Inpixon (INPX) CEO Nadir Ali on Q4 2021 Results - Earnings Call Transcript

Mar. 11, 2022 4:47 PM ETInpixon (INPX)
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Inpixon (NASDAQ:INPX) Q4 2021 Earnings Conference Call March 11, 2022 11:00 AM ET

Company Participants

David Waldman - President and CEO, Crescendo Communications, IR

Nadir Ali - CEO

Wendy Loundermon - CFO

Conference Call Participants

Operator

Good morning, and welcome to Inpixon’s business update call. All participants will be in listen only mode. [Operator Instructions] Participants of this call are advised that the audio of this conference call is being broadcast live over the Internet and is also being recorded for playback purposes. A telephone replay of the call will be available approximately one hour after the end of the call through March 15, 2022.

I would now like to turn the call over to David Waldman, President and CEO of Crescendo Communications LLC, the company's Investor Relations firm. Please go ahead, sir.

David Waldman

Good morning, and thank you for joining today's conference call to discuss Inpixon’s corporate developments and financial results for 2021 fiscal year ended December 31, 2021. With us today are Nadir Ali, the company's CEO; and Wendy Lenderman, the company's Chief Financial Officer.

Today, Inpixon released financial results for the fiscal year ended December 31, 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.

Nadir Ali

All right. Thanks, David. And good morning, everyone. Thank you for joining us today.

So I want to jump right in and focus on three main topics I'd like to cover today. First, our 2021 revenues reached $16 million. That's a 72% increase over 2020. Tremendous growth and in fact, if you look at the last four years, you'll see we grew this business from approximately $3 million to $6 million to $9 million, and now to $16 million in revenue. I currently expect ‘22 revenue to continue at these growth rates, primarily coming from organic growth with existing product lines.

During the time we also maintained our gross margins above 70% and increased our annual recurring revenue in absolute dollars. More on that later. While total operating losses were higher as compared to the prior year, over $21 million of that increase was primarily non-cash, non-recurring expenses that we don't currently anticipate for ‘22 with the remainder primarily related to depreciation and amortization, stock-based comp and expenses related to recent acquisitions.

We expect we'll see an improvement here in ‘22 as a result of the integration of the acquired entities, and operational synergies becoming more fully realized as the year goes on. And as our revenue grows, we should see improved EBITDA and are anticipating a lower burn for 2022.

Second I want to touch on the decline in our market cap and stock price. We believe what we are experiencing is not unique to Inpixon and has more to do with the macro-economic changes over the past several months, as well as the current political situation. As I speak to our IR folks, bankers and other CEOs, it's clear that this has impacted many companies from microcap to large cap, with micro and small caps disproportionately impacted by the current sell off.

Valuations have come down, whether you're public or private or in the crypto space. My team and I are focused and will continue to be focused on executing our business plan and controlling what we can. But we do believe our market cap doesn't reflect the value of our business. So for example, and depending on the source you look at, whether it's Blossom Street Ventures or Klipfolio, or others, the median multiple for annual recurring revenue, or ARR, is 13x to 17x. And with larger companies getting even higher multiples.

We've been trading below the value of our cash on hand, which is before even taking into account any of our recurring revenue, and our growth in ARR. This is frustrating and difficult to explain. But however, as I said, we believe that much of this is due to the overall macro events. And so hopefully, when the volatility and turmoil in the market settle down I believe the market will recognize that we are executing on our business plan, and we should see a recovery.

The third topic I want to cover today is how our suite of products that have come together to deliver on the indoor intelligent experiences is more important now than ever before. I can give you three reasons why our current offering is so right for today's market.

First, because hybrid and remote workplaces and events are here today. Nothing is changing that back to the way it was. And we believe we can help companies better than anyone else, to be successful in this new hybrid worker paradigm. We have an incredible roster of customers like Aruba, Adobe, Warner Media, Siemens, Lenovo, Nvidia, Meta, and many more that you can find on our website, all using our solutions to help create the best experiences for their employees, customers and partners. And we're continuing to add more Fortune 2000 type customers that are helping us build a recurring revenue stream for years to come.

