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Date
Aug. 12, 2025, 5 p.m. ET
Call participants
Chairman and Chief Executive Officer — Khurram Sheikh
Chief Financial Officer — Joy Mbanugo
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Takeaways
Annual recurring revenue (ARR)-- Achieved meaningful expansion driven by two large Fortune 1,000 renewals, including the largest ever with a Fortune 50 client, which broadened global deployment and enabled full platform adoption in fiscal Q2 2025 (period ended June 30, 2025).
Subscription revenue mix-- Subscription revenue reached 96% of total revenue, up from 87% a year ago, indicating a continued transition to a higher-margin recurring revenue model.
Gross margin-- Gross margin improved to 86% from 80% last year, despite increased R&D investment.
Revenue stability-- Quarterly revenue remained steady at $1.22 million in fiscal Q2 2025, consistent with the prior quarter despite macroeconomic headwinds.
EPS-- Reported negative $0.16 per share for the period, representing improvement both quarter over quarter and year over year.
Cash position-- Cash on hand increased year over year, as directly stated by the CFO in fiscal Q2 2025.
Operating expenses-- Increased in fiscal Q2 2025, driven by R&D and ongoing partnership investments, while sales and marketing spend held steady.
General and administrative (G&A) costs-- Decreased quarter over quarter in fiscal Q2 2025, following cost increases in the prior period.
Client usage metrics-- Some enterprise client sites experienced over 150% usage in fiscal Q2 2025, driven by return-to-office mandates and platform adoption.
Sky Kiosk product-- First orders and deployments completed successfully, with additional client interest for expansion.
Patent portfolio-- Granted one new patent for 3D mapping and augmented reality in fiscal Q2 2025, bringing the total to 19 granted and 39 filed.
Key strategic partnerships-- Renewed and expanded multi-year commitment with Google Cloud, leveraging Gemini 2.5 and Google Credit Intelligence platforms for scalability and security.
Product launches-- Launched SkyView analytics across all customers and rolled out the OneMap experience for integrated navigation, booking, and content in one interface.
AI-driven efficiency gains-- Achieved more than 90% accuracy in resource cancellation prediction models, contributing to $300,000 in cost savings and up to a 75% reduction in underutilized space for at least one major client site in fiscal Q2 2025.
Compliance credentials-- Achieved ISO 27001 and SOC 2 certifications, cited as supporting strong adoption in regulated industries.
Summary
The call highlightedCXApp(CXAI 0.92%)'s deepening enterprise penetration, marked by expanded global deployments and increased client dependence on the Sky platform. Management provided evidence of significant product development, demonstrated by a new patent, expanded use cases such as Sky Kiosk, and organization-wide adoption of AI-driven features. Operating discipline was emphasized, balancing increased investment in R&D and partnerships with improved cash and margin indicators. Senior executives detailed client metrics and partnership agreements that could sustain future ARR growth and strengthen CXApp's position within the workplace experience market segment.
Sheikh emphasized, "every team member on Sky is using it," indicating a company-wide integration of new technologies and process efficiencies.
Mbanugo stated, "Subscription revenue made up 96% of total revenue compared to 87% just a year ago," underlining a rapid business model transition.
CXApp leaders confirmed active collaborations with enterprise clients and ongoing partnerships among design-build firms, automation providers, and real estate companies to embed Sky in large-scale workplace projects.
Adoption data and product innovations were linked directly to market trends such as increased return-to-office mandates and space optimization needs among Fortune 1,000 companies.
Industry glossary
ARR (Annual recurring revenue): A metric showing the predictable and recurring revenue components of subscription-based businesses over a one-year period.
Sky Kiosk: An interactive, on-premises device enabling just-in-time bookings and employee engagement as part of the Sky workplace platform.
SkyView: CXApp's analytics module offering actionable insights and spatial intelligence for clients to optimize workplace operations.
VTS (Behind-the-scenes): The management infrastructure component that powers Sky's app integration, space management, and user controls.
OneMap experience: A single interface in the Sky platform for booking, navigating, and connecting in workplace environments.
Gemini: Google Cloud's AI and machine learning infrastructure leveraged within the Sky platform to enable advanced automation and analytics.
ISO 27001: An international information security certification standard for systematic management of sensitive company information.
SOC 2: A security standard for service providers handling customer data, focusing on five trust principles: security, availability, processing integrity, confidentiality, and privacy.
