Q2 2021 Inpixon Earnings Call

[music].

Good afternoon, and welcome to infection business update call all participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

Participants of this call are advised that the audio of this conference call is being broadcast over.

The unit and is also being recorded for playback purposes, a telephone replay of this call will be available approximately.

After the end of the call 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.

Noon and thank you for joining today's conference call to discuss <unk> corporate developments and financial results for the three months ended June 32021.

With us today are not Ali the company's CEO and Wendy <unk>, the Companys Chief Financial Officer.

Today in picture released financial results for the three months ended June 32021, if you have not received infections earnings release. Please visit the company's Investor Relations page at IR Dot and <unk> Dot 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 factors are forward looking.

Statement. This includes any projections of earnings revenues cash or other statements related to the Companys future financial results any statements about plans strategies or objectives as management for future operations any statements regarding completed a planned acquisitions or strategic partnerships and the anticipated impact of those transactions on our business any stay.

<unk> concerning proposed new products or solutions any statements regarding anticipated new customers relationships or agreements any statements regarding expectations for the success of the companys 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 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 public periodic reports the company files with the Securities and Exchange Commission investors or.

<unk> investors should read these risks infection 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 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 releases.

Now turn the call over to not all leads and <unk> CEO. Please go ahead.

Thanks, David.

Hello, everyone. Good afternoon, thanks for joining us today to hear an update on our recent business activities and our financial results for the second quarter of 2021.

I'll go into the details of our financial results in a bit.

But to start off I'm happy to report that Q2 revenue was up 221% compared to the same three month period a year ago.

And gross profit increased 132% over that same period.

We ended the quarter with a strong cash position of approximately $70 million, including roughly $25 million cash and another $45 million in short term T bills.

In addition, with our new product offerings, we are not only starting to scale. The business in terms of number of customers and revenues were also beginning to see increases in our ASP or average selling price for some of our indoor intelligence products and use cases this year.

And we're also working towards increasing our SaaS subscription offerings, increasing our recurring revenue as we work towards a 70.30 split between recurring revenue and nonrecurring revenue.

If you recall in April we announced the conversion of approximately $9 million in principal and accrued interest underlying the seismic note receivable into an equity investment as of the end of the second quarter, we recorded a hardly discounted net fair value of approximately $20 million for the seismic shares.

There are a variety of factors impacting the valuation of the equity received however, this transaction primarily contributed to the resulting net income of $14.5 million for the second quarter of 'twenty one.

Factors, such as seismic stated plans to uplift to NASDAQ or some other national changed.

And pricing could impact the marketplace of securities along with of course trading volume and liquidity on a quarter by quarter basis, and so this will impact our P&L accordingly as well.

But it goes without saying that this transaction is that an overall significant net positive result for the company.

So today, we will also talk about the unique challenges companies here in the U S and all over the world are really facing as they move towards a post pandemic world.

In the future of work and this hybrid model.

The role of digital transformation initiatives and then how our infection solutions are helping these organizations meet these challenges by driving superior employee experiences.

Alright, so let's start with the challenges.

These organizations are facing today and.

And before we even taking into the <unk>.

Count the specific impact of the pandemic savings have shown that employers are paying a big cost for a dissatisfied workforce.

Disengaged employees cost organizations $500 billion a year. According to income magazine and 90% of executives say that retention is an issue and businesses are losing about $11 billion a year as a result of turnover.

It's well documented that digital technologies in the workplace are critical part of driving employee satisfaction.

These are frustrated with the technology in place that their organizations for engagement and collaboration certain.

Certain study show that only 13% of employees had a satisfactory experience with technology in the workplace with over 45%, claiming that the implementation of the technology wasn't living up to expectations I remember I've been talking about these challenges experienced by employers even before the pandemic hit.

With the pandemic the need for digital transformation in the workplace has accelerated especially with all the news you're hearing about the great resignation happening across this country right. So a lot of turnover and movements employee experience is becoming such a key.

Factor.

With no clear path to manage these changes employers are struggling to redefine what their work environment will look like and we're trying to identify which tools and technologies can help help them best.

AD.

Improved experience without adding existing frustrations.

Employees, how employees feel about returning to the office will be determined by this experience that I'm, referring to and the employers can create this through use of digital transformation and trying to address these concerns.

Of course, the Delta variant is causing additional uncertainty for employees returning to the office.

Part of the work place experience.

Driven by the Delta variant and ongoing issues.

It is really trying to make that an experienced safe and secure and thats part of our main goal is how do we provide a safe healthy work environment.

To keep employee well being a top priority.

So employers need solutions that help address the new requirements of a hybrid and in office workforce and enabling not only be highly productive with simultaneously feel safe and secure.

So the way we're solving these problems for our customers is we're helping to accelerate their digital transformation.

