CXApp Inc. (CXAI) Q3 2026 Earnings Call Transcript

Operator: Good day, and welcome to the CXAI Third Quarter 2026 Earnings Call. [Operator Instructions] Today's conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Khurram Sheikh, CXAI's Chairman and CEO. Please go ahead, sir.

Khurram Sheikh: Thank you, Rachel. Good afternoon, everyone, and thank you for joining CXAI's Third Quarter 2026 Earnings Call. I'm Khurram Sheikh, and I'm very pleased to share with you our results for the quarter and our plans moving forward. You have all seen our press release that hit the wire 20 minutes ago. I want to begin with a simple message. CXAI is becoming a healthier, more scalable company and the progress we made in the third quarter reinforces our confidence in the direction of the business. Over the past several quarters, we have been focused on 3 priorities: number one, expanding our recurring revenue base; secondly, building a differentiated agentic AI platform around real business outcomes; and thirdly, creating a more efficient operating model. In Q3, those priorities began to come together in a more visible way. We delivered approximately $3 million in quarterly revenue, meaningfully reduced our cash EBITDA loss by $1 million, expanding the reach of our platform through the full quarter contribution of EngineRoom and advanced our next-generation AI products. The story today is not simply about getting larger, it's about building a software-led AI business that can grow with improving operating leverage. That is what I want to walk through with you this afternoon. Next couple of charts are the forward-looking statements and disclaimers. Please review them at your convenience. Okay. Let me start with the most important highlights from Q3. Total revenue reached approximately $3 million compared with about $1.69 million in Q2. Revenue growth was 77%. That increase reflects a larger combined business, including a full quarter of EngineRoom contribution. Equally important, more than 94% of our third quarter revenue was recurring. This is the recurring software and services foundation we believe can support a more predictable and scalable business. We use the SaaS metric of cash EBITDA, which is a measure we use to assess the underlying operating performance of our business, very well used in the SaaS business and software business, which basically includes the operating, excluding certain financing, accounting and noncash items. Put simply, it helps us understand whether we are becoming more efficient as we grow. In Q2, our cash EBITDA loss was approximately $2.7 million. In Q3, it declined to $1.7 million, an improvement of $1 million or 37% in just 1 quarter. What is particularly interesting is that we achieved this while growing our revenue by 77%. In simple terms, we are generating significantly more revenue while reducing our underlying operating losses. That improving operating leverage is an important part of our plan to achieve positive operating cash flow by Q3 2027. On the comparable share reflected in the presentation pre-reverse split, loss per share improved by $0.08 from $0.10 to $0.02, and we achieved this progress while continuing to support the growth and integration of the business. That means there is an 80% reduction in the net loss on an earnings per share basis. At the same time, at these financial metrics, we've made great success in our customers and with our product launches. Commercially, we secured 2 Fortune 500 annual renewals and added a large financial services investment management customer with a multimillion dollar 3-year contract. Those customer renewals and that new client are testament to the capability of the team, the product and the agentic AI platform we have built, CXAI 2.0. On the product side, as an extension of CXAI 2.0, Beat, our latest agentic AI solution that helps software developers and project managers complete real work and execute their workflows seamlessly is beta-ready now, with testing beginning this week and a planned commercial go-live in January 2027. When I combine all of these results, they reinforce an important point. We are not only scaling revenue, we are improving the economics of that scale. So super exciting. So with that -- with those results, what is CXAI becoming now? And this slide is central to our investment thesis because it shows what CXAI has become following the EngineRoom integration. We now have an annualized revenue run rate above $12 million and a recurring revenue mix around 94%. We combine an enterprise workspace software foundation with EngineRoom's mid-market customers, vertical market expertise and growing intelligence capabilities. And we see a significant opportunity from aligning common technology and infrastructure, enterprise-grade security, cloud foundations, product delivery and AI-enabled operations. Some of those operating synergies are still being realized. That work is ongoing. As you know, we closed the EngineRoom deal first week of June. So it's been 4 to 5 months of intense work to bring it all together, but we're still working on the synergies and improving the operating systems together. But on top of this foundation, we are building agentic AI execution capabilities across Workspace AI, Flow, Beat and specialized industry workflows. Our ambition is to help organizations move from information and insights to completed work and measurable outcomes. The combination creates 3 opportunities: number one, a broader addressable market through mid-market distribution and vertical expansion, a capital-efficient model with improving operating leverage; and finally, an agentic operating layer that helps large and small enterprises get work done across people, locations, data and tools. We provide that context we provide that intelligence that differentiates us from everybody else in the marketplace. We are all doing this because we are targeting positive operating cash flow in Q3 2027. That target depends on continued revenue expansion, what we've shown already in the last 2 quarters, execution of our efficiency initiatives, which we've also demonstrated and disciplined use of cash. But Q3 gives us encouraging evidence