Good afternoon, everyone, and thank you for joining us for our Q2 Earnings Call Investor Forum. I want to bring, I want to start a little differently today. Q2 fundamentally changed the trajectory of Sky. For the last several years, we have been building, improving our technology inside some of the world's most demanding enterprises. We built trust, we built proprietary workplace intelligence, and we built the foundation of a genetic AI platform. Now we're entering this scaling phase and this is where i want to do things a little different this quarter but i want to also tell you as investors the three things i want to take out of today's meeting number one engine room transforms our scale and gives us something strategically critical mid-market distribution secondly sky 2.0 has moved from strategy into production and third we now see a a much clearer operating model for translating growth into operating leverage and ultimately profitable growth. To do that, I have a very extensive agenda for today. I'm excited to have our leadership team join us. And I'm Khurram Shaikh, I'm the Chairman and CEO of CXAI. And with me today, I'll have Chris Wiegand, who's our General Manager of North America, talking about our enterprise business and the scale we're getting there. Our newest leader, Adam Laurie, who is the general manager of australia previously the managing director of engine room will be with us as well and my new partner melissa prudini who's uh who's who stepped up to be the interim cfo after the transaction she was leading the finance function at uh at engine room so melissa welcome and last but not least we'll have an industry expert guest zoe chen uh zoe is very well respected in the industry and would love to hear her views on the human experience in ai so with that let me show you the agenda for today we're going to first have the q2 earnings call melissa and i will take that and we'll we'll run you through the financials we'll run you through what were the wins what happened this quarter what is our outlook for for the quarter and for the future then we'll we'll adjourn around 5 30 we'll take an intermission we won't actually adjourn but we'll just take a little break if we if we end early or we'll transition directly into our investor forum and the investor forum will really focus on number one from my perspective the vision and what do i think about sky 2.0 and the agenda enterprise what's the market what's the opportunity where we're at and where we're going then i'm going to hand over to chris to talk about north america the customers the product and the growth going to go more detail on the product side there and then adam will talk about the australasian opportunity that he sees the mid-market scale what he's been winning and continues to win as we speak this quarter and what his future path is and then we'll round up with fireside chair with zoe which i'm hopefully you're going to enjoy her perspective and we're close so it's going to be a packed agenda i know a lot of you have been sending some questions we'll take some questions in the in the q a section as well so i appreciate that so with that let's get going with the business so let's talk about our q2 earnings and as i said earlier the three themes number one engine room is transformative number two sky 2d auto is real is available and third we're now seeing a clear operating model for translating growth into operating leverage and ultimately profitable growth and we at sky AI are building the agentic AI operating layer. So before we go into the business numbers, let me talk to you guys about the, just make sure you have the disclaimer slide on what is, you know, what are the forward-looking statements. Make sure you read the Safe Harbor. Please review the Safe Harbor non-GAAP disclosures in today's presentation and our SEC filings the applicable risk assumptions and reconciliations we will be filing the 10q tomorrow um and so you can read that when you get that so let me talk about um you know the company we have today right and the company we have today is pretty amazing you know we um you know we are deployed globally around 200 plus cities with more than 60 plus customers now supporting a large installed base of users we operate in inside demanding enterprise environments where security privacy reliability integration are are not optional they're necessary this matters because our ai strategy starts from something valuable enterprise trust and real operating context context is very important we aren't we aren't beginning by building an ai application and trying to figure out where it fits We already operate inside the enterprise. We understand people, places, workflows, and enterprise systems. And Sky2.0 is about making that context increasingly intelligent and actionable. So we're headquartered in the San Francisco Bay Area. As you know, we have teams in Toronto and Manila. And now we're excited to welcome the Australian team, which is headquartered out of Melbourne, but they're all across Australia as well as New Zealand. We're excited to have them on board. And this gives us the global coverage. you know we have around 70 team members now globally and they're all working hard making ai successful in the enterprise market that we're in so before we get to the numbers let me just give you context of where we're being and where we're going right so sky 1.0 established the enterprise foundation it showed us that we have you know great software workplace software that has people and place intelligence we have fortune 500 customers they have high trust high complexity deployments this remains an important part of business we made some significant strides in the last two quarters you know chris is going to talk about those customer case studies and stuff but it's been amazing there but sky 2.0 really expands that opportunity we're moving primarily from understanding places which is really the flow product which is where and how people work to person which is what we're calling beat what an individual and team need to accomplish and what should happen next in your life as a worker and