CXApp Inc.

Greetings. Welcome to the CX AI third quarter 2024 earnings call. At this time, all participants are in a listen-only mode. Please note this conference is being recorded. I will now turn the conference over to your host, Karam Shaikh, founder, chairman, and CEO of CX App. You may begin.

Thank you, operator. And thank you, everybody, for joining the quality earnings call for CXAI, pronounced Sky. Joining me today is our Chief Financial Officer, Joy Benugo. We plan to discuss CXAI's financial results for the third quarter of 2024 and also provide an overall business update on our progress in shaping the future of work, creating transformative employee experiences. By now, everybody should have access to our earnings press release. as well as our announcement of CXAI being available on the Amazon Web Services AWS Marketplace. We've also filed our quarterly earnings report, or 10Q, for Q3 2024 today. This information will also be found on our website, www.cxaapp.com. Operator, we can move to slide two and three, please. These are our disclaimer slides. I let the folks on the call read in their own leisure, and we want to make sure we give those disclaimers before we get into the main section. Please go to slide four, please. So, dear shareholders, I am proud to share our Q3 2024 results and the amazing progress we have made in shaping the future of work. At the heart of CXAI lies a simple yet powerful belief. Put the employee first and everything else follows. It's not just about the work, it's about the people who do it, the places where they come together, and the things they need to succeed. CXAI, or what we call SCIE, redefines how we think about work, life, and the seamless interplay between the two. I want to share with you a company snapshot of where we're at today. We are an AI-first company that believes the employee is at the center, of the multi-billion dollar growing workplace experiences market. And with our state-of-the-art Sky Platform, we are creating a new category in software employee experiences. We're headquartered in the San Francisco Bay Area, where we have our key design and technology development resources. We also have satellite hubs in Toronto and Manila, supporting global deployments in around 200 plus cities in 50 countries in nearly five continents. Our team of 80 innovators globally today at Sky are majority engineers, but all our colleagues are great collaborators and design thinkers that are creating the next generation of experiences for employees globally. Our customers are Fortune 1000 companies headquartered in North America, but once they signed up with Sky, they eventually deployed to all their employee sites globally. The reason why they chose Sky is because we have the best and most advanced technology platform that's built on 37 file patents, 17 of them which have been issued. This substantial intellectual property not only establishes our company as a technological frontrunner, but also secures 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. We're excited to partner with the leading cloud providers like Google Cloud and Microsoft Azure, and today we announced our collaboration with Amazon Web Services, AWS, which will allow us to scale our business to the next level. A key differentiator to 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. They use Sky because they know they can trust us with their data and provide enhanced employee experiences in a secure and reliable environment. So the company is in a strong position today. The earnings release is out. I'm going to talk about the market next. So operator, if you can move to slide five and on to slide six as well. As you think about the market, I think the biggest item in the news has been the return to office. RTO has been a big topic. At the same time, employee engagement has been super important as well. And most recently, Amazon CEO Andy Jassy sent a letter to his employees with a mandate for a full five days return to office, RTO mandate, beginning January 2025. There have been many CEOs following suit, as well as many others doubling down on their remote first mandate. This data that we show here from FlexIndex shows that although there has been an increase in the RTO mandates, most companies still offer work location flexibility. No matter what side of the RTO debate you belong to, there's overwhelming evidence that employee engagement is still at its lowest since the pandemic and continues to be a significant challenge for any organization, large or small. Gallup has actually created an engagement survey called the Gallup Q12, a survey of 12 questions that ask employees about performance, commitment to their organization, and business metrics. Employee engagement trends are significant because they link to many important performance outcomes crucial to organization leaders like employee retention, customer service, safety incidents, quality of work, and profitability. According to Gallup, not engaged or actively disengaged employees account for approximately $1.9 trillion. Again, $1.9 trillion in lost productivity nationally. And if you look at the chart that I show here, The trends are still on low engagement, both in, this is from North America, but this is around a global phenomena. And as Gallup has measured the productivity of employees and really advanced organizations that have got high employee engagement, that number has to be around 70%. So we're way off, orders are mainly off on the average in terms of employee engagement. And this is probably the main reason why CEOs like Andy Jassy are asking their teams to come back to the office, is Memo actually outlined three things driving the decision. Culture, cost, and innovation. Culture is key to the success of any organization. Culture is what defines a group of people, how they work together, and ultimately defines their identity. The fact that culture is challenged in the new normal of hybrid work is an interesting