Full Conference Call Transcript
Operator: Greetings. Welcome to the CXApp Inc. Second Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference call is being recorded. Now I would like to turn the call over to your host, Khurram Sheikh, Chairman and CEO of CXApp Inc. Please go ahead.
Khurram Sheikh: Thank you, Operator. Good afternoon, everybody. I'm joined today by our CFO, Joy Mbanugo. We are both excited to share with you our earnings for 2025. We will also provide an overall business update on our progress in shaping the future of work and creating transformative employee experiences with our state-of-the-art agentic AI platform, CXApp Inc., pronounced Sky. By now, everyone should have access to our earnings press release as well as the 10-Q that was filed with the SEC. This information will also be found on our website www.cxapp.com or www.cxai.ai. With that, I'm going to move to the next couple of slides, which are disclaimer slides. You can read them on your own leisure after the earnings call.
I'm not going to go through each of the slides, but just show you the disclaimer slides.
I want to start by giving you a snapshot of the company. The Sky platform is anchored on customer experience (CX) and artificial intelligence (AI). It is the most advanced technology solution transforming people, places, and things in the workplace. We are solving the biggest problems in our industry post-pandemic, i.e., the return to office (RTO) and employee engagement. Before I get into the specifics, what if planning your entire workday took seconds? That's what we can do with Sky. We can schedule meetings, desks, parking, and catering in a New York minute. We can keep you spatially aware of events, even food trucks, and help you hit your step goals without missing a meeting.
This is the future of the workplace and is closer than you think. I know we've been talking about this for a while, but we are here now with the Sky platform being deployed across the world with all our great customers.
The company is located in the San Francisco Bay Area, with regional tech hubs globally. The global presence and diversity of experiences give us a leading edge as we shape the future of work everywhere. Of the 65-plus team members at Sky, more than 70% are engineers focused on building agentic AI solutions and maintaining our technology and product leadership. The culture of Sky is innovation-focused with three core values: purpose, passion, and positivity. We are passionate about solving the big problems in the future of work using AI, and we are super positive about creating a new paradigm of digital transformation of the enterprise focused on employee experiences. We believe the employee is at the center of this multibillion-dollar growing workplace experiences market. We are creating a new category in software, employee experiences.
The Sky platform is based on 39 filed patents, with 19 of them already granted. We have actually one new patent grant this quarter. We'll talk about it later in the slides, but it's tied to our multidimensional mapping and object orientation technology. We are super proud to have some of the largest logos in the world as our customers that are at the leading edge of the employee experience transformation. Our customers are sophisticated by the technology solutions and do not compromise on quality, performance, security, reliability, scalability, and the technology roadmap. One of the key differentiators for our business is that we have strong security and compliance credentials globally.
We have both ISO 27001 and SOC 2 compliance certifications. We just recently went through these compliance and were successful in achieving them. That is the reason why you see so many logos from regulated industries, from the finance, healthcare, entertainment, and technology industries. They use Sky because they know they can trust us with their data and their enterprise security growth.
If you ask me in a nutshell, what is our focus? Our focus is really in creating amazing employee experiences that create the engagement to drive actionable insights for our enterprise clients. Let me talk a little bit about what our architecture is and what the products are, and we'll talk about the market and what our results for 2025Q2 are. The Sky platform is really a platform that's AI-first and is driven to a mobile and cloud-first architecture. We were the first to develop the mobile application in this space. We were the first to have cloud-first, and now we're the first deploying AI-native applications. When you think about this application platform, it is not just about the app.
It's also about the infrastructure and the back-end architecture that we have deployed now that's really creating these amazing experiences.
Our app is a multi-OS app. It could be Android, it could be iOS, it could be on any of those platforms, but it is driven towards multiple devices from the mobile device to the laptop, to even the large-size kiosk. We will also be on watches as well. We are creating that environment that allows us multi-OS and multi-device capability. The brains behind all of this is VTS, which is the behind-the-scenes solution that drives the app management. Finally, SkyView ties it all together with the actionable insights and analytics where they drive the user behavior, but also drive the enterprise. All of this is tied to our strategic partners on the cloud.
Google Cloud is our biggest strategic partner, but we have now relationships with Azure and with AWS. We're partnering with all three of the cloud providers to provide these end-to-end solutions to our esteemed customers.
