Q2 2024 Earnings Roundup: SKYX, KULR, CXApp, and Spectral AI Report Strong Growth

Earnings call: SKYX Platforms Corp. Reports Record Q2 Sales Growth By Investing.com

SKYX Platforms Corp. (SKYX), a company focused on making homes and buildings safe and smart, reported a significant increase in second-quarter sales, reaching $21.4 million, which is up from $15 million in the same quarter the previous year. The company, with 97 patents and applications, including 36 issued globally, has outlined multiple revenue streams, such as product sales, royalties, and licensing. During the Q2 2024 Investor Update Call, SKYX also discussed strategic collaborations with major industry players like Home Depot (NYSE:HD) and GE Licensing, as well as their efforts to become cash flow positive by 2025. They also announced a reduction in their adjusted EBITDA loss to $2.1 million and a net cash loss of $2.7 million in Q2 2024, showing positive trends in key metrics and a strategic plan to expand market penetration with new product launches. SKYX Platforms Corp. has demonstrated a clear strategy for growth and market expansion, supported by its strong intellectual property and strategic partnerships. With the anticipated launch of new products and the aim to become cash flow positive by 2025, SKYX is positioning itself as a key player in the smart home industry. The company's management expressed gratitude for the support and looks forward to making further announcements in the future. SKYX Platforms Corp. (SKYX) has certainly made headlines with its impressive sales growth and strategic partnerships. To complement the article's insights, let's delve into some additional data and tips from InvestingPro that may be pertinent to investors and stakeholders following the company's financial trajectory. InvestingPro Data shows that SKYX has a Market Cap of approximately $99.67 million, highlighting the company's size in the competitive smart home industry. Despite the positive sales figures reported, the company's P/E Ratio stands at -2.05, reflecting the challenges SKYX faces in achieving profitability. Furthermore, the Price / Book ratio as of the last twelve months is 7.38, indicating that the stock may be trading at a premium relative to the company's book value. An InvestingPro Tip that stands out is the analysts' expectation of sales growth in the current year, which aligns with the reported Q2 sales increase and may signal continued upward momentum. However, investors should be aware that SKYX is quickly burning through cash, a point of concern that requires careful monitoring, especially as the company aims to become cash flow positive by 2025. Lastly, it's important to note that SKYX operates with a moderate level of debt and has not been profitable over the last twelve months. This underscores the importance of the company's strategic initiatives and new product launches to improve its financial standing. For those interested in a deeper analysis, there are 11 additional InvestingPro Tips available, providing a comprehensive look at SKYX's financial health and market position. Access these valuable insights at https://www.investing.com/pro/SKYX to inform your investment decisions. Operator: Good day and welcome to the SKYX Platforms Corp. Second Quarter 2024 Investor Update Call. Today's webinar is being recorded. Before we begin the formal presentation, I'd like to remind everyone that statements made on the call and webcast, including those regarding future financial results and industry prospects, are forward-looking and may be subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the call. Please refer to the company's SEC filings for a list of associated risks, and we would also refer you to the company's website for more supporting industry information. At this time, I would like to turn the webinar over to Rani Kohen, Executive Chairman of SKYX Platforms Corp. Sir, please go ahead. Rani Kohen: Thank you. Good afternoon to everyone. Welcome to our second quarter earning call and corporate update. We will have Steve Schmidt, our President, start with the call. So, I'll hand the microphone to Steve Schmidt. Thank you. Steven Schmidt: Thank you, Rani. It's obviously my pleasure being with you here this afternoon. And let's start off with a chart that you've seen, but one that we continue to take great pride in, and that is of our management team, our Board, our advisors, and our investors. We feel very, very proud of the individuals that have been attracted to SKY. We continue to add additional talent as the business warrants, and we think second to none relative to the overall skill and capabilities. And all of these people have joined SKY because they believe in the company, they believe in our vision, and they believe in the products and the future of this organization. So critical that we have it, and it's important for any organization. Next, let me remind everyone again of our mission. Because we think it's critical that our mission is to make homes and buildings safe and smart and advanced as the new standard. And our products significantly do four things. We save lives, we save cost, we save time, and they're advanced and simplified. And there are many industries that have been successful in just one of these areas. But at SKY, all four of these areas apply to our products. And it's why we're so enthusiastic. We continue to make significant progress on our patents. We now have accompanied 97 patents and pending applications with 36 issued patents in the US and globally, including China, India and Europe. Our TAM aggressible market is massive, over $500 billion, spanning almost every room. And you think about homes and hotels and offices and buildings in every location that we have the possibility of being in making a huge TAM market. And our expected revenue streams include product sales, royalties and licensing, subscription monitoring, and the sale of global country rights. As you know, we have three really generations of ceiling platform technologies. First, our plug and play lighting and ceiling fans; next, our smart plug and play lighting and ceiling fans and finally, our all-in-one smart home plug and play products. All of these really represent significant growth opportunities in terms of market penetration and significant future licensing programs. Let's now move on to really the business and financial highlights. We are in the beginning of opening a new world on the ceiling for advanced and smart home plug and play products, and we strongly believe that we can revolutionize the lighting, ceiling fan, smart home AI industries, among others. In 2023 going back, we generated our first year record revenue of $58 million -- $58.8 million through our 60 websites, including sales of our advanced and smart home plug and play products. We now reported record second quarter sales of $21.4 million compared to $15 million for the second quarter 2023, as we continue to grow our market penetration in the US and Canada for advanced and smart platform products. The fact that we are maintaining and even increasing revenues in this market is quite significant as the lighting and home decor are suffering substantial declines based on two main factors. First, the slowdown of the real estate market and second, COVID, where people were at home and many of them were renovating their homes. And as recently stated by the Wayfarer CEO, the whole home decor home improvement area is in somewhat of a crisis mode. We reported $15.6 million in cash, cash equivalents and restricted cash as of June 30, 2024 as compared to $19.8 million as of March 31, 2024. As common though with companies such as ours, when sales are converted into cash rapidly often referred to as the Dell (NYSE:DELL) Working Capital Model, the company leverages its trade payable to finance its operations, to enhance its cash position and to lower its cost of capital. Additional business and financial highlights, we continue to grow our market penetration of our advanced and smart plug and play products as our products are in nearly 10,000 US and Canadian homes and are expected to be in tens of thousands of homes in 2025. We continue to utilize our e-commerce platform of over 60 websites for lighting and home decor to educate and enhance our market penetration to both retail and professional segments. We expect to significantly enhance our market penetration to the builder markets in the coming months. We believe the company will continue to become cash flow positive during 2025 through our product collaborations that are expected to significantly increase our gross margin sales and our distribution channels. Let me now shift gears to some of our key collaborations. We have just recently announced Home Depot. And what we've done with Home Depot parallel to many products going into Home Depot's website, some of our products are expected to go into some stores. As we are the only products that include smart plug and play technology, it's important to emphasize that from the many products including smart lighting and smart ceiling fans that are expected to go in on Home Depot's website, those products that perform well will have a good chance to go into their stores, bringing an opportunity to potentially significantly increase our revenues, with over 2,000 Home Depot stores, any product that goes into those stores can potentially generate a substantial revenue for us. Next, our collaboration with GE Licensing continues to make progress with initiatives related to recently signed five-year licensing partnership agreement for the US and global markets. SKYX and GE's goal is to make SKYX game changing ceiling outlet/receptacle the standard for homes and buildings by licensing it and its related products, including SKYX's advanced and smart home platform technologies, to various industries including tech, smart home, AI, lighting, ceiling fans and electrical. Next, our collaboration with the world leading Chinese lighting supplier and manufacturer Ruee Appliances for the US, Chinese and European markets. This collaboration provides SKY substantial backing in several areas including financial, mass production, manufacturing capabilities and distribution to the global markets. And then, as we have announced prior, we've got collaborations with world leading lighting company Kichler, collaborations with US lighting leading company Quoizel with over 100 years in the lighting industry, collaboration with the US leading lighting company Golden Lighting and all of these collaborations will be including SKY's advanced smart and standard products for online, professional channels and retail. As I mentioned prior, when it comes to our patents, we're making significant progress. We started production of our new global patent advanced smart plug and play Recessed Lights. The global Recessed Lights market is a multibillion-unit market. SKY's new plug and play Recessed Lights global patents include the US, China, Canada, Hong Kong and Mexico, as billions of Recessed Lights are installed globally with hazardous electrical wires SKY's Recessed Light solutions enable an advanced, simple plug and play installation that saves costs and lives. SKY's plug and play Recessed Lights can be controlled through SKY's app, voice control, phone and works with Apple (NASDAQ:AAPL), Siri, Amazon (NASDAQ:AMZN) Alexa, Google (NASDAQ:GOOGL) Home and Samsung (KS:005930). New Google Smart Home and AI related patents SKYX new and existing patents, including the new global patent advanced smart and plug and play Recessed Light enable enhanced performance of smart home and AI sensors in addition to home safety sensors, bringing the company's intellectual property portfolio to a total of over 97 issued and pending patents, 36 of which are issued patents covering SKY's advanced plug and play and smart home platform technologies for the smart home, AI, electrical and lighting industries in the US and internationally, including China, Europe, Mexico and two patents in India. It also includes the recent issuance of six additional patents in the US and internationally in China, India, Europe, Canada and Mexico for advanced smart and plug ceiling fan and heater. With that, let me now turn the meeting over to Len Sokolow, our Co-CEO, who will take you through additional financials. Len? Leonard Sokolow: Yeah. Thank you, Steve, very much. Just to reiterate, initially, the revenue in our second quarter of 2024 increased to a record $21.4 million, including our e-commerce sales, as well as smart and standard plug and play products, as compared to $15 million in the second quarter of 2023. We reported $15.6 million in cash, cash equivalents restricted cash as of June 30, 2024, as compared to $19.8 million as of March 31, 2024. And as Steve stated it's common with companies such as our as ours when the sales are converted into cash rapidly, it's often referred to as the Dell Working Capital Model. We leverage our trade payables, enhance our cash position to lower our cost of capital. And just to elaborate, as many know, the Dell Computer really revolutionized the direct sales or rapid sales to customers and they were able to collect their receivables within one to three days. And they were able to have favorable vendor payables that could be over 10 times that time span. So, it could be 30 to 60 days. And that significantly enhances the cash conversion cycle and the liquidity generated from working capital. Just to connect some dots that are in the press release also Ruee and that great relationship also enhances our cash conversion cycle. We had a EBITDA -- we had a $2.5 million reduction in our net cash loss before interest, taxes, depreciation, amortization as adjusted per share based payment, we call that the adjusted EBITDA. It's a non-GAAP measure, and that reduction went to $2.1 million in the second quarter as compared to $4.6 million in the first quarter of 2024. Our adjusted EBITDA loss, a non-GAAP measure, amounted to $2.1 million in addition to non-cash basis loss of $5.4 million. This amounted to a net loss of $7.5 million in the second quarter of 2024 as compared to a net cash loss of $2.7 million. In addition to a non-cash basis loss of $9.6 million amounted to a net loss of $12.3 million in the second quarter of 2023. And just to distill it down, to give some perspective, the key metrics that are reflected in our quarterly filings. When we compare this Q2 results to Q1 of 2024, keep in mind the following. In our view, it's very good direction. Our revenues increased 13% to $21.4 million. Our gross profit increased 18% to $6.6 million. Our gross margin increased 4% to 30.7%. Our operating expenses decreased 11% to $12.8 million, and our cash operating expenses decreased 14% to $8.7 million. So our EBITDA loss as adjusted decreased 54% to $2.1 million and then our cash used in operations decreased 32% to $2 million. So, our metrics and our trends were extremely favorable quarter to quarter. So, something that we wanted to emphasize that these numbers are, of course, reflected in our filing. So, if I could turn it over to Rani. Rani, please. Rani Kohen: Thank you, Steve and thank you Lenny. Great cover. Great month here, a good quarter for us and month. A couple of points here as you see the slide here. And again, we're utilizing what we call the razor and the blade model. We're enhancing our market penetration, as we said, nearly 10,000 homes and expected to be in this rhythm within tens of thousands of homes within a year or less. Hopefully, this provides us a large variety of products including smart light fixtures, smart chandelier, smart ceiling fans are all in one platform and the Recessed Light that we just announced is our new patent. All of them can be controlled by smart. We announced this Recessed Light, some people call it hi-hats. No patent on plug and play people still, it's a small, very small fixture, but people still go on ladder, spend time on the ladder, touching hazardous wires and taking can take 30 minutes to someone install one of them. Here it becomes plug and play. This is -- as we said in our press release and earlier, this is a multibillion-unit market. We're very excited that we started production. Those are part of things that are going to go on homedepot.com. This potential