paradox. By pure definition, we have always had remote workers, all not in the headquarters of the company. As companies grow, they grow their base of employees everywhere. So the notion of the new normal where the people in the same city are remote because they're not in the office every day, like every other remote, not in the same city worker, is interesting. The sweet, sweet must start thinking differently how to create the culture of one team everywhere. The fact that someone is in the same city but not coming to the office every day should not prevent them to be part of the overall culture. The new culture is created with a combination of digital tools tied to the places where people work to create a pervasive engagement environment and letting the bonds build naturally. Even with Amazon's amazing market cap and profitability, the market demands that the C-suite continue to look at sustained growth and profitability. Real estate and human capital are two big cost items for any organization and seeing less than 50% occupancy reports or less than 33% employee engagement analytics is not pleasant reading to a senior executive or their boards. To manage cost efficiently and track employee productivity, occupancy reports or user service are inadequate. What is needed are AI-enhanced analytical tools that not only provide historical actual reports but also allow managers to forecast their enterprise usage as well as reimagine the workplaces to meet their key performance indicators. This is a big, big problem, and this is across all organizations. That's why we're so excited about the solution cycle we have. Technology has enabled people to be able to connect virtually from anywhere, anytime, and provide in-moment feedback. Yet we all know that even with all these technology advancements, for a team to gel and create amazing products, it is super critical to meet and work in person. We need that face-to-face interaction, but with a new set of engagement tools for this new workplace age. The employees need tools that will allow them to be empowered and engaged to work from anywhere, like how the smartphone enabled a new way of interactions between humans. And we need the managers and employers to have similar tools that allow them to guide and nurture their employees in friendly environments. So I'm going to next talk about how Gartner, next charge operator, please, is talking about this now as the next hype cycle. And as you know, Gartner is famous for, you know, looking at technology in advance. Gartner has created now a hype cycle for digital workplace infrastructure and IT operations. And it really focused on generative AI-based applications that take center stage in this digital workplace infrastructure. Sky has been mentioned by Gartner as a key technology leader in this ecosystem with numerous technologies from workplace experience apps to generative wide tools to augmented reality cloud to indoor location services that are all in our Sky platform that are on various slopes of this hype cycle. It's interesting when you read this hype cycle, it's obvious this is not something 10 years away. This is something within the next two to five years. And this is transformational. Even Gartner's accepted that. And as you look at the capabilities that our company provides for the markets we're serving, this is transformative. This is existential for some of these companies. So hybrid work is here to say improving the experience of employees in the office or away from the office is paramount. And we've got the technology capabilities around it. So this is where, operate next chart, please. Next slide, please. We are really focused on the AI piece of it. When we took the company public a year and a half ago. It was obvious that we were focused on Sky as being the AI transformational platform. And now the world is seeing that AI is coming into its next incarnation with AI agents that operate autonomously, making decisions and taking actions without human intervention. Agents just don't give answers. They can also take actions. A GenTech AI's ability to take action autonomously has the potential to help CIOs realize their vision for generative AI to increase productivity across the organization. I'm showing a chart here from Gartner, the survey of 78 leading CIOs on the benefits to the organization using generative AI, and two of the top four are squarely tied to our space, increased employee experiences and productivity. AI is transformed into the future of work, creating massively scalable offerings that create the flywheel effect of automating the workflows, driving engagement, enabling collaboration and productivity, leading to immense affinity in the employer-employee relationship. We have been strong believers in this technology and now proud to be the first in our industry to offer the solution to our customers. We firmly believe the future of work will be based on agentic AI as it will drive outcome-based solutions than just assistance. Autonomous AI agents must be trustworthy given their potential role in automating mission critical business processes. Enterprise will only deploy AI agents unless they're reliable, trustworthy, and secure. And that is why we built Sky. Next chart operator. So I want to talk about why our products and capabilities are really transformational here. The Sky technology platform represents a shift towards an AI-centric approach in workplace innovation. Sky seamlessly integrates customer experience, CX, with artificial intelligence, AI, focused around the employee to deliver solutions that transform the way work happens, making workspaces more intuitive and efficient, leading to happier and more productive employees. We have built Sky as an AI-native solution, grounds up, anchored on our mobile-first, cloud-first architecture. We have walked into our solution as a platform that solves problems for both employees and employees as they navigate their work lives. So