The second reason we have great product market fit is because we are at the right place at the right time. In fact, just last week Inpixon was identified by Gartner as a Leader in the 2022 Magic Quadrant for Indoor Location Services. The Metaverse is here and companies need our products from our augmented reality technologies to our mapping positioning sensors that help them create their digital twins and launch into the metaverse. If your company doesn't have a plan to use indoor intelligence to enter the metaverse, then you need to get in touch with us.

Combining this with partners that have wearables like smart glasses, or gesture technology, NFTs and the like, is going to deliver significant opportunities for us to shape and create exciting new experiences for our customers.

The third reason our offering is spot on is Industry 4.0 or Industrial IoT or whatever you want to call the massive digital transformation going on in the industrial sector. This space is exploding as manufacturing, warehouse -- excuse me -- and logistics companies are all looking to use new web and other sensing technologies to track assets, automate workflows, reduce production times, and implement safety solutions. Combine that again with AR and smart glasses, and we change the factory worker experience, creating efficiencies and increasing productivity.

All right, now I want to take a minute to explain how our tech helps companies create digital twins for the metaverse or for augmented reality because that's seems to be on top of mind for everyone these days.

Our Visualix products, including augmented reality and patent pending methodologies, uses your smartphones camera, as well as onboard sensors to create 3D models of indoor spaces. It positions the user on a map with centimeter level accuracy and provides turn by turn visually guided navigation. Then we overlay virtual artifacts onto this live map displaying key information such as room name, amenities, photos, or reviews. And then we display this on your phone or smart glasses using our CXApp and make the navigating experience shareable with others.

The team was just showing me a new feature that we added recently, where people these days are going into the office to meet other people. So imagine being able to see on this map where your colleagues and friends are, and being able to book a desk near them, or at least know they are on site that day that you're planning to go in. Of course, there are privacy options built in so you can decide if you want to share when and where you are in the office. But this allows tremendous collaboration capabilities, and our customer love this functionality, because it's the number one reason people want to go back to the office. They want to reconnect with their peers.

Inpixon is uniquely capable of providing this type of integrated solution because we can offer all of these key technologies, which is the result of our successfully executed acquisition strategy and our internal development initiatives. I'd love to go into more great detail about all our products and capabilities. But instead I want to share with you some third party facts and figures that validate what I'm saying about what we believe is a massive growth opportunity.

So if you go to markets, end markets, you can see lots of these numbers about the indoor location market being $7 billion and forecasted to grow at 23% compound annual growth. RTLS or Real Time Location Services is a $3.9 billion market growing at 26%. Industry 4.0, $65 billion is growing at 20%, the virtual event platform $10.4 billion growing at 13% and augmented reality, $15 billion, growing at 31.5%. All these sectors, we have solutions in are a billion dollar markets growing at double digit compound annual growth rates.

Now our internal research supports the favorable situation too. We recently released our State of Indoor intelligence 2022 Study where approximately 52% of respondents indicated they are increasing the pace of indoor intelligence initiatives, with 92% reporting their indoor intelligence was key for their company to stay competitive, and 77%, indicating they will be investing in indoor intelligent solutions this year.

The huge opportunity noted in research is starting to be realized. And you can see that in the strong results we posted in \21. So let me share some stats around that. In ‘21, we closed hundreds of deals with customers. We increased our staff annual recurring revenue bookings by 70%, or more than $4 million. Just in the last few months of the year alone, we built out more than 150 corporate campuses with tens of thousands of reservable desks and mapped more than 12 million square feet of office space.

And importantly, our annual recurring revenue, or ARR, is approximately 45% of our revenues in 2021. That means we've got roughly $7 million in the bank to start this year from our current product lines. And we believe this will only continue to grow as we move forward in 2022.

In addition to our Smart Campus App, which is really about connecting people in the office, I'd like to highlight two of our other product lines where we think growth opportunity is just as exciting, and that we haven't fully focused our sales and marketing on yet. That's hybrid events and industrial IoT.

