Earnings Call Transcript - SKYX Q2 2023

Operator, Operator

Good day, and welcome to the SKYX Platforms Corp. Investor Update Call. Today's webinar is being recorded. Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast including those regarding future financial results and industry prospects are forward-looking and may be subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the call. Please refer to the Company's SEC filings for a list of associated risks, and we would also refer you to the Company's website for more supporting industry information. At this time, I'd like to turn the webinar over to Rani Kohen, Executive Chairman of SKYX Platforms Corp. Sir, please go ahead.

Rani Kohen, Executive Chairman

Hi, everyone. Good morning. Thank you for joining us, and I hope everyone can see our screen. Luke, do we see our screen? I guess that's a yes. Okay. So no screen sharing. So we will share the screen. Just one second, our screen here. We would like to share our screen. Make sure we have. Here we go. Okay. Now, I believe we can see our screen. Thank you again, everyone. Thank you for joining us this morning. We have our second quarter investor call and update. With me here, I have our CEO, John Campi; and then we have Steve Schmidt, our President, former President of Office Depot and CEO of Nielsen Corporation; and we have our CFO, Marc Boisseau. Thank you again. What we will do today is we will go over some management commentary about financials for the second quarter, we will demonstrate a video to those who aren't familiar with our three generation products - Generation 1, 2, and Smart. And we will also have a live demo of some of the 64 websites that we acquired at Belami. And we will have a live demo to show you what we're doing there and demonstrate. With that being said, we would like to say that our mission is to make homes and buildings safe and smart as the new standards. Our products significantly save lives, save costs, save time and simplify. One of these reasons by itself is a major reason for huge success. We've seen significant results across the board. Therefore, we strongly believe that we can revolutionize at least one or maybe two industries with our patented plug & play technology. So with that being said, we will move the screen now and share it with our CEO, John Campi, who will read his commentary.

John Campi, CEO

Good morning, everyone. Second quarter 2023 and subsequent operational highlights. We generated $15 million in revenue in the second quarter of 2023, reflecting a partial quarter of sales, including the commencement of sales of our smart and standard plug & play products. Sequentially, we reduced net cash used in operating activities by $2.5 million in the quarter. Cash and cash equivalents, restricted cash, and investments available for sale totaled $23.7 million as of June 30, 2023, compared to $16.8 million as of December 31, 2022. We've appointed several strategic advisors, including Khadija Mustafa, former Microsoft AI and Global Business Leader, as a senior tech AI and global business advisor; Eric Jacobson, former President and CEO of the American Lighting Association, as a Senior Product Standardization Advisor; and Al Weiss, former President of Worldwide Operations at Walt Disney Parks, Resorts, and Cruises, as a Senior Business Development Advisor. We joined the broad-market Russell 2000 and Russell 3000 indices at the conclusion of the 2023 annual reconstitution. We successfully acquired Belami E-commerce, a profitable conglomerate with 64 websites for lighting and home décor. The acquisition was primarily funded using the Company's stock, while the cash portion was funded by two major Sky investors. The E-commerce acquisition is expected to enhance the Company's cash flows, speed up time to market for Sky’s ceiling safe plug & play smart and standard products, as well as expand distribution across professional and retail segments, while concurrently serving as a marketing and educational platform. The Company is eligible to apply for a building safety standardization requirement with the National Electrical Code (NEC) for its ceiling outlet receptacle and is expected to file its application within the next few weeks. Management believes that after over 12 years of its standardization process, including its product specification approval voting by ANSI and NEMA (American National Standardization Institute and the National Electrical Manufacturing Association), it has met the necessary safety conditions for becoming a ceiling safety standardization requirement for homes and buildings. In the past 12 years, the Company's product has been voted into 10 segments in the NEC Code Book. Voting decisions are at the discretion of NEC voting members. Our code leaders are Mark Earley, former head of the National Electrical Code, and Eric Jacobson, former President and CEO of The American Lighting Association.