And pension is helping organizations deliver superior experiences by leveraging the range of indoor intelligence technologies that we have to create a smarter and safer more secure environments that customers need.

With our recently acquired Smart office App, the CX App employers can offer their employees, a corporate customer branded location aware app, allowing for a fully connected workforce, our smart office App Leverages, a robust mapping platform and blue dot or on device positioning technologies with the integration of our.

On device protection positioning technologies, we can calculate the user's position to allow for navigation and turn by turn directions with little or no infrastructure requirements. So just like you would imagine with Google maps or ways in what they do for the outdoors, we do for the indoors.

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

In the near term, we also expect to integrate our <unk> <unk> mapping and augmented reality capabilities as well as our asset tracking tags and badges. For example, users can navigate more easily by following overlaid graphic arrows that guide the way similar to Google lie view experiences or they could point their phone, let's say at a pallet.

Warehouse and seeking key information about the assets on that pilot.

One of the key frustrations often cited by employees and rising from the shift to a more digital workplace is opportunity. So data shows that the average business professional uses about nine four apps that work Egypt App has a different user interface different operating characteristics, resulting in wasted time switching between.

Apps, and increasing security risk with various passwords for each app.

So to address this concern and relieve the fatigue, we focus on building a stronger partner ecosystem we.

We have over 75 prebuilt partner integrations with third party solutions like Zoom Slack G suite Microsoft.

Our systems et cetera.

That employers can offer their employees access tools that they engage with daily through a single App platform.

This allows for delivery of an easier more accessible friction list workplace tool, improving productivity and helping relieve that appetito I'm referring to.

We offer a purpose built centralized gateway to all of these business related digital touch points in one unified employee friendly experience integrating.

A variety of capabilities, including reserving or socially distance desk or searching for and booking rooms that nature spatial and audio visual requirements, finding and booking seats near colleagues, we're navigating to a colleague or a key destination Mike.

The conference room or an auditorium.

These apps also allow our employees to order food or interact with company news feeds and notifications.

And even some of the work order and much much more.

Ultimately, we are promoting engagement productivity and collaboration.

Gartner says increasing employee productivity with technology has become a top priority for organizations and it's the top objective for 90% of organizations that are implementing digital workplace strategies.

We have moved quicker and innovating faster than others in the space delivering a complete comprehensive award winning all in one app.

It integrates our mapping positioning and analytics.

We're providing solutions that our diverse agile flexible so an organization can pivot as its needs change and we're trying to address all aspects related to this new normal that we're all living in.

To address employee frustration with technologies that are currently in place.

All of this results and engaged employees connected workforce.

And of course safety and security.

Companies with engaged employees outperformed those without by up to 202%. According to deal economy and companies with highly effective communication practices enjoy 47% higher total returns to shareholders.

So by engaging staff with innovative technology that empowers them to do a good job productivity will increase turnover will drop and recruitment efforts will thrive.

Alright, so let's now go a little bit beyond the workplace the office space and talk about hybrid corporate events.

So live in person conferences executive briefings concerts, and gatherings are happening, but they've also got this hybrid twist right they've got the online version as well and so we're beginning to see more activity in the event space companies need solutions like ours to address new requirements and to support in person.

Remote and hybrid events differ.

Different geographies have different capacity restrictions, our app adapts to the unique needs of each venue optimizing the use of our technology for every facility.

The CX app actually starting to add some events and meeting platform and it continues to be one of our key strengths.

To execute our hybrid event organizers need an event platform optimized for hybrid events and Omnia device experiences.

Our customers are utilizing the app to host conferences employee events and executive briefings.

Grating attendee registration travel logistics and accommodations.

<unk> of event agenda monitoring sessions, and speaker, Bios and offering maps of course with navigation to key destinations like conference rooms, and breakout rooms, and a private venue or a large convention center.

We are optimized to support virtual events meeting the demand of this exploding market segment.

Live and recorded event video streaming can be piped into the <unk> platform and viewed on any device.

Attendees are unable to attend in person they can still get the event experience.

We're doing virtual boots, and viewing <unk> trade show floors product demos, even virtual offices.

Importantly, this mobile app creates an attendee engagement experience that can be fulfilled anywhere through live streaming social feeds polls surveys and electronic content.

Unlike other hybrid and companies. We also have all of the indoor intelligence products like our ultra wideband visitor badges and positioning sensors to provide event organizers and vendors tons of analytics of what's happening at their event and let.

Let's go one step further and imagine, adding our augmented reality to hybrid events, creating a truly immersive experience.

You've probably heard of other.

Other companies in this space like Hoffman and <unk>, who are also in this event space and raising money at $1 billion valuations. We can take this to the next level compared to those.

Competitors by bringing in our augmented reality.

Youll hear more about this as we execute on our roadmap here.

Ultimately what we're trying to do is create a connection with our customers and their end users and for infection. It's the way our indoor intelligence defines that indoor experience that you have in the space that you visit no matter, where you are in the office at an event.

