Q4 2023 CXApp Inc Earnings Call
Speaker Change: Greetings and welcome to the <unk> fourth quarter 2023 earnings call. At this time all participants are in a listen only mode. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded.
Speaker Change: I'll now turn the conference over to your host.
Speaker Change: Shake Chairman and CEO you may begin.
Speaker Change: Thank you operator, thank you everyone for joining the quarterly earnings calls with <unk>.
I plan to discuss <unk> financial results for the fourth quarter 2023, and for the full year 2023 as well.
Speaker Change: Also provide an overall business update on our progress in shaping the future of work.
Speaker Change: Creating transformative employee experiences.
Speaker Change: What else would start off by thanking you for joining the call I know that unfortunate yesterday, there was a hiccup with our webcast system, which has nothing to do with the company.
Speaker Change: But the webcast for why do we were working with unfortunate this system was down and because this was such an important call.
Speaker Change: You know sharing the results for Q4 as well as the full year.
Speaker Change: Really exciting enel so she wants to make what we decided to do it today.
Speaker Change: And we really appreciate your patience with that by.
Speaker Change: By now everyone should have access to our earnings PR announcement that went out on the wire a few minutes ago.
Speaker Change: This information will also be found on our website www dot <unk> dot com so not the move to the next two slides, which you can review at your leisure. This is your disclosure statements.
Speaker Change: Disclaimer statements.
Okay.
Speaker Change: Okay.
Speaker Change: Well Dear shareholders today is an exciting day.
Speaker Change: Oh for our company as we announced a strategic rebranding from <unk> to <unk>, our Crinone Sky.
Speaker Change: Being just over a year that we went public on March 14 2023.
Speaker Change: We have made incredible progress in shaping the future of work.
Speaker Change: I wanted to share a short video that describe this amazing transformation that our team is leading.
Speaker Change: Listen in.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Well that was exciting.
Speaker Change: At the heart of <unk> or would we like to call Sky lives a simple yet powerful belief put the employee first and everything else will follow its not just about the work it's about the people who do it to places where they come together and the things they need to succeed.
Speaker Change: Guy Redefines, how we think about work life and the seamless interplay between the two.
Speaker Change: Sky offers a unique proposition for both employers and employees where employers at all to the streamlined integrated work Super App.
Speaker Change: Caters to the needs of a modern mobile first workforce simplifying daily operations will amplify efficiency and innovation for employees Sky promises of Workday transformation Envisaging, a scenario, where every tool we task and every interaction is tailored to individual preferences facilitated by a single user friendly.
Speaker Change: Excellent.
Speaker Change: Sky is more than a super App, it's a platform to create in workplaces that are as dynamic worth Italian remarkable at the people who inhabit them. We're not just enhancing how work gets done we re imagining it for a brighter more connected work with Sky you don't just build a workforce your culture.
Speaker Change: A weird a culture U shape of community and you create an architect the future because at the end of the day without the employee there's no work no office no culture, let's put your Playfirst together watch everything else falls into place.
Speaker Change: So who is sky today in the evolution of our company. So wanted to give everybody a snapshot of where we are today.
Speaker Change: Where we were a year ago.
Speaker Change: We are headquartered in the San Francisco Bay area, where regional Tech hubs globally to go global presence and diversity of experiences gives us a leading edge and reshape the future of work everywhere, we have a development.
Speaker Change: Dwell been team in Toronto, and who also have development team in Manila, and we have resources globally supporting us as we scale.
Speaker Change: Our architecture. After 75 team members at Sky more than two thirds are engineers, and we have doubled and drink staff over the course of the last year at the same time as reducing overall expenses significantly as you'll see in the financial information we will share.
Speaker Change: We believe the employees at the center of this multibillion dollar growing workplace experience with Margaret.
Speaker Change: We're creating a new category of software employee experiences that's who we are.
Speaker Change: The Sky platform is based on 37 filed patents with 17 of them already granted this substantial intellectual property not only establishes a copy of the technological front runner, but also secured our position as a pioneer in the industry. This platform has been developed in collaboration with leading AI companies in the tech ecosystem in Silicon Valley.
Speaker Change: We're excited to partner with Google Cloud as we scale our business to the next level.
Speaker Change: We're excited to report a 24% increase in annual recurring revenue from 'twenty to 'twenty two to 'twenty three.