Rani Kohen, Executive Chairman

Thank you, John. We will now move to our CFO, Marc Boisseau, former Chief Accounting Officer of Citrix. Please, Marc?

Marc Boisseau, CFO

Good morning and thank you, Rani. Good morning, everyone. For Q2, as John mentioned earlier, revenues were $15 million for Q2 2023, with a gross profit of $4.7 million. These figures include the operations of Belami, which we acquired in late April 2023. As of June 30, 2023, cash and restricted cash totaled $23.7 million. When we include marketable securities, this compares to $16.8 million as of December 31, 2022. Our cash used in operating activities for the quarter was $2.5 million, down from $2.8 million in the same quarter last year. It's worth noting that current liabilities include $5.6 million of fair value for our common stock shares, which are payable to the sellers of Belami in April 2024. Operating expenses for the quarter totaled $17 million, which included $8.2 million in non-cash share-based payments. Among those expenses, $2.2 million was for share-based payments granted to newly hired Belami employees, with approximately $5 million allocated for Belami SG&A and about $3.7 million for SKYX SG&A. The net loss for the second quarter of 2023 was $12.3 million, which included $8.7 million in non-cash share-based payments, depreciation, and amortization, along with another $3.6 million in cash-based expenses. Therefore, the net loss per share was $0.14 last quarter, compared to $0.06 per share in the prior year quarter.

Rani Kohen, Executive Chairman

Thank you, Marc. And now, we are going to move to Steve Schmidt here, our President. Please, Steve.

Steve Schmidt, President

Hey, Rani, thank you. And good morning to everyone, and it's my pleasure to be on the call with you this morning. Before I talk about the management commentary, I just want to share a few thoughts with you. I joined this company several years ago for really five or six reasons. And I think what's really exciting to me is that those reasons have come to fruition, or will be coming to fruition very shortly. It starts with the company having a solid leadership team. Rani Kohen's leadership role, both as an inventor and from a strategic aspect, really makes a significant difference. The second element is the leadership team. We have one of the smartest leadership teams I've encountered. We've got expertise across the entire organization. What speaks volumes around their commitment to this company is the fact that the majority of them, or many of them, are taking stock and have purchased into the Company, which helps reduce cash flow but also shows their commitment. Third, we really believe we have global opportunities. This is not merely a U.S. opportunity but a global one when we achieve the standardization of our products and services. Fourth, we are confident in our ability to revolutionize several categories in the lighting industry. Having proprietary products, services, and technology is essential. With our patents, we have exclusivity. We can protect the intellectual property of this company, which we believe is critical. Finally, we have General Electric as a global partner who believes in what we are doing and the products and services we have to offer. It’s an exciting time for this company as we roll out our products. What you are seeing today is the fruit of our labor. From a management perspective, the second quarter of 2023 was highlighted by our first significant revenue that included the sales and rollout of our ceiling smart and standard plug & play products, which are now featured on 16 leading U.S. and Canadian websites. Despite this being a partial quarter, it demonstrated a promising cadence of sales and a robust gross margin profile, notably reducing the cash burn of SKYX sequentially. Additionally, the acceleration of our marketing, distribution channels, and sales efforts to both professional and retail segments will provide additional cash flow to the Company. This, combined with our existing cash, should be sufficient for at least 18 months of operation. We are encouraged by the momentum in our commercial journey, which I have previously discussed, paving the way for our standardization efforts. The 16 leading websites featuring the Company's ceiling smart and standard plug & play products include 1stoplighting.com, lightingdesignexperts.com, canadalightingexperts.com, americanlightingstore.com, homeclick.com, and lunawarehouse.com, among others. These websites offer banners, videos, and educational materials regarding the simplicity, cost savings, time savings, and lifesaving aspects of the Company's patented technologies. One other key point I want to cover is this chart here that Rani touched on briefly. Our products present four significant benefits: they save lives, save costs, save time, and offer simplicity. There are many companies that have been incredibly successful by focusing on one of these benefits, but we offer all four. When you consider the safety factor surrounding our products and services, every media outlet, association, and government agency has a fiduciary obligation to report on lifesaving opportunities. Offering all four benefits with our products places us in a unique position for future success. With that said, let me turn the meeting back to Rani to continue.

