Earnings Call Transcript - CXAI Q3 2025

Operator, Operator

Greetings. Welcome to the CX AI Third Quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If you would like to ask a question, please click on the ask question box on the left side of your screen. Type in your question, and hit submit. As a reminder, this conference call is being recorded. Now I would like to turn the call over to your host, Khurram Sheikh, Chairman and CEO of CXAI. Please go ahead.

Khurram Sheikh, Chairman and CEO

Thank you, operator. Good afternoon, everyone, and thank you for joining us. I'm Khurram Sheikh, Chairman and CEO of CXApp Inc., trading on Nasdaq under the symbol CXAI, pronounced Sky. Also joining me on this call is our CFO, Joy Mbanugo. And before we begin, please note our forward-looking statements as outlined in our safe harbor statements as outlined in our disclosures. We're also submitting our 10-Q, which will be filed with the SEC, and you'll also see a press release that just got launched out there. So let me talk about Sky. You know, people ask me the question, what does Sky actually do? At Sky, we are defining the intelligent experience layer for the modern enterprise. Our platform blends AgenTeq AI's autonomous context over agents with spatial intelligence that understands how people actually use the workplace. This combination turns data into decision-making and routine actions into automation. We're not just another AI platform. We're the bridge between billions in corporate AI investment and the actual human experience at work. When people ask, what does Sky actually do? Here's my answer. We transform office buildings, campuses, and digital workspaces into living, learning, and adaptive environments. Environments that think and act with you. We now operate in over 200 cities across 50 countries serving over a million users. And all of those users are using us in a very secure manner across all their campus environments, integrating all the enterprise functions into one application. I'm also proud of the great team we have. We have around 65 Willow Sky employees who are all based in multiple offices globally. In the Bay Area, where our headquarters is, in Toronto, Canada, and in Manila. More than 70% of them are in R&D. We're a technology-focused company, and this tells you that our DNA is an innovation company. So let's talk about, you know, technology-wise, what does this entail? And we've been the leader in the first mobile app for this application of workplace experience. Being cloud-first and now we're AI-native in terms of this deployment that we're embarking on with Sky 1.0 going to Sky 2.0. So, and I've shared these slides in the past, but I want to just reinforce the fact that we're building this as a platform. It's not a one-off application. The Sky apps go all the way from your mobile device to a kiosk or even larger. We'll talk about that today. They will also be multi-OS and be able to be adaptive. Our BTS behind the scenes is our rule engine, our brains behind the Sky system that allows enterprise owners and users to control and manage the content as well as provide access control and create all the great things that will enable productivity at the workplace. I want to show you some great examples of that. And then finally, SkyView is our data analytics and ingestion engine that allows you to create your own dashboard, create your own analytics, and create insights and the outcomes that really matter at the end of the day. All of this is hosted on the cloud. We're partnered with Google, as you know, but we also enable things on AWS and Azure. So we're multi-cloud. We're multi-application across the board, and we're building this as a platform for scale. So I want to talk about the market and what's happening within the market today and the market trends. Across this is a study done by McKinsey. And it's very enlightening to see that across the Fortune 500, where we participate, 88% of organizations say that when they use AI, they only don't scale it to the enterprise level. So although AI is being used by a large percentage of enterprises, they're not using it at scale. They have the tools but not the orchestration. That's where Sky comes in. Sky solves that execution gap. By unifying workflows, analytics, and the human experience into a single agentic layer. It's what we call agentic orchestration, turning disconnected tools into intelligent systems that anticipate and act. Think of a global bank with 40 offices worldwide. You already have Teams, Zoom, ServiceNow, and multiple space management tools. But no unified experience. The OriginChic engine stitches those environments together so that a team lead books a hybrid meeting in New York, and the system automatically coordinates rooms, catering, visitor access, AV support across different time zones. It's invisible, autonomous, and measurable. Along with that, you've seen what's happening in the environment. A lot of CEOs are mandating return to office and AI tool adoption. Where employees are burned out and disengaged. That's the leadership expectation versus workflow reality divide. As