now we're moving with engine room into business how companies acquire customers convert demand and grow that business context is significantly strengthened by engine room as you know and underneath those experiences is the same sky agenda platform the strategy for me here is very straightforward proven enterprise technology mid-market distribution, prioritized AI, and scale recurring revenue. We're going to run that flywheel cycle because we've got now an agentic platform that we can leverage across multiple verticals. And more importantly, we now have a new distribution mechanism through Engine Room. So this is the transformation I'm talking about. This is what we're executing on and we're super excited about this opportunity. So let me go into the business for this quarter and what happened this quarter um so this is a pretty exciting time for for cxi or sky as you can see on sorry as you can see on our highlights for the quarter the six main highlights but the biggest one is the engine room transaction it is transformative i'm going to talk more about it in detail but it really did change the revenue trajectory for the company and more importantly the quarter will occur increase probably 79 percent revenue growth from 950 000 in q1 to approximately 1.7 million in q2 the more important thing is what sits underneath that growth enterprise retention remains strong two major fortune 500 customers renewed their relationship with sky in enterprise software renewals matter enormously because they validate the product after the initial sale customers that continue to choose sky we also added a significant new win in the financial services sector this is a three-year multi-million dollar recurring revenue deal it went through a very competitive rfp we're super excited to have that customer on board and they're scaling with us the beginning this quarter and it's a really really important win for the team and it's one for two reasons first it demonstrates continued demand from highly sophisticated regulated customers. Secondly, these are the types of customers where Sky 2.0 can expand over time across additional modules, users, and AI capabilities. The other big achievement for this quarter is we moved Sky 2.0 into deployment, and that's a big win for us. And the progression is win, deploy, adopt, expand exactly what we want to replicate. and with 2.0 really what we get is an agentic air platform that allows a user to you know navigate their workplace navigate their work and navigate their experiences across the whole enterprise and that's very exciting and our customers the reason why they're selecting us is because we have sky 2.0 that's the wins we got that's the renewals we got are all because of sky 2.0 and as you know in the quarter we complete the engine room transaction so for q2 we only have one month because it was the month of june those that engine room is part of the revenue and it's been an amazing one month because they've continued to get new clients they've got double digit growth they're going through this annuals process where they've got commitments from existing clients so it's been really good and so all of these six factors combined really have been super successful for the for the for the company i want to congratulate the team on the job well done and it builds the momentum it strengthens the foundation for sky 2.0 and our scale growth moving forward so let me tell you you know a little bit about engine room and what better than just to roll a video so um operator if you can roll the video all right cool that's pretty exciting so um when i talk about engine room i talk about as being transformative and as you can see from the video it's pretty exciting stuff they do and they've been at it for 13 years and they've made amazing progress in in getting clients and making sure that they have really solid footing so let me tell you why this is transformative engine room does not simply add revenue it changes the starting point for sky engine room brings more than 8 million of revenue approximately 1.6 million of adjusted EBITDA a highly recurring revenue profile and more than 50 mid-market customer relationships but strategically three things matter even more for me number one distribution sky historically sold into large enterprises through an enterprise sales process Engine Room gives us a structured relationship with dozens of mid-market businesses. That gives us a much faster proving ground and future distribution channel for Sky AI products. Number two, business context. As I said earlier, Sky already understands workplace and employee context, and that's one of our modes in differentiation. Engine Room brings customer acquisition, performance, marketing, and growth data. That allows Sky 2.0 to expand from understanding how people work to understanding how businesses grow number three cross-sell we can introduce sky capabilities into engine room's customer base and we can introduce engine room's growth capability into sky's enterprise products so the combined company has an enterprise anchor a mid-market growth engine and a shared agentic ai platform and the combination moves sky to more than 12 million of analyzed revenue scale this acquisition created scale our job now is to turn that scale into operating leverage so i'm super excited about this i think this is the right move for the company it positions us ready for the growth engine and that we've been talking about the double digital growth it gives us that flexibility in terms of having you know the ability to innovate in a very interesting market australia i'll talk more about that in the investor forum we will have we'll go more deeper into it but i just want to share this the story with you and share with you that this has been an amazing amazing transaction for us so with that i want to move on to the financials for q2 you know i'm going to turn it over to melissa to walk through the quarter in more detail as you listen to the financial results i would focus on one important relationship how rapidly the revenue base is changing relative to the cost structure. Melissa, all yours.