of progress. I would call this is an inflection point for the company. Super proud of the results, super proud of the work that the team has done to get us here. All right. Let me talk about the financial results and give you -- and double down into the numbers so you get a better perspective of what has happened and what are we doing. So our sequential financial trend puts the change that has happened in perspective. Revenue, number one, progressed from approximately $950,000 in Q1 to $1.69 million in Q2 to approximately $3 million in Q3. Again, this step-up includes the timing of our EngineRoom acquisition and the full quarter benefit in Q3. So it's a great achievement. As you can see, the trend line is very encouraging, and we believe that this is the trend we're going to continue on. Cash EBITDA losses moved in the opposite direction, approximately $3 million in Q1, $2.7 million in Q2 and $1.7 million in Q3. This is the combination we want investors to focus on, a larger revenue base accompanied by a significantly lower cash EBITDA loss. Our loss per share also improved quarter-over-quarter on a share base as shown in the deck. While quarterly results will not necessarily move in a straight line, we believe this trajectory demonstrates the operating leverage we are working to build. Our objective is straightforward: grow revenue faster than the cost required to support it. We are using AI-enabled workflows, a more efficient delivery model and tighter cost discipline to pursue that goal. Let me delve deeper on the revenue side to show you -- talk about a little bit more about the quality of the revenue. In Q2, approximately $1.56 million of revenue was recurring, representing 91.91% of total revenue. In Q3, recurring revenue grew to approximately $2.84 million or -- sorry, $2.815 million or 93.68% of the total. That represents about 81% sequential growth in recurring revenue and an improvement of 177 basis points in the recurring mix. For us, the point is not just that recurring revenue is high, it is that recurring customer relationships give us a foundation from which to expand product adoption, introduce more specialized AI workflows and pursue cross-selling opportunities. No recurring model is immune to renewals, budget cycles or execution risk, but we believe this revenue composition gives CXAI greater visibility as we scale and helps create the potential for stronger operating leverage over time. So one of the things as we think about moving forward is with this great revenue, with this high-quality revenue growth, when are we going to be profitable? So let me walk you through now what I believe is one of the most important parts of our story, our path to profitability. As you can see, we have demonstrated meaningful progress in the last 2 quarters. What gives us confidence is that we now have 2 very clear drivers to continue this trajectory. The first is revenue growth. We are targeting approximately $4 million in quarterly revenue by Q3 2027, representing about 33% growth from our Q3 2026 level. We believe this growth can come from expanding our existing enterprise relationships, cross-selling our AI solutions and leveraging EngineRoom's mid-market distribution capabilities. And that's something, as you've seen in the last couple of quarters, we've demonstrated that growth. The second driver is AI-enabled operating efficiency. We are targeting more than $700,000 in additional quality cost efficiencies through AI automation, shared technology infrastructure, streamlined delivery and greater operating discipline. We've been working closely with our partners at Google in streamlining our cost structure with GCP as well as all the other services and software that are needed to allow our solutions to scale. And I'm very happy to report that we've found more efficiencies in that partnership with them and more to come on that in the coming quarters. So when you combine all of this stuff, this is where our business model becomes particularly compelling. We are building a capital-efficient AI software business where revenue can scale without requiring a proportional increase in operating costs. As we grow revenue and improve margins while reducing our cost structure, we believe we can generate increasing operating leverage. Our target is to achieve the positive cash EBITDA and positive operating cash flow by Q3 2027. We have sufficient cash reserves today and do not need additional financing to reach this target. Our focus, again, is not simply on growing a larger company. It is also building a scalable, financially sustainable and ultimately profitable AI software business. Let me talk about capital structure. We recognize the importance of protecting shareholder value while maintaining enough flexibility to execute our business plan. In October this year, we announced a conditional 90-day standstill agreement with Avondale Capital, which is one of our investors, designed to provide greater predictability around specified equity issuance activity during the standstill period. It is important to declare that the arrangement is conditional and temporary and underlying financing obligations remain outstanding. Our Board also authorized a share repurchase program for up to $1 million. This is an authorization, not a commitment to repurchase a fixed number of shares. Any purchases will be evaluated against liquidity, operating needs, market conditions and applicable restrictions. We have been in a quiet period since we announced this authorization. After announcing our results in our 10-Q and it filed, our quiet period will be over. This authorization reflects our confidence in the long-term prospects of CXAI and our belief in the business we are building. Our objective is straightforward: grow the business, improve operating efficiency, exercise discipline in capital allocation and create sustainable long-term shareholder value. We believe that these actions, combined with our improving operating performance, reinforce our commitment to that objective. Let me now focus on the market opportunity ahead of us. So this is one of the most exciting aspects of our business, the significant market