CXApp Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 20, 2025

There are 3 speakers on the call.

Operator

Greetings. Welcome to the CX App First Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. Please note, to ask a question, please click on the Ask Question button on the left side of your player. Type in your question and hit send.

Operator

Please note, this conference is being recorded. I will now turn the conference over to your host, Karam Sheikh, Chairman and CEO. You may begin.

Speaker 1

Thank you, operator. Good afternoon, everybody. I'm joined by our CFO, Joy Penugo, as well on this call, and we are both excited to share with you our earnings for the first quarter of twenty twenty five. We will also provide an overall business update on our progress in shaping the future work and creating transformative employee experiences with our state of the art CXAI, pronounced SKY platform. By now, everyone should have access to our earnings PR announcement as well as the 10 Q that we are filing with the SEC.

Speaker 1

This information will also be found on our website, www.cxapp.com or www.cxai.ai. I'm gonna go through the next couple of slides, are the disclaimer slides, which you can read at your own leisure. Okay. Dear shareholders, the Sky platform anchored on customer experience CX and artificial intelligence AI is the most advanced technology solution transforming people, places, and things in the workplace. We are solving the biggest problems in our industry post the pandemic, the return to office, RTO, and employee engagement.

Speaker 1

And, as we've been saying since the start of, the company post IPO that we are shaping the future work. The start of 2025 has been very interesting. Technology giants like Amazon, Salesforce, and Dell have called all employees or specific teams back to the office five days a week, which has reignited conversation about how and where people can best do their work. Even companies that don't have a five day RTO plan see their leadership wanting employees to spend more time together. Sergei Bin, cofounder of Google, said the company could lead the industry in artificial general intelligence when machines match or become smarter than humans if employees just worked harder.

Speaker 1

He said in a in a memo that was viewed by the New York Times, I recommend being in the office at least every weekday. He added that sixty hours a week is the sweet spot of productivity in the message to employees who work on Gemini, Google's lineup of AI models and applications. As leaders, we see firsthand that the workplace is undergoing one of the most significant transformations in decades. Hybrid work is in the trend. It's the new operating model, and the stakes are really high.

Speaker 1

And yet, many organizations are still trying to manage it with legacy and disconnected systems. The reality is clear. Mandates alone won't bring employees back. Spaces alone won't foster collaboration. Amenities alone won't guarantee engagement.

Speaker 1

The organizations that will thrive are those that rethink the workplace experience fundamentally and holistically to meet new expectations and business needs. Business leaders like Amazon CEO Andy Jassy say that in office work offers a level of energy, collaboration, and speed that is missing when employees work from home. Executives at Dell echoed this in a memo calling all sales staff back to the office full time stating, all data shows that sales teams are more productive when on-site. Similarly, although leadership in Microsoft and Google have ruled out five day RPO mandates anytime soon, the productivity caveat is hard to ignore. In a hybrid world, yesterday's solutions create today's gaps.

Speaker 1

Conference rooms sit empty while desk neighborhoods overflow, and no one knows why. Underutilized spaces. Leaders lack real time visibility into how people work, collaborate, and engage, disconnected leadership. Without intuitive seamless experiences, employees feel friction leading to disengagement, quiet quitting, or attrition, employee frustration. And the root of it is a lack of actionable insights.

Speaker 1

We can't manage what we can't see. Leaders need systems that don't trust connect devices. They need to connect people to meaningful experiences using intelligent insights to optimize space based on real users' patterns, personalize the employee journey in real time, anticipate needs instead of reacting to frustrations. And that's what Sky does, and we do it with AgenTek AI. So we are Sky.

Speaker 1

We're shaping the future of work, and we're excited to share with you the progress we've made in our journey. So I'll go to the next slide to talk about the company. I do that every quarter because I wanna make sure we give you updates that allow you to see what progress we're making. And there are a lot of common things still. We are still headquartered in San Francisco Bay Area.

Speaker 1

We're regional tech hubs globally. The global presence and diversity of experience gives us a leading edge as we shape the future work everywhere. Of the 70 plus team members of Sky, more than 70% are engineers, and we have doubled the staff in Silicon Valley focused on building agentic AI solutions and maintaining our technology and product leadership. We believe the employees are the center of this multibillion dollar growing workplace experiences market, and we are creating a new category in software, employee experiences. The Sky platform is based on 39 filed patents, with 17 of them already granted.

Speaker 1

This substantial intellectual property not only establishes our company as a technological front runner, but also secures our position as the pioneer in the industry. We have two new patents published this quarter. Both are tied to spatial intelligence, which we'll talk about later as we're investing in that technology. We're proud to have some of the largest logos of the world as our customers that are at the leading edge of the employee experience transformation, and our focus is the technology. The technology is the transformation factor.