At a museum airport et cetera.

So now let's talk about some of the customers that are using our indoor intelligence technology and the App.

You've probably seen several press releases.

The last few months.

Talking about some of these customers marquee customers.

You know, we can't always named them, but there are <unk>.

Fairly large fortune 500 companies that we're starting to see strong momentum as organizations worldwide are preparing to reopen their offices and welcome back employees, We've recently announced several key customer engagements.

Across a variety of industries that are implementing our solutions.

Our products are relevant to everyone and every business today.

Few examples I can touch on major European based commercial and retail banking firm with over 50000 employees.

They are implementing our app across 75 different locations. We've also been working with a customer that is a globally recognized media and entertainment conglomerate.

Have a portfolio of well recognized movie cable and network television sports and news brands. They were implementing our app across multiple corporate campuses, including its global headquarters as well.

And finally, a leading global social media and information sharing company with hundreds of millions of active users worldwide is implementing our app across their dozens of corporate locations.

And the pipeline continues to.

Be filled with large.

Corporate customers across a variety of industries, both in the U S and across the World you.

These engagements demonstrate how we are and continue to deliver an all in one app solving hybrid workforce challenges by integrating numerous workplace services and tools into a unified employee experience with countless capabilities, we're integrating with collaboration systems for conferencing and meetings facilities for occupancy.

Levels and smart parking.

Foodservice is for menus and ordering social media for engagement and.

In security for help tickets and single sign on even systems for CRM and marketing campaigns.

And all of this allows for increased stickiness and customer retention rates as well as growing our annual recurring revenue streams.

So for some of your new investors everything that I've been talking about is a combination of what our business plan and strategy has been over the last few years several years ago, we recognize the value of connecting to the end user with our indoor intelligence products and being the only player in the market with the ability to deliver all of the key technology.

<unk> required for a comprehensive indoor intelligence solution.

Starting with our device detection sensors, which were leveraged by government agencies and corporations to enhance security measures and bridge the gap between physical and digital security.

Allowing our organizations to make key decisions around security risk risk mitigation and public safety.

Then we added mapping and analytics capabilities.

And then supplemented our range of positioning technologies with our on device positioning and their <unk> solutions.

And finally, we've now closed the loop to connecting to that end user with the addition of the Smart office App.

Now have one of the industry's most complete indoor location technology portfolios and can offer a one stop shop for all indoor intelligence needs.

Customers in the past had to purchase all of these products from multiple vendors and trying to integrate them, we take that pain and overhead cost away for them right. We know we've been in engagements in the past, where we've had to work with those other vendors and the challenges that that brings not only for the customer but for us having all of this in house.

It gives us a huge competitive advantage and create stickiness and of course increases our average sales price.

All of the value that GPS brought to the outdoors. We can now make available in the indoors and not revolution is just beginning the digital transformation market is forecast to surpass a trillion by 2025, and we intend to capture a significant share of this market as it relates to our products.

Im excited about the confluence of factors the synergy of things that have come together for us.

Today, we've got a team with expertise across the spectrum of indoor intelligence solutions.

Full suite of technologies, a strong balance sheet and it's all happening at the right time right.

This hybrid.

Focus has been in the works but of course, that's been accelerated by the pandemic, whether it's in the workplace or four events. So when I consider the momentum we're experiencing with the high caliber of enterprise companies across various industries around the world that have selected our solutions to help them meet the demands of the future of work for their employees couple.

With the pull through potential for our maps and physician products immediately and then future upsell opportunities for RTL, Pos analytics and augmented reality products I'm confident in our ability to meet our goal of becoming the undisputed leader of indoor location based technologies.

I'll come back and answer some of the questions. You've also made to our Investor relations firm, but first I would like to turn it over to Wendy our CFO to discuss second quarter 2021 financial results.

Thank you know Theyre Rev.

Revenue for the three months ended June 32021, with the $3.5 million compared to $1.1 million for the comparable period in the prior year for an increase of approximately $2.4 million or approximately 221%.

The increase is primarily attributable to an approximate $1.5 million increase in indoor intelligence sale and an increase of approximately $700000 of faith payout.

Gross profit for the three months ended June 32021, with $2.6 million compared to approximately $770000 for the comparable period in the prior year.

For an increase of Covid.

And a 32%.

The gross profit margin for the three months ended June 32021, with 74% compared to 72% for the three months ended June 32020.

This increase in margin is primarily.

Due to the higher mix of gross profit from Android intelligence product.

Net income attributable to stockholders that inflection for the three months ended June 32021 with income of $14.8 million.

Compared to a loss of $7.3 million for the comparable period in the prior year.

This increase in income of approximately $22.1 million was primarily attributable to the higher gross profit the discounted net gain on the projects and the release of the valuation allowance on the seismic now offset by some increased operating expenses.