if you look at this architecture diagram, I have tried to simplify it as we redesigned it as an end-to-end data architecture. And I want to walk you through the key components of the capability. On the left, as you start from the sky apps, these includes applications that work on all operating systems from Apple's iOS to Google's Android to any web-based solution that can reside on the smallest screens of a phone or a watch to the largest screens of a kiosk. We are truly multi-OS. These applications are all designed with AI capabilities to improve the user experience and automated workflows for the most productive and engaging actions and outcomes. The next box that we have is the brains behind Sky Platform resides in what we call Sky BTS. aka behind the scenes, where rule engines are established and content delivery is managed securely for all functions. The ability for managers to streamline their operation digitally with natural language-based commands and customize it for their locations is groundbreaking and transformational. And last but not least, the third leg of the wheel is The Skyview. Skyview is a generative AI-based analytics platform designed to revolutionize the workplace environment, allowing organizations to analyze large data sets, generate actionable insights, and make real-time decisions. All of these products are connected together in a secure enterprise environment that provides continuous feedback and enhancement to provide unmatched experiences for the enterprise. All the Sky products that you see here are hosted on all major cloud platforms. with modern AI infrastructure powering our customers with best-in-class cloud capabilities including proactive monitoring, security, privacy, reliability, and automation. And today's announcement with us being, you know, collaborating with AWS allows us now to be on all three cloud providers. We've had deployments on Google Cloud and Azure, and now we're gearing up to be deploying on AWS, the largest cloud provider. By the way, we're deploying all of these with the safeguards and guardrails to prevent agents from hallucinating in production environments. We're making this as a true enterprise environment solution, and this is where working with the likes of Google, Amazon, and Azure has been really important for us. Plus, all this innovation of Sky has been done with our large customers. As you know, our customers are in large five verticals, entertainment, healthcare, financial services, consumer, and tech. And these are big giants in the Fortune 1000. We've been working with them closely to provide these end-to-end solutions. And it's so satisfying to see this now coming to reality. Next slide, operator. So let me delve a little deeper into what are these experiences and some updates on the capabilities and availabilities of these offerings. So if you look at the left, you see the screen, the Sky app screen, and you see the home screen of a typical Sky application. It's an intuitive screen anchored on the map of the location that allows the user to be one click away from any actions and with our agentic AI solutions, one voice or text command away from actions. So make it very simple, very intuitive, very easy to use. And the first color that is really, you know, providing that consistent personalized workflow specific experience across mobile and web powered by over 100 plus integrations with enterprise back end system. It manages the complexity in the back with the Sky BTS, providing users with a clean, easy to navigate, context specific UI to complete their tasks. The next experience is really through the spatial intelligence. Spatial intelligence is a key part of Sky's technology stack, focused on optimizing physical spaces and enhancing interactions within the workplace, providing contextual awareness. Sky provides unique intelligent interaction capabilities by combining 2D and 3D mapping, mobile positioning, and IoT technologies. These are combined with the pre-trained AI models, helping to create in-the-moment experiences to delight our customers. The third part of these experience solutions is the AI experiential analytics. The use of AI to derive insights into employee engagement and workplace utilization is a core component of Sky. emphasizing the value of data in making decisions as well as measuring productivity. 5U had its first paid customer this quarter and is now generally available to all our existing clients who are all excited about its capabilities. And I'm really proud of the engineering team for delivering this solution on schedule to our first customers and deploying it. And all our customers are excited about it because absolutely this is super critical for their business operations. And for all new customers coming on Sky, Skyview is being packaged together with the applications. So as you go acquire the Sky platform, analytics comes with it. And finally, you know, as we look at our more advanced capabilities with generative AI, generative AI in Sky is really tied to boosting efficiency and productivity by enabling voice and text activated tasks, like scheduling meetings with a simple command and features like search and discovery. Leveraging the most advanced multimodal LLMs, we are adding responsible, secure, and reliable GenAI capabilities through a retrieval augmented generation RAG model that uses internal enterprise data to support intelligent planning and user interaction through text, speech, and video. This streamlines administrative duties, driving efficiency and convenience for employers, as well as personalization for on-demand knowledge augmentation. And I'm going to have the operator now switch to a video that I want to show a generative AI video to you guys of some of the capabilities we have and Opera you can start the video now Hey Sky, I have an unexpected client drop in with at least 3 guests in 10 minutes need a meeting room nearby immediately just find the closest available space