Earnings Call Transcript - SKYX Q3 2025

Operator, Operator

Good day, and welcome to the SKYX Platforms Corp. Third Quarter 2025 Earnings Conference Call. Please note that this event is being recorded. I would like to remind everyone that today's call may contain forward-looking statements that are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. For more details, please refer to our Form 10-Q for the quarter ended September 30, 2025, and other filings with the SEC. SKYX undertakes no obligation to update forward-looking statements, except as required by law. I would now like to turn the conference over to Rani Cohen, Founder and Executive Chairman. Please go ahead.

Ran Kohen, Founder and Executive Chairman

Thank you for joining us for our third quarter conference call. We have some important updates to share, and I'm excited to discuss them. Now, I will hand it over to Steve Schmidt, our President and former CEO of Nielsen Data Corporation. Thank you, Steve.

Steven Schmidt, President

All right. Rani, thank you very, very much. It's great to be with you here this afternoon. I also want to welcome you to our third quarter earnings call. As you're going to hear today, we are making significant progress, and I'd like to emphasize that there are more significant things to come on several fronts in the very near future. We reported record revenue of $24 million in the third quarter 2025 compared to $23 million for the second quarter 2025 as we continue to grow our market penetration. Our revenues have now increased for seven consecutive quarters from Q1 '24 through Q3 of '25. We've signed an agreement with a prominent U.S. and international real estate developer, Global Ventures Group, to deploy our advanced smart home technologies to buildings and hotels in Middle East projects, including Saudi Arabia and Egypt. We expect to deploy hundreds of thousands of units to tens of thousands of homes and hotel rooms to Middle East projects. This is another major step for us as we anticipate more to come in the Real Estate segment. We will be supplying our technologies to a 278-apartment project in Austin, Texas, built by prominent developers, Landmark Companies, providing over 10,000 units of our advanced Smart Plug & Play technologies. Again, another major development group, and again, we anticipate more to come. As previously shared, we have established a major collaboration with a Miami $3 billion mixed-use Urban Smart Home City project. We expect to supply over 500,000 units of our advanced Smart Home Plug & Play platform technologies for the entire Smart City project. After our successful demonstration of our technologies during a recent Marriott hotel renovation, we expect to significantly expand our hotel segment. We hope to share more information about our hotel channel expansion in the very near future. We can continue to grow by developing over 50,000 of our products into homes and units by the end of Q4 2025 through Retail and Pro segments. It's important to emphasize that our technologies expansion provides additional opportunities for future recurring revenues through interchangeability, upgrades, AI services, monitoring, subscriptions, and data. As former CEO of AC Nielsen, I understand the importance of data and the revenue opportunity associated with it. Khadija Mustafa, former Head of Microsoft AI, will be shortly expanding on this significant opportunity. Regarding our Safety Code Standardization, our team continues to make progress and is receiving significant support from a prominent leader with its government safety organization process for safety mandatory standardization in homes and buildings of our ceiling outlet and receptacle technology. We are confident with the recent progress that our team is making with our mandatory application for our ceiling receptacle. On the product front, we expect to launch our patented Advanced & Smart Turbo heater fan and a variety of Plug & Play ceiling fans during this month. We anticipate it will be a major step towards our positive cash goal. In the area of AI, a significant development is our upcoming launch of a new AI-driven software for our e-commerce platform of 60 websites expected to increase our conversion rate in sales by 30%. The AI native e-commerce platform is designed to elevate B2B and B2C experiences through our innovative and smart product line. In the area of cash, as of September 30, 2025, we reported a total of $13 million in cash, cash equivalents, restricted cash, and receivables. The company has recently raised $5 million in additional capital from two of our leading shareholders. This is another proof of confidence from our lead investors and in continuation of our path of raising funds from strategic long-term investors and shareholders as well as from insiders, including myself. Before I pass it to Lenny Sokolow, our CEO, I'd like to emphasize again, like I did in our last call, that we are making significant progress and are working on additional significant business opportunities, and we hope to be able to share a significant amount of this more in the very, very near future. So with that, let me turn the call over to Lenny Sokolow, our CEO. Lenny?