Speaker 1

One of the key differentiators of our business is that we have strong security and compliance credentials globally. We have both ISO 27,001 and SOC two compliance certifications, and that is the reason why you see so many logos from regulated industries. They use Sky because they know they can trust us with their data and their enterprise security goals. As I mentioned earlier, we have a global team. The team is located in the Bay Area, in Canada, Toronto, and in Manila with other contracted workers globally.

Speaker 1

And the reason for that is also to leverage the fact that we are deployed right now, even with the small scale we're at, in 200 plus cities, in 50 plus countries, in five continents. That gives us the diversity of experiences, relationships, as well as users. And the users is the key part of this equation as we move forward. We also, in the last year, built a culture of Sky that's innovation focused with three core values, purpose, passion, and positivity. We are passionate about solving the big problem in the future of work using AI, and we are super positive about creating a new paradigm of digital transformation of the enterprise focused on employee experiences.

Speaker 1

Our large enterprise customers are mainly divided to the following top five verticals, financial services, technology, media and entertainment, health care, and consumer. We are proud to have some of the largest logo on the world as our customers that are the leading edge of workplace transformation. And when you talk to our clients, they're all at the c level. They're CIOs. They're head of workplace experiences.

Speaker 1

They're CHROs. They and and some of them are actually the CEOs of these companies. They've taken upon themselves to drive this transformation. So we're super excited to work with them. And these these these customers are sophisticated buyers of technology solutions and do not compromise on quality, performance, security, reliability, scalability, and actually the technology road map.

Speaker 1

So as I think about 2025 and, we, the management team and the board said, you know, to build our 2025 plan, we said, what are the top three priorities for 2025? And, you know, we've got a lot on our plate, a lot of things we can do better, but the one most important thing is customer success. And customer success is not just about getting customer contracts, but really about user engagement and adoption. We see that we are focused on the day in the life of a user at these large clients and how those user experiences will make them more productive, save time, and engage with their fellow employees. So for us, we're working on great features that are must have features.

Speaker 1

We already have a lot of them in place, but we're constantly evolving those that technology road map. And more importantly, we're getting this immersive engagement with these employees who wanna use Sky every day, all the time, on all the things that matter for their work. Now how do you make that all happen? Well, there's a lot of solutions out there in the marketplace. Have not been successful.

Speaker 1

I mentioned at the start about the disconnected systems, but we're building an AgenTeq AI solution. The AgenTeq AI is gonna be the way humans interact and collaborate with AI. Is a dramatic leap forward with the agent AI. The agent AI system understands what the goal or vision of the user is and the context to the problem they are trying to solve, and then it takes actions to solve the problem versus just assistance. Design thinking into the journey of a user or drive the day in the life of user into actionable outcomes.

Speaker 1

So that's what we're doing. We're building automated workflows. You'll see some examples that I'll show today of some of the progress we made. We saw it in the last quarter when I showed you the agentic booking example. And more importantly, we're trying to build a platform that becomes a trusted adviser for our customers.

Speaker 1

And our customers are not just our large enterprise, it is the end user, the employees of these large companies. And last but not least, the big differentiation that we provide is spatial intelligence, providing those contextual insights using our two d and three d technologies, as well as our AI based application platform to allow for AI powered actions and predictable outcomes. It's really focused on analytics that will provide more value to the end user. So from a big picture, when we think about 2025, we focus the engineering team on driving these key initiatives, technology initiatives, and, ultimately, our sales and customer success team are driving that user adoption and user engagement, which we think is gonna make this product so sticky that it will be indispensable for the employees. So let me talk about what are those employee experiences and what makes it really distinguished.

Speaker 1

So when we think about employee experiences, the first thing that comes to mind is, you know, what is the platform that you built and how you built it. Right? And the Thype platform, as we've talked about, is AI native, is the first mobile and cloud based technology platform in this space. We've thought about it from the end user as not just an application, but a platform. And we think about the three different pillars that make up the Sky platform.

Speaker 1

One pillar is the Sky apps. The Sky apps are based on Android, iOS, and web applications, but we're building them to be not only multi US, but also multi device, all the way from your watch to your smartphone to your laptop to your to your desktop, and also into kiosk and larger devices. And we've got that now in place with a lot of our clients. Now in order to make this application intelligent and smart, we gotta have a rule engine. We gotta have something that has content and price access control and decision.

Speaker 1

That's the brains of our system. That's the Sky BTS. And then coming out of this are all the great insights and analytics and recommendations that SkyView, our analytics platform. So this trifecta creates that end to end platform that provides the best in class employee experiences. And with our partnership with our cloud providers, as you know, we've had a great relationship with Google for a number of years.