Now the question is, how does this architecture manifest into customer experiences? When we think about customer experiences, we think about four pillars. The first pillar is this unified employee experience, which integrates 100-plus enterprise tools and functionalities into a seamless employee experience on one single pane of glass. From a user perspective, you don't have to go anywhere besides Sky if you want to get your work done. The second part is the spatial intelligence. There's a key part of the Sky technology stack focusing on optimizing physical spaces and enhancing interactions within the workplace through multidimensional mapping technologies. The third part of this is the experiential analytics.
The use of AI to derive insights into employee engagement and workplace utilization is a core component of Sky, emphasizing the value of data in making decisions as well as measured productivity. Finally, Agenda AI boosts its efficiency and productivity by enabling multimodal activated tasks, scheduling meetings with a simple command, and features like search and discovery. This streamlines administrative duties, driving efficiencies and convenience for employees as well as personalization for on-demand knowledge augmentation. This is the future. This is the future that's here now with us.
When we think about the Sky platform, we've been talking about the technology. But now, from the last quarter, we have actually been out there in the market talking about our marketing initiatives or branding. Our small marketing team has actually done an amazing job this quarter with three main initiatives. Number one, sharing case studies and trend reports based on the actual use of data and experiences from our global deployments. We've got around 200-plus cities covered, 50-plus countries covered. We have deployments all over the globe. Now we're sharing all of the use cases and the case studies that drive the value, the ROI for the end user.
Secondly, we've been starting to work on podcasts on key industry topics. The first one was actually with me with Chris Daigle, who runs chiefaiofficer.com. We had a really great off-the-cuff sixty-minute podcast that has had a strong response on social media. Feel free to check it out on the attached link. Trust me, it will be sixty minutes of fun as we talk about not only the capabilities of our platform but the unique experiences we found with our clients that are enabling this amazing experience.
Finally, we're going to be talking more about the people that make up Sky, the human side. We are an AI-first enterprise where everyone on the team, whether they are in sales, marketing, finance, engineering, DevOps, all use AI. As you can see, the first video we have is of our CFO, Joy Mbanugo, who's on the call, who's an amazing finance expert, but she's actually pretty passionate about AI. You can see that she has a lot to say about AI, and she's also a user of AI. Basically, every single employee at Sky is using AI. It's also part of our Google partnership where we get access to Gemini enterprise access. My expectation is clear to the team.
If you do not use AI in your job function, you'll be left behind. I'm proud to say that every team member on Sky is using it, and we're finding a lot of great cabling efficiency because of that.
That's a little bit about the company and what we do. Let me talk about the market. Let me talk about what's happened since we last talked to you guys about the market. The headline is the corporate real estate world is getting compressed. No pun intended. For the first time in modern history, the US is set to lose more office space than it gains. Let that sink in. That's kind of an interesting phenomenon, and that is driven by the fact that employees don't want to spend more money on space. They are fine with the space they have.
The more important thing that's happening is that the large employers are saying, we want people to come back to the office not one day, two days, but at least three days. Most of them are asking for four days. Actually, there are some that are even asking for five days. As you can see, we've been showing you the flex index charts for the last year. The trend is going towards more structured hybrid work. That seems the highest.
But on that, the return to office or full-time in the office has increased from the low twenties to now 33%, but the structured hybrid, which means that you're going to be in the office at least three days, mostly four days, is on the rise.
In the last couple of weeks, we've had HSBC, Royal Bank of Canada, Scotiabank, TD Bank, Rogers, Starbucks, also announced four-day in-office mandates. Actually, one of the headlines it made last week was AT&T CEO, John Stankey, made a headline saying that if you don't want to show up at the office, you may not be part of the new culture he believes AT&T needs. He's making it very clear that he needs based on performance and loyalty and culture. That's where the wind is blowing, towards more and more ability to come together in the office so we can collaborate and expand our capabilities. By the way, just yesterday, the mighty Microsoft was reported mulling the three-day return to office beginning January. We believe that work is anywhere. We believe we can provide the capability where the employees want to be. But the reality is this: corporations are reversing hybrid flexibility even as workspace density increases and floor plans shrink, pressuring real estate and workplace planners. We're getting a lot of interest from folks that are saying, you know what? We need a solution to this problem because we're getting less space and getting more people back. The reality is the Sky platform, the way we designed it, is already doing AI-powered desk reservations. They're doing capacity analysis. They're doing space-time optimizations. They're doing a lot of things that will drive the innovation as well as drive the demand for this stuff. That's an interesting trend that we see.