Thanks, Kram. So the quarter-over-quarter comparisons demonstrate that steps change is taking place in the business. Between Q1 and Q2, revenue has increased approximately $950,000. in Q1 to $1.7 million in Q2, representing, as Krem previously mentioned, a 79% sequential growth. Our annual recurring revenue has increased from $3.6 million to $11.5 million. Sorry about that. Net revenue retention has increased from approximately 98% to 99.3%, continuing to demonstrate our strong retention across installed bases. Total assets increased from approximately $33 million to $36 million, and our cash EBITDA improved from approximately negative $3 million in quarter one to negative 2.68 million in quarter two. EPS was approximately negative 0.10 compared with negative 0.09 in Q1. So the key takeaway quarter over quarter is that revenue base increased substantially while cash, well, will cash EBITDA improve modestly. We're still investing in integration and development of the combined businesses, but the operating model is beginning to show greater scale the year over year comparison also shows meaningful progress revenue increased approximately 42 percent from 1.2 million dollars in q2 of 2025 to 1.7 million this quarter arr increases from 4.5 million to again the 11.5 million an increase of approximately 156 percent. Net revenue retention increased by more than five percentage points to approximately 99.3. Assets also increased 22 percent from 29.6 million to approximately 36 million. Cash EBITDA was approximately negative 2.7 million, which is a neutral position compared to a year ago and eps has improved from approximately negative 0.16 to negative 0.10 between the two two years the most significant change in the financial profile is therefore the scale of the recurring revenue base while we continue to manage investments required to support integration and future growth and now let me put this cost structure into perspective total operating expenses increased approximately $275,000 quarter over quarter, or 5.6%. However, we do need to compare that with the approximately 79% sequential revenue growth. The increase in operating costs was driven primarily by the engine room acquisition and associated operating activity. Importantly, these Q2 numbers do not yet reflect the benefit of the operating synergies we are implementing as we integrate the businesses. Our focus moving forward is straightforward. Grow revenue faster than expenses. We expect to accomplish that through shared functions, tighter operating discipline, productized implementation, increasing automation, and a higher recurring software contribution. That operating leverage is central to the financial strategy for the combined company.
Speaker 1
And I'll turn it back to Karam now. Karam, you're muted.
Thank you, Melissa. I apologize. I was on mute. This was a really great quarter. As you can see, we are finally showing the value of our technology platform, but also the engineering acquisition. But I want to put in perspective what I see the value of this company as we move forward. And this is the valuation is based on numbers that we get from KeyBank, which does a monthly survey on software benchmarks and looks at all the recurring revenue-based businesses and software businesses. So as I think of our business now, it is an AI-powered software business that is at a much larger scale. And the scale, as you know, last quarter, we were at a million a quarter. This quarter, we are now 1.7 million a quarter. And with the full engine room integration, we'll be hitting 3 million a quarter or 12 million analyze by next quarter and that shows real growth as well as shows real momentum and scale and based on that when you think about that business and you think about that software business with the metrics we have you know just on a conservative basis um we're we're it's a 9.7x multiple right that's more on next 12 months revenue i'm just saying that revenue we have now we will have now by q3 so to me we're at a very um you know attractive stock price right now given where we're at in terms of the valuation that we should command i do believe that we will continue to perform and given our double digit growth strategy we believe by in the second half of 2027 we will be you know growing and getting to the break-even point and that's where our focus is our focus is ready to get to that level and you can see the metrics based on that this is all illustrated by the way this is not a valuation guidance i'm just taking industry benchmarks and showing you what the value of this company is and the fact that we've now built that agenda gap platform that r d expense has been done and now it's about growth and distribution and this is where we we did the engine room transaction and this is where we feel very strongly about about the growth and scale of the business. Can we sustain this growth? Can we increase software mix? Can we translate into greater revenue scale? Absolutely. And that's where the two businesses have been complimentary, but we're gonna help each other scale up faster. Now, let me talk about probably the most important, one of the most important charts in the slide deck here is about the path to break even, right? and again this is a directional operating framework not specific financial guidance the engine room acquisition gives us a combined revenue of more than 12 million dollars from here there are several identifiable levers first organic growth continue expanding the sky enterprise business and engine room's customer base that's obvious second is cross-sell introduce additional sky modules into existing enterprise customers chris is going to talk a lot about that today number two is introduce sky