Speaker 1

We are strategic partner at Google, but we have signed agreements with both Microsoft and Azure platform, which we've deployed, and with AWS, we're planning to work with them on a deployment. But we are multi cloud, and we are enabling the capability from the device to the cloud for our clients. So our clients use us as the you could call it the Intel Inside for their application, or you could call it the Apple Outside. But we are providing the end to end application that the that our clients use, but they're using their own branding, their own, you know, content to drive it, but with Inside, trying the brains behind the solution. So with that platform in mind, you can say, well, you got a great technology.

Speaker 1

What problem are you solving? And so I'm gonna share a slide that, our friends at Gartner put together. They did, an assessment of what is the motivation to return to office. And, you know, return to office is one of the biggest issues of our century, I would say. Every single enterprise globally is looking to find solutions for the digital workplace and workforce.

Speaker 1

Both leaders of enterprises and employees are navigating unchartered waters related to hybrid work in the post pandemic and encountering significant challenges. Company C Suite want employees back in the office to be more productive, engage in the corporate environment, and better utilize the workspace. Employees, on the other hand, want flexibility to work from their home or the office, and they have a high expectation when it comes to having easy access to their workplace tools, finding information, and ability to collaborate with peers from anywhere. So if you look at this chart, it's kinda obvious that employee why do employees wanna come back? They're not just coming back because it's a mandate.

Speaker 1

They're coming back because they wanna reconnect with their and collaborate with their fellow employees. They wanna have face time with their senior leaders. They wanna be able to connect with their environment and their colleagues. That is the real reason why they wanna come back or they have a desire to come back. And we need a solution to that.

Speaker 1

And that is where we have built this end to end platform. Gonna give you a little bit more detail on it. On the left, you'll see the immersive UI that we have that has one click away to make an action. You have a very immersive mapping technology capability that allows you to connect inside the building to any place, any location, navigate, as well as click on to book things and and drive engagement. But end to end, we provide this full solution.

Speaker 1

The key part of the application is all these integrations that we do with the enterprise tools and services into one application platform, allowing employees one seamless experience to connect anything that you do in their workplace. We also do that with two d and three d mapping technologies enhanced by AI to provide intelligent interactions with spaces and things. And like I mentioned, the SkyView is the experiential analytics that provides you insights about what needs to get done and how and how would you make it happen. So and then finally, to top it off is agenda guide, automating all these workflows to provide, you know, with natural language command, a a trustful domain so you can provide any question you have, you get an answer. Any action you want, you get it done.

Speaker 1

Any meeting you wanna change, any booking you wanna redo, anything you wanna connect with multiple folks from outside inside the organization, we're gonna do that with the AgenTek AI. The first three pillars are deployed with global customers today. I'm proud to say we are the best in class. What I'm more excited about is AgenTeq AI because that's gonna be groundbreaking and transformational to the whole workplace. So let me talk about, you know, what do people do when they come back to the office?

Speaker 1

What are the main things they like doing? And this is another Gartner chart, so it's not just from what we see. We'll show you what we see, but this is what Gartner collected the data from lots of different vendors in the space and as well as clients. And, you know, the biggest issue when you wanna come back to the office is, can I find a space where I can sit? Can I get a desk?

Speaker 1

Can I get a meeting room? Can I connect with all the people that are in the office? Can I do any coordination, collaboration? And with AI, can I have a virtual assistant that can actually help me get my stuff done? All those things have an increased demand.

Speaker 1

And as I said earlier, with the start of 2025, there has been a renewed interest because there are mandates that are driving it, but also I think there's interest among the younger generation to be more social, to be more connected with their workplace. So I'm gonna show you, so what do we see at Sky? You know, we've been working with all these clients. We have, you know, more than a million plus users globally out there that use our product. And when you think about, you know actually, I skipped a slide early.

Speaker 1

Let me go back to slide 12 here that talks about space utilization analytics. The biggest problem is space, right, initially in these markets because you gotta think about how you're gonna utilize the space. So this example shows you desk bookings. We can show you how desks were booked, whether they were booked in advance, how far in advance were they booked, and what is the booking ratio, and what is the cancellation ratio. Lot of interesting statistics and then the insights that come out of it.

Speaker 1

It's very obvious. People are coming mostly on Tuesday, Wednesday, Thursday. Mondays is kinda coming back a little bit, but mostly Tuesday, Wednesday, Thursday, and it drops off very quickly on a Friday. But then it's interesting to see that even with this planning capability, there's a lot of just in time booking. Like, people are booking within the hour to get a desk or a room, and we've being able to connect with their fellow employees or with instead of meeting.

Speaker 1

So just having that mobile connectivity, and this is why our Sky kiosk having at the front of your office so you can walk in, click one button, get a desk. Click a button, get a room, and click a button and know where your colleague's at is immensely useful. And this is where a lot of people are starting to use that technology and capability as they build these return to office initiative. Because without that technology, people are lost, people don't know what to do, and people get disorganized. So this is super interesting.