product opens the door for many builders and other projects that we're talking to now and we hope we'll be able to announce in the next coming months. We're working on several fronts with this and there's some excitement about this product. It provides also the capability to use it as a smart product and talk to Recessed Light or talk to 20 Recessed Lights or more in one room or use your iPhone through Apple Siri, Alexa, Google Home, Samsung and other ways. As you can see, the product provides not only round four-inch size and seven-inch size, it also provides for square four-inch and seven-inch and those are huge markets and definitely good for the US market, but has a great potential going globally. We're also showing here a taste of some of the products that are capable compatible with the lighting products and fan products and lighting and smart fans that you can see here down the road. In addition to Recessed Lights that we'll have the chandeliers, smart chandeliers will have for kids rooms, we'll have holiday lights that we expect also with all of this to go to Home Depot. We will have ceiling fans, smart ceiling fans. We have the patented all in one heater and ceiling fan. We'll have wall sconces, we'll have exit signs, emergency lights, variety of products that we expect to launch not only on our 60 websites, but now, as announced on the Home Depot website. And as Steve mentioned, parallel to launching on the Home Depot website, we will also be going to stores with some products and products that perform well online, have a good chance to go to stores. And as Steve mentioned, even the product, one product that goes into such a big company's Home Depot 2,000 stores, can be quite significant in substantial revenues for us. The packages of them, we also continue to sell and will sell in Home Depot. The one pack, four pack, eight pack and 24 pack of the stealing outlet, what we call Razor and other products to be with this, all our products to remind everyone we got the 7 CES award and we are really going after a market -- with a addressable market of over 4.2 billion applications, US and homes and apartments, and that's residential only. Obviously, the smart home market is also a big play with this, but we can also go to commercial as expected, to do our all-in-one smart platform as we're getting close and we hope to start production this year, as we said, and the sooner the better. And there's a lot of excitement around this product. And as we said, so many capabilities in one product and the CES awards we won and enhancing performance of so many things, including WiFi, AI, performance of chips or software, as well as smoke detectors, geodetectors, sound, voice and many other things you can put here. And you know, we can really believe we can transform buildings and homes instantly to smart. Rather than spending weeks on homes, it can happen within minutes or an hour. And large buildings, rather than spending millions of dollars in a one-year span, we can do it, as we mentioned, quite fast, within days or hotels, et cetera. And as Steve mentioned, we're doing great progress here on some GE initiatives with GE Licensing. And we have addressed the whole licensing packages to various industries and as Steve mentioned earlier, we're going to license not only the standard plug and play, but we'll also license, and hope to license the smart technologies and capabilities, including the electronic real estate that we have. We can provide to enhance performance of smart homes. Other companies can utilize our patents, our code achievements here, and also license our capabilities to do it in every home. As to the code application, we have filed, as you know, last year to mandatory. After a long time, our team members Mark Earley and Eric Jacobson, that lead the application, are confident that we have everything that's needed to become mandatory. Again, as I always said, it's a very long process. We're already over 12 years in this process. So that's the good news. It's still a slow machine, but we're making progress and we hope to share more things about this with you as time comes. In the meantime, we did get approved, as you can see here, the WSDR as our generic name. That that's a major condition. We got 10 segments voted into the national electrical code in the past 12 years, and we got this historical approval by ANSI, American Standardization Institute, and NEMA, National Electrical Manufacturers, that actually create the standards in home and buildings when it comes to safety. So, our code team is optimistic, as we said, and we really think that we're in the beginning of, as Steve said earlier, to open a new world on the ceiling with variety of products that we share with you. And we really feel that this beginning is really starting to happen with major collaborations like Home Depot and like other leaders, including GE and leading companies. So, with that being said, we hope that we will be able to share additional things that we're working on and if they prevail, we will definitely. But I think we can conclude now the first part of this call and start addressing Q&A, If there is some Q&A here. So, I'll turn it up to the host and please guide us with the Q&A. Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Michael Legg with the Benchmark Company. Please proceed with your question. Michael Legg: Thanks. Good afternoon. Congrats on the record quarter everyone. I wanted to touch on Home Depot as we enter the Home Depot phase, and that could obviously ramp up very fast and be very big. Can you just comment a little bit on how the Ruee Appliances relationship with the financial and the production capacity kind of ties into all that and gives you that power? Just expand on those two, please. Thanks. Rani Kohen: Sure. Thank you. Michael, great question. Those collaborations, including Ruee Appliances and some other collaborations we have, help us from variety of products for the smart products and the advanced plug and play products, and also some of those relationships. The way it works is that we have those relationships, provide us this product in large varieties and enables us to pay after we sell, as Lenny Sokolow, our Co-CEO, and Steve Schmidt mentioned, the Michael Dell model. So, those collaborations help us in gross margins in certain type of financial backing, as well as in opening and helping us to open distribution channels and with variety of smart and advanced products and down the road, Recessed Lights and smart ceiling fans and the heater. So those are extremely strategic relationships and having the world leading home improvement company collaborating with us and the largest, I think, lighting manufacturer in the world, Ruee Appliances, it's a major factor. He's very big here, very known, he's an approved vendor, and all the biggest companies here in the US and quite large in China and in Europe as well. So, those are extremely strategic and long-term relationships that we believe we can capitalize and improve significantly range both margins and distribution channels. Michael Legg: Great. And then just one more question. Since you made the Home Depot announcement, obviously that's big news. Have any other retailers kind of come on board and tried to get in touch with you? And how is the whole reputation expanded because of that amongst other retailers? Rani Kohen: I think that we're in discussions that we can't share yet, but I think that there's a different type of retailers that potentially we can discuss with, and some of them we are discussing. I think, in home improvement, Home Depot is a leading company. I'm very proud of that relationship and I think really can be a major factor for us, this new beginning for us. But there's definitely other targets around and home decor and other sectors that we're looking into and we hope we'll be able to announce some of them sooner than later. Operator: Our next question comes from Pat McCann with Noble Capital. Please proceed with your question. Patrick McCann: Hey, thanks for taking my questions. Just got a couple and congratulations on a nice quarter. My first question had to do with the builder channel, specifically regarding the recent announcement with Home Depot, I was wondering if there's any tangible developments that have happened since then, as far as more builders coming to talk to you or any acceleration in the builder channel as a result. Rani Kohen: We are very active in the builder channel and there's a lot that we hope that we'll be able to share. Going back to the previous question, part of our relationship with collaborating with those vendors, manufacturers, including Ruee, is to address the variety of products. Currently, our revenues mainly go our product and plug and play, go on smart chandeliers. Plug and play chandeliers and pendants. But now we're opening the door for recessed light, wall sconces, ceiling fans, flush mounts, down lines, what we call and down the road exit signs and emergency lights. Those are definitely key to builders. And as we get product here and we're working on this and we announced -- we started production, we definitely hope to be able to share some more developments regarding the builder channel that's quite active on our end. Patrick McCann: Great, thanks. And then my other question was just relating to your cash burn. I believe you mentioned in the prepared remarks that you would still be targeting a 2025 cash flow positive -- to turn cash flow positive in 2025 and the reduced cash burn in this past quarter. I was wondering, from a funding needs perspective, are there any updates there? Do you anticipate you would need additional funding, or do you have the tools you need to get the cash flow positive without additional funding if need be? Rani Kohen: So, I think, as Lenny Sokolow, our CEO, and Steve Schmidt mentioned, the Michael Dell model, because we're selling with cash really helps us on this position. We're lucky to have our 60 websites and the 21.4 million we just announced. Probably what we can call it all cash, so that helps us. And the collaborations we have with those vendors also help us that we don't need to spend big dollars. So, we really feel strongly that we have a path that can bring us to cash positive. Because of those collaborations and because of those terms, we -- what we call, or our management here calls the Michael Dell model, we feel confident that we can get to cash positive in 2025 as we start rolling and bringing and growing our gross margins and bringing more products into the country. Patrick McCann: Great. Thanks so much for the color. And again, congratulations on the quarter. Jack Vander Aarde: Okay, great. I appreciate the 2Q update, guys. Great to see the big uptick in revenue and material decrease in operating expenses for sure. Question maybe for Rani. I think, I heard you mention it briefly during your prepared remarks. But can you provide an update on the overall significance and maybe just launch timing of the upcoming Gen 3 all-in-one platform product? Rani Kohen: Yes. Our expectation is to start production second half and probably towards the end of this Q or next quarter. We're in good shape as the platform is working well and performing. We're just fine tuning towards regulations such as you have UL smoke detecting and you have the FCC communication. So that requires fine tuning. And for us is also to complete and conduct what's very important to us, our six-sigma quality control manual. We also -- with our first generation of smart, what we call generation two, our plug and play smart product, we could have launched earlier, but we decided to conduct additional testing just to make sure that as we launched, we don't have surprises. And we're very happy we conducted it because we're in the market launching that product. And really we did it responsibly and this is exactly what we're doing with all-in-one smart platform. There's great demand for that product. The product is working great on all our tests and it's a final fine tuning here, so we feel comfortable enough to start the mass production. So that's where it stands. And we think we have a good chance to start in the next couple of months, the production after we complete all the quality control manuals and regulation testing. Jack Vander Aarde: Okay, great. I appreciate the color there. And then maybe a follow up for Lenny. Can you provide maybe some additional color on the progress update with regard to the collaboration and sort of production timeline with Ruee Appliances and if we'll see maybe an uplift in gross margins because of Ruee later in the back half of this year, or just maybe next, by next year. Thanks. Leonard Sokolow: Sure. So, Ruee, I think as we've discussed, it's multidimensional in terms of what they bring to the table. Not only are they manufacturer for global products, US, Europe, China, but their ability -- with our collaboration and partner financial partnership, we're able to leverage that model, of course, with the cash conversion cycle that's favorable, similar to the Michael Dell cycle. But it's also -- there's flexibility and they have a knowledge base with respect to the large big box stores and the sales channels we have, they have that flexibility to service it. They understand the lighting, they make lighting for the big boys. So, it's really a very good foil for us in terms of growing the market and being able to expand with them. Was there another nuance to that question, Jack? Jack Vander Aarde: No, I think that pretty much covered it. I was just looking to get your thoughts, your latest thoughts on that, and that sounds encouraging. Maybe I will follow up, though, with a question on the GE relationship. Can you just speak to what's the latest with your GE arrangement and are you actively -- how active are they today and how active will they be by next year as it relates to the business model? Thanks. Rani Kohen: As far as active, we're very active with GE. We conduct weekly calls and there's a lot going on in preparation behind the scenes to what GE and us seem a great opportunity, as stated in the press release, to open a new world on the ceiling. As you all know, it's a deja vu. Edison started the GE with a light bulb and then created the Edison base. That GE created one of the most famous global standards on every ceiling, in every home, in every building in the world. And this is really our model. We're very responsible with this because we have more than creating just a receptacle, as Steve mentioned earlier, that we expect also to be able to license some smart products to the tech world. As our location significantly enhances performance of 99% of smart fixtures, we would say that go in the home will perform better in the top center of the ceiling. So, to arrange for such a big plan and all our initiatives, we're very careful using GE's great experience in that field, and we're starting to move forward towards some discussions and we hope that that will be a main factor. We hope and believe that that will be a main factor down the road as part of what we do here. And we hope we'll be able to share with you some things, hopefully the near future, but definitely in the next coming months, we will start having some serious discussions about collaborations and licensing with several industries. Jack Vander Aarde: Got it. Well, thank you very much. I appreciate it. Congrats on the continued strong results and momentum, guys. Thanks. Rani Kohen: Thank you very much. Thank you, Jack. Operator: We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Rani Kohen for closing remarks. End of Q&A: Rani Kohen: Well, thank you, everyone on the call. Thank you, Steve Schmidt. Thank you, Lenny Sokolow. Our team members here, thank to Marc the great financial update here and thank you for the audience. And hopefully, we'll have some more things to share with you, looking forward for our next earning call. And hopefully, we believe you'll hear for us prior to that next earnings call. So, we're working on some interesting things and once we're able to announce them, we will, if they happen, obviously. So, thank you very much. Looking forward to talking to all of you soon. Operator: This concludes today's virtual webinar. Thank you for your participation.

