Sysorex Global, Inc. — Form 10-Q Summary
Reporting period: Three months ended March 31, 2016; filed May 16, 2016. The supplied filing identifies the registrant as Sysorex Global, not XTI Aerospace, Inc.—verify the company and filing identity.
Business context
Sysorex provided data analytics, indoor-location products and related IT services to commercial and government customers. Its reported segments included Mobile, IoT & Big Data Products, Storage and Computing, SaaS, and Professional Services. The company said it had decided to close its Saudi Arabia legal entity and classified related assets and liabilities as held for sale/discontinued operations.
Financial results
Dollar amounts below are in millions, except per-share data and percentages.
| Metric | Q1 2016 | Q1 2015 |
|---|---|---|
| Revenue | $14.087 | $14.122 |
| Gross profit / margin | $3.947 / 28% | $4.047 / 29% |
| Operating loss | $(4.182) | $(2.811) |
| Net loss | $(4.306) | $(2.905) |
| Net loss per share, basic and diluted | $(0.17) | $(0.15) |
| Adjusted EBITDA loss (non-GAAP) | $(2.455) | $(1.336) |
| Operating cash flow | $(0.004) | $(2.261) |
| Investing cash flow | $(0.462) | $(0.119) |
| Financing cash flow | $(0.758) | $1.854 |
- Revenue was nearly flat year over year. Product revenue was $10.348 million and services revenue $3.739 million.
- Gross profit declined $0.100 million. Services cost of revenue increased to $2.098 million from $1.425 million; management reported professional-services margin fell to 35% from 56%. Storage and computing margin improved to 22% from 17%, while SaaS margin was 75% versus 77%.
- Operating expenses rose to $8.129 million from $6.858 million. Management attributed the increase primarily to amortization and depreciation and expansion of engineering, sales and marketing operations.
- Cash and cash equivalents fell to $2.853 million from $4.060 million at year-end 2015. Total assets were $65.134 million; total liabilities were $46.103 million; stockholders’ equity was $19.031 million.
- Working capital deficit was $7.707 million, compared with $4.238 million at December 31, 2015. Reported debt was approximately $9.887 million: $8.828 million current and $1.059 million long-term. Deferred revenue totaled $20.132 million.
Changes, outlook and risks
- Net loss widened by $1.401 million year over year, while revenue changed little. Weighted-average shares increased to 25.1 million from 19.8 million; the filing reports 25,116,035 common shares outstanding on May 12, 2016.
- Management said available capital resources, the bank facility, prior equity-offering proceeds, business expansion and anticipated contract-related prepayments were expected to fund planned operations for the next 12 months. It cautioned that if financing proved insufficient, expansion could be curtailed and additional financing might not be available.
- The company had a $10 million revolving facility, with about $8.0 million drawn, and a term loan with about $1.4 million outstanding. The lender waived a prior-year covenant breach; additional financial covenants were still being negotiated after the deadline was extended. The filing describes a minimum adjusted EBITDA covenant, but the period and threshold descriptions differ between sections; verify the governing agreement and compliance status.
- Management expected cash generation to improve through higher-margin services, government contract task orders, AirPatrol products and LightMiner. It gave no quantified revenue or earnings guidance. Task orders under government IDIQ contract vehicles were not assured.
- Customer and supplier concentration was significant: one customer generated 36% of Q1 revenue, another 13%; one customer represented 33% of accounts receivable. One vendor supplied 55% of purchases. The company also recorded a $212,000 doubtful-account provision in Q1.
- Liquidity and execution risks include the working-capital deficit, increased losses, debt and covenant negotiations, product and sales-cycle uncertainty, and dependence on contract awards. The company reported no pending legal proceedings, but disclosed an older $936,000 judgment against its Saudi entity; $207,000 remained accrued, and $515,000 was expected to be repaid through a surety bond. Saudi surety deposits of $749,000 were expected to be released when the related contract closed out, anticipated during 2016.
- Management reported disclosure controls were effective as of March 31, 2016, and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm that this Sysorex Global filing is the intended filing for the requested company, XTI Aerospace.
- Review the Western Alliance credit agreement amendments, covenant terms, lender waiver and current compliance status.
- Assess near-term liquidity, including the working-capital deficit, cash balance, facility availability and debt maturities.
- Check the collectability and timing of the $900,000 note receivable, which had an extended due date of March 31, 2016 and was under negotiation for extension.
- Track task-order awards and collections, customer/vendor concentration, and the performance of higher-margin products and services against management’s cash-flow expectations.
Interim results are unaudited and not necessarily indicative of full-year results. Adjusted EBITDA is a non-GAAP measure and should not be treated as a substitute for GAAP results or cash flow.