Speaker Change: It hasn't been schools through a major customer wins this last year.
Speaker Change: Especially those two fortune 1000 wins. This last quarter. We are proud to have some of the largest move into the world as our customers.
And our partners at the leading edge of the workplace transformation more than 20 of them are fortune 1000 companies, we're scaling with us we need to do.
Speaker Change: <unk> globally every day.
Speaker Change: A key differentiator for our business is that we have strong security and compliance credentials globally and that is the reason you see so many logos from regulated industries.
Speaker Change: Sky because they know they can trust us with their data.
Speaker Change: And with their enterprise security and compliance.
Speaker Change: Finally, I'd like to say you know the culture of Sky. The company that we have now is innovation focus with three core values purpose passion and positivity, we are passionate about solving the big problems in the future work using E. R and we get Super positive about creating a new paradigm of gateways transformation of the enterprise focused on it.
Speaker Change: Employee experiences.
Speaker Change: As I look over the last year, it's amazing to see how we have been deployed now 59 countries and 280 in cities. That's an amazing accomplishment for the team as you've grown the business across all dimensions. He will show you more of the technology and the financial results in a little bit, but just at a high level Super proud of the team.
Speaker Change: Thank them for doing an amazing job in 2023.
Speaker Change: So let me talk about what's happening in the market and what I see in terms of where we're at so when we think about the sky solution. It really crazy the affinity flywheel and what's happening in the market. It is a paradigm shift that is underway and it's impacting the modern day workforce society as a whole is redefining what it needs.
Speaker Change: To be productive engage and fulfilled professionally.
Speaker Change: The future of work is not place dependent it's happening in the space of endless possibilities with technologies, enabling work in life to be blended integrated seamlessly and augmented with intelligent personalization and employees are at the center of this universe.
Speaker Change: The future is now and it's being led by Sky platform focused on transformational employee experiences.
Speaker Change: As we said earlier Sky isn't just a super App, it's a catalyst for transformation businesses that embraced sky unlock the potential for more efficient collaborative and engaged workforce in doing so they set the stage for a future where work truly knows no bounds.
Speaker Change: We have architected, our solution as a platform to solve problems for both employees and employers as they navigate their work lives and we've built a grounds up anchored on artificial intelligence AI.
Speaker Change: AI is transformative to the future work, creating massively scalable offerings that creates the flywheel effect of automating the workflows driving engagement.
Speaker Change: Enabling collaboration and productivity leading to immense affinity in the employer employee relationship we've been strong believers in this technology and now proud to be the first in our industry to offer solutions to our customers.
Speaker Change: So what is our solution you know what what do we have and what did we developed over the last year.
Speaker Change: The four pillars of our employee experience solution are the first is experiential analytics use of AI to derive insights into employee engagement and workspace utilization is a core component of sky, emphasizing the value of data and making decisions as well as measuring productivity.
Speaker Change: The second pillar is the work Super App and you see a version of that the latest one on the screen here, it's a central platform that integrates various workplace functionalities, reflecting sky's emphasis on a unified mobile first approach to workplace technology.
Speaker Change: The third pillar is spatial intelligence, it's a key part of Sky's technology stack, focusing on optimizing physical spaces and enhancing interactions within the workplace to location based technologies and we have a lot of IP on that as you all know, but finally, the most the killer App for US is degenerative Jeremy.
Speaker Change: Generally we are in sky boost efficiency and productivity by enabling wife and test text activator tasks like scheduling meetings with a simple command and features like search and discovery. This streamlined administrative duties driving efficiency and convenience for employees as well as personalization for on demand knowledge augmentation. So as we look at you know.
Speaker Change: The life of the deal for an employee or the life and do you have an employer repowering Uda to sky with this great employee experience a solution that impacts them globally and all the things you'd do it work can be odd.
Speaker Change: So who's using this product and why is this so so transformative we're blessed to have really great customers across many enterprise verticals.
Speaker Change: The primary business, our primary business now as a SaaS platform that we sell to enterprise customers and an annual subscription for Nuomi three year periods.
Speaker Change: Today's customers deploy our cloud hosted software across their enterprise campuses to allow employees to connect with their workplace, where a lot of different use cases, and examples being guestroom booking collaboration navigation food ordering Indian telecommunications.
Speaker Change: Our large enterprise customers are mainly due to the falling talk quite verticals financial services technology media and entertainment healthcare and consumer.
