Inpixon (NASDAQ: INPX) Q3 2019 Outcomes Teleconference October 30, 2019 4:30 PM ET
David Waldman – President and Ceo, Crescendo Communications, LLC
Wendy Loundermon – Chief Financial Officer
Nadir Ali – Ceo
Conference Call Individuals
Good afternoon. And welcome to Inpixon Profits Teleconference for the third quarter ended September 30, 2019 [Operator Guidelines] Participants of this call are encouraged that the audio of this teleconference is being transmitted live over the Web and is likewise being tape-recorded for playback purposes. A telephone replay of the call will be readily available roughly 1 hour after completion of the call through November 6, 2019.
I would now like to the conference over to David Waldman, President and CEO of Crescendo Communications, LLC, the business’s Investor Relations firm. Please go ahead, sir.
Thank you for joining today’s conference call to go over Inpixon’s business advancements and financial outcomes for the third quarter ended September 30, 2019. With us today are Nadir Ali, the company’s CEO and Wendy Loundermon, the Chief Financial Officer.
At 4:05 Eastern Time today, Inpixon launched monetary results for the third quarter ended September 30, 2019. If you have not received Inpixon’s earnings release, please check out the financiers page at www.inpixon.com. During the course of this conference call, the company will be making positive statements. The company cautions you that any declaration that is not a statement of historic reality is a positive declaration.
This consists of any forecasts of incomes, earnings, money or other declarations connected to the company’s future monetary outcomes; any statements about strategies, methods or goals of management for future operations; any statements regarding completed or prepared acquisitions or tactical collaborations; any expected effect of those deals on our organisation; any statements worrying proposed brand-new items; any statements regarding expected brand-new clients, relationships or agreements; any declarations concerning expectations for the success of the business’s products in the U.S. and international markets; any statements regarding future financial conditions or performance; statements of any belief and any declarations of presumptions underlying any of the foregoing.
These statements are based upon expectations and presumptions since the date of this teleconference and are subject to various dangers and unpredictabilities that might trigger actual results to differ materially from those explained in the positive statements. A few of these dangers are explained in the section these days’s news release entitled Cautionary Note on forward-looking statements and in the general public routine reports the company submits with the Securities and Exchange Commission.
Financiers or possible financiers should read these threats. Inpixon presumes no responsibility to update these positive declarations to show future occasions or real results and does not mean to do so. In addition to supplement the GAAP numbers, the company has actually supplied non-GAAP adjusted bottom line and bottom line per share details in addition to non-GAAP adjusted EBITDA details.
The business believes that these non-GAAP numbers supply significant extra information and are valuable in evaluating our historic and future performance. A table reconciling the GAAP info to the non-GAAP information is included in the business’s monetary release. I’ll now turn the call over to Nadir Ali, Inpixon’s CEO. Please go on.
Thank you, David, and good afternoon, everybody. I’m extremely happy to report we achieved strong year-over-year increases in profits and gross revenue with enhanced margin. Both Wendy and I will go over the financials in more information, however first I ‘d like to examine some of the ways we have actually accomplished success and discuss our plans going forward.
Over the last year, we have taken a variety of strategic actions intended to put us in a position to provide the most comprehensive, integrated indoor information service offered in the Indoor Positioning Analytics market and to be recognized as the go-to search and visualization engine for indoor information. In an international market approximated to reach $54.6 billion by 2026, our ability to provide intelligent mapping, placing and analytic services for the inside your home throughout a plethora of verticals and markets, develops a nearly uncontested blue ocean chance for Inpixon.
In a pursuit to secure our position as the leader in this converged area, this year, we have actually continued to strengthen our essential abilities, services and innovation by structure and getting complementary products and business that completes our indoor data platform. This includes our formerly announced IPA Pod, which improves positional accuracy for visitor analytics, and when integrated with the boosted video management system we acquired with Locality, enables us to distinctively provide sensing unit fusion, specifically RF data, radio frequency data, correlated to security video.
We included GPS tracking innovation to provide indoor and outdoor school options for school, business and federal government consumers. And most notably, with the conclusion of the Jibestream acquisition and its leading intelligent mapping technology, we are now able to offer all 4 of the essential foundation required to make indoor spaces information abundant and handy. These include mapping, positioning, analytics and development tools. We think that this deal together with all of the achievements of this year will be transformational for Inpixon, not even if they will lead to an increase in income and the addition of marquee clients, but due to the fact that they have actually permitted us to protect a really attractive position as we’re the only business that can use this type of end-to-end option.
