Earnings Call Transcript - SKYX Q2 2025

Operator, Operator

Good day, and welcome to the SKYX Platforms Corp. Second Quarter 2025 Earnings Conference Call. Please be advised that this conference call will contain statements that are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. Please note, this event is being recorded. I would now like to turn the conference over to Rani Kohen, Founder and Executive Chairman. Please go ahead.

Ran Roland Kohen, Founder and Executive Chairman

Good afternoon, everyone. We're happy to have you all here in our Q2 earnings call 2025. We will start with our President, Steve Schmidt, with a general overview about some highlights of this quarter. Thank you. Steve?

Stephen M. Schmidt, President

Rani, thank you, and good afternoon, everyone, on the call. It's my pleasure to be with you here this afternoon. What I'm going to do is cover briefly, at a very high level, some very good results from a quarter standpoint on the financial side and talk about some key updates relative to the business and progress we've been making. As an overview on the key financials for the quarter, our revenue was up 15% versus Q1, which is good growth. Our cash position was up $3.4 million, growing significantly versus the prior quarter; and our gross profit was up 23%, showing significant progress on that side of the financial ledger. Our net cash used was down significantly, down 54%, primarily due to some favorability in payables and the improvement in gross profit. Len Sokolow, our Chief Executive Officer, will be going into more detail on the financials in just a bit. So let's talk now about the business perspective and some key progress we've made. During the quarter, significant progress was made regarding our patents. We have granted eight newly issued U.S. and global patents, and we now have over 100 patents and pending applications with 45 issued patents. This is absolutely critical to maintaining the momentum of our business. It's important that I mention that each of our 100 patents and pending applications is based on three major factors: safety, massive addressable market, and global applications, all of which will drive future growth for this company. We also continue our collaboration with Home Depot with our advanced and smart plug-and-play products. We are in the process of growing our product assortment in Home Depot to offer a variety of our smart products, including ceiling fans, heating fans, light fixtures, exit signs, emergency lights, ceiling outlets, recess lights, and downlights, both indoor and outdoor. We're very pleased that this growth continues as we expand our retail presence. We expect our products to be in over 40,000 homes by the end of Q3 2023 in the U.S. and Canada through retail and Pro segments. Additionally, I mentioned last quarter about raising $15 million led by the Shaner Group, which owns and develops more than 70 hotels, including 60 Marriotts. We're making progress in this segment and hope to share updates soon as a major Marriott developer. Our Safety Code Standardization Team continues to receive significant support from a new prominent leader in government safety organization processes for safety mandatory standardization in homes and buildings of ceiling outlets and receptacle technology. Lastly, we announced a major collaboration with a Miami $3 billion mixed-use urban smart home city project, which is a significant opportunity for the company. We are working on some additional large projects that we hope to discuss shortly. So a lot of progress is being made, and we have good financial results. I will now hand it back to Rani to speak more specifically about the patents, the code, and the Miami smart city.

Ran Roland Kohen, Founder and Executive Chairman

Thank you, Steve. As he mentioned, we're happy with the additional patents we have, and I think the most important aspect is that everything we invent at SKYX has to do with safety first, a massive addressable market, and global application. We are proud to have over 100 patents that all fit within those two categories as a contingency for everything we invent here. That is our core foundation, and this is why we have garnered a lot of support from tremendous leaders, Steve being one of them, who is the former CEO of Home Depot and President of Disney World, along with other key members, including individuals from the National Electrical Code Head and the American Lighting Association Head. With the code, we are making progress as we found out that there are two government safety organizations responsible for ladder falls and general safety, and the other is in charge of electrical and electronics. According to our code team, their primary criteria focus on saving lives, mitigating injuries, and preventing property damages. We're pursuing these aspects according to those criteria, but we have made some significant behind-the-scenes progress, which we hope to share soon. This is crucial for our pursuit of mandatory applications for ceiling outlet receptacles, all based on safety. Lastly, our smart city collaboration is a major milestone for us. We are excited to announce this collaboration. The site is located in the heart of Miami, near downtown, South Beach, and Wynwood, from west of I-95 to US-1. I believe that our product can expedite the wiring of the entire community and do so in a more cost-efficient manner. We hope to have it in production in the coming months, marking a significant factor in our business plan. As mentioned, we expect to deploy 500,000 units between our smart and advanced products, including the all-in-one smart home platform and various smart products. This is truly a landmark project and we're thrilled to be involved.

Leonard Jay Sokolow, CEO

Great, and thank you, Rani. I appreciate that update. We reported an increase of 15% with record second quarter 2025 revenues of $23.1 million compared to $20.1 million for the first quarter of 2025. We continue to grow our market penetration in the U.S. and Canadian markets, and further to that, our growth has increased for six consecutive quarters from Q1 2024 to Q2 2025. With respect to cash, as of June 30, the company reported $15.7 million in cash and cash equivalents, and restricted cash compared to $12.3 million as of March 31, 2025. As a company, when sales convert into cash rapidly, we refer to that as the Dell Working Capital Model. We leveraged our trade payables to finance operations, enhancing our cash position and lowering our cost of capital. Our growth continues supported by our e-commerce platform encompassing our 60 websites, along with support from strategic investors and insiders. We firmly believe we have sufficient cash to achieve our goal of becoming cash flow positive in 2025. Our net cash used in operating activities for the second quarter ending June 30, 2025, decreased sequentially by 54% to $2 million compared to $4.3 million in the first quarter of 2025. This was mainly due to a 23% increase in gross profit for the second quarter ending June 30, compared to the first quarter. This marks the beginning of what we hope to be positive momentum as the gross margin for the second quarter increased sequentially by 7% to 30.3% when compared to the first quarter. The adjusted EBITDA loss for the second quarter, which is a loss before interest, taxes, depreciation, and amortization, was $2.6 million or $0.02 per share. This is an improvement over the $3.6 million loss or $0.04 per share in the first quarter of 2025. Rani, if I could, maybe turn it over to you.