Speaker 1

And as you can see the data here, there's a lot of activity happening, a lot of usage happening with application because people do need spaces, and space is the primary factor for this market initially. But as as people get used to being in the space, working with the space, they also need to connect with their fellow employees, also when you connect with their internal systems and be able to be able to make be productive. So one of the key features, this is a chart showing the usage of our product at different days or different applications, where do they go in the app. You'll see a small purple knob here showing colleague booking, which is becoming immensely useful now because if I come in the office next week on a Tuesday, it'd be great that my friend Jack is there and my my other mentor, you know, John is gonna be there as well. And so I will actually try to be there.

Speaker 1

So colleague booking and visibility has become a key feature that we've enabled across our client base. It's super successful, super useful. You gotta enable your privacy, but a lot of people enable that and allow you to see their their calendar and and where they're at. So those kind of features are driving more app utilization and usage analytics. It also shows behavior, and we can show behavior, app interaction, not only on a daily basis, but on the hourly basis.

Speaker 1

And every single interaction you do, we can document it. We can show the day in the life of user as they progress through their work life. We can also show you location based. As you can show in the lower chart, you know, people in one part of the world are really active, whereas other part of the world, people are not active on the app. There may be reasons because they need desk booking more, or they don't have a need for desk booking, or they don't have a need for the app itself.

Speaker 1

But our job is to provide the toolkit and capability, and we find that different use cases are useful for different places. So this one's I wanna give you a flavor of the progress we're making in terms of having the technology available, but also the insights now. And collecting the data has been super useful for us because this drives our product road map, this drives our innovation cycle, and this drives actually our engagement with our clients. They love the fact that we have these data sources and fusion of the data of what they're seeing from the employees, but also from the things and the places. It prizes really amazing insights.

Speaker 1

I'll show you an example what we can do with AI now with that. So the next one, this is all great charts, great data, but what could I do more with this with AI? What could I provide insight that would be, you know, mind boggling? Well, I'm gonna give you an example here of our SkyView Smart Expert, and it's gonna show you that, as example, I wanna I don't wanna go through 500 charts. I would like to ask a question.

Speaker 1

I'm a I I'm the person responsible for return to office. I wanna see the booking counts before and after the four day RTO policy came in. Or I am a space operating person, I wanna know how many desks are utilized and which desks were utilized more than others over the past few months. And if I'm the HR person, I wanna see how frequently people are using the app or doing what kind of sessions they're doing, what kind of things they're interested in. And and then if I'm, you know, figuring out what office space needs to be in different locations, I wanna see what the pans are.

Speaker 1

So a lot of question in my mind. Right? And I don't wanna go through a big BI tool that, you know, spend hours going through datasets and then figuring out what it is. I wanna ask a question. So we're gonna show you how to view, a question, get an answer.

Speaker 1

I probably made it slow so that we can move we can show the the results. So here you'll see a chart that shows bookings. It looks flat across the whole time frame, but insights are inside it. The insights are what is changing. Well, in this case, desk bookings were significantly higher than room bookings, and parking reservations were even higher.

Speaker 1

So it shows a strong preference for individual workspaces. Similarly, what desks are more utilized than others? And then, you know, can you show me some regional preferences, location preferences? We can show you a heat map. So a heat map that shows that people would like to be near sunlight or would like to be in a quiet zone or where they would think that amenities are close by.

Speaker 1

So those are spatial insights with our technology and our capability and our application platform. We can provide those insights, and that's what gets people very excited. Example is the four day RTO policy influencing booking patterns. Well, we can figure out what days bookings were higher and where days of people were coming in or not. What are the peak days?

Speaker 1

As I mentioned earlier, we see, you know, Tuesday, Wednesday, Thursday is the highest, but then there's more insights underneath that. But more importantly, once you have all this data and you you see all these, interesting insights, you can also then do forecasting and start putting regular updates and regular models to do predictive analytics. That's the Holy Grail for you, Phil, because with these datasets, you can actually organize not only your organization, but your culture. And that's where we're really excited about using this capability to enhance, the user experience. So let me talk about AgenTeq AI.

Speaker 1

And, you know, as we said earlier, AgenTeq is being our focus from the start. We're not about providing AI just for the sake of AI, but really collaborative AI agents that allow you to take multiple workflows and provide really amazing insights. So to achieve this is a Gartner show, by the way, that shows how AgenTeq AI is progressing. As you know, it used to be AI assistant and co pilot, but now we talked about collaborative AI agents that take multiple workflows and allow them to come together to provide actionable outcomes. So to provide this level of autonomous decision making and action, Agenda AI relies on a complex ensemble of different machine learning, natural language processing, and automation technologies.

Speaker 1

Agenda AI focuses on completing actions and outcomes versus just assistance like a trusted adviser that is proactive, insightful, and acts to solve problem. So I'm gonna show you an example. Last quarter, I showed you the Agendaq Booking. We've been working on lots of different use cases. I'm gonna show you an example of a genetic workshop.

