Inpixon (NASDAQ:INPX) Q2 2022 Earnings Conference Call August 15, 2022 4:30 PM ET
Company Participants
Alexandra Schilt – Vice President of Crescendo Communications, LLC, IR
Nadir Ali – CEO
Wendy Loundermon – CFO
Conference Call Participants
Operator
Good afternoon, 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 1 hour after the end of the call through August 22, 2022.
I would now like to turn the call over to Alexandra Schilt, Vice President of Crescendo Communications, LLC, the company’s Investor Relations firms. Alexandra, please go ahead.
Alexandra Schilt
Good afternoon and thank you for joining today’s conference call to discuss Inpixon’s corporate developments and financial results for its second quarter ended June 30, 2022. With us today are Nadir Ali, the company’s Chief Executive Officer; and Wendy Lenderman, the company’s Chief Financial Officer. Today, Inpixon released financial results for the second quarter ended June 30, 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. 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
Thanks, Allie, and hello, everyone, and thanks for joining us today. I’m pleased to report despite the overall macroeconomic challenges and supply chain issues, we continue to deliver growth in the second quarter of 2022. In fact revenue increased 55% for the six months when compared to 2021 and 37% for the second quarter when compared to the same period last year. And this quarter, we’re primarily talking about organic growth, which is important to note.
We continue to also add to our recurring revenue base every quarter And as a SaaS company, we’ve been focused on extending the duration of our contracts with customers to ensure long-term recurring revenue streams. We’re continuing to adopt new customers, new Fortune 100 household names, enterprises and organizations to our customer base.
This year, we’re seeing an average contract value size for our experienced app products at over $135,000 (ph) that’s including initial primary deals plus add on deals, which bring the average down as they’re expanding, but great numbers. Some of these deals are actually even seven-digits and others are smaller, but then growing significantly through our land and expand efforts to add more campuses, buildings as well as other services. This not only increases our recurring revenue, but also increases stickiness and profitability with our customers.
On the industrial side, we realized our strongest quarter in new bookings since the beginning of last year. It’s based on a mix of new and existing customers and again supporting our land and expand strategy on the RTLS Solutions side as well. As you may know, the CDC just loosened its COVID-19 guidance for quarantine and we expect to see more people in the office along with the strong expectations for hybrid work options.
Workplace technologies that support hybrid work environments are only becoming more and more critical to allow for meaningful communication, collaboration and connection in hybrid environments. The good news is that whether companies have people fully in the office, fully remote or a hybrid mix, our solution still applies and helps create accessibility and equity for all employees, no matter where they are.
To that point, we’re adding new top tier organizations to our customer base every quarter. When we look at some of these recent deals, some of the use cases are the same as in past periods while other new use cases are emerging as well. For instance, employee experience is still the overarching reason most clients turn to us, but several months ago, the biggest names we heard were about desk booking and other in building experiences.
In recent months, we’re hearing more about seamless employee communications, the ability for employees to collaborate and engage even when off-site. This makes sense when you read the news about some companies moving away from the idea of bringing everyone back to the office and instead investing in technology to make hybrid work. So they’re using Inpixon experience to integrate all their communication and employee services and their interfaces into a single UI on our smartphone app.
Think of the old Internet concept, we are now becoming the one app or hub to access everything inside your company. Utilization of our app brings together many key workplace functions into one app, giving employees the tools they need to thrive remain engaged and connected with colleagues while boosting productivity in their preferred working environment.
With over 125 native features and nearly 100 partner integrations completed or in development, we provide an open flexible solution that delivers a comprehensive workplace experience on-site, in-home offices and everywhere in between. Additionally, we believe that implementing technologies that provide a suite of features such as ours provides companies with the ability to deliver a stronger employee experience, offering them a competitive edge with recruiting and retaining top talent against other organizations that are not leveraging digital technologies in the same way.
Our Inpixon Events platform continues to deliver rich experiences for in person, virtual and hybrid events. In recent months, our platform hosted events for the Association of Briefing Program Managers and Aruba Networks, HP Enterprise Company, just to name a few. We have been featured in numerous articles and continued win awards that recognize the value of our platform against our competitors in the market. We believe these types of recognitions validate our offering and can be particularly important to helping us win new customers and shorten our sales cycles.
Some of these recent third-party wins include being selected as the Best Smart Building Solution for Return to Work by Connected Real Estate Tech Awards. We’ve also won several communicator awards where we received an Award of Excellence for Best User Experience, the Award of Excellence for Conferences, the Award of Distinction for Business in the Virtual & Remote category.
We are recognized at the 20th Annual American Business Awards Women, Award for HR & Employee Experience in the App and Mobile Websites category. And finally, we are also recognized with a Pandemic Tech News Innovation Award for excellence in supporting safe and productive in-person, hybrid and remote workplaces during the pandemic.