Rani Kohen, Executive Chairman

Thank you. We will now show a 4.5-minute video to highlight the key points Steve just discussed. After the video, we will explain what the websites do and why they are important for us. We have won five CES awards and received endorsements from various organizations such as UL, FCC, NEC, ANSI/NEMA, and AIA, the American Institute of Architects. We are optimistic about the global market, which has billions of installations; in the U.S., there are hundreds of millions. We aim to capture a significant share of this market, whether that's 5%, 10%, 20%, or 30%. If it becomes mandatory, our share could be even larger, but we would be content with 1%. Based on U.S. installations, this would represent a substantial figure. Our application for standardization stems from our belief that we can lead in safety standards for installations, similar to how Edison’s invention of the Edison base became a global standard. We aim to establish this standard in the U.S. and potentially around the world. We have achieved important milestones in the NEC, including the most significant addition in the last 40 years and a new definition for receptacles after 120 years. Our objective is to develop a ceiling receptacle that allows for multiple fixture installations. We have received specific approvals from 10 segments, including ANSI/NEMA and the American Institute of Architects. Our WSCR (Weight-Supporting Ceiling Receptacle) has been recognized and voted upon, reflecting our achievements over the last 12 years, especially in the last year with the ongoing backing of ANSI/NEMA and the American Institute of Architects. We showcased our products at various events this year, winning multiple awards, including five at CES. The Builder’s Show was particularly successful, garnering significant appreciation and global demand for our products. We are in the process of updating our websites with our products. Our presentation at the AIA annual conference also received an enthusiastic reception. We are progressing with our 64 websites and will conduct a live demonstration. Every product on our websites will be available for purchase in three ways: traditional hardwired, plug & play, and smart plug & play options. Each option opens up potential revenue for the company, with the latter two options providing even more lucrative opportunities. We are actively converting more fixtures to include these last two options. So with that being said, we will now show you a live demo of our websites. This is one of our leading websites, 1stoplighting.com. It’s been a top U.S. website for over 16 years. As you can see on the right, there is a banner. When you click on the banner, if the internet works, it does. You arrive at our page where, on the right, there’s a demonstration video of a woman installing fixtures. You will notice our logo on the left for SKYX Platforms and our Sky Plug logo. As you scroll down, you will find fixtures integrated with our products. For example, we will now click on a fixture, and its homepage will display additional information, additional banners, additional videos, and you will have the three purchasing options discussed earlier: hardwire installation, plug & play, and smart plug & play. Each option details what hardwiring means as well as the associated risks. When you click on chandeliers, our Sky Plug banner will also appear. These banners showcase the innovation of moving from hardwiring to plug & play installations. As we click here again, you will again arrive at our page and see similar information. So, this is 1stoplighting, one of the leading websites in the U.S. Now we will take you live to another leading Canadian website, Canadalightingexperts. We have clicked here and are on the new website. You can see the same banner here, similar product choices, and a display of options for hardwire, plug & play, or smart plug & play purchase. We are very excited about these developments. Again, we click on chandeliers and see significant banners. We will have comprehensive education on every page of these products, and we will continue to educate as we integrate more products over the course of 64 websites. As John Campi, our CEO, previously shared, we are currently featured on 16 websites and are excited about expanding this number. Before we conclude, I want to express appreciation to our team. I also want to thank key individuals who joined us, including Bob Nardelli, former CEO of Home Depot and Chrysler, who has been a great support, Al Weiss, former President of Disney Parks, and Khadija Mustafa, former head of Global AI for Microsoft. Eric Jacobson, who has years of experience in the lighting industry, has also been significant in helping us lead the standardization application together with Mark Earley, former head of the National Electrical Code. Their collective experience contributes to positioning our application positively. We are incredibly excited. So with that being said, we will now take some questions.