opportunity emerging around agentic AI and why CXAI is well positioned to participate in it. We are witnessing a fundamental shift in how businesses adopt artificial intelligence. AI is rapidly becoming part of everyday business operations, but there's still a significant gap between using AI and actually integrating AI into workflows to deliver measurable business outcomes. For example, the research highlight on this slide shows that 76% of small businesses already using AI, yet only 14% have fully integrated into their core operations. At the enterprise level, adoption of AI agents is accelerating and increasingly, organizations are moving beyond experimentation towards real deployment. This is exactly where we believe the next major opportunity in AI lies, not simply in building larger models or more computing infrastructure, but in helping businesses turn AI capabilities into real productivity, better decisions, revenue growth and measurable returns. And this is where CXAI is uniquely positioned. We have 3 complementary growth opportunities. First, our enterprise workplace business gives us an established foundation of blue-chip customers where we can expand our AI-powered workplace intelligence and automation capabilities. Second, EngineRoom extends our reach into the mid-market, bringing established customer relationships, growth intelligence and distribution capabilities across industry verticals. And thirdly, CXAI Beat, I'm super excited about it. It's getting launched this week, represents our expansion into agentic workflow execution, initially targeting software teams and helping turn AI intelligence into real work getting done. What makes this especially compelling is the opportunity to bring these capabilities together through a common technology foundation. We believe this creates a powerful growth flywheel, more customers, more specialized solutions, greater cross-selling opportunities and stronger operating leverage as we scale. Importantly, ours is a capital-efficient software-led strategy. We are focused on delivering the business outcomes that make AI infrastructure valuable rather than building that infrastructure ourselves. Our ambition is to establish CXAI as a category leader in the emerging market for outcome-driven vertical agentic AI, and we're on a great path towards that. Let me talk about Beat, which is a product that we are launching this month in beta users right now. And this is a good example of how we think about agentic AI execution because everybody is talking about agentic AI. Our agentic AI is really tailored towards the modern enterprise with really great context, which provide really reliable outcomes. And I think that's the true differentiation. Our first use case that we've built is for focus on the software developer or project manager in an engineering organization. So instead of requiring a team member to start every task from scratch, Beat is designed to prepare the next step on working -- on work already waiting for them. Code reviews, tickets, follow-ups and requests. The user remains in control. Nothing is posted, sent or changed without a person reviewing and approving the action. This is important because enterprises want the productivity benefits of AI while retaining trust and oversight. Beat is designed to work within tools teams already use, including collaboration and development workflows. If you use Jira or GitHub or Slack or Google Workspace or other tools in your enterprise, we -- and your work is getting queued out, Beat helps streamline and automate those workflows, making it massively efficient to get stuff done. We first tried it with our own team. They prove it to themselves that they are super efficient now in getting stuff done faster and better. And now we're sharing with a limited set of beta users in California and other parts where we have networks. And then we're planning to launch this into the commercial space in January 2027. So we're doing a lot of testing. We're getting a lot of good customer feedback. We believe that products like Beat can extend our role from providing workspace technology intelligence to helping teams complete real work, and that is where we see meaningful long-term opportunity. And as we head into Q4, we -- it's already a period of very active customer and industry engagement. During October alone, our team participated in 6 industry events across New York, San Francisco, Los Angeles and Chicago. These included SF Tech Week, WORKTECH, Connect Global and customer focused meetings with partners and enterprise prospects. The conversations reinforce several themes. Buyers want agentic AI that moves beyond pilots into production. We have that. They want workplace data tied to real estate and operating decisions. We have that. They want less friction for employees and measurable time saves. We have that. And they increasingly prefer an integrated operating layer over more fragmented point solutions. We have that. That is the reason why you saw those 3 Fortune 500 deals in the last quarter that we won. These are large companies who don't want point solutions. They want a solution that integrates all [indiscernible] outcomes. That's why they picked CXAI. [indiscernible] a growth engine building repeatable products that are going to go after industry verticals and create those solution-based solutions. Our last pitch talk for this month, we have the IFMA Facilities event in Anaheim, where we are hosting a thought leadership seminar. All of these engagements create opportunities to strengthen relationships, demonstrate our platform and qualify. And we've got a really good level of interest and I am looking forward to some positive news in the coming quarters here. The side of the ocean, EngineRoom is creating a complementary commercial engine in Australia and in the trades-oriented mid-market. The team has been running a customer education webinar series focused on practical business outcomes, including how completed jobs can become marketing assets and how businesses can measure returns from their marketing investments. There's a big event coming up in November in next week actually. EngineRoom is participating in