XTIA - NASDAQ

Good afternoon and welcome to this Inpixon Business Update Call. All participants will be in listen only mode. [Operator Instructions] I would now like to turn the conference over to David Waldman, President and CEO of Crescendo Communications LLC, the company's Investor Relations firm. Please go ahead sir.

Good afternoon and thank you for joining today's conference call to discuss Inpixon's corporate developments and financial results for the 2020 fiscal year ended December 31, 2020. With us today are Nadir Ali, the company's CEO; and Wendy Loundermon, the company's Chief Financial Officer. Today, Inpixon released financial results for fiscal year ended December 31, 2020. 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 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 the public periodic reports the company files with the Securities and Exchange Commission. Investors or potential investors should read these risks. Inpixon assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so. In addition, to supplement the GAAP numbers, the company has provided non-GAAP adjusted net loss and net loss per share information in addition to non-GAAP adjusted EBITDA information. The company believes 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'll now turn the call over to Nadir Ali, Inpixon's CEO. Please go ahead.

Thanks David. Hello, everyone and thank you for joining us. Got a lot to cover today. So I'm going to jump right in. Despite the pandemic related challenges that practically every business has faced around the world, 2020 continued to be a year of growth and expansion for Inpixon. We grew revenue by 71% in the fourth quarter and 48% for the year, compared to the previous year periods. Even sequentially from Q3 to Q4 in 2020, we saw approximately 50% growth. We've acquired new technologies to expand our product offerings and market opportunities. We acquired new customers and one of our new customers uses our technologies to help visualize the tracking of COVID-19 vaccine production and something we're very proud of -- proud to be part of. And I'll talk about some other customers in a bit. We also expanded our customer base and operations in Europe, with new offices in the U.K. and Germany. And with the Nanotron acquisition in Q4, we entered new verticals like industrial, mining, transportation, and even smart farming. In addition to the growth and expansion, we've also continued to innovate and improve on our products. So I want to touch on a few of those points with you. We launched a new version of our Inpixon mapping platform. And really what we we’re trying to do there was to support large enterprise organizations and to do that we simplified integration with third-party data and apps. We added single sign on to manage multiple accounts, which is a key time saver for our larger partners who administer maps for several clients or tenants. We added UWB detection and IPv6 support for Inpixon aware sensors that detect known and unknown devices and enforce no phone zones. We've also been adapting our Inpixon analytics to ingest data from our RTLS product line and to address new use cases and verticals, as customers think about safety and security in the new hybrid work environment that we're all facing today. These analytics provide insights into space utilization to help plan staffing levels or to measure crowd density by zone. Some specifics here on the analytic side, there's new calendar views, which allow users to quickly examine gates of interest, or maybe analyze specific zones with heat maps to scan for crowding and bottlenecks. Additional features we've added include loyalty metrics, event analysis, and we've integrated weather data, voice recognition and chatbot functionality has also been added. So, lots of interesting developments on the analytics front. And let's go to the RTLS products. We've been improving, expanding and expanding our capabilities there for more verticals that increase productivity and safety at work. I'll get into some very interesting and real life customer examples that we're working with later in the discussion here. And then, as you saw, in a recent press release, we also introduced a new CO2 center for use in measuring indoor air quality, an important indicator of COVID and other pathogen transmission risk. So the total impact of all these capabilities gives us a significant technical and unique advantage, unique because I think we're the only company that I know that's integrating all of these key components of indoor intelligence into one platform, which really saves our customers time and money and can deliver better ROI. And I'd say the market is taking note of these accomplishments and what we're putting together here. We've been recognized and profiled by Gartner, which I'm sure as many of you know, is trusted by large enterprise executives in several key areas. Two years ago, Gartner recognized us for the first time only as a niche player. Since then, in 2020, we've advanced firmly into the visionary quadrant. And then in this year's 2021 Magic Quadrant report, we saw advancements, again, both on our ability to execute and completeness of vision, which are the two measurements that they look at. Also, this year, we were rated by Gartner for our ability to offer critical capabilities across various indoor location service use cases, including zone asset tracking, people tracking, RTLS for indoor location services. So pretty excited about the recognition and the support we're getting there. I don't know if you saw it. But earlier this year, we released our inaugural state of the Indoor Intelligence survey, which analyze results of 143 responses across a range of industries and company sizes regarding the rate of adoption of Indoor Intelligence Technologies during and following the pandemic. From our perspective, the study confirms that the adoption curve associated with Indoor Intelligence technologies is accelerating. We're seeing that from other sources and we'll touch on that in a minute. Indoor Intelligence solutions are being used for multiple purposes, including organizational and operational improvements, customer facing solutions and employee facing solutions. The top use cases deployed through 2020 covered job site worker safety, building energy efficiency, asset tracking and indoor navigation and wayfind. You'll see that correlates with some of the use cases and customers that we're working with. So that tracks very nicely with what we're seeing. Given these and other findings from our research, its evident the workplace transformation and the digital workplace solutions are going to play a huge role in 2021. And we're going to dig into that a bit here as well. And in fact, if you take a look at some of the outside research beyond just ours, you'll find that the pandemic has also accelerated real estate digitization program, essentially mapping hybrid working models, and space rationalizations, lots of companies are thinking about how to rework their spaces, how much space they need in this new hybrid working environment. Corporate enterprise organizations, here in the U.S. and in most parts of the world, still haven't opened, as you guys know, but they are eager to get started, right. And they need to reinvent what that office environment will look like and need to prepare now, because there's lots of talks about, vaccination, rollouts and timings and people are all starting to think about similar timeframes of reopening. So we're seeing a lot of interest and demand starting to heat up now because everyone's thinking about the same timeline, reach of the U.S., certain geographies are a little bit lagging behind but there's definitely momentum in that movement. The adoption of technologies and solutions that facilitated remote work capabilities were a necessity over the last year as I’m sure you are seeing with