The second thing that I would like to share on the trends is the hype cycle on AI, which is now getting towards the real estate as well as the workplace experience market. We've actually been working with Gartner for over two years as we've shared our AgenTiG AI story for workplace and employee transformation. I'm happy to say that they are on board with our thinking, and their AgenTik AI analyst digital workplace experience analyst who used to have the separate little words have now come together as combined forces to create the hype cycle for digital workplace applications.
As you can see in the workplace application, the employee experience app, which was the traditional mobile app, is kind of going through a down cycle in terms of people are using it, but the adoption is not that high as people expected. Because Facebooking is just one aspect of it, people want to see more than Facebooking. On the other side, you see AgenTeq AI on the rise, which we, as you know, have been pushing for that for the last two years. We're driving the leadership in that. That is in a little bit of a hype cycle, but at the same time, the reality is kicking in. That AgenTeq AI is here.
It's solving problems today for customers. Customers have no issues using the technology because it is solving a real problem for them and creating great value. We feel pretty bullish about this opportunity, and we were headlining this Gartner report. It's out there in July. AgenTeq AI is transformational. The way humans interact and collaborate with AI is taking dramatically forward with the Genentech AI. The AgenTeq AI system understands what the goal of vision of the user is and the context to the problem they are trying to solve. AgenTeq AI focuses on completing actions and outcomes versus just assistance. Like a trusted adviser that is proactive, insightful, and acts to solve problems. That's the key.
That's what we've been focused on, and that's what we believe is where the industry is headed.
That's my market overview of what's happening in the market, what we believe. It's pretty obvious to us that this day was coming. I think now is the time that the acceleration of the adoption needs to start happening. Let me talk about what happened in Q2 here for us. I'll focus on the product and customer highlights. Q2 2025 was a period of strategic execution and deeper customer engagement across our Fortune 1,000 base. The company made amazing progress on existing customer growth, adoption, and usage, leading to high employee engagement with a large enterprise client.
Some of the key highlights, I would say, are two of our largest customers renewed this quarter and are accelerating the adoption of all Sky products as they see incredible uses of our technology platform by their employees. We had our largest ARR renewal with a leading Fortune 50 client who is now planning to expand globally to all sites as well as adopt all of the groundbreaking capabilities on the Sky platform. They want it all as they want all the employees to experience the magic of Sky.
We are seeing more than a 150% plus usage at some of their sites, primarily driven by the mandate for RTO as well as the ease of using capabilities of the Sky platform. You may ask, can you have a 150% plus usage? Well, it's pretty simple. Not only everybody who's supposed to come to the office comes to the office, but also they're getting people from out of site, out of state, or out of city coming in because the headquarters is an important place to be. We're finding a resurgence of people saying, well, we want to be in person, and we want to collaborate. They're pretty excited.
Now this also leads to interesting problems in terms of capacity planning and trend analysis and what we can do. We'll show you a lot of the insights you've done with analytics that is a solution for this problem. But it's a good problem to have. By the way, they are not unique in their demand for this product. We believe that every large enterprise is grappling with this problem. Grappling with the fact that people want to come back to the office or are asked to come back. There's not enough space for them, and there's not enough ways to collaborate.
The other big news for this quarter was one of our new clients is launching major iconic campuses across the US in the coming month. That signifies their commitment to scale. Our teams work tirelessly with them, and these sites are going to be in New York City, in LA, in Miami. All the great centers of excellence for them. We're really excited about that deployment. Finally, if we talked last quarter, we talked about our Sky Kiosk. Well, we got our first orders in for that, and that deployment has gone successfully with our client. Now there are multiple customers lining up for Sky Kiosk. We'll talk about how the kiosk is game-changing in the market.
Our Sky platform, Anchor AgenTiga, is now in deployment accelerating workplace transformation at scale. Key products on the Sky platform gaining momentum, the Sky kiosk. Allowing employees to do JIT just-in-time bookings and connection from an interactive screen, all powered by the SkyBTS as the brains managing access, space, and content on the system leading to actionable insights and outcomes with the SkyView Analytics platform. We are committed to being the system intelligence for the hybrid workplace.
These disruptive new products that I talked about, offered by the Sky platform, are a direct result of our partnership with Google Cloud or Authentic AI technologies, creating intelligent, superhuman-like, and proactive personalized experiences at scale is made possible because of this strategic partnership. I want to thank the Google team, and I want to thank our engineering teams for really working hard on this. When you think we'll talk about all of these other capabilities in detail in the coming slides in terms of analytics, what we've done, where we've rolled it out to all our clients, and now we're getting some amazing insights.