Leonard Sokolow, CEO

Thank you, Rani, and thank you, Steve, for that update. To reiterate, we have reported year-over-year and sequential growth, which is significant for us and reflects a positive trend that we expect to continue. In addition to the recently raised $5 million in capital from two of our major shareholders, it's important to note that these funds were part of notes totaling approximately $11 million, which have now been restructured and extended with a maturity date out to 2030. This demonstrates their understanding of our position, belief in our potential, and confidence in our strategy and development. We will see this reflected in our disclosures at the end of the year. We are leveraging our cash position through our e-commerce platform, which includes our 60 websites, along with support from strategic investors and insiders. Our deferred revenue is showing growth, particularly from products sold on our websites that are pending delivery, indicating an acceleration in e-commerce revenue. As is typical for companies like ours, when sales quickly convert to cash, it's often called the Dell Working Capital model. We use our trade payables to finance operations and improve our cash flow, reducing our cost of capital through vendor support. We are implementing this structure with key manufacturing partners to assist in financing our purchases and managing inventory needs. It’s crucial to recognize our focus on cash leverage and conservation at multiple levels. The gross profit for the third quarter ending September 30 rose sequentially by 8% to $8 million compared to $7 million in the second quarter. Alongside this, we saw a slight decrease in cash used for operating expenses, meaning we are not increasing expenses while generating more gross profit. The gross margin for the third quarter increased sequentially by 4% to 32%, up from 30% in the second quarter. Our net loss per share decreased by $0.01 to $0.07 per share in the third quarter compared to $0.08 in the second quarter. The adjusted EBITDA loss per share stayed at $0.02 for both the third and second quarters. We are seeing a small decrease in our EBITDA loss, which is a positive indicator for us. With that, I'd like to hand it over to Rani. Please go ahead.

Ran Kohen, Founder and Executive Chairman

Yes. Thank you, Steve and Lenny for that update. Again, to emphasize some of the things that Steve mentioned, we're experiencing great progress with developers starting with the Smart City projects and our collaborations with Global Ventures, as well as with the project in Austin from Landmark. Now we have signed agreements with major developers that are expanding toward the Middle East, including Saudi Arabia and Egypt. We're optimistic about the future in those regions and others that we hope down the road to share with you. Also, as Steve mentioned, after our Marriott demo, which was very successful, we are confident that this has opened doors for significant business that we believe is going to happen. We're working diligently to ensure that we can expand into these channels. When we supply to the Builder and Hotel segments, as Lenny mentioned, we leverage our relationships with manufacturers who want to join our efforts and collaborate on projects, whether in Miami or here in the U.S. or hopefully in the Hotel segment or abroad. Vendors are eager to participate with us and are assisting us in funding these ventures. As Lenny indicated with the Dell Model, we supply, get paid, and then pay the vendors afterward, which is significant in terms of managing our cash flow. Lastly, before I turn it over to Khadija Mustafa, the former Head of AI for Microsoft, I'd like to highlight that we are making advancements with the mandatory standards. We see significant steps being taken behind the scenes, and we hope to get to that day soon. To remind everyone, many injuries and fatalities occur daily due to inadequate safety measures, and our products can prevent those incidents. We've been gaining attention from high-level agencies, and we hope to share more soon. With that, I'll pass it to Khadija Mustafa.

Khadija Mustafa, Former Head of AI for Microsoft

Thank you, Rani. Delighted to be here. As you've already heard from the team, SKYX is gaining solid traction and expanding rapidly. Everything from the Miami Smart City initiative to the partnership with Global Ventures is opening doors for projects in Saudi Arabia, Egypt, and beyond. It's important to recognize that this isn't just about growth; it's about progressing towards truly global scaling. In Saudi alone, there's a remarkable pace of innovation. All sectors there are rethinking themselves, adopting next-generation technologies to leapfrog the rest of the world. They have a very significant appetite for this. This is just one area where SKYX fits perfectly. Combined with the population and urbanization trends in emerging markets, entering now positions SKYX to help define how people will live and work in years and decades to come. Having observed the tech industry for 27 years, I am incredibly excited about the opportunity SKYX has. Currently, no single company has unified the smart home or smart building space. It's highly fragmented with a vast array of unbranded technologies that do not communicate effectively. SKYX has the potential to change this by addressing the integrated physical layer necessary to enable technology. Their standardized all-in-one smart ceiling platform is creating the essential infrastructure to connect everything else. This is crucial as it completes the ecosystem for both major tech companies and emerging start-ups driving smart space innovation. There's immense potential to build a suite of new AI-driven services, and all organizations are focused on AI integration. Examples include adaptive lighting responding to human presence and mood, predictive safety systems, real-time energy optimization tied to grid demand, and wellness insights based on the spaces we occupy. I like to refer to this as creating 'nodes of intelligence' in our everyday environments. The smartphone connected individuals; the car connected mobility; and now, SKYX is defining the connection for the spaces where we live and work, transforming them into intelligent nodes within the connected ecosystem. The rich data SKYX collects is invaluable, not just for homes but for all built environments including hotels, hospitals, offices, and retail spaces, each representing new opportunities for SKYX's platform to enable a wide array of AI-powered services at a global scale.