agenda gear products into the engine room's mid-market customer relationship though that's the second cross-sell that we think is very important thirdly increase software monetization you'll we'll talk about flow we'll talk about analytics events and our emerging personal execution capabilities called beat all increase our opportunity to generate recurring software revenue from the same platform and fourth prioritize that mid-market motion for mid-market customers we don't know we don't want to recreate a long enterprise implementation our objective is to standardize the products standardize the connectors faster provisioning and lower cost to serve and fifth operating leverage we now have opportunities to share infrastructure technology corporate functions and delivery capabilities across a much larger revenue base that's the synergy that melissa talked about the operating model we are working towards it characterized by number one double digit revenue growth which is part of our strategy as well as what engine room is already on number two recurring revenue more than 95 percent gross margin above 70 percent software mix above 95 percent increasing revenue per customer we're already at 150 to 200 000 per client per year which is really great and the discipline expense growth which now we can do with the larger scale if you if we execute against those levers we believe there's a credible path towards break even in the second half of 2027 followed by profitable growth so i want to now close with why sky why do you want to continue to invest and be part of this journey. Why is this moment different for Sky? Reason number one, Engine Room is transformative. It immediately increases our revenue scale. It gives us profitable operating capability. And perhaps more importantly, it gives Sky a mid-market distribution engine that we did not previously Reason number two, Sky 2.0 is now in production. This is no longer simply a roadmap or an AI narrative. We are ready now to deploy this across our clients. We've been successful in the demonstrations and prototypes and getting it through our clients. They're doing a lot of validation, but now it is launching. It is launching live with a new client. It's also launching live with existing clients. And now we have these new enterprise logos signing multi-year agreements. they would not be signing multi agreements with us unless they knew that the roadmap and the product we have is going to be long lasting and for the future and we are expanding the platform from workplace intelligence to personal execution which the beat as well as the growth intelligence which is engine room and reason number three the financial model is becoming more scalable q2 revenue increased approximately 79 percent sequentially while operating expense increased approximately 5.6 percent that does not mean the work is finished far from it but it demonstrates the opportunity for offering leverage as we integrate the businesses grow recurring revenue and prioritize more of what we offer so with that i'm gonna look into some questions that have come in um let me see okay question number one good question how much cash do you have what are your liabilities after the purchase of engine room i'm gonna have melissa take that ella thanks cram so our cash as of 30 june 2026 is 11.7 million dollars um most importantly the acquisition costs
have been acquisition costs related to engine room have been largely paid um and any subsequent uh funds owing on that on on the acquisition of engine room are tied to an earn out model um no that's good so i think just to be clear you know the the engine room acquisition was 65% cash and the rest was in earn-out.
So the team is focused on it's a two-year earn-out with growth factors in revenue specifically. So that's gonna earn-out itself. So we have no other liabilities on Engine Room except the earn-out. And overall, as you can see, the asset base has increased and it has been a very successful integration up to now. Okay, next question I see is, how quickly should shareholders expect the engine room acquisition to be reflected in Sky's report revenue? Mel, you want to take that?
Yeah, so we've actually already captured one month of combined revenue, so that being the month of June. We will be able to demonstrate next quarter, so Q3, the full combined impact over the three months of that acquisition and the combined revenue.
Yeah, okay. I think the next question was one more question. What do you think of the revenue growth over the next 12 months? So look, I gave you some illustrative graph on our potential. As you know, we are focused on double-digit growth. We really believe that the scale we're getting with engine room the the wins we have with our existing enterprise business and new new logos coming in that are multi-year multi-million dollar contract we're pretty pretty positive on that and we're also positive on engine room because they've also increased their uh um they've increased their revenue profile the number of clients and their annuals process has been super successful um so anyway we are we are pretty positive on that i think our goal is like i said is to have break even by second half of 2027 if we execute our plans that we have and the growth growth vectors that we're working on i'm pretty confident in that and we're also focused on expense management and you know with agentic ai we're leveraging ai across our enterprise all our functions are using ai so we're seeing a lot of efficiency there as you can see in terms of our team members we're very cost efficient and so i'm pretty positive that in the next 12 months we will achieve much higher growth and we will get to the breakeven target that we have