Another important milestone was obtaining our ISO/IEC security certification, which we believe helps us to provide us with a competitive advantage by simplifying and accelerating the prospective customers solution, valuation and contract approval process.
Now let me touch on our RTLS, our industrial business part of our indoor intelligent solutions, including the additional capabilities we now offer with our recent IntraNav acquisition. We recently joined SAP’s Partner Program as an SAP PartnerEdge Member. SAP is the world’s third largest publicly traded software company by revenue and a market leader in enterprise application software with over 440,000 customers worldwide. This partner program allows us to market our smart factory, smart warehouse and digital supply chain solutions to SAP customers through the SAP store.
We are currently in the process of entering the SAP store and believe that as we get up and running, it will help to increase demand for our solutions as well as our exposure globally. While global supply chain issues are a challenge to be sure, we have been working closely with customers who turn this into an opportunity to plan ahead. For instance, we’ve received a number of multiyear orders from customers looking to ensure they have adequate supply of our products going forward. These customers have committed to long term purchases upfront. This allows us to predict our needs and make timely orders to smooth out our own supply chain.
It also secures for us predictable revenue going forward. We’re also looking at more joint sales and marketing efforts with our RTLS and the Internet solutions. These solutions are gaining traction in the automotive, aerospace, mining and other manufacturing and warehouse sectors. The challenges and strains on global supply chains being experienced highlights the importance of manufacturers to optimize their manufacturing production operations and we can help than with that. With the ability to precisely track personnel and assets to create digital twins and automate processes, our real time location technologies provide end-to-end transparency across operations.
The continued digitization of supply chain processes will allow for more resilient, agile and efficient supply chain management, ultimately improving the bottom line and facilitating opportunities for increased profit for our customers. Companies that address these challenges by leveraging RFID and IoT technologies will be able to move their resources, people, assets and inventory more efficiently reducing time and cost while also mitigating transporting and manufacturing risks.
As an example, CB International (ph), an international wholesaler with a retail portfolio of women’s and men’s fashions and accessory brands recently discussed how they were able to improve throughput times and increase the productivity of warehouse processes related to goods identification as well as the storage and retrieval of goods by 40% using RFID ultra-wide band and ultrasound technologies in combination with our smart warehouse platform.
Another example is our project with Siemens Energy, which is using our solution for managing powder tracking in an additive manufacturing facility, helping them to improve the transparency of their powder handling processes on the shop floor. These are just a couple of examples of how organizations are working with us and leveraging our location based technologies and solutions and game changing ways.
I believe the opportunities for Inpixon Technologies are strong and growing. However, like many companies, we are managing through a time of substantial economic headwinds and uncertainty. Escalating inflation and the strengthening U.S. dollar are growing concerns about a global recession and escalating geopolitical tensions conflicts are just some of these challenges.
It’s prudent to assume these headwinds could potentially impact us, whether it’s customers delaying decisions or deployments or persistent global supply chain challenges, labor shortages or limited availability of some components we are focused on making sure that we address these. Stock market volatility conditions continue to place pressure on our stock price and our goal is to ensure that we’re continuing to maintain a strong financial position and move towards positive cash flow.
We’re focused on extending our runway by conserving cash and are critically evaluating our operating expenditures to increase efficiencies where possible, including making adjustments to our budget while ensuring continuing to successfully and efficiently meet our growth objectives.
Now before I turn the call over to Wendy, I also want to provide an update on some of our strategic initiatives. As I mentioned, we are primarily focused on increasing our growth opportunities, but also in a way that may relieve the pressure on our stock price and ensure that the full value of our business is realizing the market.
Late last year, we announced that our Board had authorized a review of strategic alternatives that can maximize shareholder value. That process is ongoing. And while we have not made any definitive decisions related to any particular strategic option, nor can we provide assurances that this process will result in the completion of any transaction, we are continuing to actively evaluate current and potentially new opportunities if and as they arise.
With that, Wendy, I’ll turn it to you to discuss our financials.
Wendy Loundermon
Thank you, Nadir. Revenues for the three and six months ended June 30, 2022 were $4.7 million and $10.0 million respectively compared to $3.5 million and $6.4 million for the comparable period in the prior year for an increase of approximately 37% and 55% respectively. This increase is primarily attributable to the increase in indoor intelligent sales, including our Smart Office app and real time location based technologies as well as the addition of the Industrial IoT product line in the fourth quarter of 2021.
Gross profit for the three and six months ended June 30, 2022 was $3.3 million and $7.2 million respectively, compared to $2.6 million and $4.6 million for the 2021 respective periods, representing an increase of 30% and 55% respectively. The gross profit margin for the three and six months ended June 30, 2022 was 70% and 72% compared to 74% and 72% for the three months and six months ended June 30, 2021. This decrease in margin, primarily due to the sales mix during the period.