Ran Kohen, Founder and Executive Chairman

Great. Khadija, thank you so much. That was very insightful. We're receiving numerous inquiries about our expansion and product offerings, which we've generally referred to as AI services and the AI ecosystem, but I appreciate the added detail you provided. Before we transition to Q&A, I want to emphasize one of Steve's points again. We are very close to launching our Turbo Heater Fan and ceiling fans Plug & Play. We expect this will bring us very close to our cash-positive goal. We're looking forward to launching these products in the coming weeks. They are in production and on their way. We hope to announce exciting news soon. Thank you again, Khadija and team, and we'll now take some Q&A. Barry?

Barry Sine, Analyst

Can you hear me?

Ran Kohen, Founder and Executive Chairman

Yes.

Barry Sine, Analyst

Okay. A couple of questions, trying to get a better sense of the near-term revenue outlook, if you don't mind. So you mentioned that you expect to deploy over 50,000 of your products by the end of Q4. I assume that's the total unit sales in the fourth quarter. If so, how does that compare to 3Q? What kind of average selling price might we be thinking of? I assume that's expensive lighting fixtures, just simple Sky Plugs? Can you give me a little more color on that number?

Ran Kohen, Founder and Executive Chairman

I'll give you more color on that question. To remind everyone, we emphasize our Razor & Blade model where our razor is a ceiling receptacle that opens the door for a simple fixture that can cost $50 or for a fancy fixture that can cost $500 or $1,000 or even as Khadija mentioned to our future all-in-one smart platform. We can't anticipate exactly what consumers will choose when they buy the receptacles. Our growth is with the number of units, and we anticipate approximately 50,000 by the end of this year. But the mix is variable as we get to the market; for example, we are selling lighting chandeliers, wall sconces, downlights, ceiling fans, and the heater fan this quarter. These are higher-ticket items. Once we land them, we will have a clearer picture. We believe that as we introduce these significant items, along with several others, we'll be able to provide updates when we launch in each segment and channel. The big picture is also that we are finalizing EXIT signs and emergency lights that should arrive soon. The more we increase our product range, the better our revenues should be. Additionally, we've launched unique software for our website that we believe will significantly increase conversion rates and sales overall. We're optimistic for the future, but we need to be careful with our projections, as our press releases reflect that we're committed to delivering on our promises and launching products step by step.

Barry Sine, Analyst

If I can follow up, please. You just mentioned the software upgrade on the website. Can you talk a little more about what you're doing? How do you expect to increase revenue by 30% with the software upgrade? That sounds like a fantastic upgrade. More importantly, when might we see those effects on revenue? It seems likely that its impact will start to show in early 2026, rather than in Q4. What specifically are you implementing, and when will investors see the results?

Ran Kohen, Founder and Executive Chairman

We're in the process of integrating the software and want to be cautious because we need to secure what we're selling today. We expect to have this completed hopefully by Q1 or latest Q2 of 2026. Once fully integrated, it will combine with our new products, and we anticipate a 30% increase in conversion rates through various AI methods that will enhance our ability to convert visitors to customers and improve overall website experience. The software tools available today are sophisticated, and with unique products, we have a better chance of driving traffic to our site due to our uniqueness. Our e-commerce team is well-led by Huey Long, a former Amazon executive, and our Executive Chairman Todd Johnson, and we’re collaborating with key engineers to maximize that potential. The software that worked 5 or 10 years ago is nothing compared to what's available today. This integration is expected to elevate our e-commerce capabilities significantly.

Barry Sine, Analyst

Okay. And my next question is regarding – you announced many customer contracts with builders and others in various locations such as Saudi Arabia, Egypt, Miami, and Marriott Hotel. Which of those are currently shipping and which are yet to come?

Ran Kohen, Founder and Executive Chairman

The Marriott demo was an important showcase to open the door for further business that we hope to expand soon. We have a few local projects in Austin, Texas, and some in Florida that we're supplying. We expect the Smart City in Miami and Saudi projects to start supplying next year. Our model follows the Razor & Blade model, so there is a lead time, but we are working on other projects that we hope to announce soon.

Barry Sine, Analyst

You mentioned that your product could reduce injuries. Just yesterday I installed a light fixture and cut my finger and almost fell off the ladder. I can attest to what you're saying; your products can't become mandatory fast enough. That's all my questions.

Ran Kohen, Founder and Executive Chairman

Thank you. It's sad to hear about your experience. The data we possess regarding safety incidents is shocking. We estimate there are 500 million installations in the U.S. If we assume 99% of those installations are done perfectly, that still leaves millions that do go wrong. It's essential to recognize that while not every mistake causes injury or fatalities, many do. We'll share more data on this in the future. Thank you, Barry, for your questions. Good questions. Okay, we have Pat McCann from NOBLE Capital. Please, Pat.