SKYX Platforms Corp. (SKYX) Q2 2024 Earnings Call Transcript

Rani Kohen - Founder and Executive Chairman Steven Schmidt - President Leonard Sokolow - Co Chief Executive Officer Good day and welcome to the SKYX Platforms Corp. Second Quarter 2024 Investor Update Call. Today's webinar is being recorded. Before we begin the formal presentation, I'd like to remind everyone that statements made on the call and webcast, including those regarding future financial results and industry prospects, are forward-looking and may be subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the call. Please refer to the company's SEC filings for a list of associated risks, and we would also refer you to the company's website for more supporting industry information. At this time, I would like to turn the webinar over to Rani Kohen, Executive Chairman of SKYX Platforms Corp. Sir, please go ahead. Rani Kohen Thank you. Good afternoon to everyone. Welcome to our second quarter earning call and corporate update. We will have Steve Schmidt, our President, start with the call. So, I'll hand the microphone to Steve Schmidt. Thank you. Steven Schmidt Thank you, Rani. It's obviously my pleasure being with you here this afternoon. And let's start off with a chart that you've seen, but one that we continue to take great pride in, and that is of our management team, our Board, our advisors, and our investors. We feel very, very proud of the individuals that have been attracted to SKY. We continue to add additional talent as the business warrants, and we think second to none relative to the overall skill and capabilities. And all of these people have joined SKY because they believe in the company, they believe in our vision, and they believe in the products and the future of this organization. So critical that we have it, and it's important for any organization. Next, let me remind everyone again of our mission. Because we think it's critical that our mission is to make homes and buildings safe and smart and advanced as the new standard. And our products significantly do four things. We save lives, we save cost, we save time, and they're advanced and simplified. And there are many industries that have been successful in just one of these areas. But at SKY, all four of these areas apply to our products. And it's why we're so enthusiastic. We continue to make significant progress on our patents. We now have accompanied 97 patents and pending applications with 36 issued patents in the US and globally, including China, India and Europe. Our TAM aggressible market is massive, over $500 billion, spanning almost every room. And you think about homes and hotels and offices and buildings in every location that we have the possibility of being in making a huge TAM market. And our expected revenue streams include product sales, royalties and licensing, subscription monitoring, and the sale of global country rights. As you know, we have three really generations of ceiling platform technologies. First, our plug and play lighting and ceiling fans; next, our smart plug and play lighting and ceiling fans and finally, our all-in-one smart home plug and play products. All of these really represent significant growth opportunities in terms of market penetration and significant future licensing programs. Let's now move on to really the business and financial highlights. We are in the beginning of opening a new world on the ceiling for advanced and smart home plug and play products, and we strongly believe that we can revolutionize the lighting, ceiling fan, smart home AI industries, among others. In 2023 going back, we generated our first year record revenue of $58 million -- $58.8 million through our 60 websites, including sales of our advanced and smart home plug and play products. We now reported record second quarter sales of $21.4 million compared to $15 million for the second quarter 2023, as we continue to grow our market penetration in the US and Canada for advanced and smart platform products. The fact that we are maintaining and even increasing revenues in this market is quite significant as the lighting and home decor are suffering substantial declines based on two main factors. First, the slowdown of the real estate market and second, COVID, where people were at home and many of them were renovating their homes. And as recently stated by the Wayfarer CEO, the whole home decor home improvement area is in somewhat of a crisis mode. We reported $15.6 million in cash, cash equivalents and restricted cash as of June 30, 2024 as compared to $19.8 million as of March 31, 2024. As common though with companies such as ours, when sales are converted into cash rapidly often referred to as the Dell Working Capital Model, the company leverages its trade payable to finance its operations, to enhance its cash position and to lower its cost of capital. Additional business and financial highlights, we continue to grow our market penetration of our advanced and smart plug and play products as our products are in nearly 10,000 US and Canadian homes and are expected to be in tens of thousands of homes in 2025. We continue to utilize our e-commerce platform of over 60 websites for lighting and home decor to educate and enhance our market penetration to both retail and professional segments. We expect to significantly enhance our market penetration to the builder markets in the coming months. We believe the company will continue to become cash flow positive during 2025 through our product collaborations that are expected to significantly increase our gross margin sales and our distribution channels. Let me now shift gears to some of our key collaborations. We have just recently announced Home Depot. And what we've done with Home Depot parallel to many products going into Home Depot's website, some of our products are expected to go into some stores. As we are the only products that include smart plug and play technology, it's important to emphasize that from the many products including smart lighting and smart ceiling fans that are expected to go in on Home Depot's website, those products that perform well will have a good chance to go into their stores, bringing an opportunity to potentially significantly increase our revenues, with over 2,000 Home Depot stores, any product that goes into those stores can potentially generate a substantial revenue for us. Next, our collaboration with GE Licensing continues to make progress with initiatives related to recently signed five-year licensing partnership agreement for the US and global markets. SKYX and GE's goal is to make SKYX game changing ceiling outlet/receptacle the standard for homes and buildings by licensing it and its related products, including SKYX's advanced and smart home platform technologies, to various industries including tech, smart home, AI, lighting, ceiling fans and electrical. Next, our collaboration with the world leading Chinese lighting supplier and manufacturer Ruee Appliances for the US, Chinese and European markets. This collaboration provides SKY substantial backing in several areas including financial, mass production, manufacturing capabilities and distribution to the global markets. And then, as we have announced prior, we've got collaborations with world leading lighting company Kichler, collaborations with US lighting leading company Quoizel with over 100 years in the lighting industry, collaboration with the US leading lighting company Golden Lighting and all of these collaborations will be including SKY's advanced smart and standard products for online, professional channels and retail. As I mentioned prior, when it comes to our patents, we're making significant progress. We started production of our new global patent advanced smart plug and play Recessed Lights. The global Recessed Lights market is a multibillion-unit market. SKY's new plug and play Recessed Lights global patents include the US, China, Canada, Hong Kong and Mexico, as billions of Recessed Lights are installed globally with hazardous electrical wires SKY's Recessed Light solutions enable an advanced, simple plug and play installation that saves costs and lives. SKY's plug and play Recessed Lights can be controlled through SKY's app, voice control, phone and works with Apple, Siri, Amazon Alexa, Google Home and Samsung. New Google Smart Home and AI related patents SKYX new and existing patents, including the new global patent advanced smart and plug and play Recessed Light enable enhanced performance of smart home and AI sensors in addition to home safety sensors, bringing the company's intellectual property portfolio to a total of over 97 issued and pending patents, 36 of which are issued patents covering SKY's advanced plug and play and smart home platform technologies for the smart home, AI, electrical and lighting industries in the US and internationally, including China, Europe, Mexico and two patents in India. It also includes the recent issuance of six additional patents in the US and internationally in China, India, Europe, Canada and Mexico for advanced smart and plug ceiling fan and heater. With that, let me now turn the meeting over to Len Sokolow, our Co-CEO, who will take you through additional financials. Len? Leonard Sokolow Yeah. Thank you, Steve, very much. Just to reiterate, initially, the revenue in our second quarter of 2024 increased to a record $21.4 million, including our e-commerce sales, as well as smart and standard plug and play products, as compared to $15 million in the second quarter of 2023. We reported $15.6 million in cash, cash equivalents restricted cash as of June 30, 2024, as compared to $19.8 million as of March 31, 2024. And as Steve stated it's common with companies such as our as ours when the sales are converted into cash rapidly, it's often referred to as the Dell Working Capital Model. We leverage our trade payables, enhance our cash position to lower our cost of capital. And just to elaborate, as many know, the Dell Computer really revolutionized the direct sales or rapid sales to customers and they were able to collect their receivables within one to three days. And they were able to have favorable vendor payables that could be over 10 times that time span. So, it could be 30 to 60 days. And that significantly enhances the cash conversion cycle and the liquidity generated from working capital. Just to connect some dots that are in the press release also Ruee and that great relationship also enhances our cash conversion cycle. We had a EBITDA -- we had a $2.5 million reduction in our net cash loss before interest, taxes, depreciation, amortization as adjusted per share based payment, we call that the adjusted EBITDA. It's a non-GAAP measure, and that reduction went to $2.1 million in the second quarter as compared to $4.6 million in the first quarter of 2024. Our adjusted EBITDA loss, a non-GAAP measure, amounted to $2.1 million in addition to non-cash basis loss of $5.4 million. This amounted to a net loss of $7.5 million in the second quarter of 2024 as compared to a net cash loss of $2.7 million. In addition to a non-cash basis loss of $9.6 million amounted to a net loss of $12.3 million in the second quarter of 2023. And just to distill it down, to give some perspective, the key metrics that are reflected in our quarterly filings. When we compare this Q2 results to Q1 of 2024, keep in mind the following. In our view, it's very good direction. Our revenues increased 13% to $21.4 million. Our gross profit increased 18% to $6.6 million. Our gross margin increased 4% to 30.7%. Our operating expenses decreased 11% to $12.8 million, and our cash operating expenses decreased 14% to $8.7 million. So our EBITDA loss as adjusted decreased 54% to $2.1 million and then our cash used in operations decreased 32% to $2 million. So, our metrics and our trends were extremely favorable quarter to quarter. So, something that we wanted to emphasize that these numbers are, of course, reflected in our filing. Thank you, Steve and thank you Lenny. Great cover. Great month here, a good quarter for us and month. A couple of points here as you see the slide here. And again, we're utilizing what we call the razor and the blade model. We're enhancing our market penetration, as we said, nearly 10,000 homes and expected to be in this rhythm within tens of thousands of homes within a year or less. Hopefully, this provides us a large variety of products including smart light fixtures, smart chandelier, smart ceiling fans are all in one platform and the Recessed Light that we just announced is our new patent. All of them can be controlled by smart. We announced this Recessed Light, some people call it hi-hats. No patent on plug and play people still, it's a small, very small fixture, but people still go on ladder, spend time on the ladder, touching hazardous wires and taking can take 30 minutes to someone install one of them. Here it becomes plug and play. This is -- as we said in our press release and earlier, this is a multibillion-unit market. We're very excited that we started production. Those are part of things that are going to go on homedepot.com. This potential product opens the door for many builders and other projects that we're talking to now and we hope we'll be able to announce in the next coming months. We're working on several fronts with this and there's some excitement about this product. It provides also the capability to use it as a smart product and talk to Recessed Light or talk to 20 Recessed Lights or more in one room or use your iPhone through Apple Siri, Alexa, Google Home, Samsung and other ways. As you can see, the product provides not only round four-inch size and seven-inch size, it also provides for square four-inch and seven-inch and those are huge markets and definitely good for the US market, but has a great potential going globally. We're also showing here a taste of some of the products that are capable compatible with the lighting products and fan products and lighting and smart fans that you can see here down the road. In addition to Recessed Lights that we'll have the chandeliers, smart chandeliers will have for kids rooms, we'll have holiday lights that we expect also with all of this to go to Home Depot. We will have ceiling fans, smart ceiling fans. We have the patented all in one heater and ceiling fan. We'll have wall sconces, we'll have exit signs, emergency lights, variety of products that we expect to launch not only on our 60 websites, but now, as announced on the Home Depot website. And as Steve mentioned, parallel to launching on the Home Depot website, we will also be going to stores with some products and products that perform well