So let's start with hybrid events. With masking and indoor capacity regulations relaxing in many areas, events are shifting from purely virtual to hybrid. The hybrid virtual event space is taking off as it is only recently that in person hybrid events are being held given the pandemic environment. More and more in-person or hybrid business activities and conferences are being announced. In fact we're about to host Aruba’s Atmosphere Event in Vegas with an anticipated 50,000 attendees. That's in person and online, so in other words hybrid. And our customers that are using our platform are winning awards.

Our platform was recently selected by the Association of Briefing Program Managers as their exclusive Event Management Solution. The ABPM membership includes top tier enterprises, including more than 100 Fortune 500 companies, and we expect this relationship will lead to more sales opportunities for events with their Fortune 500 customers.

And there's a huge Metaverse play that we can take advantage of in the event space. Immersive experiences can allow remote attendees to visit a virtual tradeshow booth, and chat with product experts, while on site, attendees can use augmented reality to navigate the show floor and view digital details on the product and companies they see physically in front of them. Every venue and event needs to have our app and maps and level up the experience that they're providing their attendees. We're looking to partner with folks in this space to make that happen in ‘22.

Now let's move to Industrial IoT or Industry 4.0. Some of the biggest spend with location technologies in this space using old school tech like RFID and handheld barcode scanners, is why Zebra and others show up in the Gartner Magic Quadrant as leaders. We plan to take them on with ultra-wideband and our proprietary Chirp technology. This market segment was the primary driver for the INTRANAV acquisition we made in December. It completed our offering in the IoT space, so think Smart Factories, Smart Warehouses and digital supply chains.

And we believe this will allow us to take market share from the Zebra and Ubisenses of the world. Digitizing these facilities is top of mind for manufacturers. And we have a complete offering for them now, integrating the latest cutting edge technologies, including augmented reality and wearables.

You've heard me say this before. And I'll say it again. All these acquired and developed technologies have been pulled together for a reason. Our platform approach, our ability to offer a single platform which delivers multiple solutions and use cases is working. The upsell and cross sell potential is real and it is being realized.

Let me give you a couple of examples. So if we look at our Smart Office App deals in ‘21, for every $100,000 of contract value in initial deal, we won another $89,000 on average in those customers or an 89% bookings expansion. This is a classic land and expand strategy, get in and then upsell and sell the more what they bought and cross sell and sell them our complementary solutions.

We’ve seen a natural sales growth expansion with our customers because these large customers have so many offices and so many internal system. So for example, they might roll out our app to their U.S. offices and then they expand it to European offices. Or some customers start with a pilot and then expand. And they often buy more features and add more integrations to other internal systems along the way.

These same large companies that need our Smart Office App also hold internal and external events that will no doubt be hybrid, and they'll need our Event Solution. And they’ll want to make these experiences even more immersive and rich. And we use our augmented reality technologies to bring them into the metaverse.

Another huge cross sell opportunity is to pursue sales of our Industrial IoT solutions for Smart Warehouses, Smart Factories, into our corporate customers, and vice versa. So you can imagine, automakers and others that may be using our Smart Campus App, but also have a manufacturing side to their business. So we we've got an ability to cross sell the IoT solutions with those customers.

So I hope that these examples and data that I've provided you, that you can see the vast potential here, and how we're realizing the benefits of our acquisition development strategy, and bringing these technologies solutions all-in through the infection route.

So just to wrap up before I hand the call over to Wendy to go over the financials, let me summarize the current situation. We have a tremendous suite of products and IP that allow us to deliver the hottest in demand markets today, right the hybrid workforce, AR, metaverse and Industry 4.0. We're planning for continued organic base growth at the levels that we've seen over the last year.

We're landing and expanding in our footprint in customers and capturing more market share by increasing their stickiness. And we're continually presented with a cross sell, upsell opportunities that increase our ASP or average sales selling price.

And lastly, we've got sufficient capital that we believe provides us over a year of runway based on existing operations while allowing us to execute on our growth strategy.

So I'd like to turn the call over to Wendy now to discuss our financials. And I'll come back to answer some of the questions you all submitted to our investor relations firm. Wendy?