executives, we are pushing return to office mandates, while employees create flexibility. The result is policy friction. Sky bridges that mandate to execution gap. For a major technology client in Silicon Valley, we used our platform to launch the new campus at headquarters, right-sizing their campus designs and footprint, allowing for colleague booking features to allow selecting where and who they want to spend their day, providing an automated check-in process for their users via their internal badging system. This improved on-site attendance satisfaction scores as well as created higher employee engagement. That's productivity, collaboration, and sustainability altogether. That's the beauty of Sky. We enable all of these great capabilities, and the outcomes are becoming very clear now with our clients. And, you know, this is not just us talking about it; the world is taking notice. This quarter, Gartner named Sky as a representative vendor in the 2025 market guide for workplace experience applications. A category we helped define, by the way. We've been working with them for the last two years, educating them on the benefits of AI and the benefits of our capacity to enable this transformation. It's a validation that our combination of AgenTeq AI and spatial intelligence isn't just visionary; it's essential to the future of work. And, you know, we've been very happy to see this guide come out. There's also more work coming out from Gartner and their analysts. As we stated in our first calls with you, there is going to be a new category called employee experiences. I think the market is headed in that direction. This last quarter, we were super busy also with lots of events and happenings in the market, amplifying our ecosystem presence at the San Francisco Tech Week. I'll talk about that in a bit. We were at WORKTEC at the META headquarters in Menlo Park on October 9, and we also attended the Connect Global Summit in Anaheim. Across these events, one theme was constant: AI in the workplace is no longer a pilot; it is a board-level imperative. So it's super important to recognize that as we talk to our ecosystem partners, customers, and stakeholders, they all are clear that the AI bandwagon is where everyone needs to be, and it's going to change the way we work. We're super excited about the events; we had lots of great new clients come to us, and our existing clients were there. We hosted several networking events, and we discussed and debated; the reality is everybody wants our agentic AI solution. They want it faster. Another strategic collaboration that we announced this week was our collaboration with a company called Noro. We're thrilled about this collaboration with Noro, a pioneer in immersive telepresence. Together, we're merging Sky's autonomous AI engine with Noro's life-size presence portals. Imagine walking up to a wall in New York and speaking naturally face-to-face with a colleague in London, with Sky's agentic AI automatically handling context, environment, and collaboration tools behind the scenes. That's how we're turning presence into intelligence. For most of our global customers, this partnership will allow hybrid project teams to occupy shared spaces in real time, seeing body language, maintaining eye contact, ensuring digital work streams—all orchestrated by AgenTeq AI. That's how Sky makes distance disappear in hybrid work. We're super excited about it, and we're going to have the first unit being installed in our offices. Noro also has locations already deployed in London and New York and then in Atlanta and Chicago. We're putting the roadmap together in terms of the combined offering, which will be available to clients beginning in Q1. But we're doing a lot of internal testing right now. So super excited about this opportunity, and Tomaso is a great partner. I've known him for a while, and I'm very happy that we're working together now. So let me talk about other highlights on the product side. You know, innovation continues to define Sky's Edge. We enhanced colleague visibility through dynamic math, delivering a cleaner, faster UI. And this is really important because a lot of our clients this last quarter were starting their RTO plans again, re-engaging with their employees, wanting something slicker, faster, and our team delivered. For example, one global client used the enhanced booking engine to manage more than 10,000 desks across five campuses. They reported a significant drop in scheduling conflicts of around 40% and a double-digit increase in employee satisfaction with hybrid coordination. That's another example where, with our solution, as you can see, the colleague booking where you can see the screens and the people and their images, while also looking at the visual representation of all the things around them. It's super amazing and creates that engagement layer. Say, yeah. I really want to get back to the office. I really want to interact with these people, and I really want to get my work done faster. Now, to enable that, we also have talked about the BTS, which is our behind-the-scenes. Oh, by the way, before I go there, let me