online, have a good chance to go to stores. And as Steve mentioned, even the product, one product that goes into such a big company's Home Depot 2,000 stores, can be quite significant in substantial revenues for us. The packages of them, we also continue to sell and will sell in Home Depot. The one pack, four pack, eight pack and 24 pack of the stealing outlet, what we call Razor and other products to be with this, all our products to remind everyone we got the 7 CES award and we are really going after a market -- with a addressable market of over 4.2 billion applications, US and homes and apartments, and that's residential only. Obviously, the smart home market is also a big play with this, but we can also go to commercial as expected, to do our all-in-one smart platform as we're getting close and we hope to start production this year, as we said, and the sooner the better. And there's a lot of excitement around this product. And as we said, so many capabilities in one product and the CES awards we won and enhancing performance of so many things, including WiFi, AI, performance of chips or software, as well as smoke detectors, geodetectors, sound, voice and many other things you can put here. And you know, we can really believe we can transform buildings and homes instantly to smart. Rather than spending weeks on homes, it can happen within minutes or an hour. And large buildings, rather than spending millions of dollars in a one-year span, we can do it, as we mentioned, quite fast, within days or hotels, et cetera. And as Steve mentioned, we're doing great progress here on some GE initiatives with GE Licensing. And we have addressed the whole licensing packages to various industries and as Steve mentioned earlier, we're going to license not only the standard plug and play, but we'll also license, and hope to license the smart technologies and capabilities, including the electronic real estate that we have. We can provide to enhance performance of smart homes. Other companies can utilize our patents, our code achievements here, and also license our capabilities to do it in every home. As to the code application, we have filed, as you know, last year to mandatory. After a long time, our team members Mark Earley and Eric Jacobson, that lead the application, are confident that we have everything that's needed to become mandatory. Again, as I always said, it's a very long process. We're already over 12 years in this process. So that's the good news. It's still a slow machine, but we're making progress and we hope to share more things about this with you as time comes. In the meantime, we did get approved, as you can see here, the WSDR as our generic name. That that's a major condition. We got 10 segments voted into the national electrical code in the past 12 years, and we got this historical approval by ANSI, American Standardization Institute, and NEMA, National Electrical Manufacturers, that actually create the standards in home and buildings when it comes to safety. So, our code team is optimistic, as we said, and we really think that we're in the beginning of, as Steve said earlier, to open a new world on the ceiling with variety of products that we share with you. And we really feel that this beginning is really starting to happen with major collaborations like Home Depot and like other leaders, including GE and leading companies. So, with that being said, we hope that we will be able to share additional things that we're working on and if they prevail, we will definitely. But I think we can conclude now the first part of this call and start addressing Q&A, If there is some Q&A here. So, I'll turn it up to the host and please guide us with the Q&A. Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Michael Legg with the Benchmark Company. Please proceed with your question. Michael Legg Thanks. Good afternoon. Congrats on the record quarter everyone. I wanted to touch on Home Depot as we enter the Home Depot phase, and that could obviously ramp up very fast and be very big. Can you just comment a little bit on how the Ruee Appliances relationship with the financial and the production capacity kind of ties into all that and gives you that power? Just expand on those two, please. Thanks. Rani Kohen Sure. Thank you. Michael, great question. Those collaborations, including Ruee Appliances and some other collaborations we have, help us from variety of products for the smart products and the advanced plug and play products, and also some of those relationships. The way it works is that we have those relationships, provide us this product in large varieties and enables us to pay after we sell, as Lenny Sokolow, our Co-CEO, and Steve Schmidt mentioned, the Michael Dell model. So, those collaborations help us in gross margins in certain type of financial backing, as well as in opening and helping us to open distribution channels and with variety of smart and advanced products and down the road, Recessed Lights and smart ceiling fans and the heater. So those are extremely strategic relationships and having the world leading home improvement company collaborating with us and the largest, I think, lighting manufacturer in the world, Ruee Appliances, it's a major factor. He's very big here, very known, he's an approved vendor, and all the biggest companies here in the US and quite large in China and in Europe as well. So, those are extremely strategic and long-term relationships that we believe we can capitalize and improve significantly range both margins and distribution channels. Michael Legg Great. And then just one more question. Since you made the Home Depot announcement, obviously that's big news. Have any other retailers kind of come on board and tried to get in touch with you? And how is the whole reputation expanded because of that amongst other retailers? Rani Kohen I think that we're in discussions that we can't share yet, but I think that there's a different type of retailers that potentially we can discuss with, and some of them we are discussing. I think, in home improvement, Home Depot is a leading company. I'm very proud of that relationship and I think really can be a major factor for us, this new beginning for us. But there's definitely other targets around and home decor and other sectors that we're looking into and we hope we'll be able to announce some of them sooner than later. Our next question comes from Pat McCann with Noble Capital. Please proceed with your question. Patrick McCann Hey, thanks for taking my questions. Just got a couple and congratulations on a nice quarter. My first question had to do with the builder channel, specifically regarding the recent announcement with Home Depot, I was wondering if there's any tangible developments that have happened since then, as far as more builders coming to talk to you or any acceleration in the builder channel as a result. Rani Kohen We are very active in the builder channel and there's a lot that we hope that we'll be able to share. Going back to the previous question, part of our relationship with collaborating with those vendors, manufacturers, including Ruee, is to address the variety of products. Currently, our revenues mainly go our product and plug and play, go on smart chandeliers. Plug and play chandeliers and pendants. But now we're opening the door for recessed light, wall sconces, ceiling fans, flush mounts, down lines, what we call and down the road exit signs and emergency lights. Those are definitely key to builders. And as we get product here and we're working on this and we announced -- we started production, we definitely hope to be able to share some more developments regarding the builder channel that's quite active on our end. Patrick McCann Great, thanks. And then my other question was just relating to your cash burn. I believe you mentioned in the prepared remarks that you would still be targeting a 2025 cash flow positive -- to turn cash flow positive in 2025 and the reduced cash burn in this past quarter. I was wondering, from a funding needs perspective, are there any updates there? Do you anticipate you would need additional funding, or do you have the tools you need to get the cash flow positive without additional funding if need be? Rani Kohen So, I think, as Lenny Sokolow, our CEO, and Steve Schmidt mentioned, the Michael Dell model, because we're selling with cash really helps us on this position. We're lucky to have our 60 websites and the 21.4 million we just announced. Probably what we can call it all cash, so that helps us. And the collaborations we have with those vendors also help us that we don't need to spend big dollars. So, we really feel strongly that we have a path that can bring us to cash positive. Because of those collaborations and because of those terms, we -- what we call, or our management here calls the Michael Dell model, we feel confident that we can get to cash positive in 2025 as we start rolling and bringing and growing our gross margins and bringing more products into the country. Patrick McCann Great. Thanks so much for the color. And again, congratulations on the quarter. Our next question comes from Jack Vander with Maxim Group. Please proceed with your question. Jack Vander Aarde Okay, great. I appreciate the 2Q update, guys. Great to see the big uptick in revenue and material decrease in operating expenses for sure. Question maybe for Rani. I think, I heard you mention it briefly during your prepared remarks. But can you provide an update on the overall significance and maybe just launch timing of the upcoming Gen 3 all-in-one platform product? Rani Kohen Yes. Our expectation is to start production second half and probably towards the end of this Q or next quarter. We're in good shape as the platform is working well and performing. We're just fine tuning towards regulations such as you have UL smoke detecting and you have the FCC communication. So that requires fine tuning. And for us is also to complete and conduct what's very important to us, our six-sigma quality control manual. We also -- with our first generation of smart, what we call generation two, our plug and play smart product, we could have launched earlier, but we decided to conduct additional testing just to make sure that as we launched, we don't have surprises. And we're very happy we conducted it because we're in the market launching that product. And really we did it responsibly and this is exactly what we're doing with all-in-one smart platform. There's great demand for that product. The product is working great on all our tests and it's a final fine tuning here, so we feel comfortable enough to start the mass production. So that's where it stands. And we think we have a good chance to start in the next couple of months, the production after we complete all the quality control manuals and regulation testing. Jack Vander Aarde Okay, great. I appreciate the color there. And then maybe a follow up for Lenny. Can you provide maybe some additional color on the progress update with regard to the collaboration and sort of production timeline with Ruee Appliances and if we'll see maybe an uplift in gross margins because of Ruee later in the back half of this year, or just maybe next, by next year. Thanks. Leonard Sokolow Sure. So, Ruee, I think as we've discussed, it's multidimensional in terms of what they bring to the table. Not only are they manufacturer for global products, US, Europe, China, but their ability -- with our collaboration and partner financial partnership, we're able to leverage that model, of course, with the cash conversion cycle that's favorable, similar to the Michael Dell cycle. But it's also -- there's flexibility and they have a knowledge base with respect to the large big box stores and the sales channels we have, they have that flexibility to service it. They understand the lighting, they make lighting for the big boys. So, it's really a very good foil for us in terms of growing the market and being able to expand with them. No, I think that pretty much covered it. I was just looking to get your thoughts, your latest thoughts on that, and that sounds encouraging. Maybe I will follow up, though, with a question on the GE relationship. Can you just speak to what's the latest with your GE arrangement and are you actively -- how active are they today and how active will they be by next year as it relates to the business model? Thanks. Rani Kohen As far as active, we're very active with GE. We conduct weekly calls and there's a lot going on in preparation behind the scenes to what GE and us seem a great opportunity, as stated in the press release, to open a new world on the ceiling. As you all know, it's a deja vu. Edison started the GE with a light bulb and then created the Edison base. That GE created one of the most famous global standards on every ceiling, in every home, in every building in the world. And this is really our model. We're very responsible with this because we have more than creating just a receptacle, as Steve mentioned earlier, that we expect also to be able to license some smart products to the tech world. As our location significantly enhances performance of 99% of smart fixtures, we would say that go in the home will perform better in the top center of the ceiling. So, to arrange for such a big plan and all our initiatives, we're very careful using GE's great experience in that field, and we're starting to move forward towards some discussions and we hope that that will be a main factor. We hope and believe that that will be a main factor down the road as part of what we do here. And we hope we'll be able to share with you some things, hopefully the near future, but definitely in the next coming months, we will start having some serious discussions about collaborations and licensing with several industries. Jack Vander Aarde Got it. Well, thank you very much. I appreciate it. Congrats on the continued strong results and momentum, guys. Thanks. We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Rani Kohen for closing remarks. Well, thank you, everyone on the call. Thank you, Steve Schmidt. Thank you, Lenny Sokolow. Our team members here, thank to Marc the great financial update here and thank you for the audience. And hopefully, we'll have some more things to share with you, looking forward for our next earning call. And hopefully, we believe you'll hear for us prior to that next earnings call. So, we're working on some interesting things and once we're able to announce them, we will, if they happen, obviously. So, thank you very much. Looking forward to talking to all of you soon. This concludes today's virtual webinar. Thank you for your participation.