Our strategic deals have resulted in the addition of marquee clients, such as Mall of America, The Pentagon, Westfield World Trade Center, San Francisco International Airport and others permitting us not just to expand our consumer base, but likewise our existing consumer relationships with considerable opportunities for up-selling and cross-selling.
We just recently deployed our indoor mapping service with a leading national retailer, which will allow buyers to search and find items within their stories utilizing digital directories. This makes it possible for the seller to significantly boost the client’s experience as numerous buyers often become annoyed finding a particular item inside a store. Our platform enables buyers to anonymously and quickly search for the item and then determine the product’s area. This performance is developed to increase purchases by helping consumers in addition to provide retailers with advantageous information on consumer activity.
Another example of our lots of new consumers, we recently announced that we’re chosen by American Dream, one of the largest entertainment and retail centers in The United States and Canada, as its indoor mapping partner. Being picked by American Dream is another validation of the effectiveness and flexibility of our platform, which provides the needed tools to provide exceptional visitor experiences and include value for American Dream’s tenants and partners.
We have a robust sales pipeline, and we continue to see a growing interest from clients worldwide as we establish the company as a leader in the indoor placing market. In order to more speed up growth, we intend to ramp up our sales and marketing efforts, consisting of through the addition of brand-new sales personnel. At the same time, we are aligning our teams and enhancing resources to support our anticipated development and improve profitability.
Strategic partnerships have and will continue to play a crucial function in our technique to quickly and cost-effectively broaden our penetration within this market. We have actually announced a range of strategic partnerships that our company believe will assist accelerate our growth. Through our partnership with IDENTOS, we announced a successful cooperation task with one of Canada’s many renowned healthcare facilities. We have likewise partnered with Express Image Digital to produce immersive digital experiences and we just recently signed Master Technology Group as a licensed reseller.
Now let’s talk for a minute about Inpixon’s patents. Great companies in nearly every market typically have a strong patent portfolio and Inpixon is no exception. Patents are one really fundamental part of our copyright, but our IP likewise includes our copyrighted software, middleware, techniques and strategies, trademarks and trade secrets.
Patents are especially powerful for 3 reasons. Initially, they’re an offensive tool. They enable to us develop on previous innovations, moving further into what our basically secured opportunities going where others can not. Second, they’re protective. They enable us to construct walls around our innovations, so others can’t copy us. And 3rd, they create profits opportunities. We might select to license particular patents for a cost or pursue violation claims. Inpixon has actually purposefully secured patents by development, acquisition or licensing at every single level of our architecture, detection, processing and positioning, analytics, discussion or visualization, and extensibility, such as the method we communicate with other systems.
Inpixon is a real innovator and we uphold an inventor culture. Towards this end, we just recently received a Notice of Allowance from the U.S. Patent and Trademark Workplace permitting our patent application covering a technique of storing and examining variable-width information. This patent makes retrieval of information faster and closer to actual time. We are not a tech reseller or aggregator or fan. We’re resolving essential problems for our consumers, treading new ground and pioneering options in the world of indoor information, while protecting our inventions and innovations along the method.
Our company believe our technique is working which we have laid the foundation for continual development. We will talk more particularly about our financial lead to a minute, but I wish to highlight that we attained a 63% increase in profits for the third quarter of 2019 compared to the exact same duration in 2015. At the same time, gross earnings increased 79% and our gross margin increased to 75% for the third quarter of 2019 compared to 68% for the very same period last year.
In addition to our profits development and enhancement in gross margin, we are also carefully handling costs. While our operating losses have actually grown as a result of acquisitions and growth, a considerable portion of that has been noncash items, resulting in a lower EBITDA loss year-over-year. This enhancement remains in line with our push towards achieving favorable capital as quickly as we can. As a result, our company believe we have developed a highly scalable organization with substantial revenues potential.
To summarize our technology development, we believe we have actually developed the most detailed, flexible, scalable and interoperable architecture readily available in the indoor placing market. Our platform is able to user interface with diverse information sources, both internal and external, suggesting consumers can take advantage of existing information sources like wireless access points, beacons, RFID or ultra wideband tags, IoT sensors, and combine it with Inpixon sensing unit data, as well as our video management systems, point-of-sale information, and public databases like weather condition and traffic.