show you a video jumping ahead of when I talked about this at the conference at the SF Tech Week, where we had Google as our invited guest partners. But let me share with you something that I've said there. Okay. I don't know if the video was accessible or not, but we're going to have it available on the platform. Let me try to play it again actually with my volume up; maybe that'll help. So that feature becomes so important. Our customer said, this is a must-have. The v1 pictures provide a scramble screen of all these images. Don't we want to see them? Let's see who they are. Right? It's just human behavior. Dash booking is a self-created feature, meaning that there's no need for it if you have assigned desks, which we grew up with. It was clear before the pandemic. So you created a new problem that has now made it difficult for an employee to get to the office and find a spot, which creates this new set of opportunities that I think AgenTeq AI makes easier and simpler because you don't want to go every morning wondering where you have to sit or what you have to do. We make recommendations for you so you can make it better. So what we do. Okay. So I think we had some technical glitches earlier, but hopefully, the audience heard the audio that just tells you, you know, what we see as a really killer application, a killer use case wanting to have this colleague booking feature, knowing who is in the office and where they're sitting, being able to adjust your daily calendar as well as your weekly calendar based on where it is. You know? And I think it's pretty cool to see this live in motion now. A lot of our clients are using it. It's a great feature. It's a must-have for a lot of our clients. I'm super excited about that. What enables all of this stuff is behind the scenes, the brains behind it. And, you know, before we go there, let me talk to you a little bit about one of the big deployments that we did this quarter, which was we went live at 30 Rock, which is a marquee place, and it's been pretty amazing to have that deployment live now. It took lots of effort from our client as well as us, and as you know, it's a high-profile place, so we made sure that everything was working well. We had around 6,000 users on day one on that system. The system did not implode; it actually worked really well. People were super happy. The clients made some Instagram posts, as you can see there. There were some really great activities happening. Looking at the activity logs, we have our SkyView Analytics; we can show you the things people were doing, and it's interesting. That client does not do any space booking, but they were doing a lot of amenities, content, and events. Most importantly, dining. Dining was the number one feature across the board. We launched not only that one site in New York; we also launched four sites across the country. One is on the West Coast, and the others are on the East Coast. It's interesting to see that there's a lot of great demand for their capability. A lot of users are using it every single day; some of the sites that we thought wouldn't be used as much are actually using it more. Primarily, as I said, the dining feature is a must-have; everybody loves the dining feature. Seeing all the other capabilities in terms of access to different amenities at the offices and the different events you can go to really create that engagement layer. Now, all of the ideas we talked about are in real motion, in real deployment with this client, and they're super happy with the performance. So let's talk a little bit about I mentioned the BTS, which is behind the scenes, and that is actually the key technology platform that lets enterprise admins manage complex content faster. We are in beta trials with a full AI plug-in for natural language content creation. These migrations are beginning in Q4, and this will be fully compatible with our legacy apps offering faster administration and granular growth controls. What that means is, if you're the IT person, you can access all the information ready to IT. Or if you're an HR manager, you can get all the people data. Or if you're an operations manager and you want your team data, you can have that access to that. You can provide content, notifications—everything necessary for that. So it's super exciting, and this is an infrastructure player that we believe will enable supercharging your legacy apps. So I want to go to the future a little bit. So we've talked about our Sky digital assistant and how it works. I'm going to play a little video of how our existing new and enhanced Sky Digital Assistant is working in our labs in San Ramon. You know, it's kind of like a Sky digital assistant. It's like an intelligent concierge. Employees can now book, plan, and act in real time using natural language, with the system proactively suggesting actions based on calendar, location, and behavior. It's a living example of AgenTeq AI in a workplace that works for you and not the other way around. I want to play the video. Hopefully, you'll hear the audio on this. You'll see our Sky assistant interacting with one of our engineers.

