Inpixon

Q3 2021 Earnings Conference Call

11/15/2021

spk03: Good afternoon and welcome to InPICtion's 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 it 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 22, 2021. I would now like to turn the call over to Alexandra Schilt, Director of Account Management at Crescendo Communications, LLC, the company's investor relations firm. Please go ahead, ma'am.
spk04: Thank you. Good afternoon, and thank you for joining today's conference call to discuss Infection's corporate development and financial results for the third quarter ended September 30th, 2021. With us today are Nader Ali, the company's CEO, and Wendy Lunderman, the company's chief financial officer. Today, Impiction released financial results for the third quarter ended September 30th, 2021. If you have not received Impiction's earnings release, please visit the company's investor relations page at ir.impiction.com. During the course of this conference call, the company will be making forward-looking statements. The company cautions view 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 Impiction 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 Nader Ali, Infection's CEO. Please go ahead.
spk01: Thanks, Ali, and hello, everyone. Thank you for joining us today. We're here to discuss our recent business activities and financial results for the third quarter of 2021. I've got a lot of good information to share with you, so why don't we get started? First off, We've continued 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 and Global 2000 companies while deploying our technologies and solutions around the world. So I want to dig into some of that revenue and customers that I'm referring to. We continue to substantially increase our revenue for the first three quarters of 2021. We've generated year-over-year and sequential revenue growth. In fact, we saw a 74% increase in revenue for the three months ended September 30th, 2021, and a 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 as the pandemic hit in March 22 and going forward. Now, 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. And within our hardware portfolio, we also saw increased costs as a result of a need to substitute suppliers who couldn't meet our needs and had higher logistics and shipping costs. On-site installation and deployment plans for our sensor and mapping technologies were sometimes delayed or stalled as a result of a shutdown. And of course, the Delta variant earlier this year has continued to impose some challenges and delayed reopenings. But 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 CX app acquisition, which expanded our offerings this year to include a location-aware employee app 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 InPICtion's 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's already been signed and contracts date. And as we've talked about in the past, we're building our reoccurring or ARR model versus upfront revenue growth. So as you hear about these numbers 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 and some of these other products. But we really are counting on building that solid recurring revenue base. And that's where most of the revenue comes from. And you'll see that we're building these or signing these contracts for on average, three years. And so we're building a long-term recurring revenue stream that should be valuable for us and our shareholders. Along those lines, we've increased our ARR to 75% for the nine-month period ended September 30th, 2021, as compared to the same period last year. And we've even grown close to 20% in ARR 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 an annual basis is going to show that we're growing ARR, and that's one of the most important metrics that I'm tracking, and hopefully so are you. And, you know, 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 customer needs. We're not only adding new customers to an already impressive customer base of leading top-tier enterprise organizations across various industries, but we're also expanding existing customer relationships. You'll hear me mention that a lot through the call today, and I'll give you some specific examples. Providing customers seeking solutions that offer premier 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 that I 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 talk about a few of these contract wins so you can see the types of industry, the types of customers, and what we're selling. So we signed five new contracts with one of our existing Fortune 500 customers, the leading provider of creativity and productivity software. 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 this land and expand opportunity or strategy that we've been implementing is working. We also had a customer that added three new contracts, and they're a leading network technology company, and that's for our event platform. So again, depending on which products, Smart Office, events, 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 into additional campuses, including some international campuses for them. We've added a new customer as 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 EBC product that we've already deployed for them. And another large IT company customer has upgraded their executive briefing or EBC solution, again, touching on that event side of our capabilities, and I'll talk about that in a bit. A collaboration partner of ours just executed a contract with us to implement our smart office app. to cover over 40 of their workplace locations around the world. On the RTLS 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 on our AWARE product line to 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 in the social media space. We're implementing our Smart Office app at a leading healthcare testing technology company. And most recently, we also contracted to implement our Smart Office app 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, right? And most of these, again, are three-year contracts with some upfront revenue, but good, solid, reoccurring revenue over, you know, multiple number of years. And as you can see, our sales strategies are working. We're landing and expanding. We're cross-selling. We're 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 back end. 