Thank you, Nadir. Revenues for the year ended December 31, 2020, were $9.3 million as compared to $6.3 million for the comparable period in the prior year for an increase of about $3 million, or approximately 48%. Revenues increased approximately $1.2 million from the Systat licensing agreement, approximately $900,000 from the Nanotron acquisition and approximately $900,000 from existing product lines over the prior comparable period. Gross profit for the year ended December 31, 2020 was $6.7 million, compared to $4.7 million for the comparable period in the prior year for an increase of 42%. The gross margin for the year ended December 31, 2020 was 72% compared to 74% for the year ended December 31, 2019. This decrease in margin is primarily due to lower gross profit margin from the Nanotron acquisition. Loss from operations for the year ended December 31, 2020 was $23.8 million as compared to $20.8 million for the comparable period in the prior year. This increase in loss of approximately $3 million was primarily attributable to higher operating expenses, offset by the increase in gross profit for the year ended December 31, 2020. Net loss attributable to stockholders of Inpixon for the year ended December 31, 2020, was $29.2 million, compared to $34 million for the comparable period in the prior year. This decrease in loss of approximately $4.8 million was primarily attributed to the increase in operating expenses, offset by the increase in gross margin and the decrease in the valuation allowance adjustments. Non-GAAP adjusted EBITDA for the year ended December 31, 2020, with a loss of about $17.1 million compared to a loss of $11.1 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 common share for the year ended December 31, 2020, was a loss of $0.71 per share, compared to a loss of $18.75 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 stock based compensation, amortization of intangibles, provision of doubtful accounts, severance costs, acquisition costs, costs associated with public offerings and one-time charges including the loss on exchange of debt for equity and valuation allowance adjustments. Cash on hand at December 31, 2020, was approximately $80 million. However, we raised approximately $78 million in net proceeds since January 1, 2021 from sales of our securities including the exercise of warrants. This concludes my comments, and I now like to turn the call back over to Nadir.

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

Yes. Thanks Nadir. And like last quarter in our earnings data 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. So our first question, you recently raised a good amount of money and safe use of proceeds may include future acquisitions or other strategic activities. Can you elaborate on this?

Sure, yes. As I discussed over the course of the call, we're definitely in a solid financial position to execute on our growth strategy. This may include acquisitions that complement, or further enhance our overall platform and would ideally be accretive to earnings. That's what we're typically looking for. The bottom-line is that we intend to put this capital to work to deliver growth in terms of top-line, bottom-line, as well as their stock price and market cap. So that's the focus of how we're going to invest this capital and where we're headed with it.

Great, thank you. Our next question, you mentioned, you're working with Fortune 500 companies and large pharmaceutical companies, but have not released any names. Can you give a better sense of the types of companies and some examples of the work you're doing for them?

Yes. So, most of our customers, as you've heard me, say, in the past, don't allow us to name them. And these are typically larger household name type companies that for security or other reasons, decide not to share that information. So we've talked about some of our customers today that I can share a few descriptions of the types of companies that we engage with and work with. And even some of the examples that you heard me mentioned, 10s of 1000s of employees or millions of square feet. So, I hope you understand that, we are dealing with larger companies. But some clients are, for example, a major technology company that's looking at managing employees and visitors for security purposes. And then also thinking about, contact tracing and now is going to have to think about the return to work stuff that we've talked about today. We've got a major pharmaceutical company for mapping and asset tracking capabilities, an international hardware manufacturer for both our mapping and wayfinding solutions on their campus and their -- with our partner implementing desk booking and hotelling for their office space. I would probably add that our pipeline is growing significantly as companies look to reopen the offices as I alluded to in the call. So we're engaged with a variety of companies including multi billion dollar financials services companies, technology companies, manufacturing, online marketplace companies and of course, government agencies that we've traditionally worked with. And I've been listening to some of these customer calls and it's clear, the customers have some real pain points that we can help solve for them as a reopening. So it's an opportunity for us to see that we've got real product market fit as we move forward with the solution. So we're excited about that.