Sky VTS was deployed with our newest client at scale, and now since we've tested it, validated, we're going to deploy it across all our customers this coming quarter. Finally, we have the SkyOneMap experience to show you some examples of that. One place to navigate, to book, to connect, and more. It's been great working with a new client and putting that together. Now all our clients want the same experience, super excited about that. I'm going to turn it to the Google partnership now.
Our Google partnership and products are moving at a rapid pace as the AI ecosystem has evolved dramatically over the last year. It's great to see Google Gemini leading the pack in innovation and cost disruption. This year, we just signed our next year commit with Google Cloud. As part of that, we're getting a lot of great technology capability, I'd break it down from infrastructure to spatial intelligence and security. Leveraging Gemini 2.5, Sky is now enabling automation of nuanced and multi-turn booking requests. Significantly enhancing the employee experience where Sky agents will complete their daily space booking tasks so employees can be more productive on getting the work done versus scheduling work.
We're using both the data engineering agent and the coding per agent in our infrastructure and our codevelopment that's going to accelerate the development of those products.
In terms of spatial intelligence, the Gemini data agent API provides the building blocks to integrate Google's Booker natural language processing and code interpreter capabilities directly into SkyView. Resulting in more contextual, very insightful outcomes allowing users to create unique, engaging, and accessible data experiences to meet their specific business needs. We'll show you an example of what we've done there with one of our clients this quarter that's pretty amazing. Given that most of our customer base are Fortune 1,000 clients, Sky provides the enterprise-grade governance framework needed to accelerate AI adoption and value while ensuring trust, transparency, and security. We are using the Google Credit Intelligence GTI platform module now.
In addition to our GCP platform to provide that trusted and secure experience globally. As you look at our demand, it's increasing with our clients. The deployments are global. Think about a 40,000 to 50,000 person organization that's globally it's a large bank or it's a large entertainment company, no matter what, security is top of mind. The fact that now usage is happening not in one or two sites, it's happening in 50 sites. It's not happening with 4,000 users. It's happening with 30,000 users. Coming to a point where security becomes essential. It's well, I would say existential and essential.
We are partnering with our clients to make sure that we deliver that really on-demand secure experience for them everywhere. This is a good problem to have, but it's something that as we grow, we are definitely going to make it more and more important.
Let me talk about the other products that we are delivering and the capabilities that we offer. You get a glimpse of specifically what the users are using it for and what's the experience like. Let me talk about the OneMap experience. Implementing the OneMap experience across all our customers now. Empowering employees to book, navigate, connect, rate, and review, all through a single map view. Some favorite use cases are colleague booking. You want to see who's in the office when before you book.
That's becoming very, very popular, and it's interesting that even in a small tree, if you want to see who's in the office, want to see their picture, want to make sure they can connect or they can be next to them or nearby them, or maybe they want to be far away from them. It gives them the full flexibility and opportunity. Similarly, we've got another interesting use case of emerging notifications where panic button triggers the location sharing or a notification that allows users to very quickly react and also for employees to very quickly inform employees of different actions. That's also an exciting thing that's now fully deployed. It's also enabled through that one map experience.
You don't have to go to a separate map to book. You don't have to get a separate map to navigate. You have one place to go, and it's interactive. It's immersive. It lets you interact very easily, and it's very easy to use. That has been really the key part of our drive towards this one map experience is that ease of use and that immersive experience.
I'm happy to say we just were awarded a new patent on 3D mapping and augmented reality. The patent number is over there. It's really a cornerstone of our multidimensional map strategy. Providing context to your immersive experiences. This is a roadmap for us in terms of developing that multi-dimensional environment, but we believe that a lot of our users are finding the capability to be super interesting and to give them more and more context than just booking a room or booking a desk. They really want to see what's in their environment. Super excited about that.
Next, let me talk about analytics and spatial intelligence. As you know, we just talked about launching SkyView across all our customers. You've seen the slide before that we talk about all the great things we can do in terms of space optimization, user engagement analytics, giving you data-driven decision-making ability. The more interesting part is giving you the insights and the analytics that allow you to do predictions. That's been really interesting for us as we started peeling the onions with our clients. Finally, the automation of the dashboards. Some people want to have dashboards, some want to create their own dashboards, some want to have reports. We can put all those capabilities.
