Scott Gordon - President of CORE IR Nadir Ali - Chief Executive Officer Wendy Loundermon - Vice President of Finance

Good day, everyone. And welcome to the Inpixon Earnings Conference Call for the Third Quarter Ended September 30, 2017. All participants will be in listen-only mode [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions [Operator Instructions]. Participants of this call are advised that the audio of this conference call is being broadcast live over the Internet and is also being recorded for playback purposes. A replay of this call will be available approximately one hour after the end of the call through December 21, 2017. I would now like to turn the conference call over to Scott Gordon, President of CORE IR, the Company's Investor Relations firm. Please go ahead.

Thank you, William. And thank you for joining today's conference call to discuss Inpixon's corporate developments and financial results for the third quarter ended September 30, 2017. With us today are Nadir Ali, the company's CEO, and Wendy Loundermon, VP of Finance. At 4:05 PM Eastern time today, Inpixon released financial results for the quarter ended September 30, 2017. If you have not received Inpixon's earnings release, please visit the news section or the investors page at www.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 concerning proposed new products, any statements regarding anticipated new 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, 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 section of today's press release titled cautionary note on forward-looking statements and in 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. The table reconciling the GAAP information to the non-GAAP information is included in the Company's financial release. It is now my pleasure to turn the call over to Nadir Ali, Inpixon's CEO. Nadir?

Thanks, Scott and good afternoon, everyone. Welcome to our third quarter 2017 earnings call and corporate update and thank you for joining us. I'm here today with Wendy Loundermon, our VP of finance who will be discussing our financial results for the quarter ended September 30, 2017, after my opening remarks. And I will return to conclude our prepared remarks and then we will field your questions. Despite the business and credit challenges we faced, particularly in storage and computing segment in 2017, I'm proud of the perseverance and determination shown by our team to pull through and focus on areas to position us for growth and success in 2018. In the storage and computing segment, we are seeing the value of the Integrio acquisition, which is helping to bolster our Bar business. In the last 90 days, we announced significant orders with the Bureau of Census, the U.S. Army and the FBI. We continue to have a strong government contracts pipeline and we are very confident that this trend will continue, especially as we resolve our credit issues. We are also taking our API products to former Integrio and now Inpixon customers and are in active discussions with a large government agency for a pilot deployment that could grow into a multimillion dollar opportunity. In the IPA business, we are signing up new channel partners with industry leading global technology companies who can assist us in championing our unmatched indoor positioning analytics products and services, and drive commercial proliferations. The GTRI partnership, announced in the third quarter, is just one example of these channel partnerships. They are one of the top federal solution provider firms in United States to render comprehensive three dimensional physical cyber security solutions and are including our IPA Security Dome for physical premises, airways and…

Thank you, Nadir. Net revenues for the three months ended September 30, 2017 were $11.9 million compared to $11.2 million for the comparable period in the prior year. This $700,000 increase in revenues was primarily attributable to the acquisition of Integrio Technologies in November 2016. For the three months ended September 30, 2017, Indoor Positioning Analytics revenue was $871,000 compared to $1.4 million for the prior year period. Infrastructure revenue was $11.1 million for the three months ended September 30, 2017 and $9.9 million for the prior year period. The gross profit margin for the three months ended September 30, 2017 was 19% compared to 28% during the prior year period. The decrease in gross margin was primarily attributable to lower gross margins on the Integrio revenue which is included in the Infrastructure segment during the quarter ended September 30, 2017. Indoor Positioning Analytics gross margins for the three months ended September 30, 2017 and 2016 were 69% and 64% respectively. Gross margins for the infrastructure segment for the three months ended September 30, 2017 and 2016 were 15% and 22% respectively. Net loss attributable to common stock holders for the three months ended September 30, 2017 was $14.6 million compared to $4.7 million in the prior year period. This increase in net loss of $9.9 million was attributable to an impairment of goodwill charge of $8.4 million, increase in amortization of intangibles and depreciation cost, additional cost incurred from the Integrio operation offset by a reduction in operating expenses related to Inpixon USA and a lower gross profit. As Nadir mentioned, significant reductions made in operating expenses will have more of an impact in the fourth quarter 2017 and into 2018. Pro forma non-GAAP net loss per basic and diluted common share for the three months ended September 30, 2017 was $0.46 per share compared to $1.92 per share for the prior year period. This increase was attributable to the changes discussed in our results of operations. Adjusted EBITDA for the three months ended September 30, 2017 was a loss of $3.1 million compared to a loss of $2.4 million for the prior-year period. Non-GAAP adjusted EBITDA is defined as net income or loss before interest, provision for or benefit from income taxes, and depreciation and amortization plus adjustments for other income or expense items, non-recurring items, and non-cash stock-based compensation. This concludes my comments. And now I’d like to turn the call back over to Nadir.

Thanks, Wendy. I want to take this opportunity to thank our loyal shareholders for their continued support of our Company. We believe we have a great opportunity in the IPA market that is poised for growth and we have aligned our operations to minimize our cash burn and continue to rebuild the storage and computing business as our credit situation improves. We continue to develop a strong pipeline for our IPA business with global channel partners and are confident that we will achieve these objectives in the near term. With that William, we're ready to open up the call to any questions.

Thanks, William. I wish to thank everyone again for your time today. Thanks for joining us on today's call and we look forward to reporting our progress in the near future. I wish you and your families a happy and the safe holiday season. Thank you.

And the conference has now concluded. Thank you all for attending today's presentation. You may now disconnect your lines.