Speaker 1

You know, a lot of our clients are talking about having to set up events or workshops within their community or their their office environment, and they have to do a lot of coordination. They like to, you know, not only be able to book a place, find the right people to come, but also invite visitors as well as regular employees, and then also order food. You know, how can you do that? And I'm gonna show you how we can do that in a New York minute here. So as you can see, in a very short period of time, you could do multiple workflows coming together.

Speaker 1

This means that multiple agents are collaborating together. But more importantly, you got what you wanted. You wanted a meeting set up with your CEO. You didn't have to give your name. You could find who the CEO is, to find who the right contacts who would be invited to the meeting, and then you wanted to not only host them, find a room that that accommodates them, but also order refreshments and make sure that it's tied to their preferences.

Speaker 1

So you could look at their profiles and look at what food preference they have and then provide the necessary arrangements and be all done within a minute, and they will all get notifications on their email, on their calendar. And even if they want navigation, we could provide that. I didn't wanna add too many workflows. But the idea is we make complex things very simple. And this thing these things happen every day at every enterprise where I go and see meet customers.

Speaker 1

They can't get meetings done on schedule. They can't get things organized. It takes a lot of time and effort, and there's a lot of frustration. With this agentic solution, we're gonna minimize that. We're gonna make it seamless and easy to do.

Speaker 1

We do it well today with our with our apps, but we're now gonna make it even even super easy and super productive with these agentic solutions. So now I'm gonna talk about our our q one product and customer highlights, and then we'll have Joy walk us through the financials. So q one the start of 2025 has been an interesting one, as I said earlier. RTO is a big theme with a lot of four clients as well as a lot of new clients that we're working with. But we hit all all our business objectives for the q one.

Speaker 1

We had three large Fortune 500 expansion renewals. Expansion renewal means they actually, you know, signed up for more than the last year's renewal and are expanding not only in campuses, but more importantly, in new features and capabilities. And a lot of those new features and capabilities are the things I talked about, engagement, community, getting more collaboration, or finding mission critical things like emerging notifications or critical notifications, we call them. So there's a lot of new capabilities that people are signing up to, and they're seeing the adoption uses. That's where they expanded.

Speaker 1

So we're excited about that expansion this quarter. We also talked about last quarter, the one dot five platform that was deployed with a large financial customer. That customer has actually now deployed this with the full suite of products, including SkyView and SkyBTS, and also has done a renewal. So we're excited that they have liked the technology platform, deployed in the first market, and are launching multiple markets with new new capabilities. Last quarter, I had mentioned about the single core base Sky1.o.

Speaker 1

That is now available to all our clients. But more importantly, this quarter, we are now we have implemented SkyView Analytics for all those clients. So all the datasets I showed you, the statistics, every single one our clients have that capability now in all of their campuses. So that's a big accomplishment from the engineering team and also from our customer success team that's working closely with those clients. Sky Kiosk is a game changer.

Speaker 1

As I mentioned earlier, we had our first deployment in Silicon Valley with a large technology company that really wanted to implement an RTO policy, and they said, hey, In order to get employees engaged in in using the tools and capabilities, let's put it in the front office front lobby. They walk in the door. They can see where rooms are available, where desks are available, where people are available, and one click away from an action and get it on their mobile app. We've done that very elegantly with a solution that's web based that can be connected to any touchscreen device. And now after that first successful deployment, we're getting multiple engagements from all our clients globally.

Speaker 1

And so this is gonna be a big expansion opportunity as we roll out Sky Kiosk. And I also mentioned last quarter about Sky Localization, which was really using a partnership with Google to do translation for our apps as well as other localization features. And we deployed that with a large entertainment customer, and now we're we're planning to deploy again with Sky1.0 with all our existing clients. I think this is a great feature because everybody wants localized information, localized insights, and so that's been super successful too. So all in all, I would say from a product customer, we are making a lot of great progress and the AgenTeq AI is in trials with the first internally, we're trialing it ourselves in our labs here in San Ramon and Palo Alto, and then we're going to be doing more and more trials with our clients moving forward.

Speaker 1

So with that, I'm gonna move to the results for 2025. I'm gonna ask our CFO, Joy, to take over and share with us the results. Over to Joy.

Speaker 2

Thank you, Karam. If we could go to the next slide. I'll walk us through our Q1 results, starting with headline metrics, then dive into operational details, dive into our income statement, and conclude with our overall liquidity position, which is pretty strong, we're happy to report. While we have seen some expected pressures, the underlying improvements in our margins and continued cost discipline are driving meaningful progress. So, Kerm, as you mentioned in the previous slide, we did have three large logos that increased their expansion and pushed ARR up 130% of their original contract value, which is clear validation of our platform stickiness and our team's focus on customer success.