Speaker Change: We are proud to have some of the largest logos of the world as our customers that are at the leading edge of the workplace transformation, we have a healthy distribution across all verticals and we see the adoption trend developing from technology sector focused companies to larger fortune 1000 portfolio.
Speaker Change: And as you can see some of the new logos that we've had are coming from the financial services from health check in and from media and entertainment a lot of regulated industries are adopting our technology because they see the value of.
Speaker Change: The mobile slowest application the rehab.
Speaker Change: But all of our customers are sophisticated buyers of technology solutions and do not compromise our quality performance security reliability.
Speaker Change: Our ability and technology roadmap. So that's why we as we compete in the market, we find us to be at the leading edge of all these large enterprises.
Speaker Change: So let me talk about the transformation we've done overall at the company.
Speaker Change: As we think about the business.
Speaker Change: The predecessor business that we acquired was accustomed design services for enterprise clients business well.
Speaker Change: While this approach provided a customized solutions limited, our scalability and ability to serve a broader market and heavily weighted to business to onetime revenues.
Speaker Change: Upon taking over the business last year, we immediately recognized the need to award that's why we made a strategic shift to become an AI first subscription based SaaS platform.
Speaker Change: Okay.
Speaker Change: This transition empowered us to deliver a unified work experience to our workplace Super App.
Speaker Change: By leveraging AI, we can drive personalize the user experience automate tasks and quite valuable insights to our customers.
Speaker Change: This shift towards a platform world, where recurring revenue streams position sky for long term sustainable growth.
Speaker Change: Ultimately, it's a win win for both Guy and our customers, we get scalability and efficiency with our customers, but also from a platform that leverages the software capabilities of scale.
Speaker Change: Well as probably more engaging productive work experience. So when you look at the Hum you know our our today's business. We are signing multiyear our licenses we are going to multi cloud now besides Google cloud, we have deployments with AWS as well as with Azure and then we are now.
Speaker Change: <unk> building feature based releases with engineering, so you're seeing a much much more refined engineering team as well as a much more clearer product focus and driving scalability.
Speaker Change: And if you look to the future and all the all the work that we're doing with Sky platform really moving the value chain into the value to the user and to the end user experiences as well as providing a SaaS platform with micro services and lastly, but most importantly, the data analytics and the general applications are where we're headed so.
Speaker Change: We've gone through this transformation in year, one we're ready for you to in terms of scaling up this business and we're super excited that we're achieving a lot of success with our customers and our partners in achieving that mission.
Speaker Change: So I will just recap our mission statement, which I know that when we when we acquired the business we've had it and we're going to stick with it because it is the right mission and vision disguise Scott SaaS platform is anchored on the intersection of customer experience and artificial intelligence, providing digital transformation of the workplace for enhanced <unk>.
Speaker Change: <unk> says across people places and things.
Speaker Change: So that's our mission that's been our focus and I'm really proud that the team has executed this year to get us through this phase.
Speaker Change: So now I'm going to flip over to the financial section and financial results. We're going to talk about Q4 first and then we're going to talk about the year comparing from year to year.
Speaker Change: So let's get into it.
Speaker Change: On the Q4.
Speaker Change: You know it's been a great amazing Q4 for US we had double digit growth.
Speaker Change: Our you know in our ear.
Speaker Change: E R R, which is annual recurring revenue, which is a key metric for us.
Speaker Change: We saw the significant increase due to some really large wins are our team pulled through these deals after lots of scrutiny and testing as well as fierce competition and this translate to robust future subscription revenue and a healthy pipeline.
Speaker Change: Additionally, subscription revenue increases it continues to increase and is now 81% of our total revenue. This again reinforces our successful transition to a recurring revenue model.
Speaker Change: And we will continue to increase that percentage. If you recall this was at the time of our transaction with <unk>.
Speaker Change: In the 60% to 70%, but now it's north of 80.
Speaker Change: Our gross margins remained strong at 80% indicated operational efficiency and healthy profitability potential as we scale our business.
Speaker Change: On the customer acquisition side, we are proud to have secured two enterprise clients NBC Universal one of the largest media entertainment companies in the war and there are greater than $5 billion.
Speaker Change: Investment management company in the financial services has been the two big wins for this quarter is further validates the market demand for our solution, where the world's biggest enterprise companies. We're super excited to work with them and with these clients we are going to deploy it with sky and with our newly formed Google Cloud partnership fine.