This is where we partner with Google in trying that advanced SkyView capability.
Let me talk about an interesting model that our team developed. As we look at all of the hundreds of sites that we have globally, we took a case study with one of our clients who's got the problem of cancellations of bookings. The problem exists is that when you book a room, you have the opportunity to keep it till you cancel it. Sometimes people don't cancel in advance or sometimes it auto cancels. Depends on the settings through BTS. The funny thing we found is that we're seeing these are two. One is in Southeast Asia where you have an enormous number of bookings, maybe there's 10,000-plus bookings a week or a month.
In some cases, we have only a couple thousand a month in a US campus, but we found that the auto cancellation or the auto release is independent of the booking volume. You could have more bookings, but it didn't matter. You still would have similar auto releases or non-auto releases, meaning cancellations. As we delved further into this, we actually created a model prediction model to say, how would we be able to predict what the cancellations would be given that we have all this historical data and usage data and we do this as a function of the campus, the department, the user title they have, what they booked ahead, how they used it.
We have all the history of the usage as well as the campus. Looking at that, we've created this very accurate prediction model. We think it's more than 90% accuracy on it, but we've been able to showcase to our client really three major business impacts.
Number one is real estate optimization. If you look at the number of desks that were wasted or were never ever utilized, we've got a metric on what the cost per desk per day is. We've realized that for that campus alone, there's a $300,000 cost savings in there, which is significant for a campus. If you can predict or know that these desks were going to get canceled anyway or these rooms were not going to get booked, you don't need to, you need to give it to somebody else to use, or you don't need to even have those rooms or desks.
Technically, employee productivity, we've seen that the number of hours that we can save an employer, the team, it's in the thousands of hours per year that we can save in terms of their lack of productivity because they're spending time trying to book and rebook and cancel. The auto release feature enables that easily for them. Lastly, when you have these cancellations late in the time before the day comes, people are not utilizing those resources because it's too late to come back.
Given that our algorithm can show you that these things will be released sooner, could be canceled sooner, we've shown that you can have a 75% savings of the underutilized spaces, which is significant because this means that somebody who wanted to come to the office can now be at the office and somebody who wasn't going to come was actually let go earlier. Very interesting model that we built with our team. We're building these kinds of models on top of the Google AI infrastructure that will allow really value-based insights and outcomes to our clients, which is exactly what they're looking for. Super excited about this development.
Let me talk about, last but not least, the brains behind our system called SkyBTS. BTS stands for behind the scenes. It's not Korean pop. It's really just more about making sure that we have all the capabilities that allow for a great infrastructure for our clients. The way we think about it now is not just about traditionally, these systems used to have content management systems. We've actually enabled it to have access, space, and content management. The newest client that we have is super happy with this unified experience because now you can see everything in one pane of glass. You can see your space. You can see the people using it.
You can give them access control and rights to where they want to be, where they want access. Finally, you can distribute content anywhere you want, anytime you want using NLP commands. Our feature with us is we're going to use Gemini to provide NLP-based commands, and we'll be launching the solution across all our clients this coming quarter. The beauty of the system is that in the traditional old-school real estate models where you've got maps sitting somewhere, you got space information sitting somewhere else, you got people content somewhere else. There's a lot of coordination that needs to happen to actually make some of these solutions work. We're now integrating all those pieces together, recording dynamic updates.
Creating this really easy solution for our clients to create content, to give control to folks, and manage their spaces more efficiently. This is going to be a platform play that we're going to do across our clients.
With that, this is the end of the product and customer presentation. Let me focus now on finance, and I'm going to move over to our CFO, Joy Mbanugo, to share with you the financial results for Q2 2025. Joy?
Joy Mbanugo: Thank you, Khurram. Turning to our Q2 2025 results, picking up where Khurram left off, we saw a meaningful ARR expansion this quarter by two large Fortune 1,000 renewals. I just want to note that these aren't just contracts. They're multiyear partnerships that reflect both customer trust and the mission-critical role our platform plays in our operations and in improving overall employee experience. Subscription revenue made up 96% of total revenue compared to 87% just a year ago, showing our progress toward a higher margin recurring model. Gross margin improved to 86% from 80% last year even as we invested heavily in R&D to accelerate ARR growth.