Speaker 2

These include Fortune 500 customers in financial services and tech verticals who have expanded their footprint with us and continue to expand their footprint with us. Subscription revenue, a huge increase here from Q1 twenty twenty four, where we're at 87% up to 99%, which shows our overall commitment to recurring revenue. Not certain that it will be this high every quarter, but we do expect to concede, like we did in previous quarters, a continued increase in subscription revenue compared to one time revenue. Again, an increase in gross margin and just our overall discipline in cost, an increase up to 88% from 82% from Q1 twenty twenty four. Cash OpEx, we did reduce cash operating expenses by 300 ks year over year despite absorbing one time costs, which we'll go into into the next slide.

Speaker 2

And then we're happy to report our earnings per share has increased from negative $0.34 up to negative $08 from Q1 twenty twenty four. So overall, just great highlights for Q1 twenty twenty five. And we can move to the next slide and dive into a little bit more detail in our income statement. So we did have a decline in revenue, which we want to talk about because I know we may get some questions on this. The decline mainly came from two of our large customers who traditionally would have been Q1 renewals, but we pushed them to Q4 renewals.

Speaker 2

So if you remember, we had a pretty steady state and solid Q4, and so those two, that increase or that solidness that you saw in Q4 were from those two clients that renewed in Q4 instead of Q1. So, this is a timing shift, not a decline necessarily in anything else. We are seeing resilience in gross profit. Despite lower revenue, it continued to have 88% margins. As we discussed, our partnership with Google Cloud, we've been looking to reduce our cloud costs, and we saved 177 ks year over year.

Speaker 2

And again, the subscription based revenue increased our margins. Overall, operating expenses increased a little bit, and we'll dive into that. So research and development declined slightly. Marketing year over year had a steep decline, some of that sales and marketing, sorry, and personnel and other spend as we continue to focus on R and D and just developing the product in IdentiK AI. We did have an increase in G and A year over year, but that was related to one time costs for professional services fees and new hires.

Speaker 2

Our operating loss continues to narrow. It widened a little bit, but remember this is without 600 ks revenue. So this just shows our cost structure is holding firm during this transition. So let's move to the next slide where we'll talk a little bit about our liquidity and our overall cash position, because I know that was questions that came up in our last earnings call. So overall net cash used in operating expenses decreased from $979,000 from $2,700,000 in Q4 twenty twenty four.

Speaker 2

And this just reflects our tighter control on working capital and our discipline as we lower overall cash burn. Secondly, I'd like to discuss liquidity. Our cash balance, as you'll see, because our Q was just released, you can go have a look, Our cash balance, we ended the quarter at $3,980,000 but what you'll see in the subsequent events is that we drew on, we entered into a new note, a new convertible note, where we have access to $20,000,000 and on April 8, we drew down about $4,000,000 of that $20,000,000 And so with just that in place in the previous convertible note that we entered into last year, we have $20,000,000 access to $20,000,000 and so we have more than eighteen months of liquidity at our current operating run, at least eighteen months, if not more. So, we also, with our filing today and our filing of the K, have become S3 eligible. So, overall, these results reflect our focus on three strategic priorities that Chrome laid out earlier, our customer success, deeper AI adoption and analytics usage, and just the stickiness of some of our product capabilities and new features and new offerings like our kiosk.

Speaker 2

Every renewal, every cost decision, and every platform investment is mapped to these goals. To tie it all together, one, revenue decline was timing related and not structural. Our margins hit high records through operational rigor, which will continue throughout the year. We continue to keep costs under control despite one time expense hits, and our cash position is strong, and we have multiple levers to pull to continue growth. So with that, I'll turn it over to Kurum, and if there are any questions, just put them in the chat and we'll answer.

Speaker 1

Thank you, Yep. Thank you, Joy. So let's just summarize why Sky? And I think the first piece is and I'll talk about the the the financial performance too because I think we have hit a hit a corner here where we're now moving from the traditional old model to the new model. But first of all, I wanna be clear with everybody.

Speaker 1

Sky is more than an app. It's a platform to create workplaces that are as dynamic, versatile, and remarkable as the people in in the habit them. We're not just enhancing how work gets done. We reimagining it for a brighter, more connected world. With Sky, you just don't build a workflow.

Speaker 1

You cultivate a culture, shape a community, and architect the future. Because at the end of the day, without the employee, there is no work, no office, no culture. Let's put the employee first together and watch everything else fall into place. That's been our focus. And now with with our, you know, Sky platform solution anchored in AI, we're poised to provide that capability to all our clients.

Speaker 1

Now when you think about our business, I think it's amazing that we've gone from I think at some point, were like, when we first acquired the business, it was 70% or less recurring revenue. This quarter, we hit 99%, which is kind of amazing. We weren't targeting to be 99, but it's just the fact that both of our, you know, customer success teams as well as our engineering team have done a great job of creating the products that are more recurring revenue, and our customers have adopted them instead of getting one time professional fees. They're like, yeah. We'll check that feature because we want it every year, and we wanna be providing you advanced capabilities on that.