Non-GAAP adjusted EBITDA for the three months ended June 32021 was a loss of $6.3 million compared to a loss of $3.9 million 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 and 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 three months ended June 32021 was a loss of seven cents per share compared to a loss of 21 cents per share 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 one time charges and other adjustments, including loss on the exchange of debt for equity provision for valuation allowance on node and acquisition costs.

As of June 32021, we had approximately $70 million in available capital, including $24.9 million in cash and $45.3 million held in short term investments, which is primarily treasuries out.

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

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

Yes, Thanks, daughter 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 know some of them were duplicative. So we did our best to reconcile those where possible.

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, how does the smart office benefit employees.

Alright, yes.

Dresses during the call, but let me just try to summarize here overall.

Simplified and comprehensive mobile app.

Workplace solution that supports the flexibility required of a hybrid return to office Reits or whether they are working from home or in the office employees can use this app.

Employees are adjusting to an evolving work environment right in the same way that their employers are and we're able to help them deliver a more connected workplace with a mix of on site and remote options by having everything you need in one place, including your calendar meeting schedule directions, ordering breakfast or lunch looking at desk reserving the con.

<unk> room employees become more productive with easier access to information, so remember that whole app fatigue.

Discussion, we had earlier trying to bring it all in one place using this app as a gateway to all of the other technologies that the company may be providing.

And Additionally, as you can imagine right Theres, new health requirements in place like contact tracing or.

Vaccination proves our COVID-19 testing.

<unk>.

These employees are required by their employers to abide by these rules and they need to submit health survey, sometimes prior to entering a building.

Or they need to provide tickets and information as they check out all of this can be done through a simple solution that these large organizations can implement using our app.

And it's a balance of employee productivity.

A good.

Safe work environment, and then of course employee satisfaction and that's why I think we're seeing such strong demand for it.

Great. Thank you. Our next question in fiction was added to the Russell Microcap Index can you comment on this and its potential benefits.

Sure, Yes, so as of June 28, I believe were included in the Russell Microcap Index.

The Russell indexes are widely used by investment managers and institutional investors for index funds and as benchmarks for active investment strategies.

We believe this inclusion is reflective of the growth we've experienced over the past year, including our synergistic acquisitions and we also believe this inclusion will assist us in gaining additional awareness and exposure.

About infection throughout the investment community.

Great. Thank you. Our next question can you say anything about whether patients planning more acquisitions or whether your focus now is on growing the existing business.

Yeah.

I get this question often so yeah look we're focused on increasing our organic growth opportunities and that's certainly a priority and primary focus we have some solid business use cases that span our products and we're looking to scale them.

I believe that the acquisition strategy that we exited or executed over the last couple of years was essential in order to position infection as a leading and frankly, the only all in one indoor intelligence provider.

I also believe that the full extent of the value that our indoor intelligence solutions can offers only just recently beginning to be recognized by enterprise organizations.

Worldwide.

We're in a rapidly evolving industry, we have to continue to be open to exploring the possibility of strategic transactions.

In order to continue to enhance and improve our product line and maintain a leading position in the industry.

Or to the extent that we believe there are opportunities that will create long term shareholder value.

So we keep an open mind, we're opportunistic but we certainly are focused on scaling the business.

That we have.

Great. Thank you. Our next question with all that's happened this year like COVID-19, various acquisitions returned to work in sales momentum do you think the company has turned a figure at this corner.

Yeah. Good question I mean look I certainly believe we are in a significant growth trajectory we.

We have diversified our product lines and increased our revenue and as I mentioned earlier. We're also beginning to see an increase in our ASP among certain product lines and use cases as well as in our reoccurring revenue stream, that's really important to us. Unlike most technologies.

Non lodging companies, where we're looking to build that.

So I am encouraged by the demand, we're seeing for our products and as more and more organizations are looking to bring their employees back into the office or to support their hybrid workplace and events.

I expect this trend to continue for us as we grow and aggressively market our offerings.

Great. Thank you.

That concludes the Q&A and I'll now turn it back over to you for the close.

Alright, Thanks, David.

So before we conclude I'd just like to highlight that we continue to differentiate ourselves from other players in the market with our ability to deliver full stack indoor intelligence technologies.

We believe that our competitors can't truly delivered a unique experiences customers desire without being in control of all of these critical components that we have under one roof and thats.

Whether thats, our smart campus solutions or hybrid events or Archie loss, we've been pursuing this path over the last few years and achieve the milestones we set out to accomplish this and now we're looking to scale these product lines and use cases.

I'm excited and pleased with the momentum we're gaining within these markets and I look forward to providing updates regarding contract wins technology enhancements and more developments as they unfold. So thank you everyone and stay safe out there. Thank you for attending the call John I think we can call it a wrap.

Thank you thank.

Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.