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 all at the same time. So across the company in every department, we've been managing and 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 we're continue 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 employer user experience. Data supports that companies with engaged employees outpace other organizations that don't prioritize the employee experience or struggle 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 from home, sometimes in the office. And so employers are leveraging the Piction Indoor Intelligence Solutions not just to enable productivity, but also seeking to redefine the indoor experience with smarter, safer, and more secure workplace environments. We're providing a positive experience to the 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 or couldn't attend our demo day, which we held on September 8th, I encourage you to watch the replay on our website because the video goes into details about our products, including our Smart Office app, event 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 Piction as a one-stop shop, again, to create more stickiness and build our ASP, but also giving us the ability to offer all of the core technological components required to deliver 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 maps, some have the positioning pieces and the hardware, some are just focused on the front end app. And so we've been able to bring all of those things together. And so we're continuing to increase adoption of these complementary products in delivering our solutions. So for example, our mapping platform is core to many of those campus app deals. I talked about how that drags in our mapping and on-device positioning capabilities. Employees have access to a dynamic interactive map of their corporate facilities through the app. And that serves as a digital twin of all the facility's key places and things like entrances and exits, valid pathways, conference rooms, restrooms, elevators, cafeterias, 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 in turn-by-turn directions with little or no infrastructure requirements. Just like you would use Google Maps or Waze for the outdoors, we deliver for the indoors. And complementary to our mobile app and technology ecosystem, we have an enhanced events platform and executive briefing solutions. These solutions are becoming of more importance to organizations as in-person and hybrid events are taking place. And to execute these events, companies need a platform that can address 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 maps with navigation to key destinations like conference rooms and breakout rooms in a private venue or a large convention center. 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 an executive meeting, and these are custom-branded platforms that clients and team members don't even realize that there's an 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 50,000 attendees recently for a Fortune 500 company, as well as in real-life events that CXHAP has done in its past that were even larger events. So we're a great fit for companies that want both or what we all call now hybrid events. So I'm really looking forward to growing this business in 22 with our installed base as well as new customers. And last but not least, we continue to invest in resources in developing our augmented reality technology and are pursuing exciting partnerships and collaborations leveraging the latest in wearable displays. So for example, in August, we announced our collaboration with Ostendo, a leader in quantum photonics and augmented reality technologies. Ostendo has developed QPI, a full micro-display that delivers both immersive and volumetric aspects needed to realize effective and wearable augmented reality smart glasses. The combination of InPICtion's hybrid workplace experience coupled with Ostendo's truly wearable AR smart glasses can help organizations enhance the in-real-life experience and performance of its employees based on their location, whether at home, in the workplace, or in between, completely hands-free. There's been a lot of buzz around the metaverse recently, and it's our belief that it's not hype. The metaverse is simply the term used to describe the next evolution of the Internet, moving beyond Web 2.0, so where the digital universe is merged with our physical reality. The Internet will not be something you go to, but rather something that you are immersed within. As many of you know, we at InPiction 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 Visualix, to build out our AR capabilities on top of our indoor intelligence platform. But we also want it to be immersive. Hence our partnership with Ostendo on the wearable front. And by the way, there are other leading wearable companies that have also approached us 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 in media. The experience will be served up to you automatically, hands-free, in 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 use 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 in the near future on this front. As you can see, we continue to innovate and enhance our technologies bringing us to the forefront of the industry and believe our growth is a reflection of our progress. So I just want 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 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-month period. Second, we have more than $100 million available in 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 InPiction as an innovator and leader. Third, we're increasing market share by securing new contracts from both new and existing customers. We're increasing stickiness, growing our ASP, and cross-selling, upselling everywhere we can. We have solid footing within indoor mapping, positioning, smart office apps, security, and the RTLS 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 you know, talked about in the past that there's no 800-pound gorilla in the indoor intelligence space, and that's what we're setting our sights on. So we're looking forward to that. So I'd 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. Wendy?