Speaker 1

So I think that's a real positive. And then as Joy mentioned, with the cost structure improvement, it's because of our partnership with Google Cloud where we can scale very profitably on this. Because as we go with AI, we go with more datasets and others, we need a low cost solution that scales. And this is where you're seeing the benefit of that, you know, gross margins going from, I think, 78 at some point a year and a half ago now all the way to 88%. And along with that, we have great clients that love working with us, and we're working with CIOs at all these companies as well as the head of workplace experiences, and they're looking to move the needle in a direction where AI becomes the key enabler for all these different opportunities.

Speaker 1

So we're excited working with our clients. I think we're design thinking with them on all these new application, and you're gonna see a lot of new applications coming out in the coming months. And, you know, our our business is global. Although we sell only in US, we're deployed globally. We have no impact to tariffs or other issues, but we are deployed globally.

Speaker 1

So I wanna rest assure that we're not we're not impacted by any of the situation that's happening in the financial markets right now, but we are naturally cognizant of the fact that enterprises are looking to cut their spend and be more productive, and we enable that. We enable an ROI that lets them, you know, provide a solution that is cost effective, but more importantly, impactful impactful across the whole organization. So that's why there's not a a demand pull pull here in terms of, you know, people are looking for solutions there. Today, we had our annual shareholder meeting. I'm excited to announce that two of our directors, Camilo Martino and Shanti Priya got reelected.

Speaker 1

We're really blessed to have a really strong board that has been supporting this effort for the last couple of years, and they come together as as innovators, as pioneers, but also more importantly as mentors to help me and the management team scale the company. So we're really excited about having that camaraderie and having that, push and pull of innovation. And last but not least, we're in we're in Silicon Valley. We're working with the biggest disruptors in the market. We we we have told you about our Google partnership.

Speaker 1

It not only enables us on the cost side for our cloud management, but also in terms of innovation side in getting access to the latest tools and technologies. I I I mentioned to you guys earlier that we are a strategic partner level, and I know today, Google announced a number of new AI tools in Gemini and other capabilities. We have access to all those tools. We're first in line to get access to those. And so we're partnering with them.

Speaker 1

When you think about SkyView, when you think about AgenTek AI, we are definitely partnering with Google and their capabilities. We're not building everything from scratch, but we are building something that's differentiated, unique that we believe nobody else in the market has, and that's called employee experiences. We're creating a new software category. We're really excited. And, with that, I'd, I'd open up to any questions you have, but I wanna just end by saying we are really destined for lot success here because the opportunity is huge.

Speaker 1

There's a lot of fragmented competitors out there, and we have a singular vision to create the best employee experience for all employees. So, Joy, do we have any questions from the webcast? Or

Speaker 2

We do, and I'll I'll take a couple of them. So one, some of these can be some of the answers to answers to these questions can be found in the the 10 k sorry, the q. But what is the current shares outstanding that's on our balance sheet? It's about $19,800,000 There's a question, how much total debt is currently outstanding when including the $4,000,000 drawn Avondale on April 8? I think if we take all of that together with our previous note and our warrants, I think we're at about 10,000,000, but I'm doing that off the top of my head.

Speaker 2

There's another question. Will you guys ever plan on I think the question is, will we share who our clients are? I think we've done some case studies in the past, probably prior to me joining, and to the extent that we can, but as you can imagine, with some of the return to office, snap food, and other things going on, some of our clients value their confidentiality. But to the extent we can in the future, we we absolutely will.

Speaker 1

Joy, you wanna jump in there? Actually, on CX. Joey, just wanna jump in there. On CXapp.com, you can see those clients. So if you go on there, I'm proud of all of them, so I don't wanna, you know, take one's name or the other.

Speaker 1

But most of our clients are on the website, and you can easily look at them up. But they're in five categories that we talked about in technology, in entertainment, in financial services, in health care, and in consumer. We have some of the biggest logos in the world. They're all on our website, and, you know, and we're collaborating with them. So but some of them, as Joyce said, are careful about what we share about what they're doing for obvious reasons, but they're all excited to be using the Sky platform.

Speaker 2

Thanks, Krum. One more we have two more questions. One I'll answer, and then one I'll I'll, give over to you, Krum. After after from Maxim, after soft Q1 revenue results, do you expect total revenue growth or subscription revenue growth year over year in '25 versus '24? As you know, we're not giving any official guidance, so that's the aim, but don't want to give any official guidance at the moment.