Joy Mbanugo, CFO

Hi. I'm Sky at San Ramon HQ. Can book meetings, reserve desks, or order food. How can I help today?

Khurram Sheikh, Chairman and CEO

I'm on the clinic tomorrow at 2 PM for one hour.

Joy Mbanugo, CFO

Thanks. How many people including you, will be attending, and will you need a screen?

Khurram Sheikh, Chairman and CEO

Oh, yeah. There will be screen people, and yes, I need one.

Joy Mbanugo, CFO

Yablo Gen with capacity for five and a screen sounds ideal. Would you like me to check its availability for tomorrow, November 12, at 2 PM for one hour?

Khurram Sheikh, Chairman and CEO

Yes, please.

Joy Mbanugo, CFO

Perfect. Let me check if Diablo Den is available for you. Good news! Diablo Den is available. Booking it now. All done. I've successfully booked Diablo Den for Wednesday, November 12, from 2 PM to 3 PM. Would you like to order food for your meeting?

Khurram Sheikh, Chairman and CEO

Yeah, that would be great.

Joy Mbanugo, CFO

Great. What type of food would you prefer? Do you recommend bamboo sushi for sushi? Both from tallest for vegetarian or mixed for healthy bowls.

Khurram Sheikh, Chairman and CEO

I'll go with mixed.

Joy Mbanugo, CFO

Perfect choice. I know you love the Dave's Taco Bowl from mixed. Should I order that for all three people?

Khurram Sheikh, Chairman and CEO

Yes.

Operator, Operator

Great.

Joy Mbanugo, CFO

What time should it arrive? Your meeting starts at 2 PM.

Khurram Sheikh, Chairman and CEO

02:30 PM.

Operator, Operator

Perfect.

Joy Mbanugo, CFO

I've ordered three Dave's Taco Bowls from Mixed, being delivered to Diablo Den by 02:30 PM. You're all set.

Khurram Sheikh, Chairman and CEO

So that's a gender guide work. Context-aware, proactive, and human-centered. Hopefully, you see how intuitive it was, how easy it was to use, and how context-aware it was to find the right thing for you and make it happen effectively. I know that, you know, if you turn if you put push the video on the screen, you can you could see it in real time. So we'll have that available for you after the call. And for the next video, I'll let you know how to depress it, but hopefully, you heard the audio on this. And, you know, before I go forward, you know, Q3 was a really good quarter for us. We had a lot of these great customer highlights, deployments, as well as, you know, this new advancement with the Sky platform. So we're super excited about that. I'm now going to continue to my partner, CFO, Joy, to give you the financial updates for Q3. Joy?

Joy Mbanugo, CFO

Thank you, Khurram. It sounds like—or not sounds like, but the digital assistant just reminds me of a theme for this quarter, something I've been thinking about, and the theme or keyword is momentum. So we're seeing momentum in the AI ecosystem. We're seeing momentum in the speed at which companies are implementing a return to office, or the reboot of return to office. So return to office 2.0. And then, more excitingly, momentum in our product, I think the digital assistant is super exciting for me. I don't know if I want whatever bowl I was ordering, but that sounds like a lot of great progress there. If we go to slide 18, we can look at our three financial highlights. This was a solid quarter of execution and operating discipline. We maintained strong margins, controlled OpEx, and delivered measurable improvement in profitability. Starting with ARR expansion, we closed the quarter with two large logo renewals in the enterprise segment. These renewals reflect customer confidence in our workplace platform and demonstrate the durability of our recurring revenue base. Our subscription revenue mix reached 99%, an increase from 88% in the same quarter last year. That transition towards pure staff continues to be one of our key strategic levers. It increases predictability, expands gross margins, and creates multiyear visibility into future cash flow. Next, on gross margin, we delivered an 89% increase compared to 88% in Q3 of last year and 86% last quarter. The steady improvement reflects the benefits of disciplined cloud cost management and more efficient infrastructure scaling. We're continuing to see leverage in our cost delivery as we optimize across multitenant environments and automate provisioning. Turning to cash OpEx, we held steady at $3,200,000 flat compared to both last quarter and the prior period. That stability reflects our ongoing focus on operational efficiency, maintaining a lean structure while still investing in innovation and go-to-market execution. Finally, on profitability and earnings per share, we improved earnings per share this quarter to negative $0.13, a substantial gain from negative $0.34 in the same quarter last year. That's a very clear signal that our cost controls and recurring model are working together to improve the bottom line. We can go to Slide 19, which is our quarter over quarter comparison.

Khurram Sheikh, Chairman and CEO

Revenue came in

Joy Mbanugo, CFO

at $1,100,000 compared to $1,200,000 in Q2. The modest decline reflects the shift in revenue mix. We saw lower hardware-related sales this quarter consistent with our strategy to phase out noncore components and focus on software-led growth. Cost of revenue decreased from $171,000 to $123,000, which drove an improvement in growth profit to $991,000 and lifted gross margin to 89%. That gain was driven primarily by tighter control over cloud utilization and vendor optimization. Looking at operating expenses, total OpEx declined to $4,800,000 from $5,200,000 in Q2, an 8% reduction quarter over quarter. Most of that was related to some savings, and you will see a slight increase in G&A, but that is primarily due to stock-based comp, just because we have a large amount of stock that vested for employees in Q3. So you always see that likely quarter over quarter. Overall, the shift demonstrates the flexibility of our operating model. We're able to scale innovation while containing discretionary spend. As a result, our firm operations improved to negative $3.8 million compared to negative $4.1 million in Q2 2025. That's continued progress quarter over quarter as we execute against our goal of reaching breakeven eventually. I'd also like to talk about our cash position. We remain very healthy with our cash position. We ended the quarter as of today with $9,000,000 in the bank. And with our equity and debt fundraising that we've done throughout the year, we have access to cash that should last at least for the next two years. In summary, Q3 showcased steady discipline performance, improving gross margins, consistent OpEx, and expanding recurring revenue for managing growth and profitability in tandem, ensuring Sky's position to scale efficiently while driving durable shareholder value.