Earnings call: KULR Technology Q2 2024 results show strong growth By Investing.com

In a recent earnings call, KULR Technology Group Inc. (KULR) reported significant financial growth for the second quarter of 2024, with a 39% revenue increase from the first quarter to $2.43 million. The company, which specializes in thermal management and battery safety solutions, has seen a substantial rise in its engineering service revenue and customer base. KULR's strategic investments in its Battery Center of Excellence and new facility near the NASA Johnson Space Center reflect its commitment to expanding its capabilities in battery design, testing, and production services, particularly for the aerospace industry. KULR Technology Group's advancements in thermal management and battery safety continue to attract a growing customer base, including tier-one automotive OEMs. The company maintains confidentiality agreements to expedite product development and is engaged in service business engagements that lead to future product sales opportunities. With a strengthening balance sheet and a strategic focus on funding needs, KULR is well-positioned to capitalize on the opportunities in the space economy and automotive markets. KULR Technology Group Inc. has demonstrated a strong commitment to growth, as evidenced by the impressive 39% revenue increase in Q2 2024. However, it's essential to consider the broader financial context provided by InvestingPro to understand the company's current market position and future prospects. InvestingPro Data highlights that KULR has a market capitalization of $48.96 million and has experienced a substantial revenue growth of 76.8% over the last twelve months as of Q1 2024. Despite this growth, the company's revenue for Q1 2024 contracted slightly by 0.61% compared to the previous quarter. Additionally, the Price/Book ratio stands at a high 18.91, suggesting a premium valuation compared to the company's book value. According to InvestingPro Tips, KULR is quickly burning through cash, and its short-term obligations exceed its liquid assets, which may raise concerns about its financial sustainability. The stock also trades with high price volatility, indicating a potentially higher risk for investors. Notably, analysts do not anticipate the company will be profitable this year, which is a crucial aspect for investors to consider given the company's growth trajectory. For those interested in a deeper dive into KULR's financial health and stock performance, InvestingPro offers a total of 15 additional InvestingPro Tips, providing a comprehensive analysis for potential investors. These insights, along with the real-time metrics available on InvestingPro, can help investors make more informed decisions about their investments in KULR Technology Group Inc. Stuart Smith: Welcome, everyone, to the KULR Technology Group Second Quarter 2024 Earnings Call. KULR Technology Group is traded on the New York Stock Exchange under the ticker symbol KULR. In just a moment, I'll be joined by the CEO of the company, Michael Mo, as well as by the CFO of the company, Shawn Canter. As usual, like the calls in the past, today's call will cover opening comments from both Michael Mo and Shawn Canter, and then it will be followed by a Q&A session where the company representatives will answer questions that were e-mailed in to the company for this call. Now before we get started on the call, we do need to cover the Safe Harbor statements. This call does not constitute an offer to sell or solicitation of offers to buy any securities of any entity. This call contains certain forward-looking statements based on the company's current expectations, forecasts and assumptions that involve risks and uncertainties. Forward-looking statements made on this call are based on information available to the company as of the date hereof. The actual results may differ materially from those stated or implied in such forward-looking statements due to risks and uncertainties associated with their business, which include risk factors disclosed in their Form 10-K filed with the Securities and Exchange Commission on April 12, 2024, as may be amended or supplemented by other reports the company files with the Securities and Exchange Commission from time to time. Forward-looking statements include statements regarding their expectations, beliefs, intentions or strategies regarding the future, and can be identified by forward-looking statements such as anticipate, believe, could, estimate, expect, intend, may, should and would, or similar words. All forecasts provided by management made on this call are based on the information available to them at this time, and management expects that internal projections and expectations may change over time. In addition, the forecasts are entirely on management's best estimate of their future financial performance, given their current contracts, current backlog of opportunities with conversations -- and conversations with new and existing customers about their products and services. The company assumes no obligation to update the information included on this call, whether as a result of new information, future events or otherwise. With that, I will turn over the call to Michael Mo. Michael, the call is yours. Michael Mo: Thank you Stuart. This is Michael Mo. Thanks to everyone for joining us today. I'd like to go over some of the financial and operational highlights here. In Q2 2024, we achieved revenue of $2.43 million, up 39% sequentially from Q1. Engineering service revenue increased 76% year-over-year to approximately $1.3 million a record for KULR. Total paying customer number increased 42% year-over-year to 27%. Service revenue customer increased 100% year-over-year to 14%, and product revenue customer increased 25% year-over-year to 15%. In Q2, KULR made significant investments to enhance the capabilities and talent within our Battery Center of Excellence located in Webster, Texas. These investments are critical to our goal of driving revenue growth by providing comprehensive in-house product and service solutions that span the entire life cycle of battery design, testing, prototyping and volume production, all under one roof. I believe we are well positioned to resume year-over-year revenue growth in the second half of 2024 with our new customer wins. During this quarter, we moved into our new state-of-art 17,500 square foot facility. This expanded space was designed specifically to meet the growing demands of our battery design and testing contracts, supporting key industries such as aerospace, defense, electric mobility and space exploration. This space is approximately 2.1 miles from NASA Johnson Space Center and is next to companies like Axiom Space, Leidos, Blue Origin and many others. It is an ideal location to provide the one-stop shop for rapid turnaround design, testing, and production service to the surrounding ecosystem of aerospace customers. We now have a vast majority of our battery engineering team in Webster, Texas to perform three key functions, battery cell and pack-level testing, battery design and analysis, and battery production and engineering services. Our battery design testing capabilities are a key factor in establishing our credibility in understanding and mitigating thermal runaway in lithium-ion batteries. We have accumulated extensive data on various cell chemistries, formats and their reaction to different triggers. This growing data set directly informs ongoing improvements to the KULR ONE architecture. The impact of this work is already evident in this quarter, as we secured a contract from a top Japanese automaker for testing analysis of high-energy battery cells for the next generation electric vehicles. Once we complete our KULR Texas facility built out by the end of Q3, we estimate our testing service capacity at approximately $2 million per quarter. These services include the NASA's award-winning FGRC test, as well as various stealth impact-level abuse thermal runaway tests. These are high-margin services that leads us to design better and safer batteries for our customers. Our battery design and analysis capabilities are a key differentiator. We assembled a team of seasoned design experts complemented by advanced computer modeling and analysis tools allows to deliver cutting-edge solutions in this critical area. In addition to our proprietary products and components such as Thermal Runaway Shield and ISC trigger cells, we continue to provide and develop new technologies for thermal runaway cell body heating protection and ejecta mitigation. At the system level, we have developed KULR's own radiation-tolerant battery management system for our space exploration customers. We're incorporating all these capabilities into design analysis process to build a more robust KULR ONE Space, KULR ONE Guardian, and KULR ONE Air batteries. In Q2, we also expanded our battery production capabilities. Being a one-stop shop for our KULR ONE Space and KULR ONE Guardian customers is a big competitive advantage for us as these customers require speed and quality. We enhanced our infrastructure by integrating our expert fabrication and assembling teams with on-site precision machining, which allows us to scale production quickly and efficiently. As you know, our service revenue is an early indication of potential product revenue. As we achieved record engineering service revenue for Q2, we're preparing for these service customers to go into prototype and production build in the near future. This is why we have been carefully and strategically investing in our production capabilities, to bring one-stop shop service to our customers. A big driver for our service revenue and our motivation to invest in these capabilities is the KULR ONE Space market opportunity. The space economy is going to be $1.8 trillion dollars by 2035, according to McKinsey. This is driven by commoditization of the space industry. The space battery market is estimated to grow to 6.35 billion by 2030. We expect our KULR ONE Space platform to play an important role in this market. Some of the key players in driving this tremendous growth in the space economy include the rapidly growing private companies, such as SpaceX and Blue Origin, continued growth of the traditional government flying contractors, such as Boeing (NYSE:BA) and Northrop Grumman (NYSE:NOC), and new and upcoming companies like Voyager Space, Axiom, and Vast. Many of these are already KULR customers. During Q2, we made significant investments in the technology readiness level of our KULR ONE Space battery architecture, which is already been utilized by Voyager Space and other partners for their upcoming missions. The KULR ONE Space architecture is a scalable safety-first battery design developed with the goal of achieving NASA JSC-20793 certification for human spaceflight applications. Our efforts in Q2 also focus on commercialization of the KULR ONE Space architecture to meet the specific mission requirements of the CubeSat and SmallSat industries. The first off-the-shelf commercial version of the KULR ONE Space is a 200 watt hour version that will be available in fall of 2024. This off-the-shelf solution is engineered to deliver an optimum balance of performance, quality, safety and cost advantage positioning as the industry leader. These developments underscore our commitment to provide advanced battery solutions to meet the rigorous demand of the space of exploration market and beyond. Next to KULR Vibe, in addition to the traditional helicopter and drone delivery markets, we see good opportunity to apply KULR Vibe to computer server fans, and industrial fan applications. As AI demand exponentially more computing power and energy consumption, so does the need for cooling with both air and liquid thermal systems. For air cooling, fan performance is critical to drive enough airflow to cool the latest AI GPUs. Fan performance is limited by the vibration and rotor speed. By removing vibration, KULR Vibe can make bandwidth at higher speed with less energy, less noise, and generate more airflow, therefore providing more cooling to the AI chips. According to Morgan Stanley (NYSE:MS), the liquid cooling system for NVIDIA's GB200 Blackwell high-end rack costs more than $80,000, about 15 to 20 times the cost of an air-cooling system for an existing rack of NVIDIA (NASDAQ:NVDA) H100 chips. More than 95% of the current data centers use air cooling because of its maturity and reliability. There lies our opportunity. We are working on fans used by Facebook's Open Compute Project servers. We are also working on higher-speed fans that can be used to cool the highest performance AI servers. We expect to report performance results and new customers in second half of 2024. Next, Shawn Canter will go over financial highlights. Shawn? Shawn Canter: Thanks, Mike. Our Form 10-Q for the second quarter of 2024 is now available online. Please refer to it for more details. I'd like to highlight three themes that we are focused on. One, growing revenue and relevant KPIs. Two, spending less cash, and three, stronger balance sheet. This slide shows key KULR full year annual growth trends from 2021 to 2023. Total revenue up over 300%. Product revenue up over 360%. Service revenue up almost 220%. Paying customers up 165%. Revenue per customer up 54%. KULR is a growing business. Here's the trailing 12 month revenue chart starting from the first quarter of 2021. As you can see, growth doesn't always happen in a straight-line. When you get a perspective, you can see the growth trend. Trailing 12 months revenue since the first quarter of 2021 is up almost 900% through the second quarter of 2024. Going from a broader perspective, now let us zoom in. Second quarter versus the first quarter of 2024 revenue was up 39%. KULR's using less cash. Comparing the six months ending June 2023 and 2024, cash used from operating activities is down 7%. Cash used in investing activities is down 82% for a combined cash use reduction of 13%. KULR's balance sheet, comparing the end of 2023 to the end of June 2024, cash plus accounts receivable up 40%. Liabilities down 42%. KULR's balance sheet is getting stronger. Back to you, Stuart. A - Stuart Smith: All right, thank you for that. Now let's move on to the question-and-answer portion of the call. Here is the first question submitted by one of your shareholders, regarding bills H.R. 1797 and S.1008 Setting Consumer Standards for Lithium-Ion Batteries Act and with Representative Ritchie Torres as the sponsor, it seems like KULR fits perfectly to be the leading candidate for this bill. Can you give us any information regarding this bill and whether KULR is a top candidate? Also, is KULR building the new cathode for Tesla (NASDAQ:TSLA) in the Cybertruck? So, a detailed question right there. I will put it to both of you and see who wants to answer it. Michael Mo: All right, Stuart, I'll take that. Yeah, this is Michael Mo. We have engaged with various stakeholders in this area, including our departments, HazMat teams, local officials and national organizations, offering our expertise on thermal runaway mitigation. So our response to the challenge has been multifaceted. We provide three key packs, battery packs with built-in thermal runaway protection, assist other battery design teams ensuring their designs are safe from propagation for SafeCase as a solution for safely storing and transportation of batteries, so regardless of their starting point. So, it's crucial for first responders, as well as customers in automotive, aviation, defense and aerospace sectors who prioritize safety. We hope this legislation continues its efforts which specific details have not been fully released yet as far as we know, and also can't comment on the new cathode development for the Tesla Cybertruck application. Stuart Smith: Okay, I just want to clarify that last part. There was just a little bit of interference, and you said you cannot, or you can comment on the new cathode. Michael Mo: I cannot, cannot. Stuart Smith: Understood, understood. Okay, great. Let's move on to the next question then. Over the last year we haven't heard much about KULR Vibe. As this is a software-based solution, it would seem like a low-cost way for companies to save money and KULR to generate revenue. Why hasn't KULR found more success here, and can you demonstrate actual cost savings to present to potential clients? Thinking in terms of energy saved to run a data center fan or fuel saved to fly a helicopter, as a couple of examples, if I can spend $5 to save $10, I am probably going to do that running a business. The use cases here seem very large. Michael Mo: So, I'll take that as well. So, we see a good opportunity to apply KULR Vibe to server fans and industrial applications. So, by removing vibration, the fan can run at higher speed with less energy, less noise, and generate more airflow, therefore providing more cooling to the chips. We're now working on fans used by Facebook's OCP, which stands for Open Compute Project servers, but we are also working on higher speed fans that are used to cool high-performance AI servers. So, we hope to report results on the testing, also new customers in the second half of 2024. Stuart Smith: Okay, great. Thank you for that, Michael. All right, so KULR is a small company and thus expanding manufacturing capacity of its product seems like a costly way to grow its business. Licensing your technology to OEMs seems like the best way to grow revenue. How does this fit into your strategy going forward? Michael Mo: So being a one-stop shop for our KULR ONE Space and KULR ONE Guardian customer is a big competitive advantage for us. That's why we're investing in all of the technical capabilities in our Texas facility, especially for large and important customers, being fast and agile is very important to them. So KULR frequently collaborating with these companies and common groups that have their own design battery design capabilities. In these cases, KULR become the trusted partner for them for rapid testing and prototype, which introduce KULR's expertise to new departments and also their next-generation designs. So, it's an entryway for groups to explore additional KULR offerings that complement their current design and also help them to accelerate their time to market. So, it's very important for us. Stuart Smith: All right, next question can we expect KULR to announce its automotive partnership soon? If not, why and what happened? If so, then when? Michael Mo: Yeah, EV, I think we've stated for the EV market is not this area for us for KULR ONE batteries because of its long lead time and also low margin. However, we are serving many of the automotive units with our battery testing and SafeCase technology. So these are good business for us with high margins and good growth. We'll continue to serve the automotive market with these products and services. Stuart Smith: All right, next question then, what are the plans to reverse the decline in stock value that started over three years ago when the stock price reached $3.60 per share? Shawn Canter: I'll take that one, Stuart. It's Shawn. It's an interesting question and maybe to answer it I'll start with a little bit of history. KULR first traded on the New York Stock Exchange American in June 2021, a little over three years ago. Since then, the high closing price for KULR stock was $3.53, and that was in November of 2021. In calendar year 2021 KULR generated about $2.5 million of revenue. In 2022, about $4 million of revenue, and in 2023, about $10 million of revenue. So, from 2021 to 2023, that is about a 300% growth in annual revenue. The markets KULR serves have only grown since 2021. The demands for more energy intense batteries have only grown across the various segments that KULR serves like space, military, industrial, electric vehicles, electric planes, electric drones. From an operational point of view, I think KULR is in the best position it is ever been in. Look, stocks go up and down for any number of reasons. I won't pretend to be able to predict the future. Management thinks KULR is in the best operational performance and customer satisfaction position it's ever been in. When does the stock price reflect that? I don't know. I would guess though that when it does, it will reflect a similar trend. Stuart Smith: All right, very good. Thank you for that, Shawn. So next question, will KULR management use cash via equity, funding or borrowing from the bank to fund ongoing operations of the company until the end of the year? Shawn Canter: Why don't I take this one, Mike. As I highlighted in my prepared remarks, KULR's balance sheet is getting stronger. We evaluate funding needs and opportunities through the lens of what serves KULR's operating requirements and keeps KULR on this trend of a stronger balance sheet. That's good for operations. It balances risk and ultimately those things are good for shareholders. Stuart Smith: All right, so here's the next question, can the company speak to its outreach to vehicle manufacturers? If the products are so great, why are they not the industry standard? Michael Mo: Yes, Stuart being an industry standard takes a long time and it's hard. We are serving automotive customers with our battery testing and SafeCase technology, which we hope it will become de facto standards over time, and these engagements allow KULR to sell more products and services to our tier-one automotive customers. Stuart Smith: Next question, how does KULR expect the future mass production of solid-state batteries to impact the business? Michael Mo: Yes, we are testing batteries of all chemistries and sizes for customers. So as more solid-state batteries come to the market, we expect to do the same and also design them into a KULR ONE battery platform, so it should be a positive impact to our future growth. Stuart Smith: Okay. Next question, in the Q1 earnings report, KULR listed 34 customers. Understanding the constraints of NDAs, non-disclosure agreements, can you share any customer names that we might not already know about additionally? Please expand on any new customer engagements that might interest investors. Michael Mo: Yeah, also as we shared in our prepared remark that we continue to grow our customer base, which is up 50% a year-over-year this quarter. Many of them are some of the largest OEMs in the world, and we are working with them on the next-generation product platforms. So, it is important that we keep their confidentiality, and then also do our best to speed up their product development. And these developments are across space application, common applications, energy storage applications, so it's a very exciting time right now. Stuart Smith: Okay, thank you for that. Next question, how does the war in Europe and the Middle East impact the revenue of KULR? Shawn Canter: I'll take this one, Mike. So far we haven't seen any negative impacts to our pipeline or supply chain, that I'm aware of. We'll certainly continue to monitor what's going on and adapt accordingly. Our work with drone manufacturers regarding both batteries and vibration control may be implicated by what's going on in the world, of course. As drones and artificial intelligence based mobile systems become more commonplace, the need for high-powered safer batteries and vibration control would seem to be growing. In fact, you might remember, Stuart, that this was referenced in a KULR press release, I think it was back in April about the Ukraine. Stuart Smith: Yeah, I do remember, and thanks for pointing that out, Shawn. And here comes the next question then, in the Q1 earnings call, KULR had a slide that listed private space stations in relation to the KULR ONE Space product. Could you provide any details or is there anything that you can share on current or future space station projects? Michael Mo: Yes, Stuart. We have customer designing private space stations with our battery technology. As a matter of fact, I think that different governments now are trying to do their own space stations and subcontract out to private companies to do this. So, we see many more applications actually in the space economy ecosystem to use KULR ONE Space, which is the space economy ecosystem is forecast to be $1.8 trillion. This is definitely a new market and it's growing very, very quickly, so we see huge opportunity in this. Stuart Smith: All right, you guys will have to forgive my naivete here on this. That's from the shareholder, they wanted to preface their question with that, and they say, but I can see after reviewing the website that KULR products can be used in storage and transportation of batteries, but can the company's products be used on batteries that are operating such as in cars that are in use? If so, can this help prevent car fires? Michael Mo: I think this question from this shareholder is about the SafeCase application for battery storage and transportation. Yes, they are used to store batteries during production, during the storage, the shipping and the recycling life cycle of the battery. We are expanding the SafeCase application with fire departments and hazmat professionals around the country, so you'll see more and more of these adoptions of the technology across multiple battery applications. Stuart Smith: Let's see. We have about two more questions here, so here is the second to last question. While investors have come to understand in general that you cannot disclose the company and contract values for most EV companies under NDA, there has been a lot of news about EV news released in the last couple of years. This has led to speculation among retail investors about who KULR is working with. Can you give us the tiniest taste of excitement by telling us the number of automakers you are working with? Michael Mo: So let me recap some of these customer engagements. I think we talked about the top automotive OEM in the world, so that will be Japanese and German automotive OEMs. So, I talked about the number one automaker in the US, and we talked about the number one electric SUV maker in the US. So, I think that recap should give our shareholders some idea about who we're working with. Stuart Smith: So here is our final question. It has to do with something Shawn Canter mentioned. Here is the question Shawn Canter mentioned in a November 2023 YouTube interview that the service business can be seen as foreshadowing future product sales opportunities. Can you share any specific examples from Q2 where service business engagements have led to or are expected to lead to future product sales? Shawn Canter: I think this one already has my name on it. We are starting to ship sample KULR ONE's Space batteries and cells to customers. These are the results of our design service engagements with customers throughout 2023 and through the first part of 2024. We expect to see more of that in the second half of 2024 and to ramp up in 2025, since these programs usually take about 12 months to 18 months of lead time to get to production. Thanks. Stuart Smith: Well, excellent. That was the final question. I know I speak on behalf of both my guests today, Michael Mo and Shawn Canter, in expressing our gratitude for the shareholders and interested parties for sending in their questions. I will now turn the call back over to our operator to close out the call. Operator: Thank you. This does conclude today's conference call and webcast. You may disconnect at this time, and have a wonderful day. Thank you for your participation.

