Inpixon, Inc. — Form 10-Q Summary
Company identification: The supplied filing is for Inpixon, Inc. (Nasdaq: INPX), not XTI Aerospace, Inc. Investors should verify that this is the intended filing.
Business context and reporting period
This unaudited quarterly report covers the three and six months ended June 30, 2021, compared with the corresponding 2020 periods. Inpixon describes itself as an indoor-intelligence company offering positioning, mapping, real-time location, analytics, software and related services. During the quarter, it began reporting three segments: Indoor Intelligence, Saves and Shoom. Results include acquisitions made during 2021, including CXApp, Game Your Game and Visualix; comparisons with 2020 are therefore affected by changes in the business.
Key financial metrics
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $3.453 million | $1.076 million | $6.407 million | $2.880 million |
| Gross profit / margin | $2.557 million / 74% | $0.771 million / 72% | $4.627 million / 72% | $2.066 million / 72% |
| Operating loss | $(13.293) million | $(5.128) million | $(25.713) million | $(10.693) million |
| Net income (loss) | $14.506 million | $(7.304) million | $1.967 million | $(13.469) million |
| Adjusted EBITDA loss | $(6.279) million | $(3.879) million | $(11.836) million | $(7.764) million |
Q2 revenue increased 221% year over year; six-month revenue increased 122%. Management attributed growth principally to Indoor Intelligence and Saves sales and the addition of product lines and acquired businesses. Q2 gross margin improved to 74%; the six-month margin was unchanged at 72%. Operating expenses rose substantially, including acquisition-related costs, higher stock-based compensation, acquired-business expenses and CXApp earnout compensation.
Reported 2021 net income should not be read as evidence of profitable core operations: operating losses continued, and results included the Sysorex debt settlement and subsequent fair-value movements in Sysorex securities. For the six months, the company recorded a $49.817 million settlement gain, a $7.345 million recovery of valuation allowance and a $28.965 million unrealized loss on equity securities, among other items.
- Cash flow: Six-month operating cash use was $14.163 million, versus $10.369 million in 2020. Investing cash use was $53.847 million, largely reflecting treasury-bill purchases and acquisitions; financing provided $74.945 million, primarily from equity and warrant proceeds.
- Liquidity: At June 30, cash and cash equivalents were $24.912 million and short-term investments were $45.303 million. Working capital surplus was approximately $54.2 million. Management said available funds were expected to support operations for 12 months from issuance of the financial statements.
- Debt and obligations: Short-term debt was $4.251 million, consisting of a 10% note with a stated March 2022 maturity. Acquisition liabilities totaled $5.865 million, including CXApp-related amounts. CXApp also has a contingent earnout of up to $12.5 million, conditional on revenue targets and other requirements.
- Balance sheet: Total assets were $174.414 million, goodwill $23.890 million and net intangible assets $36.530 million. Total liabilities were $28.928 million. The company held Sysorex equity securities valued at $29.940 million, compared with recorded cost of $58.905 million.
- Share count and dilution: Common shares issued were 116.454 million at June 30, versus 53.178 million at December 31, 2020. The filing reports substantial outstanding warrants; potential dilution is material.
Material changes versus the prior comparable period
- Revenue rose markedly, reflecting increased Indoor Intelligence sales, Saves revenue and acquired product lines; reported growth is not solely organic.
- Operating losses widened as operating expenses increased faster than gross profit, including from acquisitions, amortization, stock compensation and earnout compensation.
- Reported net results swung to income because of the Sysorex settlement and related accounting effects, despite continued operating losses and negative adjusted EBITDA.
- Cash and working capital increased, supported by approximately $77.9 million of net proceeds from 2021 registered direct offerings and warrant exercises. Common shares outstanding also rose substantially.
- Inpixon changed from one reportable segment to three, with historical segment information recast to match the new structure.
Outlook, commentary, risks and unusual items
The filing provides no specific revenue, earnings or margin guidance. Management cited supply-chain constraints, component delays and cost increases, as well as COVID-19-related customer demand uncertainty, delayed projects and limits on onsite work. It cautioned that the pandemic’s effects remain uncertain and that growth may not continue. Management also said it may pursue further acquisitions and could fund them with cash, equity or debt.
Key risks include the company’s history of losses and uncertainty about achieving profitability; ongoing cash use; acquisition integration and valuation risks; competition and technology change; continued access to capital; and potential impairment of acquired goodwill and intangibles. The Sysorex position is volatile: the filing says changes in its value can materially affect assets and quarterly earnings, and that the company may be unable to sell the securities promptly or at favorable prices. The filing reports no material pending legal proceedings other than routine litigation. Management concluded disclosure controls were effective as of quarter-end. A subsequent event disclosed an exchange of approximately $1.0 million of note principal and interest for 877,192 shares in the following quarter.
Important facts for investors to verify
- Confirm that this Inpixon filing, rather than a filing for XTI Aerospace, is the intended document.
- Review the Sysorex settlement valuation, the $49.8 million gain, the $29.0 million subsequent unrealized loss and the ability to register and monetize the securities.
- Assess operating performance separately from settlement and fair-value items, including continuing operating losses, negative adjusted EBITDA and operating cash use.
- Check acquisition purchase-price allocations, CXApp earnout conditions and expense treatment, and the performance and integration of acquired businesses.
- Evaluate the potential dilution from warrants and equity compensation, alongside the company’s remaining financing needs and 12-month liquidity assertion.
- Monitor COVID-19 and supply-chain effects, acquisition-related impairment risk, the March 2022 note maturity and the disclosed post-quarter debt-for-equity exchange.