Speaker Change: We have achieved a 56% net reduction in operating expenses compared to Q3 2022. This proactive cost optimization will position us for sustainable growth in strategic reinvestment because you've done the restructuring we have as I had mentioned earlier double the number of engineering staff the supporting it we've taken out a lot of the G&A.
Speaker Change: Cost and other cost and sales and marketing there were not productive for us, but we're not really at risk.
Speaker Change: Tipping point of scaling up with the right technology right platform and the right focus of the business.
Now I'm going to move to a 2023, how do we do there.
Speaker Change: And.
If you think about our.
Speaker Change: Our results that we announced here you know it's been a record banner year for us for ear or growth perspective.
Speaker Change: First and foremost we reached achieved a remarkable 80% increase in Iraq for new bookings for our Super App product in 2023 compared to 2022.
Speaker Change: Exceptional growth underscored the surging demand for our subscription based offerings and validates our strategic shift towards a recurring revenue model.
Speaker Change: Also the overall annual recurring revenue was up 24%, which shows great resilience, we've done at our existing customer base as well as new clients, who are at the beginning of the Sky journey as you read the financial statements, you'll see that the total revenue was down but that was because of our strategic shift to this annual recurring mall.
Speaker Change: Well, we have given a one time revenues or these multiyear deals which are more beneficial for us both from our customer engagement and as well as from a valuation perspective and for our scalability. So that was a that was determined move by us and I'm pretty happy that we have seen seen this level of Iraq growths in our business.
Speaker Change: You know the Furthermore, our yearly subscription revenue mix has increased from 65% to a strong 78% as I said earlier.
Speaker Change: Q4.
Speaker Change: It was at 81%. So we're really on a strong path to getting more subscription revenue and this successful shift away from onetime fees to a more predictable and sustainable revenue model is the right path for us.
Speaker Change: On the customer acquisition front, we've added many new fortune 500 companies as our customers highlighting the market appeal of our Super App solution. The key marquee was as you can see in financial services reason being why Mellon and NBC Universal are really the results there of their segments and so we're super excited to working with them.
Speaker Change: We're working on really great products for them and really great solutions that I think will be launched in 2024 and will be scaled up dramatically.
Speaker Change: And.
Speaker Change: So all in all we really are pretty happy with the end of the year performance. We when you look at the GAAP Opex reduction from when we acquired the business. We've had a 37% reduction year over year in Opex, which ultimately caused around $13 $2 million and cost cutting measures and as I said early we reinvest in the business.
Speaker Change: We cut deeper, but still we managed to maintain the quality of our product maintain the performance of our engineering team actually double the number of engineers and more importantly, we have kept our cost structure to a point, where it's really tied to scalability in 2024.
Speaker Change: Looking forward.
Speaker Change: Looking ahead, we're confident that our increasing euro bookings strong customer acquisition and focus on subscription only little gripe sustainable growth, we're committed to continually innovating our sky platform delivering value to our expanded customer base.
Speaker Change: So let me talk a little bit more about 2024.
Our initiatives in 2024.
Speaker Change: Okay.
Speaker Change: Our strategic initiatives are focused on five key pillars, firstly learning expand we plan to scale our existing logos.
Speaker Change: With deployments globally.
Speaker Change: You want some really large clients at the starting point of their journey.
Speaker Change: Secondly, given that we have successfully deployed the solution does demand from new clients to build a future for them faster, we're seeing a lot of new demand coming in from the Sky platform and working with Google and others, you think that that expansion will definitely happen.
Speaker Change: Foreign expansion to optimize customer retention and deliver exceptional value. We're relentlessly focused on continuous part of innovation on the Sky platform. These innovations are driven by our customer request for increased engagement tool to drive employee satisfaction and productivity. So we're continuously adding new features to the existing platform grew at all.
Speaker Change: For new innovations and new experiences.
Speaker Change: As you look forward.
Speaker Change: The Sky platform is built on a are the focus of AI is really on the AI automation dispersion is to revolutionize the employee experience in 2024 and beyond by consulting and tools into a mobile fluids work Super App, we streamline workflows boosting efficiency and productivity.
Speaker Change: In our power to push integrated with Google Cloud goes beyond basic automation is designed to create a intuitive and personalized work experience, reducing friction and promoting employee collaboration key factors driving engagement and affinity.