CXApp Inc. (CXAI) Q2 2024 Earnings Call Transcript

Good afternoon, and welcome to the CXAI Second Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised that this call is being recorded. And now I would like to turn the conference over to Mr. Khurram Sheikh, Chairman and CEO of CXApp Inc. Please go ahead, sir. Khurram Sheikh Thank you, operator, and thank you, everyone, for joining the quarterly earnings call for CXAI, pronounced Sky. I plan to discuss CXAI's financial results for the second quarter of 2024. I will also provide an overall business update on our progress in shaping the future of work and creating transformative employee experiences. By now, everyone should have access to our earnings press release announcement. We have also filed our quarterly earnings report, our 10-Q for Q2 2024 with the SEC today. This information will also be found on our website. www.cxapp.com. With that, I'm going to move to show some disclaimer slides, which people can review at their own leisure. So now let me tell you a little bit about the company, CXAI. We are listed on NASDAQ. As you know, we're an AI plus enterprise software company, creating a new segment and software called Employee Experiences. We're headquartered in the San Francisco Bay Area, where we have design and development resources all over the globe with main hubs in Toronto and Manila. More importantly, we have customers that are globally situated, although all our customers are headquartered in North America, where we're deployed in around 200-plus cities in 50 countries in all five continents, where we tell you the depth and breadth of our capability and our span across the globe. Our customers are Fortune 1000 customers that have great enterprise capabilities globally. The reason why the true CXAI or Sky is because we have a great technology platform that's built on 37 filed and 17 granted them. And this team of 80 innovators globally has made mostly of engineers, so more than 2/3 of the team is engineering. But all our colleagues are great collaborators, innovators and design thinkers that are creating the next generation of the future work. So, this is where we're super excited to share with you the progress we made, the outcomes we have. And I'm going to start by -- before I go forward, I'm going to talk a little bit about the market and see what we're -- what's shaping the market, what's happening in the market, as you can see. But first of all, it's very obvious that the world is going to an AI-centric world, where transformation is happening across all states of the industry, and we are the company that is changing the transformation or transforming the workplace as we speak. So let me talk about the market, what is happening in the market, what do we see in the market right now. It's obvious that the -- that work-from-home was the predominant use case during the pandemic. And work-from-home is now stabilizing at around 25% of days, which is around one to two days a week, which is still a five-floor jump from 2019 when we had less than 5% people working from home. The work-from-home is staying, it's not going away. It's also becoming more stable, more predictable. Now as you look there, there's also a trend happening in terms of what's happening with the office occupancy. During COVID and post-COVID, there was a rising occupancy in the marketplace. It's flattening out for the last number of years. So, the last two years is that we flattened for around 50% of 2019 levels. This data shows that now we're in a position of stability or at least a new work norm is being implemented. This data that I showed you is from courtesy of Professor Nick Bloom at Stanford, who is the leading thought leader in this space. And as you can see, there's a lot that has changed, but now there's a new norm, which is called Hybrid Work. So, what is Hybrid Work? And why is Hybrid Work is more important? As you can see, 37% of U.S. companies have now embraced a structured hybrid model, which is up from 20% in Q1 of 2023. If you look carefully at this chart, it's obvious that the world is going towards a structured hybrid model. There are people that are fully flexible. There are companies still doing full time in the office, but the structured hybrid seems to be the most successful and most useful model out there. And managers have shown that have reported that there's an increase in productivity, there's increase in work like balance and there's reduced burn out. Employees want to be given the opportunity to have that flexibility. That flexibility is key to the success of new workers experience. As we move forward in this structured hybrid world, what does that entail? That entails all of these large customers of our large Fortune 100 and 1000s, they're adopting that more and more. As you can see, more than 67% of the companies with 25,000-plus employees are using structured hybrid. And most of our customers are in that same footprint, either 25,000 or in the 5,000 to 25,000 range. At the same time, this phenomenon in this trend is going to grow over and over across all the segments. So, we believe that this is going to be the way of the future and structural hybrid is where the world is going. And there's no going back on this. This is the way industry is performing in terms of how enterprises are expecting workers to come back to the office or work from the home. We're actually working from anywhere, and giving the capability and the tools and technologies to allow them to be successful in any environment. So, when we think about the challenges of hybrid work, this is where the biggest thing that's come out is the hybrid coordination tax. And the hybrid coordination tax is tied to the fact that as these employees are trying to figure out their new working arrangement, there are still a lot of things to work out. The challenges to get the most out of the return to office and remain productive, at the same time, the logistics of actually meeting with people you need to do when some are working in person, others are working virtually. It's an effort. It requires coordination. It requires consultation and all of that can be enabled by technology. No longer phone calls only or e-mails only. It has to be the ability to coordinate successfully across all digital platforms. That's the power of communication. That's the power of intelligent platform. And that's what CXAI does, and we'll talk about that in a bit. The other part that's important is the time taken with these co-ordinations and the setting up these meetings and conferences and others is becoming a bare on people, taking 30% of their time, which, in some cases, is costing companies tens of thousand dollars per employee. So that's a huge cost issue. More importantly, the return to office mandates have really not worked out for a lot of the employees and the employers. And what we call is a new vernacular called HushHybrid where coffee badging and shadow policies are in place. Coffee badging means that you could go into your office, you bag yourself in, you put a couple of coffee and you walk out five minutes later because they're only checking you when you check in, they don't know when you're checked out. Well, that's happening a lot. And there's data out there showing 15% of hybrid workers are coffee badging. And then they're having shadow policies where they're talking to the manager to allow them to have flexibility to do things differently or to allow them some flexibility in the timing. All that is good as long as there's awareness, there's transparency, visibility to understand what is happening and how to actually manage that. So, it's important to note this hush hybrid is happening across the workplace and we're seeing it with our customers, too. And we're finding out that these customers need solutions to that. So, when you think of the challenges, this world has gone to the hybrid world, we have to find solutions to that. So, coming over to now, what are we doing? Why are we doing this? And why is an AI-centric solution so critical to this? So, with CXAI, we have built this for this real purpose. And the purpose we built it for is to create transformational employee experience end-to-end. And when we think about the transformation, it's happening all the way from the time the employee starts the day to the time they hang up their phone for the day. So CXAI is a unique enterprise employee experience platform that powers seamless connections across people, places and things and enables a best-in-class workplace environment your people will love. It is true enterprise solution design for millions of users. It provides enterprise-grade security and supports our 100 integrations with corporate systems. These integrations enable large amounts of experiential data and feed CXAI's powerful analytics, suggesting new ways to improve employee productivity and engagement. As you can see, the way we've thought about CXAI is a shift towards an AI-centric approach and workplace integration, tie seamless integrated customer experience CX, with artificial intelligence, AI, focus around the employee to deliver solutions and transform the way work capital, making workspaces more intuitive and efficient leading to happier and more productive employees. As you look at the solution, it starts with this branded immersive mobile or web app. So, think about any large customers are using their logos, their content, their look and feel to enable the users to feel like they're at home or they're at their work environment in their work home environment. And similarly, when you look at the analytics and the data, it's all in a trusted environment where we're collecting the data from the users in an enterprise environment and providing trusted advice to both the users as well as the employers, and creating an end-to-end architecture that is really multi-cloud. So, we are right now in all cloud systems, supporting all of that, and we plan to do that. Moving forward, is extended with our Google Cloud partnership. We are working with other cloud providers. And more importantly, we're also looking at multi-OS and multi-devices because these interactions happen everywhere, not just on the mobile phone. They happen on a laptop, they can happen on a kiosk. It could happen on a watch, they could happen on any digital device that you can connect to. So that's why the CXAI vision is really tied towards the data and making sure that data is available on all devices in all capabilities for all our customers globally. So peeling the onion a little bit more, what is underneath this CXAI platform? What are the key technology and capabilities that we've enabled? Number one, we're AI native, and we were a mobile-first and cloud-first technology platform. Now we're focused on centering it around the employee first experience, meaning this is all tied to increasing the employees' capability and employees' ability to be successful. So, the first pillar is the unified employee experience where as a central platform that integrates various workplace functionalities and a unified workflow reflecting CXAI's emphasis on a unified mobile force approach to Workspace technology. CXAI's platform creates a consistent personalized workflow specific experience across mobile and web powered by over 100 integrations with enterprise back-end system. It covers the complexities providing the users with a clean, easy to navigate context-specific UI to complete their task. The second part of this is Spatial Intelligence. Spatial Intelligence is a key part of CXAI's technology stack, focusing on optimizing physical spacing and enhancing interactions within the workplace through location-based technologies, providing contextual awareness. The third part of our pillar is really on the experiential analytics. The use of AI to drive insights into employee engagement and work space utilization is a core component of CXAI, emphasizing the value of data in making decisions as well as measuring productivity. Finally, generative AI. Generative AI and CXAI boost efficiency and productivity by enabling voice and text activated tasks like scheduling meetings with a simple command and features like search and discovery. This streamlines administrative duties driving efficiency and convenience for employees as well as personalization for on-demand knowledge augmentation. Leveraging the most advanced multimodal large language models, LMs we are adding responsible, secure and reliable Gen AI capabilities through a retrievable augmented generation RAD model that uses internal enterprise data to support intelligent planning and using interactions to text patient video. So, as you can see, this is a stated VR solution that really enables the most advanced capabilities in the marketplace today. And we're so proud to have this solution available to most of our customers today and the generative AI pieces in data that's coming out soon with our customer base as well as new customers. So why do enterprise leaders to CXAI. Why do we have these 20-plus large Fortune 1000 customers? Why do we have these great expansions that we're going to talk about? Well, number one, it's an engaging all-in-one app. It's an intuitive user experience with all these seamless integrations and with immersive content. There's no solution out there today that's all-in-one app in the enterprise space. Secondly, we turn complexity into productivity. We're asked for providing automated workflows where there's one click, one view and then one voice command to an action, requiring enterprise-grade security and providing their trusted adviser capability so that where all your complex functions become simplified and easy to use. And last and most import, we're delivering insights both to the employee and employers that make their lives easier and better. These AI-powered analytics provide predictable outcomes and provide insights that will allow users to become more productive in the environment, and for employers to figure out ways to make their workspace and more intelligent and more engaging. So that's a little bit about the market and about what we have been doing from a technology perspective, from a customer engagement perspective. Let's talk about the results. I know a lot of you have come here today to learn about what is our results. But I want to first give you a little bit of highlights of what happened this quarter, right? So, the biggest announcement for us today is that we signed our largest expansion deal ever. This is one of the largest financial services customer in the world. They have global sites all over and they are growing dramatically with us. They started off with two sites at their headquarters and the second, lot site. And those pilots have been super successful in this last quarter, and they have now decided to sign on for 25-plus sites globally as well as add on more and more capabilities based on the success of those pilots. So that is our largest financial deal in terms of the size of an expansion and it validates our land and expand strategy. Secondly, our bookings growth this quarter is driven by renewals and expansion by five enterprise customers. And these five enterprise customers are across all major verticals. They're not just in financial services, they're in financial services. They're intact. They're in consumer. They're in all the different -- in health care, all the different verticals that we have. So, we're super excited about having those customers renew with us and scale up with us. The third big highlight for this quarter is our multiyear, multimillion dollar agreement with Google. I'm going to talk a lot more about it in detail in the coming slides. But essentially, it provides an overarching agreement where we get access to the most latest AI infrastructure products and monitoring for our CXAI platform and allows Google in us, Google Cloud in us to be driving together in the workplace transformation. This is significant because it shows commitment on both sides on enhancing the capabilities but also changing the way people work. We believe that Google Cloud is a strategic partner to us. And we are super excited to work with them and to enable new capabilities on our platform. On the last call, I had mentioned about the new CXAI platform, which is being launched with a brand-new customer in the financial services, where that development is going really well. And I'm happy to announce that we are doing a pilot in Q3 here in the coming months, where we're going to launch it with their internal pilot customers, meaning that this is a subset of their full employees that are going to be testing this. And the plan is to deploy it in Q4 globally to major sites. So, this new platform, as I said earlier, is multi-tenant, multi-OS, multi-cloud, allowing you to do many of the interactions I showed earlier in terms of analytics as well as in terms of the simplicity of the architecture for A native. And we're the first in the industry to implement this, and we're super excited that this is on track for deployment in Q4. And last but not least, I think we announced last time was CXAI VU capability, which is our analytics platform based on AI. I'm happy to report that we've been working with our existing customer base, and we are now in three pilots in Q3 here, with diversified customers, one is in consumer, one is in the tech space and one is in financial services. We believe that diversity of these trials is important to see what are the use cases and capabilities that they want, and we're finding really great insights on those pilots. I'm going to show you a couple of charts in the end where we talk about what are the insights and capabilities we can provide. But this is the future for us. The future is CXAI platform with CXAI VU is going to be the full solution that solves the hybrid work problem that I shared in the start. So let me go further deeper into the results. So, let's talk about the financial numbers. What are those highlights translating to financial numbers. So, for Q2 2024, we had $1.91 million of bookings. And those bookings are really tied to the expansion deal that I talked about as well as the four other renewals. So that's a total amount of bookings that happened, which is significantly higher than last year, same quarter. This expansion deal is groundbreaking for us because it is the validation of our land expense strategy. This customer is going from the current ARR to 112% growth, which is massive in terms of the size as well as the opportunity for us. And as I said earlier, this is not the end game for them. They have many more sites and many more capabilities they want to enable. But this is a stepping stone in the right direction, and we're super proud of this achievement this quarter. On the subscription to onetime revenue split, we are -- we performed at 85% recurring, which is much, much better than what it was last year. And this is trending in the right direction. And with the gross margin consistently trending in the 80% and north of that. We really had a really great quarter in terms of the metrics trending in the right direction as well as this large expansion deal. This is the first quarter -- first full quarter where we can compare to a year ago after the company did the business combination. So, from a stand-alone basis, this is the first time we can compare from what we were last year at this time of the quarter to now because before that, we had being part of another entity, there was a lot of financials that were mixed together. So anyway, the biggest news item I will tell you from last year financial results, we have completed a full business transformation. And what do I mean by that? The business transformation is really driving to an AI-native SaaS model with continued positive trending of T SaaS metrics. This quarter saw a massive increase of 78% in renewal and expansion bookings from the same period last year. The company reported its largest expansion deal with a major enterprise customer in the financial sector that is now scaling its footprint globally after the initial pilots. And as I said earlier, discuss with the annual recurring revenue growth grew by 120% as a result of this expansion. And the other piece that was important is the onetime subscription revenue that we had is from 85% this quarter, it was 79% a year ago. So that's six basis point increase. Similarly, gross margins of 5.5 basis points increase from last year. More importantly, when you combine all of these capabilities and these metrics, the net retention rate from last year to now is 105%, which is trending really positively, and this is really driven by those five renewals and the record expansion deal. And last but not least, we're focused on the bottom line. Our OpEx reduction from the time last year is more than 15%, and that has really been a combination of restructuring that we did earlier, but more importantly, we're using AI and AI tools to lower our cost structure. So that has been a big highlight for the team as we are a technology organization, really focused on improving our productivity and capability with that. So, in a nutshell, I can tell you we're much better off than we were a year ago. We're in the right trending in the right areas. We're scaling up really well. I know that when you look at the financial spreadsheet, you would look at the onetime revenue that was in the past. Think of this as a recurring revenue business now that is transformed to a SaaS model and that is growing dramatically in terms of customer penetration as well as customer engagement to scale up. It's super important that we have our customers really using our products effectively. Actually, the last week, I was in New York City visiting with our customers, and it was amazing to see the amount of activity at the customer site. I was at four or five different sites and I can see different kind of use cases where