's seeing the most growth. Within that, it's enterprise app. And that's because customers care about their employees and wanting to have the technologies in place to deliver that experience. As I mentioned, they're at risk if they don't, right? We've seen what can happen with this great resignation going on when you don't prioritize the employee experience. And we're continuing to gain the attention of Fortune 500 companies across varying industries. And as I indicated, we've historically been able to substantially expand our footprint in these accounts once we land them.

And I expect that number will increase as we fully roll out to all of the campuses there. So enterprise app is definitely allowing us to build tremendous growth with increased recurring revenue streams and more value for Inpixon shareholders.

Our next question is why were $1.75 strike warrants bought back rather than leave them alone eventually expire as more warrants were getting issued at a $0.47 strike?

Yes. Fair question. So this was done to -- and complete it to really clean up some of the restrictions, challenges related to those prior warrants, which would then allow us to more easily execute a strategic transaction if and when appropriate. And so that was the main driver for that.

Okay. Thanks. Our next question, can you provide us with an update on the IntraNav integration?

Sure. So as you guys know, we've completed the IntraNav acquisition in December 2021. They bring some great synergies and complementary technologies. And in fact, we're already integrating our Chirp technology into the IntraNav IoT platform because we see a strong opportunity for Chirp in what's referred to as the yard area. So just outside the manufacturing facility, where many of their parts and materials are stored. And Chirp is particularly well suited for asset tracking in those areas and to work with other technologies such as ultra-wideband. And as we discussed earlier, we see strong potential for growth in the IoT sector, right? And there's a lot of spend in the industrial verticals. And so we're looking forward to executing on that. And our teams are very active in connecting with new prospective customers. In fact, we're just featured to speak at the logistics day event put on BBL, the German Logistics Association next week, we're exhibiting and speaking at the logistics and distribution trade fair.

And then I think in June, we're exhibiting an Embedded World. So there's a lot of conferences and trade associations that we're attending and participating in marketing activities to grow that side of the business. That 1 has been challenged by some supply chain issues on the hardware side but as you'll see, we're still seeing growth despite that. And we'll continue to build and integrate IntraNav into the rest of the organization.

So we're pretty pleased with the progress on the acquisition integration front, and we're looking to grow this business over the next several quarters.

All right. Thank you, Nadir. That does conclude the Q&A, and I'll turn it back over to you for the close.

All right. Well, thank you, everyone, for joining us today. We really appreciate your time. As I said, we're focused on executing and growing the business. And I'm pleased with the results that we showed today, and we're building the enterprise app side as well as the industrial apps, we've been fortunate enough to keep winning customers in the space. We just had a couple of Fortune 500s that we closed this month. So thank you for your support and interest, and we'll be in touch soon. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. You may now disconnect your lines at this time, and enjoy the rest of your day.