Khurram Sheikh, Chairman and CEO

Back over to you, Joy.

Joy Mbanugo, CFO

Thank you, Khurram. So I want to talk a little bit about the future here. You know, at the tech week, we hosted a panel moderated by Samra Khan, who heads up system integrator partnerships at Google Cloud. She talked about the inclusive and immersive workplaces of the future. It's a very interesting talk. So I'm going to play a snippet of it. What I ask the audience is to please press on the play button so you can watch the video, but you're going to hear the audio through this as well. So I'm going to start right now. Speak if I'm in Foster City, my hologram is going to be sitting here. Those of you who are big Star Trek fans, I grew up as a kid. I always believed that one day that's going to become reality. If any of you have visited an Executive Meeting Center, we already have a demo of it. I'd say it's amazing and scary, all at the same time that, you know, the hologram was eating an apple, and I'm like, oh my God. This kid. So I believe, you know, we're going to—it workspace is going to enter the world of Panover. There is going to be virtual reality. That's how we're going to do meetings. I'm not saying that we're going to replace human interaction; I absolutely not. I think there is a need for that, and the need for it is always going to stay there. If COVID has proven one thing, it's proven that human connections are important. We're going to, you know, continue to be in a hybrid environment. But I think, most importantly, we're going to do what is going to get even better in 2030 and beyond is that no matter what part of the globe you are in, your employee experience is going to be inclusive, culturally adaptable for someone working out of Alaska versus Silicon Valley. It's going to be inclusive, which I think is very, very important. That's why I think virtual reality is going to be a big part of it. I wouldn't be surprised if I'm talking about this around five years from now, and I'm testing this new app if I've met a person at, and you know, I have all of this other stuff, and then he's like, hey, I've been testing this new app; I mean, I've met a person, and you know, I have all of this stuff.

Khurram Sheikh, Chairman and CEO

It's pretty exciting stuff. And, you know, these conversations and the others we've had, with great partners at our events, reaffirm that Sky is the partner choice for the world's most advanced AI ecosystems. We are very proud of our partnership with Google. It's super interesting how they are, you know, aligned with our vision, helping us on the infrastructure side, helping us on the go-to-market side as well. And then, you know, being thought leaders with us as we look at defining future work. So I want to summarize what you saw today, what you heard from us today, but you know, as we exit Q3 and now in Q4 moving into 2026, our priorities are clear. Three priorities. Number one, expand within our current customer base. Meaning for Fortune 500 clients, it's only two, three, or four modules today. Every expansion into either analytics or content management, the digital assistant that you saw multiplies ARR potential. Number two, accelerate ecosystem integrations. Partnerships like you heard about Noro and Google Cloud extend Sky's reach beyond traditional workplace apps into immersive and agentic experiences. And third, maintain cost discipline while investing in AI leadership. We're balancing growth with responsibility, proving that AI companies can scale intelligently. In short, Sky is the most advanced agentic AI solution for workplace and employee markets. We're not just riding the AI wave; we're architecting it. We're building not just another AI company; we're building a category-defining enterprise cloud platform. The most advanced agent AI solution for workplace experience and hybrid collaboration. I want to thank our employees, our extraordinary, creative mission-driven team, our customers, and shareholders for believing in this journey. Sky is more than a ticker symbol; it's a movement to make AI human again. We're super excited about this opportunity. Thank you, everybody, for joining the call. I’m going to take a couple of questions that came online. So, Joy, if you have a list of questions, please go ahead.