Wendy Loundermon

Thank you Nadir. Revenues for the year ended December 31, 2021 were $16 million, compared to $9.3 million for the comparable period in the prior year, an increase of approximately $6.7 million, or approximately 72%. This increase is primarily attributed to the approximate $5 million increase in indoor intelligence sales, including our Smart Office App and real time location-based technologies and an increase of approximately $1.7 million of SAVES sales.

Gross profit for the year ended December 31, 2021 was $11.6 million, compared to $6.7 million in 2020, representing an increase of 74%. The gross profit margin for the year ended December 31, 2021 was 73% compared to 72% for the year ended December 31, 2021. This increased margin is primarily due to the sales mix.

Net loss attributable to stockholders for the year ended December 31, 2021 was $69.2 million, compared to $29.2 million for the comparable period in the prior year. This increase in loss of approximately $39.9 million was primarily attributed to the increase in operating expenses of $53.8 million offset by the higher gross margin of $4.9 million and reduced other loss of $5.5 million. Although total operating expenses were higher, as compared to the prior year, over $21 million was comprised of non-recurring and non-cash expenses, which are not anticipated for 2022.

Non-GAAP adjusted EBITDA for the year ended December 31, 2021 was a loss of $29.6 million dollars, compared to a loss of $17.1 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, non-recurring items and non-cash items including stock-based compensation.

Pro forma non-GAAP net loss per basic and diluted share for the year ended December 31, 2021, was a loss of $0.26 per share compared to a loss of $0.71 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 non-cash items including stock-based compensation, amortization of intangibles and onetime charges and other adjustments including loss on the exchange of debt for equity, provision for valuation allowance on notes and acquisition costs.

As of December 31, 2021, we had approximately $52.5 million in cash and cash equivalents and approximately $43 million in Treasury bills.

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

Nadir Ali

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

Question-and-Answer Session

A - David Waldman

Yeah, thanks Nadir. Like last quarter in our conference call announcement press release we suggested interested parties submit your questions in advance. We'd like to address those questions for you now. Some of them were duplicated. 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.

So turning to our first question, in December, the company announced it was working on a strategic transaction. Can you provide a status update?

Nadir Ali

Sure. All I can say there is that our exploration process is still underway. And we really have no new information to share at this time, except to note that we are evaluating these strategic opportunities, to the extent we believe they can maximize shareholder value.

David Waldman

Thank you. Our next question. Recently, there was a LinkedIn post by a Siemens employee sharing a video that show Inpixon’s work with Siemens Energy. Can you elaborate on that project?

Nadir Ali

Sure, yeah. That was a really nice video that our customer posted. Siemens Energy is a great customer of ours. They use our industrial IoT solution for managing material tracking in an additive manufacturing facility in Europe. And if you see the video, our customer states that it helped them greatly improve the transparency of powder handling processes on the shop floor. And in his LinkedIn posts, he wrote that it's a project that cannot be called anything else than a success story. So that was awesome.

He was talking about how with fast installation, commissioning, and global enterprise model for all Siemens Energy sites available. So I think this is a great example of one of the many success stories we have. We believe we're just at the tip of the whole IA-IoT iceberg. And there's significant potential for us in there, now especially with the INTRANAV acquisition.

And the industrial workplace is modernizing to standardize and centralize indoor tracking for more automation and sustainability. So we look forward to expanding our footprint in that sector.

David Waldman

Thank you. Our next question. I understand Inpixon has a number of automakers as customers, what all does the company do within the automotive sector?

Nadir Ali

So we actually have several top tier automotive manufacturers as customers. That industry is a great example of how we can support multiple use cases. So for example, one of our customers, BMW uses inventory tracking, using our Bluetooth tags. Another one tracks the movements of electrical vehicle battery, safe boxes, another uses ultra-wideband technologies for production tracking.

And besides automakers, our customers include automobile parts suppliers too. So for instance, one is monitoring material flow using Bluetooth. And another doing is doing production tracking based on ultra-wideband and tracking forklifts with ultra-wideband as well. So there's a variety of use cases. And actually, we have an automotive manufacturer that's using completely different use case, which is in the corporate side, in the business offices, and they've over 5,000 of their office employees using our Smart Office App across eight locations.