Patrick McCann, Analyst

First, I was curious about the upcoming launch of the ceiling heater fan. Is there a level of visibility you already have in terms of billings for that to help you get towards adjusted EBITDA breakeven in Q4? Or is it more of an expectation of what will happen once they become available?

Ran Kohen, Founder and Executive Chairman

We have some visibility, but we want to ensure that we can deliver them on time, which is our main focus. Today, in our press release, we did indicate that we expect to start landing these products in November. We'll have a better picture once they arrive, but there is significant anticipation around them.

Patrick McCann, Analyst

Got it. My other question is about revenue mix looking ahead to 2026. How do you think things will play out in terms of the mix between consumer sales on websites versus builder partnerships starting to gain traction? Do you have any idea of the general mix between these two revenue types?

Ran Kohen, Founder and Executive Chairman

Currently, our revenues this year mainly come from retail, but we expect significant B2B growth starting in 2026. We're already seeing signs of this, and while we can't definitively say what revenues will be from retail and B2B, we anticipate a shift toward a larger share coming from B2B by 2026 along with potential revenue streams from partnerships like Home Depot.

Patrick McCann, Analyst

Congrats on the quarter.

Ran Kohen, Founder and Executive Chairman

Thank you, Pat. We have Jack Vander with us. Please, Jack.

Jack Vander Aarde, Analyst

Great. I appreciate the update. Clearly, progress is made on all fronts. You're tackling a lot. I want to start with Rani and Lenny about the gross margin trends and the new software to boost conversion rates. This quarter shows record gross margin historically. Where does this go from here? Is there potential for more upside or is this just reflective of the product mix?

Ran Kohen, Founder and Executive Chairman

In the big picture, as we merge in more of our own products, we expect to see higher gross margins, which aligns with what we've previously said. The new software will also assist in this trend. Merging our products into the market increases gross profitability. The anticipated software and the new product mix will facilitate further gross margin improvement, and in this quarter, you are seeing the beginning of this trend.

Leonard Sokolow, CEO

As we mentioned, it is all about the margin blend. Once we can land and sell more of our own products, we have a different margin profile. Meanwhile, B2B revenue is expected to increase, positively impacting both top-line revenue and margins; also, licensing opportunities present a significant margin potential for the future.

Jack Vander Aarde, Analyst

I have one more question. Regarding the recent U.S. government shutdown, can you elaborate on any impact this may have had on your progress in seeking application for standardization of your ceiling receptacle? Is this something behind you now, any implications?

Ran Kohen, Founder and Executive Chairman

Generally, the government shutdown and tariff situation encouraged manufacturers to get creative. They have turned to countries like Taiwan, Vietnam, and Cambodia. We are working with U.S. sources as well. As for our product standardization, the current push from the U.S. government to manufacture domestically aligns with what we can do. Our technology can be entirely automated, opening doors for U.S. manufacturing.

Jack Vander Aarde, Analyst

Excellent. Just one last follow-up. You mentioned you are aiming to track towards 50,000 installations by year-end. Are these numbers tied to specific larger projects, including the Smart City project and hotels?

Ran Kohen, Founder and Executive Chairman

Not from the Miami City project or hotels yet, but we are working on several products and projects to supply. While the end of the year is approaching rapidly, our Builder segment is beginning to see supply, and significant growth in 2026 appears promising. We hope to confirm further developments soon.

Thomas Hayes, Analyst

I appreciate your time. Could you elaborate on the opportunities in the Middle East? Will it focus on commercial, retail, or residential developments, and how do you see your new programs working out?

Ran Kohen, Founder and Executive Chairman

Yes, the Middle East is emphasizing the development of advanced technologies. This focus has opened doors for us with Global Ventures Group in that region. They believe our technology enhances their projects by providing better homes and hotels. They anticipate collaboration with other builders to introduce our products, which align well with the region's significant growth and innovation, so we are optimistic about our presence in markets there.

Thomas Hayes, Analyst

Thanks. One last follow-up about the Turbo Heater Fan. Is it only selling through your website, or will it also be available at Home Depot?

Ran Kohen, Founder and Executive Chairman

Yes, we anticipate it will be available on our website and several accounts including Home Depot, pending further announcements. We’re also confident that the Turbo Heater Fan will be significant for us once these products land. We aim to announce more retailers as we can. Thank you.

Operator, Operator

That concludes the question-and-answer session. I would like to turn the conference back over to Rani Kohen for any closing remarks. Please go ahead.

Ran Kohen, Founder and Executive Chairman

Thank you, everyone, for joining our call. As you saw, we're making progress. As Steve said, we’re optimistic about continuing that progress, and we look forward to our next call and potentially even closer updates if interesting developments arise. Thank you all very much, and we look forward to speaking with you again soon.

Operator, Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.