Ran Roland Kohen, Founder and Executive Chairman

Thank you, Lenny. We can now open it up for Q&A. We have Gerry Sweeney here from ROTH Capital.

Gerard J. Sweeney, Analyst

Yes. Is my line open now?

Operator, Operator

Yes, you may proceed.

Gerard J. Sweeney, Analyst

A couple of questions. Obviously, you highlighted being cash flow breakeven this year, and it looks like you're making some headway. Can you give us a little bit of a bridge from where we are today to cash flow breakeven? Is this accelerating sales? I noticed some increase in G&A in the quarter, but I'd like to understand how we get to cash flow breakeven by the end of the year?

Ran Roland Kohen, Founder and Executive Chairman

Yes. As you can see, as Lenny mentioned, we reduced some cash expenses, and that's a major step that we want to continue, and we believe we will. Additionally, we expect to launch a few products very soon. One of them is an all-in-one smart heater plug-and-play product. As I mentioned, it has a ceiling fan functionality for summer and heating for winter. This product is designed with safety in mind, allowing it to be installed in a secure location rather than on the floor. We foresee strong demand for this product from several big box retailers and aim to notify everyone upon launch. Our e-commerce platform is also contributing towards this and we anticipate a significant increase in revenues and gross margins this winter.

Gerard J. Sweeney, Analyst

Got it. The standardized code or mandatory standardization has always been a significant potential catalyst for you guys. I know there have been movements over the last six months, and you highlighted two government agencies potentially offering support in achieving that. Could you provide more details on what’s happening there and the path forward?

Ran Roland Kohen, Founder and Executive Chairman

Yes. I'm sharing an interesting slide now with those who can see. These are prominent mandatory safety standards that are known, such as plug and play systems, GFCI receptacles in bathrooms, and significant safety changes like seatbelts and airbags. Many of our leadership here are from Fortune 100 companies and believe it's only a matter of time before this mandatory compliance is enacted for electrical safety. We have met all the contingencies, including from various national electrical codes, and we are in discussions with relevant government organizations that can expedite the standardization process. We are optimistic that this can happen sooner rather than later, but we must also wait for confirmations.

Gerard J. Sweeney, Analyst

Got it. One more question for me. A big hire in your e-commerce platform from Amazon. Any details on changes or opportunities there?

Ran Roland Kohen, Founder and Executive Chairman

Yes. We have a great e-commerce team, and our Executive Chairman, Todd Johnson, has been focused on major platform changes. We felt it was necessary to bring on a prominent leader in the industry, Huey Long. He has extensive experience in the e-commerce sector, starting as a buyer at Circuit City and later building brands at Amazon. His leadership has elevated our e-commerce strategy, and we believe he will be a significant asset as we scale our operations. We are excited about the direction we are headed and hope to announce more developments in this area soon.

Gerard J. Sweeney, Analyst

Rani, it's a pleasure talking to you.

Ran Roland Kohen, Founder and Executive Chairman

Thank you, Gerry. It's a pleasure talking to you as well.

Operator, Operator

Ladies and gentlemen, that was Gerry Sweeney with ROTH Capital.

Ran Roland Kohen, Founder and Executive Chairman

We now have Pat McCann from NOBLE.

Patrick Joseph McCann, Analyst

First, I wanted to touch on the Parrot Uncle manufacturing partnership for the ceiling heaters and fans. Could you talk about the product availability? Are there any new partnerships with developers? You mentioned that big box retailers want this product, but are there any partnerships with other developers hinging on that product becoming available?

Ran Roland Kohen, Founder and Executive Chairman

Yes. We are working on several channels for the advanced and smart plug-and-play heater. The collaboration with Parrot Uncle opens markets in the U.S., as well as globally. Many regions that do not utilize air conditioning represent significant opportunities for our product. We believe the advanced smart heater has great potential. We are also working with several big box retailers and builders, and we hope to announce partnerships soon as the product nears availability.

Patrick Joseph McCann, Analyst

Does that collaboration serve as a proof point for other developers? Are you seeing any extra traction due to the smart city project's announcement?

Ran Roland Kohen, Founder and Executive Chairman

Yes, great question, Pat! We're receiving significant interest and many positive discussions following the smart city announcement. We are actively exploring multiple opportunities based on this project, so the recognition we've gained is certainly beneficial.

Patrick Joseph McCann, Analyst

Excellent. I appreciate the extra color.

Ran Roland Kohen, Founder and Executive Chairman

Thank you, everyone, for your time. We look forward to our next call or any updates in between. Thank you to Steve Schmidt, our President; and Lenny Sokolow, our CEO. We appreciate your participation. Hopefully, we will see or talk to you soon at our next call.

Operator, Operator

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