Inpixon 10-Q Summary — Quarter Ended March 31, 2017
Issuer note: The supplied filing is for Inpixon, formerly Sysorex Global; it does not identify XTI Aerospace as the registrant. Dollar amounts below are in millions unless stated otherwise. Share and per-share figures reflect the 1-for-15 reverse split.
Business Context and Reporting Period
Inpixon provided indoor-positioning analytics and IT infrastructure products and services. It reported two segments: Indoor Positioning Analytics and Infrastructure. The quarter was the first following the January 2017 segment realignment; prior-period segment figures were recast. The company also changed its name from Sysorex Global to Inpixon and its Nasdaq symbol to INPX, effective March 1, 2017. The November 2016 Integrio acquisition expanded its federal-government IT services business.
Financial Performance and Position
- Revenue: $13.5 million, down 4% from $14.1 million in Q1 2016. Product revenue was $9.4 million, down 9%; services revenue was $4.0 million, up 8%.
- Gross profit and margin: $3.3 million and 24%, versus $3.9 million and 28% a year earlier. Indoor Positioning Analytics margin fell to 65% from 72%; Infrastructure margin fell to 21% from 25%.
- Operating results: Operating expenses were $8.6 million, up 6%. Operating loss was $5.4 million, compared with $4.2 million. Net loss was $6.1 million, versus $4.3 million; loss per share was $2.79 versus $2.57.
- Adjusted EBITDA: Loss of $3.3 million, compared with a $2.5 million loss. This is a non-GAAP measure and should be considered alongside GAAP results.
- Cash flow: Operating activities provided $1.6 million, versus $4,000 used in Q1 2016. The 2017 inflow included $5.3 million from changes in operating assets and liabilities, including lower receivables and prepaid contracts, partly offset by a $3.7 million decrease in deferred revenue. Investing used $0.4 million; financing used $2.3 million, primarily to repay the credit line. Cash decreased $1.1 million to $0.7 million.
- Liquidity: Working-capital deficit was $25.3 million, compared with $21.0 million at December 31, 2016. Current assets were $20.6 million and current liabilities $45.9 million.
- Debt and equity: Reported short- and long-term debt totaled approximately $9.0 million, including a $5.7 million principal convertible debenture (reported net of discount) and $4.4 million drawn on the revolving credit facility. Stockholders’ deficit was $2.5 million.
Material Changes Versus Q1 2016
- Revenue declined by $0.6 million. Management attributed the decrease mainly to delayed order processing and credit constraints with vendors and distributors, which pushed infrastructure orders into the quarter ending June 30, 2017.
- Gross profit fell $0.7 million as both segment margins contracted. Operating expenses rose by $0.5 million; Integrio-related costs and higher acquired-intangible amortization and depreciation were partly offset by lower expenses in the legacy U.S. business.
- Net loss widened by $1.8 million. Other expense increased, primarily due to interest on the convertible debenture and credit facility and amortization of debt discount and financing fees.
- Operating cash flow improved, but was supported substantially by working-capital movements rather than earnings. Cash remained limited after credit-line repayments.
Outlook, Risks, and Unusual Items
- Going concern: Management disclosed substantial doubt about the company’s ability to continue as a going concern. It reported recurring losses, a $25.3 million working-capital deficit, and stated available capital and resources might not fund planned 2017 operations. Additional debt or equity financing may be needed; if unavailable, the company could curtail expansion, reduce spending, or consider asset or business-segment sales.
- Management outlook: Management expected services growth and higher-margin business expansion to support cash flow, and anticipated addressing vendor credit limitations. It expected some order-processing constraints to ease in Q2 2017, but provided no quantified financial guidance. Indoor Positioning Analytics sales cycles remained long; management expected improvement in 2017 and more in 2018, while noting adoption and procurement uncertainties.
- Financing and dilution: The GemCap facility had a $10 million maximum, with $4.4 million utilized at quarter-end and maturity in November 2018; availability depended on eligible assets. After quarter-end, $315,700 of a $343,267 debenture interest payment was settled with 110,000 shares at $2.87 per share. On May 8, the preferred-stock holder converted 2,250 Series 1 preferred shares into 100,000 common shares.
- Listing risk: The $2.5 million stockholders’ equity minimum cited for Nasdaq was not met: quarter-end stockholders’ deficit was approximately $2.483 million. The company warned of possible delisting, which could reduce trading liquidity and impair access to financing.
- Other risks and items: One customer represented 12% of Q1 revenue, and one vendor represented 38% of gross accounts payable at quarter-end. A $722,000 Saudi Arabia judgment remained included in liabilities held for sale. The filing reported no material pending legal proceedings apart from routine litigation. Management stated disclosure controls were effective and reported no material quarterly change in internal control over financial reporting.
Most Important Facts for Investors to Verify
- Confirm the registrant and corporate identity: this document names Inpixon, not XTI Aerospace.
- Track cash runway, financing access, credit-facility availability, and progress toward resolving the going-concern uncertainty.
- Check whether vendor and distributor credit constraints eased and whether delayed infrastructure orders converted to revenue and cash.
- Monitor gross margins, services mix, and the performance and sales-cycle development of Indoor Positioning Analytics.
- Assess potential dilution from the convertible debenture, preferred-stock conversion, equity issuances, and any future capital raise.
- Verify Nasdaq stockholders’ equity compliance and the status and potential settlement of the Saudi judgment and related held-for-sale liabilities.