EPS also increased from last quarter and from last year up to negative 16¢ per share, but that's an increase quarter over quarter and year over year. We're also happy to report that cash on hand as of today, year over year, has increased. We're really happy with the direction that we're heading in. Moving to the next slide, we can go into more details.
Quarter over quarter, revenue held steady at $1.22 million, which is a strong outcome given some of the macro headwinds and some of the news we're seeing about whether or not we're heading into a recession. It just shows that we're holding steady. You'll see that the cost of revenue increased slightly, but that's due to hardware that we purchased on behalf of a client. That cost is passed through. Which brings our gross margin to 86% this quarter versus 88%. Again, above the 80% mark, but it's still holding steady.
Overall, operating expenses increased, but that is attributable to some of the investment we had in R&D that Khurram talked about, our continued and expanded partnership with Google, the Gemini tools that we're using, etc. You'll see a one-time pop from this quarter and an increase year over year and quarter over quarter. But, again, that's a significant investment that we think is much needed at the time. Sales and marketing have held steady and will continue to hold steady. We are making investments, but we're being smarter about it, not spending more dollars, but thinking more about how we can do, I don't want to use the cliché term more with less, but that's absolutely what we're doing.
We're proud of the work the team has done with the podcast, humanizing CXApp Inc., and the case studies, and we'll continue in that vein.
Quarter over quarter, G&A did decrease. If you remember from last quarter, we had a bit of an increase quarter over quarter and year over year based on some of the filings and other costs that we had that were baked into G&A. Overall, loss from operations did increase, but it's a significant investment in R&D. We believe this is the direction that we need to go in. Putting it together, Q2 demonstrates our ability to maintain revenue stability, strategically invest for growth, and strengthen our market partner market position.
This combination, resilient recurring revenue, disciplined cost management, and innovation investment is exactly what positions us to grow our share of the employee experiences market, where penetration is still just 5% to 20% according to the Gartner survey that Khurram mentioned earlier. That's why we believe Sky is on a clear path to continue to lead the market in this area and this new vertical. Khurram, over to you.
Khurram Sheikh: Thank you, Joy. Just echoing what Joy said, we've done a great job in terms of managing our expenses while at the same time investing in the right technology sets. As you can see, our focus really has been on the technology. As we scale up, we're going to be focusing on sales and marketing as well and growing that base. We have a very small team working in that area because our best references are existing clients, and the existing clients are loving what we're doing, and they're investing the time and effort to help scale this business. Let me close out with the summary slide of talking about why you should invest in Sky.
I think the fundamental belief that you have to believe is at the heart of Sky, we also have a simple yet powerful belief. Put the employee first, and everything else follows. It's not just about the work. It's about the people who do it, the places where they come together, and the things they need to succeed. Sky redefines how we think about work, life, and the seamless interplay between the two. I think we're onto something pretty big here because as I talk to our clients, who are all the largest brands in the world, in the Fortune 1,000, they want to work with us as partners, not just in a vendor-customer relationship.
They want us to solve their problems. Their commitment to renew and expand significantly with us in this market establishes us as the leader in this emerging market. There are many other options they could choose. They could have the large bulge bracket, large trillion-dollar companies. They could also have the other startups that could be in the space, but they trust us because they know what we're working on is truly transformational, truly helping them be successful. We really believe in that transformation. We've shown a continued recurring revenue path as you see with Joy's numbers. We're increasing the subscription revenue quarter to quarter.
We have a path to profitability based on that because we believe these clients are not easy to get hold of. Not easy to scale up. Once they are with us, they want to go everywhere. We really believe that there's a huge opportunity for expansion with these amazing clients we have. Because of the diversity of deployment and you saw the insights that I showed you, I just gave you a snapshot.
There are so many interesting insights that we're finding that will allow employers to become more savvy about what to offer to the employees, how to make them more productive in their environment, and for employees to also feel like, how can I take advantage of all the assets of my company? I think this is a two-way street where employees and employers have to be together, and we believe Sky is that tool that brings it all together for them. Finally, we are an innovation-driven team. We've got a great board. Got a great management team. We're situated in Silicon Valley. We have partnerships with leading innovators.
We're really on a mission to define a new category in software called employee experiences. I'm super excited about it. I think we believe that this opportunity is long-term. It's not a short-term opportunity. The demand is coming, and we believe that we are at the right time with the right place with the right technology set to be able to scale this business. With that, operator, if there are any questions from the audience, I know Joy was monitoring them. We can take some questions from the web that's there, and then we can answer them. Joy, do you have any questions coming in from the web?