Net loss attributable to stockholders of Inpixon for the three and six months ended June 30, 2022 was $19.9 million and $31.1 million respectively, compared to income of $14.8 million and $2.2 million respectively for the comparable periods in the prior year. This increase in loss was primarily attributable to non-cash items in the three months ended June 30, 2021 period including the discounted net gain on the Sysorex note and the release of the valuation allowance on the Sysorex note, offset by operating expenses in the three and six months ended June 30, 2022.
Non GAAP adjusted EBITDA for the three and six months ended June 30, 2022 was a loss of $9.9 million and $18.7 million respectively compared to a loss of $6.3 million and $11.8 million for the prior year period respectively. Non-GAAP adjusted EBITDA as defined as net income or loss before interest, provision for income taxes, depreciation and amortization, plus adjustments for other income or expense items, non-recurring items and non-cash items including stock-based compensation.
Pro forma non-GAAP net loss for basic and diluted common share for the three and six months ended June 30, 2022 was a loss of $0.07 per share and a loss of $0.13 per share respectively, compared to a loss of $0.07 per share and $0.14 per share for the prior year period. Non GAAP net loss per share defined as net loss per basic and diluted share adjusted for non-cash items, including stock-based compensation, amortization of intangibles and one-time charges and other adjustments, including loss in the exchange of debt per equity, goodwill impairment, provision for valuation allowance for notes and acquisition costs. As of June 30, 2022, we had approximately $65.8 million in cash and cash equivalents.
This concludes my comments. And I’d like to turn the call back over to you, Nadir.
Nadir Ali
Thanks, Wendy. Allie, would you please lead us through the Q&A discussion?
Question-and-Answer Session
A – Alexandra Schilt
Thanks, Nadir. Like last quarter in our conference call announcement press release we suggested interested parties submit their questions in advance. We’d like to address those questions for you now. Some of them were 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.
Our first question is, can you provide an update on the strategic transactions mentioned in your December 2021 press release?
Nadir Ali
Yeah, sure. So as I mentioned earlier, we’re primarily focused on increasing our growth opportunities, but also in ways that may relieve the pressure on our stock price and ensure that the full value of our business is realized in the market. Late last year, we announced that our Board had authorized a review of strategic alternatives that can maximize shareholder value in our opinion. And our view is ongoing and while we haven’t made any definitive decisions related to any particular option and nor can we provide assurances that this process will result in completion of a transaction, we are continuing to actually evaluate and work on potential new — current and new opportunities if and as they arise. So I think that covers that, Allie. Let’s go on to the next one.
Alexandra Schilt
Thank you. Our next question regarding the NASDAQ minimum bid requirement, what are your plans to address this?
Nadir Ali
Yeah. We share our investors’ frustration with our current share price and do believe the value of our company is not properly represented with its current price. We intend to explore all options available to us to regain compliance with NASDAQ’s minimum bid requirement. And we believe we continue to execute on our business strategy. The market will recognize the value of our platform and business, which should translate into an appropriate stock price. So we’ll keep our shareholders apprised of developments on this front, but we’re pursuing all options here.
Alexandra Schilt
Thank you. Our next question, can we expect some insider buying from management?
Nadir Ali
Management team, including myself, does explore purchasing stock outside of blackout periods and unfortunately, these are enormous short winds of opportunity, but we continue to explore this as time permits.
Alexandra Schilt
Thank you. Our next question has the company considered workforce reductions as a way to reduce costs, as well as an efficient way to restructure the company to further its growth potential.
Nadir Ali
Yeah. I touched on this a little bit earlier as well. We are evaluating options for reducing our costs and expenses, conserving cash, increasing our operating efficiencies is a priority for us. And we expect that we’ll have to make some adjustments to our operating budget in order to ensure that we can maintain a strong financial position during this time of economic uncertainty. At the same time, it’s also important for us to ensure that we continue to execute and achieve our long term growth goals. So there’s a balancing act, but yes, we are definitely looking at how do we operate more efficiently.
Alexandra Schilt
Thank you. Our next question, what can the company do to avoid the stock being shorted?
Nadir Ali
Well, I mean, again, we share the frustration and continue to believe we’re undervalued. We can’t control the trading in the stock. But as I’ve mentioned, increasing shareholder value is a priority, from ensuring that we are critically evaluating our expenditures for maximum efficiency to evaluating the strategic options and opportunities for the benefit of our shareholders. We are looking at all the options to address this issue and increase shareholder value.
Alexandra Schilt
Thank you, Nadir. That concludes the Q&A. I’ll turn it back to you for the close.
Nadir Ali
All right. Well, thank you everyone for joining us today. And as always, we appreciate the support of all our shareholders and look forward to providing more updates in the future Thank you and take care.
Operator
Thank you, ladies and gentlemen. This does conclude today’s conference. You may disconnect your lines at this time and have a wonderful day. Thank you for your participation.
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