In turn, this information can be absorbed and examined for a large range of applications, consisting of visitor analytics, customer experience improvement, wayfinding, navigation, student safety, first responders, security, theft avoidance, property tracking, labor force performance and much more. The prospective applications are endless and we have actually hardly scratched the surface of this huge addressable market.
I ‘d also like to take this opportunity to remind everyone that our Annual Investor Fulfilling is tomorrow, October 31, 2019, and we request your vote in assistance of propositions two and three, which are explained in our proxy declaration submitted with the SEC on October 1, 2019, and dispersed to our stockholders of record since September 3, 2019, calling for an amendment to our short articles of incorporation to increase our authorized shares of typical stock from 250 million to 500 million with respect to proposal three and the permission to affect a reverse stock split in a ratio of in between 1 to 2 and 1 to 50. I comprehend there might be substantial hesitation to approve each of these propositions. I ‘d like to describe the importance of each of these proposals to our long-lasting success and method.
With respect to the implementation of a reverse stock split, our desire to accomplish compliance with the NASDAQ bid cost requirement naturally. As you most likely understand, NASDAQ requires stocks listed on its exchange trade at a minimum quote price of $1 per share. Inpixon is presently listed below that threshold. If we do not achieve compliance by November 26th, the due date by which we are required to cure the shortage, we mean to request additional time, generally 6 months to treat that shortage.
Getting there organically is our very first top priority and our preference. However, there are no assurances that NASDAQ will concur to provide such additional time, and for that reason, we think it is necessary for our shareholders, consumers and partners that we have alternatives offered to us that will provide us the ability to increase our stock cost in order to please the listing requirements of NASDAQ or any other major U.S. exchange.
While there are choices for our shareholders for ongoing trading on the OTC markets, the liquidity provided by an actively traded stock on an exchange listing is very important to all of you. In addition, existence on an exchange supplies our consumers and partners with greater confidence in the business and our stability, which is very essential to our ongoing and continual growth. In addition, we have actually talked about how our current acquisitions have contributed towards our earnings growth and enhanced our technology and item offering and helped in placing us as a leader in the indoor positioning and analytics market.
In this regard, the authorized share increase described in proposition number 3 is an essential part of our M&A strategy. In all of our current transactions, we have used our stock as partial consideration permitting us to save money resources for the development of our products and services. As an outcome, it is essential that we continue to have adequate authorized shares to provide as consideration in connection with the execution of our M&A and growth strategy.
If you were an investor as of September 3 record date and haven’t voted yet or if you voted versus proposals 2 and three, I request you to go on the internet to proxyvote.com and enter your control number or call the Broadridge number at 1-800-690-6903 and vote in favor of both of these proposals. You have until 11:59 p.m. Eastern Time today to vote via Web or by telephone.
With that, I will now turn the call over to Wendy to discuss our financial results for the quarter ended September 30, 2019, and I will then wrap up with a couple of closing remarks. Wendy?
Thank you, Nadir, and thanks to everyone for joining us today. Earnings for the 3 months ended September 30, 2019, were $1.53 million compared to $940,000 for the similar duration in the previous year or an increase of $594,000 or around 63%. This is our 3rd consecutive quarter with year-over-year growth, demonstrating our momentum in the indoor data market.
Gross profit for the 3 months ended September 30, 2019, was $1.15 million compared to $642,000 for the similar period in the prior year or a boost of 79%, while gross margin for the 3 months ended September 30, 2019, was 75% compared to 68% for the 3 months ended September 30, 2018. This boost in margin is mostly due to the boost in higher-margin IPA earnings.
Loss from operations for the 3 months ended September 30, 2019, was $5.7 million as compared to $3.3 million for the comparable duration in the previous year. This boost in loss of roughly $2.4 million was mainly attributable to the higher gross margin, offset by higher business expenses during the 3 months ended September 30, 2019, consisting of acquisition-related expenditures, the addition of Jibestream’s operating costs along with other noncash products, including amortization of intangibles, stock-based settlement and other expenses.