Great, thank you. Our next question is, we see that you have continued to hire, can you expand on if and how these hires are helping to generate additional revenue?

Sure, yes. I mean, we are hiring primarily in sales, marketing and customer success to drive and support the expected growth in revenue. We're focused on scaling this business, and that does require some upfront investment in these areas.

Great, thank you. Our next question is, what are the future projections for the company?

Well, so we don't provide guidance, having provided guidance historically, or projections related to company. But, as I stated, before, we do believe our solid financial position combined with the increased interest in the solutions and the acceleration in the market that we're going after do make me feel optimistic about our growth, as well as our ability to execute on these new markets and verticals.

Great, thank you. Our next question is outside of the pandemic tracing efforts, what are the top industries or uses where Inpixon products will be leveraged?

So the biggest demand, again, that we're seeing is around this whole return to the office, the new hybrid work from home or office model, and that's across different industries, or verticals, if you will. And so I believe that'll drive definitely a lot of growth for us. And the best thing about, its global, right, so we're seeing opportunities, not only here in the U.S., but across the globe. And then, second would be the RTLS market. I mentioned that's also one of the biggest segments in the indoor location space and sometimes through older technology solutions with RFID. And so we've got an opportunity to grow that business with our ultra wideband solutions. So we've got a lot of untapped potential with our products and how we apply them to these industrial manufacturing sectors. And then, finally, I'd say, one of our core swim lanes and really, the foundation of where Inpixon got its start is, is in the security and safety space with our sensors, our device detection sensors. And so those are typically larger dollar value projects up front. And there's interest from government agencies and certainly large commercial customers alike. So that continues to be a potential growth opportunity for us.

Great, thank you. And our last question is, are there any plans to get the platform into hospitals? Or if you're already working with hospitals to get Inpixon mapping integrated? If so, are there any prime areas or hospitals, the company is already working with?

Yes, absolutely. So we are currently deployed and active at a number of hospitals, including multiple locations of the national chain. Hospitals are a great fit for us, right one, because they're usually complex facilities. We've all probably gotten confused trying to find a lab or patient's room. So the user slot for Wayfinding, intelligent navigation. But we're also working with healthcare focused solution providers to integrate with systems such as asset tracking to find, IV pumps or other equipments that you'll typically see in the hospital and also for patient experience app. So for instance, you integrate maps with appointment scheduling systems and visualize wait times in a map and of course, then for Wayfinding. So yes, we we've had good success in hospitals. And we'll continue to pursue them strongly because we think we can help improve patient experiences, reduce costs and generally enhance the safety in the hospitals.

Great, thank you. Well, that concludes the Q&A and I'll turn it back over to you for the close.

All right. Thanks David. So in closing, I guess I want to highlight just our goals and objectives for success before I leave you. So, one, I would say our goal is to really establish ourselves as a leader in the indoor intelligence market. You've heard me say before that it's fairly fragmented. There's no 800 pound gorilla, if you will, right? There's some legacy players on the RTLS side with older technologies. There's the Ciscos and Arubas that have some indoor location analytics as a byproduct of their access points, but not their main focus. So, we intend to become the premier provider for indoor intelligence, delivering the power of mapping, locationing, and actionable intelligence for smarter, safer and more secure environments and really tap into the growing industry demand in this space. Organizations are increasingly realizing the value of indoor intelligence and how it can be leveraged. And we talked last time about how the pandemic actually created more awareness around the value in use of indoor data. And so we're continuing to see that as people return to, or make plans to return to the office or target industries, with the highest rate of adoption and looking at, areas like commercial real estate or corporate enterprises, manufacturing, industrial healthcare we just talked about, as well as financial services. In terms of growth, we're also looking at acquisitions and collaborations. So we continue to value very strategic transactions, including companies with technologies and intellectual property that'll complement our goals by adding technology, differentiation, customers, geographies that we may not have our presence in and certainly revenue. And we're also primarily looking for accretive acquisitions that have business value and operational synergies that can offer us cross-sell and upsell opportunities. And certainly, we have a solid balance sheet that we're going to leverage we have $80 million of cash. And as you heard, Wendy say, we've raised net proceeds of approximately 78 million, this cash may help us not only meet our operational requirements, more than sufficient for that, but also to invest in the growth and as a part of that, that we're also looking to grow this business organically. And so we're looking forward to showing those results in '21. So I'm very optimistic about the possibilities and opportunities for Inpixon 2021 and our growth trajectory and what I'm seeing here. And so with that, I'd like to thank you all for joining us today and shout out to our customers and partners and our amazing employees across the globe for your continued support. Thank you, everyone. Take care.