Q3 2021 Inpixon Earnings Call

Please standby.

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

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 one hour. After the end of the call through November 22nd 2021 I would now like to turn the call over to Alexandra Schilke.

Director of account management at Crescendo Communications LLC, the company's Investor Relations firm. Please go ahead ma'am.

Thank you and good afternoon, and thank you for joining today's conference call to discuss infections corporate developments and financial results.

For the third quarter ended September 30 F. 2021 with US today are not Ali the company's CEO and Wendy lender men, the company's Chief Financial Officer.

Today, we released financial results for the third quarter ended September 30 F. 2021.

You have not received infections earnings release, please visit the company's Investor Relations page at IR Dot and detection dotcom.

During the course of this conference call the company will be making forward looking statements.

The company cautions cautions you that any statement that is not a statement of historical fact is a forward looking statement.

Any projections of earnings revenues cash or and or other statements relating to the company's future financial results.

These statements about plans strategies or objective 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 security instrument 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 infection assumes no obligation to update these forward looking statements to reflect future events or actual outcome 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.

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 not our Ali infection CEO. Please go ahead.

Thanks, Ali and Hello, everyone.

Joining us today.

Here to discuss our recent business activities and financial results for the third quarter of 2021.

We got a lot of good information to share with you. So why don't we get started.

First off we continue 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 for multiple use cases generate sales leads and close deals with many fortune 500.

Global 2000 companies, while deploying our technologies and solutions around the world. So I wanted to dig into some of that revenue.

Customers that I'm, referring to we've continued to substantially increase our revenue for the first three.

The quarters of 2021, we've generated year over year and sequential revenue growth.

In fact, 74% we saw 34% increase in revenue for the three months ended September 32021, and 100% increase in revenue for the nine months ended September 30th.

Our revenue growth continued even during one of the most challenging and unprecedented times of economic uncertainty.

Because we pivoted and adjusted.

Demonstrated in March 'twenty, two and going forward.

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.

Within our hardware portfolio. We also saw increased costs as a result of our need to substitute suppliers, who can meet our needs.

And had higher logistics and shipping costs.

Onsite installation and deployment plans for our sensor and mapping technologies, where sometimes you later stalled as a result of the strict shut down and of course. The Delta variant early this year has continued to impose some challenges and delayed Rio games. 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 <unk> acquisition, which expanded our offerings. This year to include a location where employee.

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 infections 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 CX App, 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 has already been signed and contracted to date.

And you know as we've talked about in the past we're building our reoccurring or.

Our 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.

Reoccurring revenue base, and that's where most of the revenue comes from and you'll see that where we're building. These.

Our signing these contracts for an average three 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 two.

75%.

For the nine months period ended September 32021, as compared to the same period last year.

And we've been growing close to 20% and Arrow 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 on an annual basis is going to show that were growing our and that's one of the most important metrics, but on tracking and hopefully so are you.

And you know, where 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.

Also expanding existing customer relationships, you'll hear me mentioned that a lot through the call today and I'll give you some specific examples.

Providing customers seeking solutions that offer premiere 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, they don't want to get into 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 let's talk about a few of these contract wins.

So you can see the types of industry and the types of customers and what we're selling.

So we signed five new contracts with one of our existing fortune 500 customers as the leading provider of creativity and productivity software.

You know for the implementation of our <unk> 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 you know this is land and expand opportunity.

The strategy that we've been implementing is working well.

I also had a customer that added three new contracts.

And they're a leading network technology company and Thats for our event platform. So again, you know, depending on which products smart office events.

D C. 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 to additional campuses, including some international campuses for them.

We've added a new customer is 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 EDC product that we've already deployed for them.

And another large company customer has upgraded their executive briefing or ABC solution.

You know again touching on that event side of our capabilities and I'll talk about that in a bit.

Our collaboration partner of ours, just executed a contract with us to implement our smart office up to cover over 40 of their workplace locations around the world.

On the RTL 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 are aware product line into one of 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 and 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 out 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.

And most of these again are three year contracts with some upfront revenue, but good solid reoccurring revenue over.

A multiple number of years and as you can see our sales strategies are working where we're landing and expanding where cross selling or 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 backend.

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 at all at the same time so across the company in every department.

We've been we've been managing in 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 were.

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 of user experience.

Data supports the companies with engaged employees outpace other organizations that don't prioritize employee experience or struggled connecting with the employee 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.