Operator, Operator

We are incredibly excited about the collective experience that Al Weiss, Khadija Mustafa, Eric Jacobson, and Mark Earley bring to our team, which helps position our application positively. With that said, we will now take some questions.

Rani Kohen, Executive Chairman

I will read some questions that we have here. Will we have retrofit options for existing ceiling fans? Yes, we're working on this. Once we introduce retrofits for light fixtures and smart retrofits, we will offer standard plug & play for ceiling fans and smart plug & play for ceiling fans as well. That’s the answer. Someone is asking if we plan to conduct quarterly calls? Yes, we do plan to do quarterly calls. Another question: are all the products on the sites already related to plug & play products? No, we're in the process of implementing now. We wish it was complete. We are currently working with hundreds of items, and we expect to move that number into thousands very soon, and hundreds of thousands in the future. As we integrate more fixtures with our smart products, we expect our sales to increase. We have noticed positive growth since the second quarter in June and anticipate much more growth as we proceed in August with more fixtures. In essence, getting receptacles to homes is critical. Once you have a receptacle in your home, it can lead to recurring revenues with future plug & play, standard, or smart configurations, or data aggregation possibilities for monitoring. We're genuinely excited about our progress. I think I've addressed most of the inquiries, if not all. Let’s see if there are a few more. Okay. I need to scroll down to see the rest. Okay. Rodney Ronan is asking what the margins are. We haven't disclosed the margins. However, we have healthy gross margins, particularly from our direct sales on our websites, which improve our financial position. Regarding Eric Jacobson, he’s focusing on licensing alongside standardization to expand our offerings. Stay tuned for more developments in the forthcoming months as we aim to share updates on these efforts. Another question is about our expansion beyond our current websites. Absolutely, yes, we are in discussions with major retailers, and we aim to integrate our 64 websites with all our products first and concurrently expand our outreach further. We will announce significant partnerships soon. Concerning our cash position; it remains robust as we highlighted between cash, cash equivalents, and other segments totaling $23.7 million. Moreover, with what Marc, our CFO, mentioned, part of our liabilities relates to stock payments. We're reviewing a few additional questions. Some seem to repeat Another question regards our inventory. We are pleased to share that we maintain a minimal inventory. Our E-commerce model does not necessitate holding much inventory. We collaborate with partners who manage the inventory, which minimizes our financial risk. We aim for a safe model in managing inventory. There are recurring questions about providing projections. At this time, we're focused on enhancing our business with product integration and are not making projections yet. We're actively working to integrate hundreds of items and eventually progress to thousands. I believe we have addressed most of the questions. Many of these inquiries seem to repeat. Someone is asking where they can find a list of websites. Currently, you can review our press releases, where Steve Schmidt previously mentioned several. We will be announcing more websites as we continue integrating our products. How quickly can we finish integrating the 64 websites? We believe that in the coming months, a significant portion will be completed. As for the mandate application, per what John Campi, our CEO mentioned, we intend to file in the upcoming weeks. After 12 years of progress, we feel confident about our position. It’s been a gradual journey, but we’ve made significant strides in the past year.

Steve Schmidt, President

Yes. We want to thank all of you for your time here this morning. It’s our pleasure to present our quarterly results, and we look forward to doing this each quarter with you. Thank you again for your participation.

John Campi, CEO

I would also like to thank you for your participation today. We truly look forward to these quarterly reports, as they allow us to share the accelerating progress we are experiencing. So, thank you once more, and have a great day.

Rani Kohen, Executive Chairman

With that, we conclude. Thank you very much for your questions. We look forward to our next call. Rest assured, when we have updates, we will announce them. Thank you very much.

Operator, Operator

Thank you. That does conclude today’s webcast. You may disconnect and enjoy the rest of your day. We appreciate your participation today.