Speaker Change: And last but not least we also have all the analytics and the Sky platform. These experiential analytics offer business had unprecedented access to data driven insights about their workplace and employee interactions.
Speaker Change: We're harnessing the power of spatial intelligence and generally we are sky provides actual recommendations, we're optimizing workplace utilization in the Hansen collaboration aimed at improving overall workplace effectiveness. These insights will allow companies to make informed decisions that align with their strategic goals seemed to better resource allocation higher operational efficiency.
Speaker Change: And then more engaging work environment that continues to do both feedback and improvement fostered an innovative culture that is responsive to change positioning businesses as needed and creating future ready workplaces.
Speaker Change: Now last one our lease our strategic partnership will be the cornerstone of our growth strategy over the year, we're actively expanding our network of partners from the cloud to the device.
Speaker Change: Regarding the best into an experience as employers and employees. This will enable us to offer a fully integrated end to end workplace solutions solidifying our position as the go to platform for managing the entire employee experiences through these partnership will unlock new and innovative use cases for our super app be able to drive both market expansion and deepen our relationship with existing.
Speaker Change: We're confident that street departure will be a key driver of extra growth in market leadership in 2024.
Speaker Change: And one of the ones that we've announced.
Speaker Change: Today, you know.
Speaker Change: Couple of weeks ago wind and in today's P or you'll see that is our is our work with Google cloud team.
Speaker Change: Olive Street partnership with Google Cloud is a major catalyst for growth it reinforces our dedication to pushing the boundaries of the future work enhancing the powerful workplace Super App and so the first initiative that they've worked with US is they are co investing in our sky platform modernization, which is really you know developing this next generation.
Speaker Change: Karen.
Speaker Change: Getting the right set of capabilities around it we think that's really important to work with a partner that has a lot of capabilities in AI and security and all the different capabilities. So we think thats super important. So that's one part of the relationship is really driving the product development and product innovation to deploy things faster deployed things at.
Speaker Change: Kale and deploy it seems with the latest set of tools.
Speaker Change: The other part of the relationship is really our lifting of the sky platform on the Google marketplace.
Speaker Change: This will really expand our reach to the Google cloud WAF customer base.
Speaker Change: In the ex list adoption and delivery of solutions and access to customers. We think that's a huge opportunity for growth.
Speaker Change: You know I talked a little bit about the technology pieces early.
Speaker Change: AI and security are really.
Speaker Change: It's a core focus of our customers that we're targeting so as we move forward.
Speaker Change: We are using.
Speaker Change: Other capabilities from Google to help us with enhancing that capability.
Speaker Change: And lastly, we are we.
Speaker Change: We are focused on joint go to market sales and marketing ample.
Speaker Change: Amplify the awareness of our products create new growth opportunities to accelerate growth as well as work together as we solve the problems for our joint customers.
Speaker Change: So this is an exciting partnership it signifies our commitment to innovation and scalability.
Speaker Change: Our integrated solution will be a competitive advantage for sky, while delivering unmatched value to our clients.
Speaker Change: So now I wanted to just sum up in terms of.
Speaker Change: Why sky.
Speaker Change: Why should be you'd be thinking about this company and.
Speaker Change: The reason is because we're a transformational solution built on CX and here, we have a patented leading edge enterprise via a SaaS platform. There are a great customer base of fortune 1000 logos across five large verticals.
Speaker Change: We're diversified deployments globally in 59 countries and 280 cities when innovation driven experienced management team and our partnership with leading innovators in the Valley is Testament to how were transformational in the technology, but also in the business.
Speaker Change: And our goal from the start has been to define this new software category called employee experiences.
Speaker Change: We really are excited about that we really believe that this is the future and we're already ahead of the game and developing the solutions for the future.
Speaker Change: So in summary, I would say amidst the industry's rapid growth sky stance uniquely positioned to lead the category and shifting employee workplace experience landscape given the ongoing digital transformation of nearly all enterprise organizations.
Speaker Change: So I welcome you to to learn more about the company to track the company, we're gonna be sharing a lot more information or a website with the new sky platform and the new Sky branding and you know.
Speaker Change: We want a your input and your partnership and investment as we move forward. We look forward to sharing more results more information in the coming weeks and months.
Speaker Change: And to the Sky and beyond Thank you everybody.
Speaker Change: Thank you. This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.