I'm home, sometimes in the office.

And so the employers are leveraging the infection indoor intelligence solutions, not just to enable productivity, but also seeking to redefine the indoor experience with smarter safer and more secure workplace environments.

Providing a positive experience with employees using our app, we're providing analytics and intelligence to their management teams and to the 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 in innovative technologies.

In case, you missed we're putting and attend our demo day, which we held on September 8th.

Current you to watch the replay on our website because the video goes into details about our products, including our smart office at events 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 infection as a one stop shop.

Again to create more stickiness and build our ASP.

Also giving us the ability to offer all of the core technological components required to deliver and towards indoor intelligence. So that includes mapping positioning analytics a lot of our competitors in this fragmented market are doing pieces of this right. Some have the map somehow the positioning pieces in the hardware. Some are just focused on the front end of that.

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 and delivering our solutions. So for example, our mapping platform is core to many of those campus out deals right and I've talked about how the drags in our mapping and on device positioning capabilities.

Employees have access to a dynamic interactive map.

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.

<unk> pathways conference rooms, restrooms elevated temperatures and more.

We're also seeing cross sales on our on device positioning we can calculate the user's positioning to deliver the blue dot to allow for navigation and turn by turn directions with little or no infrastructure requirements. Just like you would use Google Google maps or ways for the outdoors, we deliver for the indoors.

And complimentary to our mobile App and technology ecosystem, we have an event enhanced events platform an executive briefing solution.

These solutions are becoming a more important store organization as in person and hybrid events are taking place and you execute these events companies need a platform that can dress 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 mats with navigation to key destinations like conference rooms, and breakout room.

And our private venue or a large convention center for.

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 in executive meeting and these are custom branded platforms to clients and team members don't even realize that theres an extend the 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 50000 attendees recently for a fortune 500 company as well as in real life events. That's the X has done in its past that were even larger so we were a great fit for <unk>.

Companies that want both or what.

This call now hybrid events, so I'm really looking forward to growing this business in 'twenty, two with our installed base as well as new customers.

And last but not least we continue to invest in resources to developing our augmented reality technology and are pursuing exciting partnerships and collaborations leveraging latest in wearable displays to for example in August we announced our collaboration with <unk> a leader in quantum photonics and augmented reality technologies. Our Stendal had developed <unk> are full.

Micro display that delivers both immersive and volumetric aspects needed to realize effective in wearable augmented reality smart glasses. The combination of infections hybrid works workplace experience coupled with a stent is truly wearable smart glasses can help organizations enhance the in real life experience and perform.

<unk> or its employees based on their location whether at home in the workplace or in between completely hands free.

Theres been a lot of buzz around the meta versus recently and it's our belief is that it's not hype meta versus simply the term used to describe the next evolution of the internet moving beyond web two <unk>.

So where the digital universe has merged with our physical reality.

The Internet will not be something you'd go to but rather something that you were immersed with it.

As many of you know we had infection 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 vigilance to build out our capabilities on top of our indoor intelligence platform.

We also wanted to be immersive.

Hence our partnership with a stand though on the wearable fronts.

By the way there are other leading wearable companies that are also approach of 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 and media experience will be served up to you automatically hands free and 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 usage cases, 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.

Near future on this front.

As you can see we continue to innovate and enhance our technology is bringing us to the forefront of the industry and believe our growth is a reflection of our progress. So I just wanted to summarize four 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 <unk>.

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 nine months period.

Second we have more than $100 million available and 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 infection as an innovator and leader.

Third, we're increasing market share by securing new contracts from both new and existing customers.

Increasing stickiness growing our ASP and.

And cross selling Upselling everywhere, we can.

We have solid footing within indoor mapping positioning smart office apps security and the <unk> 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.

It talks about in the past, but Theres no 800 pound gorilla in the indoor intelligence space and that's what we're setting our sights on so we're looking forward.

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.

Andy.

Thank you Tyler.

Revenues for the three and nine months ended September 32021 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 three month period, and $5 $4 million or approximately 100% for the comparable nine month period.

The revenue increase for the three months ended September 32021 is primarily attributable to the approximate $1 $8 million increase in indoor intelligence sales, including our recently acquired Smart office App and real time location based technologies and an increase of approximately $100000 of phased out.