Symposium in Sydney, including a sponsored product demonstration. And next after that, the Business Show in Australia. These are relevant environments to demonstrate the value of both intelligence and vertical agentic solutions to prospective customers. For CXAI, this is about more than a second geographic market. It is a distribution channel and a vertical market foundation into which we can introduce specialized AI capabilities over time. That is an important part of the growth flywheel we are working to create. I am looking forward to the progress and success there. We're tailoring the solutions to certain verticals, our must-have product solutions and offering, and we're looking forward [indiscernible] in the coming weeks. So now I want to start closing by talking about our overall platform and the fact that [indiscernible] not only the technology platform, the engine, but now we [indiscernible]. Even today, [indiscernible] deployments across more than [ 60 ] cities, with more than 600 customers, 5 continents, and over 1 million users, as shown in the chart. Our headquarters is in the San Francisco Bay Area, with delivery and operating capabilities that include Toronto, the Philippines, and now integrated [indiscernible] EngineRoom operations in Melbourne. We have approximately 60 [indiscernible] and a growing portfolio of proprietary intellectual property, including agentic AI. We have approximately 60 [indiscernible] and a growing portfolio of proprietary intellectual property, including agentic AI. As you know, we filed a lot of patents around that, and that is going through the disclosure process as we speak. At the same time, enterprise trust, security and responsible delivery remains central to our approach. That is why enterprise like us. That is why they work with us, and that is why we're really destined to be the modern enterprise agentic AI platform. And we believe this combination, enterprise experience, integrated global delivery and a more focused team gives us a practical foundation to scale software and services without building capital-intensive AI infrastructure ourselves. Let me close our prepared remarks with why we believe this is an important moment for CXAI. It's an inflection point. First, the operating inflection is becoming visible. Q3 [indiscernible] increased 77% sequentially to approximately [indiscernible] while EBITDA loss decreased more than $1 million or 37%. We are showing higher revenue and lower losses at the same time. Second, we are building on a capital-efficient software-led model. More than 94% of our revenue is recurring, and we tend to leverage existing cloud and AI infrastructure instead of investing in the kind of massive compute build-out required elsewhere in the economy. Thirdly, we believe -- we have the ingredients for a growth flywheel. Enterprise renewals and the multiyear financial services demonstrate demand in market [indiscernible] EngineRoom expands our mid-market distribution and vertical relationships, specialized AI workflows, create opportunities to deepen those relationships and improve unit economics as the business scales. And fourth, we have clear operating objective to reach positive operating cash flow in the third quarter of 2027 through revenue expansion, AI-enabled efficiency and disciplined execution. We have the products, the team and the financial runway to achieve that target. Our conviction is stronger because it rests on operating progress we can see, stronger scale, a more recurring revenue base, improving efficiency and an expanded commercial platform. Q2 was about establishing scale. Q3 was about demonstrating operating progress. Q4 is about execution. And 2027 is about converting that progress into more sustainable financial performance. We believe CXAI has the opportunity to build a category leader in outcome-driven vertical agentic AI. We are focused on earning that position one customer outcome at a time. Thank you to our customers, our team and our shareholders for their continued support. With that, I welcome questions from the audience. I know we've got a couple of things coming online here.

Unknown Executive: Yes, Khurram, I've shared questions with you.

Khurram Sheikh: Okay. Great. Let me see the topics here. When will the buyback shares commence? Good question. As I mentioned, we have got the Board authorization. We have been going through a quiet period. And as soon as we're done with filing the 10-Q in our earnings call, which is today, we will be evaluating those options, and we will be in the clear to go do those purchases if we decide to do that. Next question is, what are the key assumptions behind your target of achieving positive operating cash flow by Q3 2027? Can the company reach this milestone without additional equity financing or shareholder dilution. So as we speak today, we have north of $9 million in the bank. We have enough cash runway for up to 6 quarters. And given the plan that I've shared with you, I think we can achieve this goal of getting to be cash flow positive by Q3 2027 without any additional financing or shareholder dilution. From that perspective, no additional financing is needed. At the same time, we always look at opportunities for growth, and we will continue to do that. But from an organic growth, we don't need any more cash infusion right now. I think those are the questions that I see. All right. Well, thank you for joining the call. We appreciate the interest in CXAI. We are looking forward to our Q4 results and numbers coming forward. We're super excited about the opportunity. We made great progress in Q3. Thank you for being a shareholder with CXAI. We look forward to sharing the updated results for us for Q4 in the coming year. And then we may be doing some demo announcements as well as showing the products and doing part showcases in the coming weeks and months. We'll keep you posted on LinkedIn as well as other media platforms, X and others, and we look forward to sharing our future progress. Thank you, everybody.

Operator: This concludes today's call. The replay will be available on CXAI's website soon. Thank you for your participation. You may now disconnect.