spk02: Thank you, Nala. Revenues for the three and nine months ended September 30, 2021, 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 30th, 2021, 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 $100,000 of saved sales. The revenues increase for the nine months ended September 30, 2021 is primarily attributable to an approximate $3.8 million increase in indoor intelligence sales, also inclusive of our recently acquired location-based technologies, and an increase of approximately $1.6 million of state sales. Gross profit for the three and nine months ended September 30, 2021, was $3.3 million and $7.9 million, respectively, compared to the $1.9 million and $4 million for the comparable periods in the prior year, representing an increase of 71% for the three months ended September 30, 2021, an increase of 99% for the nine months ended September 30th, 2021. The gross profit margin for the three months ended September 30th, 2021 was 73% compared to 75% for the three months ended September 30th, 2020. This decrease in margin is primarily due to the sales mix during the quarter. The gross profit margin for the nine months ended September 30th, 2021 and 2020 was 73%. Net loss attributed to the stockholders of infiction for the three and nine months ended September 30, 2021, was $33.6 million and $31.4 million, respectively, compared to a loss of $7.5 million and $20.9 million, respectively, for the comparable periods in the prior year. This increase in loss for the three months ended September 30, 2021, of approximately $26.2 million, was primarily attributable to the $22.3 million unrealized loss on the size-rex note and increased operating expenses offset by the higher gross profit. The increase in loss for the nine months ended September 30, 2021 of approximately $10.5 million was primarily attributable to the increased operating expenses of approximately $24.8 million offset by the $3.9 million higher gross profit and the $7.5 million release of evaluation allowance on the SISREx note. Non-GAAP adjusted EBITDA for the three and nine months ended September 30, 2021 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, 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 nine months ended September 30, 2021 was a loss of $0.05 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 non-cash 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 on notes and acquisition costs. As of September 30, 2021, we had over $100 million in liquidity, including $66.8 million in cash and $43.2 million in short-term investments, which primarily include Treasury bills. This includes my comments, and I'd now like to turn the call back over to Nader.
spk01: Thanks, Wendy. Allie, could you please lead us through the Q&A discussion?
spk04: Of course. Thanks, Nader. 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 duplicative, so we did our best to reconcile those where possible. If you have any further questions after the call, please feel free to follow up with Investor Relations, and we'll be sure to respond as quickly as possible. Our first question is, you recently received a notice from NASDAQ regarding not maintaining stock price compliance. How do you intend to regain compliance with the $1 requirement, and are you exploring a reverse split?
spk01: 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 and deploying our solutions. This is a very exciting time for InPiction, so we have no intentions of implementing a reverse split. In fact, we have not sought approval for a reverse split during our AGM, our annual shareholder meeting, because we fully intend on curing this price deficit organically. We are 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 pursuing a reverse split. And as people can see in the shareholder proxy, we've not asked shareholders to approve a reverse split.
spk04: Thanks, Nader. Our next question, when you release news regarding contracts, you rarely announce the name of the customer or any financials related to the project. Why is that?
spk01: Yeah, so as you heard me talk about earlier in the call, I mean, you know, I tried to describe many of our customers and the types of 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, you know, as I said, I did try to elaborate on the types of customers we're working with throughout the call. You know, we continue to win these big contracts with companies in pharma, entertainment, in the new gig economy, those types of customers, life sciences, an AD company that, you know, is new on market. in the marketplace, a social media company, and many, many more. So I would love to be able to name these and talk more details, but our contracts just prohibit that. And again, what I said on the call was, and these customers keep coming back. They're happy with our products. 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.
spk04: Great, thank you. Our next question, you have sufficient cash. How do you intend on deploying this, and do you intend on exploring more acquisitions?
spk01: 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 it's going to continue even beyond this pandemic, because this is just the new normal. So, you know, we have and will continue to explore 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 to 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.
spk04: Thank you. What feedback have you received from customers using your solutions?
spk01: Feedback's been great. It's been tremendous because we're helping our clients solve real pain points with all of our solutions. Many customers, you know, have talked 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 capabilities of our RTLS solution, all of these use our core products, you know, just in different ways, right? So it leverages off the same platforms. 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 product offerings and solution offerings that Intiction has. And, you know, I think, again, the biggest data point in support of this is that we're expanding with existing customers, you know, online. a variety of verticals, a variety of use cases, right? So I mentioned several today. The win 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 with a building or two or one or two campuses with a client, 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.
spk04: Great. Thank you, Nader. That concludes the Q&A session. I'll turn it back over to you for the close.
spk01: All right. Thanks, Allie. 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 have an excellent scalable solution to 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 lastly, we've not asked shareholders to approve a reverse split, just as a reminder, and we're confident that the market 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'm confident the market will catch up with us sooner or later. But thank you all for joining today, and take care.
spk03: 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.
Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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