Speaker 2

And then our last

Speaker 1

question thing I would add to that, Joy, is just to add to that is that we are driven by ARR growth, That's our main initiative, and that's why you've seen the focus on recurring repeatable, multiyear contracts. Our strategy is working out. There is some short term revenue disruption to that, but I do think that that is the right thing to do for a SaaS AI based company because it provides the stickiness that Joy mentioned. It provides the the road map. And these customers do not want to go change out every month.

Speaker 1

They want to have a long term plan for scale up. Right? And the experiment was with a couple of sites. We've seen a lot of them come to us after they go to a competitor and find out, hey. It's not exactly what you told me.

Speaker 1

So but we are retaining large clients who believe in the vision of, you know, employee experiences globally and finding those GenTech AI solution. I think those are the customers that I'm most proud of. I don't wanna be involved with customers who are just looking for a point solution. We're not a point solution company. We're a platform company.

Speaker 1

And and so I think that's the differentiation we have. And as we move forward, recurring revenue is our focus. So as you see the growth or growth in recurring revenue, naturally, there will be revenue recognition around that. But, you know, we we can't assume we're not motivated by just getting onetime revenue. We're motivated by getting recurring repeatable revenue.

Speaker 2

Yep. And we have one more question. I think you answered the second half of the question, but three large customer renewals, does this include the six renewals mentioned in 2024? I'm assuming the question is coming from Q4 of twenty twenty four, and the answer is no. These are new renewals.

Speaker 2

When we talk about renewals in any period, we're talking about renewals in that particular period. So no, this is three in addition to the six that we mentioned last quarter. And then the question on subscription revenue, Kerm already answered that question.

Speaker 1

Yeah, no, so just to be clear, as Joy mentioned, some of those clients that renewed in Q4, in 2024, they actually were delayed in their renewals, so that's why we had to book them in q one. This year, they were on schedule, and they got it done in q four. So those six renewals happen in q four. These are three additional renewals that that were scheduled for q one and are done on schedule. Right?

Speaker 1

And as we said, they've also been expanding, and so they're excited about expanding with us. So, yeah, these are independent. And as you can see, with budget cycles, a lot of these companies have, you know, fiscal quarter, some have end of the year quarter. So we have to deal with large enterprises that naturally wanna work with us, but they have to work with their policies. So that's why this gap that you see in the revenue is really because of the timing of the renewal, nothing to do with the with the revenue shortfall for us.

Speaker 1

And but I think that as we move forward, we are gonna get a regular stream as they scale up, and our goal is to really scale them up to the next level in terms of expansion and then repeatability. And I think this is where, you know, as we we get the first deployments out, they wanna go from two sites to a hundred sites. And for a large company like any of these enterprises, going to a hundred sites is a huge endeavor. And for us also, it's a huge endeavor. So we're planning them now so that we can do renewals, hopefully, in one quarter.

Speaker 1

So we don't have renewals in multiple quarters, and then we can really get this thing scaled up so we have repeatability, and then we can add new features as as they renew. So I think this is the this is the change out from the old model to the new model.

Speaker 2

Those are all the questions.

Speaker 1

Any more questions, Joy, or you think this is this is enough for us? No. That's enough. Yep. Okay.

Speaker 1

Great. Well, I wanna close by saying thank you, everybody, who's voted for us for the annual shareholder meeting. We really appreciate it. We got all of the resolutions done, which is a good testament of the in conference investors have in us, and the board has in the management team here to deliver. We're excited about the opportunity.

Speaker 1

I will repeat that we are transforming this industry, and in transformation, disruption happens. So we're ready for disruption. We're ready to make it happen, and we're super excited that our customers are believing in us, and we're I'm more excited that our employees are really delivering on all four cylinders and all these targets. So look forward to sharing with you the next quarter results. In the meantime, you will be hearing from us as we make advancements in our product development.

Speaker 1

Thank you so much. Have a great evening.

Operator

Thank you. This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.

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Key Takeaways

  • Sky platform is an AI-native, multi-device workplace solution combining Sky apps, Sky BTS rule engine, SkyView analytics, and AgenTeq AI to optimize hybrid work, space utilization, and employee engagement.
  • In Q1 2025, three Fortune 500 customers expanded their contracts, driving ARR growth to 130% of original values, while subscription revenue rose to 99% and gross margin improved to 88%.
  • A modest Q1 revenue decline reflects a timing shift of two major renewals to Q4 2024 rather than weakened demand, underscoring the company’s move toward predictable, multiyear recurring contracts.
  • Platform analytics show strong user adoption with over 1 million seats globally, high mobile desk and room bookings midweek, and increasing use of colleague visibility features to foster in-office collaboration.
  • The company finished Q1 with $3.98 million in cash, drew $4 million from a $20 million convertible note, securing over 18 months of operating liquidity and gaining S3 eligibility for future capital raises.
A.I. generated. May contain errors.
Earnings Conference Call
CXApp Q1 2025
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