Joy Mbanugo, CFO

There's one from Jackson Vanderbilt Art from Maxim. It's multiple questions, Khurram, so I'm going to let you decide how you want to answer all of this. But the question is, give me one second. He wants the kiosk update, customer feedback and usage set, how many units deployed today versus pipeline growth and expansion progress with largest existing customers' status of testing before expanding deployments to all locations, and just the status of testing before expanding to large deployments and maybe more information on the thirty rock deployment and how we did that.

Khurram Sheikh, Chairman and CEO

Okay. Great. Thank you, Joy. Yeah. That's a lot of great questions all rolled into one. So I'll try to dissect it. The first one on the kiosk; absolutely. That's been a great product launch. We launched it with one client in Silicon Valley. They've deployed it in their campus in San Jose. It's working really well, and it's super exciting for them to start using it for their employees as they implement RTO. That deployment was our first deployment that gained traction. They want to first ensure San Jose works well before expanding it globally, around all of their 14-plus campuses. So that's an interesting opportunity. In parallel, we've got three more clients, existing clients who are already in pilot and starting to that pilot phase to deployment. A lot of them really like the engagement; it's real-time, just in time, completing actions, either booking a desk or booking a conference room or just navigating to the right person or doing a universal search. All of those are implemented, and I think there's a lot of genuine interest. I can't give you exact numbers on units right now, but I can tell you that, you know, for all the deployments in all the campuses that we have with our clients, they deploy one, it's obviously going to roll out to all the different campuses. We're excited about it, and I think there's a great opportunity coming in Q1 where we are going to launch these other three clients. From those three will come the next ten. So that's the kind of scaling you see on that product. On the other question in terms of our expansion opportunities, right? So thirty Rock is an example of a large multinational media company that deployed a marquee site in New York City. It was super critical for them to get it absolutely right. A lot of focus, a lot of hard work. I commend the team, both our team and the customer's team for making it happen. They not only launched New York; they actually launched LA, Miami, and Connecticut. So super excited. Even though they're early customers of the product, they want the kiosk right away. So they're actually in trials with the kiosk. I think all in all, it shows that it takes effort to get into these clients. But once you're in there, you see the opportunity—they're super excited about the potential. The outcomes, you know, through SkyView will be the test to see if it is actually doing a great job for the employees? I've mentioned before; my success criteria is adoption. We've been talking about our adoption numbers in terms of the number of users. I think it's going to be the number of interactions. If you look at the Sky, you know, the cloud I showed you, those 6,000 day one users had more than 30,000 interactions. It's amazing; the fact that they come to the app one time, they actually come to the app five or six times—those are the must-have moments we believe create that affinity for Sky and the value of Sky. With our agenda, as you can see, everything can be done within the New York minute. To us, that's game-changing. That's why these clients are staying with us because they see the potential of how Sky with 2.0 and the AgenTeq solution is going to be transformative to their business and to their clients. I would tell you one of the new studies I just saw said that people spend at least twenty-five minutes or more a day in scheduling conflicts. With what we showed you, we can take those scheduling conflicts out of the way so you can get your twenty-five minutes back or more, making your life more productive. We're in the phase of moving into predictable outcomes and showing them the real value of the application, not just the fact that the application functions. The application actually transforms how they work and how they are productive in their environment. There's a lot more coming, I would say to answer your question, Jack, and we believe that all of our clients are destined for scale. So alright. Any other questions, Joy, that came in? Or is that the only question we have?

Joy Mbanugo, CFO

That was the only one.

Khurram Sheikh, Chairman and CEO

Okay. Well, I want to close by saying thank you, everybody, for joining the call and for supporting Sky. I think we have a great future ahead of us, as you can hear from some of the partners we are working with. We're super excited about our success, and we're looking forward to giving you better and more predictable results in the future here as we start scaling the business. The exciting part is now coming, with AI being fully adopted in the enterprise. CIOs are not saying this is a nice-to-have; this is a must-have. We believe that we have an exciting opportunity to enable the future. We will be making many more announcements in the coming weeks and months regarding these opportunities. So stay tuned, and we look forward to our next earnings call or annual call hopefully early next year. But till then, thank you, everybody, and have a good evening.

Operator, Operator

Thank you. This does conclude today's conference call and webcast. You may disconnect at this time. Have a wonderful day. Thank you once again for your participation.