people are coming into the office, wanting to use our application to allow them to book a room, book an office, order food, use it for their daily activities from one app, one solution, one action and we're done. So, this is the power of the technology. And as I visited different campuses, it's obvious that we have so many different use cases, and we're shaping the way people behave, and we're using technology to enable much, much better outcome from them. With the analytics platform, it's right because now, as we showed earlier, people are coming back to the office. And if they're not, they want access to the office remotely from their home, so their distributed architecture is important. And this is why the not only using a mobile app, they're using a web app when they're in home. So, all those trends are leading us to -- now we have an engaged set of customers where users are wanting this capability to enable their workforce productivity. And now we need to provide them insights and analytics and keep improving that to go higher in the food chain in terms of productivity and engagement for the employees. So now I'm going to talk a little bit about our Google agreement, right? And you could ask you to say, well, we did announce a Google partnership last quarter. This is a significant step forward from that because this is now a real multiyear, multimillion dollar agreement where we are reinforcing our commitment to leveraging the cutting-edge technology to drive innovation growth. The number one thing that is important is as we're growing our customer base, and we are now extending ourselves from being just a nice to have to a must-have. It's super important that we have infrastructure that's reliable, that's scalable and that allows us to provide that seamless experience across the board. This is why it's super important to have Google Cloud as a partner helping us as we scale our customers from hundreds of thousands to millions of users. Secondly, security is a big, big factor in our -- with our customers just because they're large enterprise customers. And given the fact they trust us with their data, they trust us with their employees, it is super important that we provide all the safeguard industry to manage that data and ensure compliance with industry standards. And as you've seen in the market, there's been a lot of challenges with security. We're super proud to say that we are really working hard with our customers and with Google Cloud as well as with Azure and AWS to allow for their fully secured enterprise footprint. AI is at the heart of the CXAI platform and integration with Google's AI and machine learning tools to accelerate the deployment of our CXAI apps is super critical. And you will be seeing in the coming weeks and months, some of these announcements as we're doing pilots with Google Cloud, testing the technology. We have access to the latest technology faster than anybody else in the world in this space, and we're going to take advantage of that to drive innovation to our customer base. As I mentioned earlier, some of our customers are using our product, not just for nice to have, it would be good to have an app. They're actually using it for critical functions, be it ordering food, be it researching about their campus or navigating when they have to get to a meeting right away. So, becoming a must-have requires that we make sure the health of the CXAI system is continuously monitored. And with this agreement, Google is co-investing with us in parking to provide that monitoring capability across the board globally with all our customer sets. And finally, as we look at infrastructure and the growth of these applications with AI, it's very obvious that the cloud cost infrastructure is super critical. And with this multiyear agreement, we have a significant leverage in our costing with Google in terms of our cost structure as well as our ability to scale faster with AI. So, I'm super happy about this agreement, and we are working with other cloud partners, but naturally, most of our customers are today on Google Cloud, and we look forward to further advancements with them. So let me talk a little bit about what are we seeing with CXAI VU. And I think the way we think about it is again, the life of users. And with CXAI VU, we're embracing every single interaction they're having with the app as well as the myriad of integrations that we have integrated in our portfolio. This allows us to provide really a great activity time line to our employers as well as provide them all of the data that they need to know what are the top engagements, what are the things that they like doing, what are the things they enjoy and what are the things they don't like. And so we kind of see the behavior of what is useful in the work environment. And we also see the session duration. We see that if they could do a booking in two seconds, that success if they were on a podcast or put minute that success, we look at different kinds of metrics that drive the value at the campuses, and this has been already enlightening experience for us, learning about our customer base, but more importantly, our customers are super excited because they want access to their data. They want to know what can they do to make their employees more productive. I'll show you another chart that we talked about spatial intelligence. And one of the key things that we do with our private tool is to really provide that 3D visualization of all the KPIs, the key performance indicators. So, think about trying to the spatial distribution of activity and spatial utilization metrics and knowing which rooms are being utilized and when and how, not just giving percentage numbers and metrics, but metrics that really are defined by the space give you contextual awareness, allow you to make decisions better and faster. A lot of our customers, as they see the office occupancy changing as they see people coming back to the office, they want to provide an experience as a world-class. They want to be able to provide the same experience they have when they go back to the home office. Actually, when I was at one of our campuses here in New York, it was interesting to see that some of the new workplace designs are just like the home office, like you have your little small covered space that has a plant has bookshelf, has the same lighting that you would have in your home office. So, we're replicating the home office in the workspace. And those users want when they're in the office, they want the same environment, and they want it for the whole day. So, managing that user experience, providing that space utilization is super critical and scheduling that, predicting that is even more important. So, with our tool, you can do all of these things. And in the coming weeks and months as we go from a pilot to deployment, you're going to see a lot of value being created for our customers. So, with that, I'm going to take a look at some of the questions that was sent over and make sure that I address some of these questions. I think one of the questions was, is the business with Google set for big growth or slow growth? Well, if we're going to work with Google Cloud, we are set with growth naturally. We're looking to work with them closely, and we are also working on another initiative that we're going to be announcing soon that will be driving on the go-to-market side. So, we are definitely working with them for the growth. Another question that came in was regarding the S-1 that was filed on Friday and want to make some clarification on that. I just want to be clear that the shares that were announced for selling shareholders were actually a refiling of our initial S-1 that was done at the business combination because of a delay of our 10-K, though that S-1 went sale. So, we had to refile that. So, you see that filing. And plus, as you all know, in May, we had done a debt equity deal. And for that debt deal, there's a potential of conversion to share. So, we had signed some shares for potential conversion. So, this is not something that's new. This is already in place before. We just had to refile it because the last is for estimate stale. So those are the two main questions. I see a question around could CXAI app partner with Palantir in the future? I have not talked to Palantir, but I'm happy to engage with them. They could be potential customers. They're a large enterprise. We are really focused on enterprises right now. We're not in the government sector if the question was we're going towards the government sector. But we're really focused on enterprises, and we believe there is a huge opportunity for scale up here still. So anyway, I'm going to end with why CXAI? Why should you look at CXAI, what is the reason why this company is the right company to scale up in this space. And when I think about what the journey we've been on, it's a journey of transformation is a journey of providing probably the most advanced solution in the marketplace. We are shaping the future of work with leading-edge technology, defining a new category in enterprise software in play experience. The future of work is one of the biggest issues of our century, and every single enterprise globally is looking to find solutions for the digital workplace and workforce. So, we are at the cusp of an amazing transformation. We have great customers that are in all large verticals, financial services, health care, entertainment, consumer and tech. And we're growing dramatically with deeper penetration to those accounts. And we believe that these solutions become the norm, every other enterprise in the space will be adopting that. We're diversified globally in 50-plus countries in 200-plus cities. This is not about us hiring salespeople in those countries, we are able to scale them up by just getting the accounts in North America, we tell you the power of the technology. We're innovation-driven, experienced management team. We have a great Board who is based in Silicon Valley here, and we have great partners now, including Google Cloud and others that we'll announce in the coming months and years that are really helping us scale up. So, I'm super excited about the opportunity here. I really believe that we are at the cusp of creating something amazing, and we're really focused on delivering shareholder value by executing on our business plans, delivering great experiences to our customers and going to the CXAI and beyond. Khurram Sheikh So, thank you, everybody, for listening to the call, and I look forward to sharing with you results on the next call and the upcoming Annual Shareholder Meeting, which is August 29. Hopefully, you all got the proxy for that and we will be in touch soon as we progress in transforming the workplace. Thank you. Take care. Thank you. This concludes today's conference, and you may disconnect your lines at this time, and we thank you for your participation.

Spectral AI, Inc. (MDAI) Q2 2024 Earnings Call Transcript

Devin Sullivan - Managing Director, The Equity Group, Inc. Peter Carlson - Chief Executive Officer Vince Capone - Chief Financial Officer Jeremiah Sparks - Chief Commercial Officer Good day, and welcome to the Spectral AI Inc. Second Quarter 2024 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After the today's presentation, there will be an opportunity to ask question. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Devin Sullivan of the Equity Group. Please go ahead. Devin Sullivan Thank you, Nick. Good afternoon, everyone. Thank you for joining us for Spectral AI's 2024 second quarter financial results conference call. Our speakers for today will be Peter Carlson, Chief Executive Officer; and Vince Capone, the Company's Chief Financial Officer. Before we begin, I'd like to remind everyone that during this call, certain statements may be made that constitute forward-looking statements within the meaning of the safe harbor provision of the United States Private Securities Litigation Reform Act of 1995 and including statements regarding the Company's strategy, plans, objectives, initiatives and financial outlook. When used during these discussions, the words estimates, projected, expects, anticipates, forecasts, plans, intends, believes, seek, may, will, should and variations of these words or similar expressions or the negative versions of such words or expressions are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside the Company's control that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. As such, investors are cautioned not to place undue reliance on any forward-looking statements. Investors should carefully consider the foregoing factors and the other risks and uncertainties described in the Risk Factors section of the Company's filings with the SEC including the registration statement and other documents filed by the Company. These filings identify and address other important risks and certainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. With that said, I would now like to turn the call over to Peter Carlson, Spectral AI's Chief Executive Officer. Pete, please go ahead. Peter Carlson Thank you, Devin, and good afternoon, everyone. We appreciate you joining us today for our second quarter financial results conference call. We had strong revenues in the second quarter, and I'm pleased to say we are making significant progress in advancing our proprietary AI-driven DeepView System wound assessment platform technology. Our focus as a company is to achieve product commercialization for a technology that we believe will improve outcomes while providing tangible economic and operational benefits across the health care system. We expect more than 10 years creating the DeepView platform, which we believe is the only AI-driven predictive medical diagnostic tool that supports the delivery of a fast, accurate and informed wound assessment. The development of DeepView reflects more than $250 million of non-dilutive government awards, multiple successful clinical trials that validate the accuracy and utility of our technology and a commitment from a dedicated group of executives, engineers, clinicians and partner institutions. The evolution of our business from an exclusively clinical development stage company to development along with product commercialization will manifest with first commercial sales of our DeepView technology for the burn indication in the United Kingdom later this year. Although the initial impact of these commercial revenues will be modest, the validation provided by this landmark achievement should prove to be significant with respect to our plan submission to the FDA in 2025 and the long-term commercial success of the DeepView System as a platform technology. I'll spend some time discussing our recent achievements and highlighting the catalysts we expect over the next several quarters. In addition to preparing for the commercial availability of DeepView for burn in the United Kingdom, we are taking important steps to establish commercial presence in the United States and over the longer term, other geographies. We deployed a total of five DeepView AI burn devices at facilities across the U.K. following the February 2024 receipt of UKCA authorization. These initial deployments increased clinical familiarity of the device in advanced utilization, provide real-world data that enhances the AI algorithm and allow us to partner with these institutions as we can a better understanding of how to commercialize, train and deploy future units. I'm pleased to announce that we have exceeded 85% enrollment of our desired total subject count at burn centers for our U.S. burn pivotal study and expect to complete enrollment for this portion of the study shortly. As a reminder, it was just last month that we achieved 100% pediatric enrollment to burn centers. This burn pivotal study is one of the largest burn studies ever conducted in the United States. It is designed to validate the AI-driven algorithm used by DeepView and will be the final clinical trial before we seek FDA approval in 2025. We've expanded the total number of U.S. clinical sites to 16 comprised of both burn centers and emergency departments or EDs. Enrollment in EDs will continue into 2025 as some of those sites are just now beginning to enroll and more generally, conducting trials in EDs have longer enrollment periods than centers focused on a particular single practice. Why two different sites for the pivotal study? That reflects the structural limitations of wound care for burns in the United States and how we believe that DeepView can address this care gap. In a nation of more than 330 million people, there are approximately 125 burn centers across the U.S. and less than 250 burn surgeons. Inversely, while the number of emergency department number exceeds 5,000, they are generally limited in having burn care specialists on staff. To that end, and the efficiencies that can be introduced to the workflow of the EDs by DeepView would yield significant operational and economic benefits, allowing the most severely injured patients to be more accurately triaged and quickly treated. At Burn Centers, we believe that the predictive assessment offered by the DeepView technology can accelerate time to surgery for patients who require such treatment while avoiding unnecessary surgeries for those patients who are likely to heal on their own. At emergency departments where we estimate that most burn wounds are initially assessed, DeepView can avoid unnecessary transfers to a burn center or trauma units while adding confidence in deciding when a specialist should be a patient. In both scenarios, DeepView also provides uniform imaging documentation and standardize total body surface area, or TBSA measurements. Reflecting the enrollment momentum in Burn Centers, we expect to submit the request for a de novo classification for use of DeepView AI burn in burn centers in the first half of 2025. We believe this will result in commercialization in the U.S. early in 2026. After receipt of the de novo classification for use in Burn Centers, we plan to immediately submit the request for 510(k) approval for use in emergency departments, where we will have completed the remaining clinical trial work. We anticipate that the sequence of commercialization would begin with deploying the DeepView technology into those U.S. burn centers to promote expert adoption of the technology followed by the deployment into emergency departments where we would leverage this primary point of entry into the U.S. health care system. Beyond the U.K. and the U.S., we have an opportunity to establish a presence for DeepView in multiple geographies, such as in Australia through our recent memorandum of understanding with PolyNovo Limited, one of the world's most respected providers of burn treatment solutions and an established market leader. Under the MOU, PolyNovo will support our application to the Australian Special Access Scheme or SAS with a goal of allowing Spectral AI to deploy two devices to lay the groundwork for an eventual commercial rollout based on clinical evaluations and experiences. Significant benefit of our years of developing both the image capture technology and the AI algorithm is how deep you can be applied to potential indications that extend beyond our current focus. To that end, we are making great progress in the development of DeepView Snapshot M, a handheld version of our cart-based DeepView technology that is intended for burn wound assessment in a combat and military setting. Earlier this year, we inked a new contract valued at over $500,000 that brings the total for just the DeepView Snapshot M to more than $6 million. DeepView Snapshot M is designed to be an integral part of the Battlefield triage process by providing a quick and accurate wound care assessment, so that soldiers with more severe burn injuries can be prioritized for evacuation. We believe that the potential applications of DeepView Snapshot M expand well beyond military use to serve our first responders and other health care providers with that more mobile unit. We are presenting an abstract titled Advancing Combat Burn Assessment of DeepView's Handheld Device for Military Field Use at the upcoming 2024 Military Health System Research Symposium. This event is the Department of Defense's foremost scientific meeting, and we look forward to sharing our progress with the attendees. Now, let's talk a bit about timing of revenue from our U.S. government contracts, which is helpful in assessing our future cash flows. Through the first six months of 2024, we have received approximately $12 million in cash payments from BARDA, primarily from the base phase of the Project BioShield contract awarded in September 2023. his base phase of nearly $55 million will take us through the first quarter of 2026 in support of the clinical validation and FDA approval processes for the burn indication. The next phases, which we expect to commence no later than the first half of 2026, are estimated to be $95 million for feature enhancement, procurement, and deployment of devices to burn centers and select emergency departments across the U.S. Specific timing of amounts under these remaining phases are to discussions with BARDA. In summary, to date, BARDA has awarded contracts to spectral totaling almost $250 million and since 2013 has paid over $113 million to the Company to these contracts. Total U.S. government contracts awarded two Spectral since 2013, which include Semtech and other government agencies, approximate $258 million. Couple of more items to discuss before turning things over to Vince. We were very happy to announce that our stock was added to the Russell Microcap Index effective July 1. We continue to strengthen our intellectual property moat and increased our granted patents from -- 26 from 20, we also have an additional 38 pending patent applications