So this is where again, that cross sell, upsell story that we've been talking about is really ripe for opportunity. And we're seeing that happen, right? So we can work with our customers in their manufacturing facilities, but then also in their corporate spaces. And that's kind of our two pronged strategy. We're going after the enterprise as well as the industrial spaces.

David Waldman

Great, thank you. Our next question Digital Twins is a key initiative that is supported by Microsoft and many other large corporations. Can you provide some color on your Digital Twins initiative? And if or how the company is advancing in this area?

Nadir Ali

Yeah, I mean, sure, there's obviously a lot of press these days about Digital Twins. And for us, we've been we've been kind of doing this for many years, right? So for instance, our mapping platform, we plot on the map digital twins of all of the facilities, key places and things, right, so whether it's conference rooms, desks, elevators, restaurants, forklifts, etc. Every element can be displayed with key data pulled from external sources. So you can view it on the map. And see things like the temperature of a room, or the hours of a cafe on site, or the part numbers in a box in a warehouse.

So you're standing in a room, viewing the physical environment, while you're also looking at your phone or tablet viewing the digital version, or digital twin of that same space. And those two environments, as one is really what the metaverse, right? And so we're doing things like this, and associating multiple assets to other elements. So for instance, bundling parts to a work order or boxes to their pallet. And this is more advanced uses of digital twins that can enable even more automated processes that result in speed and reduction errors.

So I think we're far ahead from our competition being able to bring practical use cases into the metaverse especially on the industrial side. But this is something that we are very comfortable with and can help our customers, launch their digital twin into the metaverse.

David Waldman

Great. Thank you. Our next question, CXApp is powering Aruba’s Atmosphere Conference that is being held soon in Nevada. Please comment on how the company helps conferences, especially in post-pandemic environment?

Nadir Ali

Yeah, so I mentioned this earlier on the call. But so we're supporting the Aruba Atmosphere event, both our virtual event platform for remote attendees and our mobile app for onsite attendees. Our ability to provide an integrated solution for hybrid events is so key right now, and it's a huge opportunity. We're seeing a lot of large companies that need our Smart Office App, but they also hold internal and external event that will no doubt be hybrid and need our event solution.

So we believe our ability to offer this in person virtual and simultaneous hybrid events platform is unique in the market, and give us another advantage. The CXApp platform differentiates itself from competitors in that our ability to deliver native iOS and Android smartphone apps enhance the experience of the event, regardless whether you're attending in person or remotely.

So we continue to see demand for the event platform. And again, this is another cross selling opportunity with our Fortune 2000 customers as they get back to doing events.

David Waldman

Great, thank you. Our next question, you have not been able to meet the $1 compliance for your NASDAQ listing. Are you exploring a reverse split?

Nadir Ali

Yeah, look, I mean, I think, as I talked about earlier, we we've got a robust sales pipeline, we're executing our business, that's our main focus. That said, we've got no control over the markets, right. And we can control what we can control. Clearly, the micro and small caps have been disproportionately impacted by the current sell off in the market. But our NASDAQ listing is of paramount importance. We haven't asked shareholder approval for a reverse split at this time. And this is something we want to try to avoid. But under current NASDAQ rules, we expect we have several more months to work towards curing this price requirement organically. And that's our focus right now.

David Waldman

Great, thank you, Nadir. That does conclude the Q&A and I'll turn it over to you for the close.

Nadir Ali

All right, thanks, David. I just like to highlight that we are committed to continued growth and innovation that delivers exceptional user experiences. We're excited by the opportunities of what can be accomplished in the physical and digital world, when leveraging our comprehensive indoor intelligence technologies. We remain fully committed to building shareholder value by continue to grow our business, working towards positive cash flow and leveraging our balance sheet.

We believe we have built a foundation for future success both operationally and financially. And we appreciate the support of all of our shareholders. And look forward to providing you updates as the exciting developments unfold.

So thank you for taking some time out to be with us today and take care.

Operator

Thank you, ladies and gentlemen. This does conclude today's event. You may disconnect at this time and have a wonderful day. We thank you for your participation.

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