Bottom line attributable to investors for the 3 months ended September 30, 2019, was $6.6 million or $0.28 per share compared to a loss of $5.2 million or $4.84 per share for the equivalent duration in the prior year. The higher loss of around $1.4 million was primarily attributable to higher profits, offset by higher operating and interest costs throughout the 3 months ended September 30, 2019.
Non-GAAP adjusted EBITDA for the 3 months ended September 30, 2019, was a loss of $2.4 million compared to a loss of $3.4 million for the previous period in 2018. Non-GAAP adjusted EBITDA is specified as net earnings or loss before interest, provision for earnings taxes and depreciation and amortization plus changes for other earnings or cost products, nonrecurring products and noncash stock-based settlement.
Pro forma net loss for standard and diluted common share for the 3 months ended September 30, 2019, was $0.17 per share compared to a loss of $3.61 per share for the prior duration in 2018. Non-GAAP bottom line per share is specified as bottom line per standard and diluted share, changed for considered dividends and noncash products, including stock-based payment, amortization of intangibles and onetime charges, including gain or loss on the settlement of obligations, gain on earn out, acquisition expenses, arrangement for uncertain accounts and the costs connected with the public offering.
This concludes my comments. And I ‘d now like to turn the call back over to Nadir.
Thanks, Wendy. I want to thank everyone for taking part on our third quarter conference call. As I discussed previously, we are pleased with our third quarter outcomes, including the increase in income along with improved gross earnings margins, and we are strongly working towards our objective to be capital positive, as evidenced by our improving EBITDA. The integration work in connection with our strategic deals are progressing in a positive direction, substantially improving our capabilities.
We now use what our company believe is the most robust product offering within the indoor positioning market, bringing even higher advantages to our clients and partners. Integrated, we have a distinct and powerful portfolio, altering the way people live, work and play indoors. We eagerly anticipate offering additional updates in the near future. I’ll now turn the call over for questions.
Thank you [Operator Guidelines] And our very first question comes from Ellen Litvak with Forest Capital.
Congrats on another strong quarter. I mean, it actually sounds like the integration is working out. In regards to cross-selling opportunities between Inpixon and Jibestream, can you guys comment further on how do you prepare to set about this?
Ellen, yes, thanks, and thanks for the question. The cross-selling opportunities is among the intentions we have behind these acquisitions. And we have actually currently started seeing that not just with Jibestream, but likewise our Region clients throughout the entire portfolio of items. Having this one-stop store, if you will, with the suite of products we now have is going to enable us to do a land-and-expand method with our customers. They can start with any of our products and then move towards a migration path as their requirements grow, which I think from a customer perspective, it conserves budget and time for them. They do not need to deal with several vendors, right, and they have no combination difficulties because our options are optimized and wisely linked.
I think there’s definitely value in that. And the cross-selling upsell opportunities for us, start with the reality that we likewise now have entry point cost point services for our clients, who previously might have not had the budget plan to purchase Inpixon’s IoT sensors. Now they can start with not only the mapping item from Jibestream, but also the Inpixon Pods or the Region video management services and then move up to our full-blown sensing units. So we’re pretty excited about the upsell cross-sell opportunities, and we’re seeing that coming true.
I mean, that definitely sounds excellent. I indicate, undoubtedly, we’re seeing continued improvement in earnings and broadening margins. And you pointed out during the call that your objective was to turn cash circulation favorable. I suggest, obviously, that would be a major milestone for shareholders. How exactly do you prepare to get there? And how confident are you in accomplishing this objective?
We’re really positive, and it’s a priority for us and focus. As you can see, we are growing our leading line profits over the last couple of quarters, and we anticipate that growth to continue. And we have gross margins in the mid-70s variety, which as we grow the leading line, our operating expense will not grow as substantially. A lot of that gross earnings will fall to the bottom line, minimizing our burn and then helping us achieve the cash flow favorable cash flow that we’re targeting for earlier rather than later on. We’re very focused on it. We comprehend it is essential to our shareholders, and it’s a priority.
Which does conclude our Q&A session for today. I’ll turn it back over to management for any closing remarks.
Great. Thanks, Kristi. Please everybody remember to vote if you have not already for our investor conference. You can go to proxyvote.com or call 1-800-690-6903, and thank you for joining our call today.
Thank you. This does conclude today’s teleconference. We value your involvement. You may detach your lines at this time, and have a fantastic day.
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