worldwide. Finally, regarding our newly formed health care IP-focused subsidiary Spectral IP, we continue to identify potential intellectual property for acquisition and to assess alternatives to leverage those assets. As a reminder, the activities associated with this subsidiary require limited management resources and no additional capital from the Company. Additionally, no core operating assets of the Company will be involved in this subsidiary. Thanks, Pete, and thank you all for joining us today. We issued our press release this afternoon, which contains additional details of our operating results, and we filed our 10-Q with the SEC this afternoon as well. With that in mind, I will focus my remarks on select financial highlights and key metrics. We are pleased to report that R&D revenue in the second quarter rose 76% to $7.5 million from $4.3 million in the second quarter of last year. This growth reflects an increased level of activity on BARDA project BioShield contract, as previously noted, which was awarded to the Company in September of 2023. Gross margin also rose to 44.3% from 42.1% in the second quarter of last year due to the higher reimbursement rate under the BARDA Project BioShield contract as compared to the reimbursement rate in the BARDA Burn two contract, which accounted for most of our operating revenue throughout 2023. General and administrative expenses during the second quarter of 2024 rose to $5.8 million as compared to $4.8 million, reflecting higher headcount during the comparable periods. With that said, general and administrative expense as a percentage of revenue in the second quarter of 2024 decreased to 77% from 112% in last year's second quarter. Non-revenue-generating research and development activities decreased by approximately $100,000 for the three months ended June 30, 2024, as compared to the comparable period in 2023. This decrease was offset by an increase of approximately $1.1 million related to other administrative expenses for the three months ended June 30, 2024, as compared to the same period in 2023. Other expenses for the second quarter of 2024 were up approximately $314,000 from the second quarter of 2023, primarily reflecting our new borrowing related costs of $699,000 as compared to no costs in the second quarter of last year. This was due to debt issuance costs and payments from the convertible notes issued with the standby equity agreement announced in March that were expensed during the quarter. Lastly, we're pleased to announce we trimmed our net loss for the quarter to $2.9 million or $0.16 per share as compared to a net loss of $3.1 million in the second quarter of last year or 23% per share. As of June 30, 2024, we had $17 million, 606,367 shares outstanding. Moving now to the balance sheet. As of June 30, 2024, cash and cash equivalents totaled $6.9 million, up from $4.8 million on December 31, 2023. Cash at June 30, 2024, included $900,000 in the Company's newly formed wholly-owned subsidiary, Spectral IP. As discussed on our last call, we enhanced our access to capital by completing a common stock purchase agreement with an investment bank and entering into a standby equity purchase agreement with a long-only investor. The standby equity purchase agreement has a total capacity of $30 million that included $12.5 million of prepaid advances. As of June 30, 2024, the Company received a net $9.2 million in these prepaid advances. The final advance of $2.5 million was received by the Company on July 15, 2024. As a reminder, any additional draws above the total prepaid advances of $12.5 million are at the sole discretion of the Company. For 2024, we are reiterating our revenue guidance of approximately $28 million, an expected increase of about 55% from the $8.1 million we reported in 2023. This growth reflects our work on the BARDA Project BioShield contract as well as the government lending in the continued development of our handheld device, DeepView Snapshot M. Our guidance does not reflect contributions from any sales of the DeepView system for the burn indication in the U.K. that are expected to begin later this year or any other contributions that may result from the commercialization of our DeepView of system. With that, I thank you, and we'll turn the conversation back over to Pete. Peter Carlson Thank you, Vince. We are pleased with our progress through the first half of the year and are very optimistic about our future. Nick, let's open the call for questions. Thank you. Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Ryan Zimmerman with BTIG. Please go ahead. Ryan Zimmerman Congrats on your progress. Maybe just to start, I have a couple of questions, guys. First, just from -- related to guidance. So, I think last time, Vince, you guys suggested that maybe the second half, let's say, a little bit more revenue from BARDA relative to the first half. I just want to confirm if that's still your expectation as we move into the second half just based on the timing and the development milestones, et cetera, for the second half of the year regarding the $28 million? Vince Capone Yes, Ryan, nice to talk to you. Yes, we continue to see the second half ramping up in our BARDA revenue really as the clinical trials continue to grow. I think as we sit here, sitting on $13.8 million in the first half of revenue for 2024, we feel confident that 28 is something we can reiterate to the market, and we're excited to continue with our clinical trial development in the second half of this year. Ryan Zimmerman Okay. Very helpful. And then, Pete, as you think about -- you talked about this a little bit, but a commercial presence in the U.S. as you think about going after that burn market, you talked about kind of building that commercial presence. What does that look like to you at this stage, either from a cost standpoint or a size standpoint or any kind of early thoughts around targeting that burn market? Peter Carlson Ryan, good to talk. As you look in particularly to the burn centers, we have a partner in our distribution to the burn centers in BARDA. We do not need to build a large commercial operation to service that market, or frankly, even the emergency department market. We need some resources, but the -- this is a deployment of a device that's sort of a onetime transaction. And really the -- where we'll have the volume of people, but it will still be only moderate in field service as we get the devices out into the emergency department. So, we do not see the need to build a large commercial operation with significant sales force. Ryan Zimmerman Okay. Very helpful. And then just let me sneak one more in. The wound trial in the U.S., you guys reached 475 patients, it looks like. And what is the current determination for what to do with that data, clearly prioritizing burns over wound right now. Just Help us understand what the time line will be for DFU potentially in the U.S. based on completing those 475 patients? Peter Carlson Yes. The -- what we talked about kind of assessing the insights of the study, we'll get the final readout internally here probably early fourth quarter as the last patients go through the full trial. And while we work focused on the burn indication and application to the FDA, we do want to look at how the data set -- what the data set tells us and how that relates to our best approach going forward, from a reimbursement standpoint. Is it a particular indication like diabetic foot ulcers. Is it a broader indication of wounds, wound bed preparedness, et cetera. And so, we feel we have a very significant asset in this data set we are finalizing with this trial and that assessment we're going to look to do is what -- how does that -- what's the best strategic path forward given the results of that trial and where the market stands today. When you look at it on a broader basis, as we think about our near to midterm, we see the vast majority of the economics coming from the burn indication that would mean not only the burn centers, but meaningful penetration into the emergency department. So relative to our longer-term plans for that second indication, it's not a very significant change in timing as you get -- as you look out three to five years. The next question comes from Carl Byrnes with Northland Capital Markets. Please go ahead. Carl Byrnes Congratulations on the progress as well. Most of my questions have been answered here. But maybe you can drill a little bit further on U.K. I know you cited you had five deployments. What might you be looking for by the end of the year in terms of deployments in the U.K.? And I know that that's not included in the $28 million guidance in terms of contribution. Peter Carlson Thanks, Carl, good to talk. From a deployment standpoint there, one more deployments are possible here as the year goes on. What's going to be important is that we're going to convert those to -- some of these deployments in commercial revenues. We are not yet ready to further the -- further the impact or the rollout. But we also have a pretty neat opportunity coming up next week. The International Society of Burn has burn indications, I think, is the other eye, has an annual conference, and there are going to be attendees from across the burn wound care or the burn care environment in the U.K., but also a significant number of U.S. burn surgeons and burn health care providers in attendance. We'll have a significant attendance there, presence there ourselves, including a podium and are excited to share output from the device with these burn care participants. It's really going to be one of their first opportunities to see that output. I mentioned that because that will help inform our next steps in the U.K. as we visit with each of the sites we're already working with and get indication of interest from others. Carl Byrnes Got it. Great. That's helpful. And then just another follow-up here. Do you -- are there any other partnerships or alliances in the works similar to PolyNovo in Australia that we might see in the next 6 to 12 months? Peter Carlson That's a very open-ended question. We appreciate that opportunity. The answer would be yes, but that's about all we'll be able to say is, yes, we are talking with others, both domestically and elsewhere and certainly hope to continue to have partnerships like that announced, both in new geographies as well as with significant partners in current geographies. No, I don't want to make any commitment one way or the other, though. Next question comes from RK Ramakanth with HC Wainwright. Please go ahead. RK Ramakanth A couple of quick questions here. So, regarding the U.K. deployment, just trying to understand how is it helping you in terms of designing your U.S. commercialization? Also, is it possible for some of the folks in the U.K. to publish any of the data that can be used for reimbursement here in the U.S.? Peter Carlson Okay. Thanks for the question. I'll give you my thoughts, and then I'll ask Jeremiah to share his thoughts and particularly leveraging his experience. We're excited about this early opportunity to work with clinicians. And we're already getting or have been receiving very positive and constructive feedback. So it's informing not only device performance, but it's also performing our commercial rollout strategy, how we staff and support rollout, what types of skill sets we need, et cetera. Let me let Jeremiah give you his additional thoughts. Jeremiah Sparks Thank you, Pete. So I would just echo what Pete said, the ability for us to start and do these evaluations in the U.K. is giving us very good feedback, constructive feedback and helping us understand the device better and how we would start the commercialization process in the U.S. Specifically to your question about publications, that's definitely something that we're looking to work with these clinicians on as they move beyond the evaluation phase and to publish their results so that we can get that information out to payers in the U.S., et cetera, that will help us with the reimbursement. RK Ramakanth And then in terms of label expectations in the U.S., I'm just trying to understand the of the pediatric patients in the study, one, how -- in terms of label expansion and also market expansion. How much of a market expansion do you get by lending pediatrics into the late Peter Carlson Thanks, RK. The -- when you look at pediatrics in the burn environment, you actually generally about 25% of admissions for burn situations are pediatrics. And it can be -- it can even go higher than that at times. So, it's always been a focus of BARDA working with us to make sure we include pediatrics in our studies. We want to be able to serve that community. One of the technologies, and this is something we see in the U.K. as well as in the U.S. that exists today is called Laser Doppler Imaging. That technology takes several minutes to capture its image and thus requires sedation often of the pediatric patients. You can imagine a young child with a burn in pain having to sit still. This is where the benefit of our less than 1-second image capture comes in, in a place where we see the opportunity to really be useful in burns. I don't know that it expands the market opportunity. I think it enhances the willingness and acceptance in the market. So, I would tell you the numbers we generally have talked about have included the expectation of the pediatric portion of the burn community. But similar to the measurement capabilities of the tool, we think the ease of use with a pediatric patient are things that will help increase interest in the market, thus help our deployment and our penetration opportunity, both in quantity and in speed. RK Ramakanth One last question for me. This is regarding the Australian market. How long do you think it will take all in all to start commercializing your product? And also, I think you started talking about trying to place in a couple of centers initially in Australia. So, is that part of initiating the commercialization process? Or is that part of the application process such an Australian oncology will give you that okay just start to [indiscernible]? Peter Carlson Vince, do you want to take that and we can -- Jeremiah has something to add. We'll let him do that. Vince Capone Yes, RK, good to hear from you. I think with respect to the work we're in tangent with PolyNovo, their help to get us into the special access program is good for us to have a potential rollout there of at least two machines. That's probably a good 12 months away, I would say, as we have to work through not just the special access program but also have to get through each hospital's ethics committees to ensure that everybody is on board of introducing our device there. So, we look at it as it's really a partnership, the initial starting of a partnership there with them, more so and data gathering more so than the commercial opportunity that it may present subsequent to a 12-month period beyond that into 2026, 2027. [Operator Instructions] The next question comes from John Vandermosten with Zacks. Please go ahead. John Vandermosten I want to explore some of the opportunities and challenges for the Handheld Snapshot M. And I guess, first of all, what are some of the challenges, I guess, that you have with developing that and getting that approved? By the time that's ready, you'll already have DeepView approved and deployed. So, what are the incremental challenges for the mobile version of the product to get approval? Peter Carlson John, it's Pete. Good to talk. Certainly, the miniaturization is the challenge. So -- and you can see this out on our website and in some of our materials. The current image capture device associated with the cart-based version, I referred to it as sort of the size of a large household iron. And there are -- the images captured with four separate cameras, to get those four cameras into something that is affordable, sturdy, portable and easy to manipulate in difficult environments is a challenge. And it's been amazing to see the team and here to talk about the various ways and vendors they've worked with to get the cameras into smaller and smaller perspective. And that's really the challenge is maintaining the image capture quality while doing it in ultimately cameras that aren't much bigger, if not smaller than a push pin. And so, we -- again, these are four high-quality, high-resolution cameras capturing images. And then, there is the ability to have both the data set either in the device or accessible sort of by satellite technology. So, those are the couple of engineering type aspects of the device miniaturization. Yes, sort of like I talked about in my prepared remarks, once we get one of these indications and uses through the regulatory approval process, we believe these other 510(k) with the predicates will be easier or have a shorter time frame, not be easier. We'll have a shorter time frame because it will be a more-narrow aspect that is being assessed. And that's the same thing. So, what we would look to do with the miniature or the handheld version is demonstrate that the image capture and the -- it is consistent and demonstrate that the ability of the AI to make their predictive wound assessment has sort of the same performance statistics. John Vandermosten Okay. And what -- you mentioned the regulatory side of things there a little bit. And what does that regulatory pathway look like for that machine? Will you be required to do a 200-some-odd patient trial? Or are you just making sure that what worked on the large scale works on a handheld scale as well in terms of just getting the regulatory nod from the regulators? Peter Carlson I think there's twofold to that. One is the regulatory path and one is the commercial acceptance path. Again, we think we're very pleased -- let me step back. We're very please and proud to be working with these agencies supporting the DoD in developing a device that can help the military. We think this is an outstanding use of the technology. But we also think, we have a really neat opportunity on behalf of our shareholders to take that technology and commercialize it in the field in multiple ways and particularly when you get into other indications that you might do in normal practice like a diabetic foot ulcer or other more chronic wound care that is done, say, in private offices for them to have access to more affordable, smaller device with the capabilities of this technology we think is going to be very powerful. So yes, do we need to do a little bit of a trial? We don't think it has to be a significantly large trial, but enough to be able to demonstrate that the technology is working similar to the cart-based technology. We haven't, at this point, tried to size that, but I certainly don't think it would be 450 patients like this current trial. John Vandermosten Okay. And last question is on the size of the market and I guess the potential areas of the market. I think you guys have said ambulances might be a really good place to place these handheld items. And obviously, you're getting your grants to support military use of them. What are some of the other areas that might be appropriate for this? And how is that market size compared to kind of the ED and burn center market size? Is it equal? Is it maybe just a fraction of it or maybe is it larger? I mean any sense of that? Peter Carlson A couple of points here also, and let me give you my thoughts, and I'll let Jeremiah round it out. Part of it is how many -- would we get into a situation where there might be multiple units at one site? So, a large hospital complex would want to have several of these smaller devices in various practice areas as well as a cart-based device in high-volume place like the emergency department or the burn center. The other, it opens up is the private practices. And what we've talked about in some of our material with a chronic wound like diabetic foot ulcers is not only the 1,100 wound care clinics that are out there dealing with situations like this, but also the 4,000-plus private practices as far as market opportunities. And then -- so you get into those types of numbers that we think about. The -- if it was cost effective, would it be in ambulance, yes, it would be very helpful in that situation. And thinking about ambulance and the areas where you have the Level 1 trauma centers and maybe that's where the volume would justify this being carried on something like an ambulance so they could take somebody if there were no other factors directly to a burn center. So let me let Jeremiah add his thoughts. Jeremiah Sparks Thanks, Pete. No, I think Pete said it very well. And when we assess this, we're looking at both the indication basically, what types of wound types that we're looking at, also side of service. There's the inpatient, there's the outpatient and potentially even physician offices. So, when you look at the indications up again and then potentially even ambulances, when you look at that, there really could be widespread adoption, but it really starts with the -- what is the right indication and then how do we get that into the clinician's hands. And then, you couple that with reimbursement, that will be some major drivers as we look to assess the overall market. This concludes our question-and-answer session. I would like to turn the conference back over to Peter Carlson for any closing remarks. Peter Carlson We certainly appreciate everybody's participation and your continued interest in Spectral AI. I do want to let you know there are a number of upcoming events, including the H.C. Wainwright Conference in New York City September 9 through 11, where we will be available for meetings. As always, we're also available for shareholders to interact with outside of the normal meeting opportunities. With that, I'll say thank you, and have a good evening. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.