The revenue increase for the nine months ended September 32021 is primarily attributed to an approximate $3 8 million dollar increase in indoor intelligence sales also inclusive of our recently acquired location based technologies and an increase of approximately $1 $6 million that plays out.

Gross profit for the three and nine months ended September 32021, with $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 three months ended September 32021, an increase of 99% for the nine months ended September 32021.

Gross profit margin for the three months ended September 32021 was 73% compared to 75% for the three months ended September 32020.

This decrease in margin is primarily due to the sales mix during the quarter.

The gross profit margin for the nine months ended September three 2021, and 2020 was 73%.

Net loss attributable to the stockholders of infection for the three and nine months ended September 32021, with $33 $6 million and $31 $4 million, respectively, compared to a loss of seven and a half million dollars and $20 $9 million, respectively for the comparable periods in the prior year.

This.

Greece and loss for the three months ended September 32021 of approximately $26 $2 million was primarily attributable to the $22 3 million dollar.

Unrealized loss on the size of your ex note and increased operating expenses offset by the higher gross profit.

The increase in loss for the nine months ended September 32021 of approximately $10 $5 million was primarily attributable to the increased operating expenses.

We have approximately $24 $8 million offset by the $3 9 million dollar higher gross profit and the seven $5 million release.

Valuation allowance on the size right now.

Non-GAAP adjusted EBITDA for the three and nine months ended September 32021 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 debt.

Pro forma non-GAAP net loss per basic and diluted common share for the three and nine months ended September 32021 was a loss of five cents per share and 19 cents per share respectively compared to a loss of 13 cents per share and 64 cents 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 one time charges or other adjustments, including loss on the exchange of debt for equity provision for valuation allowances, our notes and <unk>.

Acquisition cost.

As of September 32021, we had over $100 million in liquidity, including $6 $66 $8 million in cash and $43 $2 million in short term investments, which primarily include treasury about.

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

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

Of course, thanks matter like last quarter in our conference call announcement press release.

Suggested interested parties submit their questions in advance.

I'd like to address those questions for you that some of them were duplicative. So we did our best to reconcile those where possible, but do 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 you.

We recently received notice from NASDAQ regarding not maintaining stock price compliant.

How do you intend to regain compliance with the $1 requirement and are you exploring reverse split.

Yeah, So look as I discussed in our call. We've got a robust sales pipeline, we're continuing to execute on our business strategy in deploying our solutions there.

A very exciting time for infection. So we have no intentions of implementing a reverse split in.

In fact, we have not sought approval for a reverse split.

During our AGM, our annual shareholder meeting because.

Because we fully intend on during 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 we're not pursuing a reverse split and as people can see.

Shareholder proxy, we've not asked shareholders to approve a reverse split.

Thanks Robert.

Our next question when you really smooth regarding contract you rarely amongst the name of the customer or any financing related to the project.

Why is that.

Yeah. So as you heard me talked about earlier in the call I mean.

Tried to describe many of our customers.

<unk> 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 sign and.

So however.

As I said I did try to elaborate on the types of customers who were working with throughout the call.

We continue to win these big contracts with companies and pharma entertainment and the new gig economy those types of customers life Sciences.

Company that is new on in the marketplace, a social media company and many many more so I would love to be able to main vs and talk more details, but our contracts just prohibit that.

And again, what I said on the call is and these customers keep coming back they are happy with our products. There 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. Thank you. Our next question you have to put some cash how do you intend on deploying that and do you incorporate exploring more acquisition.

Good question, Yeah look so moving forward, we intend to aggressively penetrate the market with our solutions. This is a time for us to capture market share, especially with the smart office App and event solution because everyone around the globe is in need of this now right and that's going to continue even beyond this pandemic because this is just the new norm.

Normal.

So.

We have and will continue to support 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 correctly said.

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.

Or is it talks 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 capable capabilities of our <unk> 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 products offerings and solution offerings and infection has and I think again the.

The biggest data point in support of this is that we are.

Expanding with existing customers.

On a variety of verticals a variety of use cases, right. So I mentioned several today.

The wind 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.

A building or two or one or two campuses with a client there.

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 matter that concludes the Q&A session I'll turn it back over to you for the close.

Alright, 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 havent 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 last week, we have not asked shareholders to approve a reverse split just as a reminder, and we're confident that the market.

We 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 am confident the market will catch up with us sooner than later.

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.

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