Joy Mbanugo: Yep. There are two questions, and we can tag team on them. The first one is, how is Sky differentiating itself from larger AI competitors in the enterprise engagement space? What specific areas are driving your competitive advantage? I think I would add in, Khurram. Let me know what you want to add. Sky is delivering an enterprise-scale AI solution validated in live workplace environments. Our platform enables advanced capabilities such as AgenTick AI-based behavior analytics and intelligent employee experience orchestration. A key differentiator is that our enterprise clients actively provide feedback and collaborate with us on a product roadmap. I get to hear it all the time, sit in the office, and I love to hear it.
Ensuring that we prioritize and deliver the most valuable features for real-world experiences. We're not making this up. The continuous loop of engagement from our customers ensures our innovations directly address market needs and drive measurable outcomes. As Khurram mentioned, we're able to ideate, test, and deliver innovations because we're based in the Bay Area, the AI hub at the moment. This agility also allows us to respond rapidly to evolving enterprise needs while larger competitors are often a bit slower to adapt. Our size is our advantage. Our technology consistently supports organizations in improving spatialization, enhancing workforce engagement, and optimizing operational efficiency. Khurram, you want to add anything to that?
Khurram Sheikh: Yeah. That's great, Joy. I think the only thing I'll add is one of the things that we pride ourselves on is localization. This drives to this one map experience because a lot of the tools out there are digital tools and with the AI space, which definitely we leverage all the AI tools. I mean, we're using Gemini, but we're also using other AI LLMs and tools in our platform. But what they can do is they don't know the map. They don't know the localization. They don't know some of the user history and data. The contextual awareness. We think that's a strong differentiator for us. Finally, we integrate all these other pieces together.
It's very hard when you're a one-product company or focus on that. We're actually more of an experience company. We focus on all these integrations. I think those are our key differentiators, and finally, it's our great team. We deliver great service to our customers, and they love working with us. I think those are the three from my perspective, the main differentiations for us.
Joy Mbanugo: Okay. We have the second question. Are there any strategic partnerships or integrations in the pipeline that could meaningfully accelerate market penetration over the next twelve months? Khurram, I'll take the first part, and then I think you could take more and go. You already talked about Google, but it may make sense to do that. But I think we're also partnering with four other groups, design-build firms, incorporating our solutions into workplace projects at the planning stage. So when a building is being built, that's probably a great time to get in there. Business process automation providers that embed our capabilities into existing client workflows, and global real estate firms that are active referrals.
They refer Sky when their clients are looking for digital transformation and employee experience solutions. Lastly, any technology ecosystem partners have engagement platforms and then the cloud providers. Khurram, your thoughts on that?
Khurram Sheikh: No. That's great, Joy. I think you hit all the different pieces. What I would say is that we believe that our best reference is our existing clients, and it's a small network of leaders in the industry because we don't work with just the project managers at these companies. We work with the C-levels. The CIO at these large clients are talking to us. In one case, actually, CEOs are actually talking to us. More and more, we have leaders in HR, in real estate, and in IT working with us. All are at the senior executive level. I think if you look at that network of people, they have a high criteria for quality products.
They have a reference group that's very, very collegial. For us, it's super important to get those clients to be at the maximum level of Sky experience. Then great things will happen. At the same time, as Joy said, we are working with different partners in the industry. As we integrate, say, a locker vendor, we work with them, and we work with parking folks. We work with real estate folks. Those are all there, but at the same time, our key differentiator is the technology, and that's where we partner with the cloud providers that also are providing us a lot of great access to clients, but also providing access to technology. I think it's a great question.
We talk about it every day at the office, and what we're finding is that what's working best for us is references from existing clients. Any other questions, Joy, or is this it?
Joy Mbanugo: That's it.
Operator: Okay.
Khurram Sheikh: Great. I want to thank everybody for joining us on the call. We look forward to giving you updates in the coming weeks and months. We have some really interesting strategic opportunities that we're working on, both from a product, technology, and market perspective. Look out for those press releases, and then we will be hopefully scheduling our next earnings call in the November time frame for Q3, and look forward to your interest in Sky. Thank you for your interest in joining the call, and look forward to sharing future results and future success of the company. Thank you so much. Take care.
Operator: Thank you. This does conclude today's conference call. You may disconnect at this time. Have a wonderful day. Thank you once again for your participation.