CXApp 2026 Q3 Earnings Call

Good afternoon, everyone, and thank you for joining CXAI's third quarter 2026 earnings call. I'm Khurram Sheikh, and I'm very pleased to share with you our results for the quarter and our plans moving forward. You have all seen our press release that hit the wire 20 minutes ago. I want to begin with a simple message. CXAI is becoming a healthier, more scalable company, and the progress we made in the third quarter reinforces our confidence in the direction of the business. Over the past several quarters, we have been focused on three priorities. Number one, expanding our recurring revenue base. Secondly, building a differentiated agentic AI platform around real business outcomes. And thirdly, creating a more efficient operating model. In Q3, those priorities began to come together in a more visible way.

We delivered approximately $3 million in quarterly revenue, meaningfully reduced our Cash EBITDA loss by $1 million, expanding the reach of our platform through the full quarter contribution of Engine Room, and advanced our next-generation AI products. The story today is not simply about getting larger. It is about building a software-led AI business that can grow with improving operating leverage. That is what I want to walk through with you this afternoon. Next couple of charts are the forward-looking statements and disclaimers. Please review them at your convenience. Okay. Let me start with the most important highlights from Q3. Core revenue reached approximately $3 million compared with about $1.69 million in Q2. Growth of 77%. That increase reflects the larger combined business, including a full quarter of Engine Room contribution. Equally important, more than 94% of our third quarter revenue was recurring.

This is the recurring software and services foundation we believe can support a more predictable and scalable business. We use the SaaS metric of Cash EBITDA, which is a measure we use to assess the underlying operating performance of our business, very well used in the SaaS business and software business, which basically includes the operating, excluding certain financing, accounting, and non-cash items. Put simply, it helps us understand whether we are becoming more efficient as we grow. In Q2, our Cash EBITDA loss was approximately $2.7 million. In Q3, it declined to $1.7 million, an improvement of $1 million or 37% in just one quarter. What is particularly interesting is that we achieved this while growing our revenue by 77%. In simple terms, we are generating significantly more revenue while reducing our underlying operating losses.

That improving operating leverage is an important part of our plan to achieve positive operating cash flow by Q3 2027. On the comparable share reflected in the presentation, pre-reverse split, loss per share improved by $0.08, from $0.10 to $0.02. We achieved this progress while continuing to support the growth and integration of the business. That means there is an 80% reduction in the net loss on an earnings per share basis. At the same time as these financial metrics, we made great success in our customers and with our product launches. Commercially, we secured two Fortune 500 annual renewals and added a large financial services investment management customer with a multi-million dollar three-year contract. Those customer renewals and that new client are testament to the capability of the team, the product, and the agentic AI platform we have built, CXAI 2.0.

On the product side, as an extension of CXAI 2.0, Beat, our latest agentic AI solution that helps software developers and project managers complete real work and execute their workflows seamlessly, is beta-ready now, with testing beginning this week and a planned commercial go-live in January 2027. When I combine all of these results, they reinforce an important point. We are not only scaling revenue, we are improving the economics of that scale. Super exciting. With those results, what is CXAI becoming now? This slide is central to our investment thesis because it shows what CXAI has become following the Engine Room integration. We now have an annualized revenue run rate above $12 million and a recurring revenue mix around 94%. We combine an enterprise workspace software foundation with Engine Room's mid-market customers, vertical market expertise, and growing intelligence capabilities.

We see a significant opportunity from aligning common technology and infrastructure, enterprise-grade security, cloud foundations, product delivery, and AI-enabled operations. Some of those operating synergies are still being realized. That work is ongoing. As you know, we closed the Engine Room deal first week of June, so it has been four to five months of intense work to bring it all together, but we are still working on the synergies and improving the operating systems together. On top of this foundation, we are building agentic AI execution capabilities across Workspace AI, Flow, Beat, and specialized industry workflows. Our ambition is to help organizations move from information and insights to completed work and measurable outcomes. The combination creates three opportunities.

Number one, a broader addressable market through mid-market distribution and vertical expansion, a capital-efficient model with improving operating leverage, and finally, an agentic operating layer that helps large and small enterprises get work done across people, locations, data, and tools. We provide that context, we provide that intelligence that differentiates us from everybody else in the marketplace. We are all doing this because we are targeting positive operating cash flow in Q3 2027. That target depends on continued revenue expansion, what we have shown already the last two quarters, execution of our efficiency initiatives, which we have also demonstrated, and disciplined use of cash. Q3 gives us encouraging evidence of progress. I would call this an inflection point for the company. Super proud of the results, super proud of the work that the team has done to get us here.

All right, let me talk about the financial results and double down into the numbers to get a better perspective of what is happening and what are we doing. Our sequential financial trend puts the change that has happened in perspective. Revenue, number one, progressed from approximately $950,000 in Q1 to $1.69 million in Q2 to approximately $3 million in Q3. Again, this step-up includes the timing of our Engine Room acquisition and the full quarter benefit in Q3. It is a great achievement. As you can see, the trend line is very encouraging, and we believe that this is the trend we are going to continue on. Cash EBITDA losses moved in the opposite direction, approximately $3 million in Q1, $2.7 million in Q2, and $1.7 million in Q3.

This is the combination we want investors to focus on, a larger revenue base accompanied by a significantly lower Cash EBITDA loss. Our loss per share also improved quarter-over-quarter on the share base as shown in the deck. While quarterly results will not necessarily move in a straight line, we believe this trajectory demonstrates the operating leverage we are working to build. Our objective is straightforward: grow revenue faster than the cost required to support it. We are using AI-enabled workflows, a more efficient delivery model, and tighter cost discipline to pursue that goal. Let me delve deeper on the revenue side to show you, talk a little more about the quality of the revenue. In Q2, approximately $1.56 million of revenue was recurring, representing 91.91% of total revenue.

In Q3, recurring revenue grew to approximately $2.84 million or $2.815 million or 93.68% of the total. That represents about 81% sequential growth in recurring revenue and an improvement of 177 basis points in the recurring mix. For us, the point is not just that recurring revenue is high, it is that recurring customer relationships give us a foundation from which to expand product adoption, introduce more specialized AI workflows, and pursue cross-selling opportunities. No recurring model is immune to renewals, budget cycles, or execution risk, but we believe this revenue composition gives CXAI greater visibility as we scale and helps create the potential for stronger operating leverage over time. So one of the things as we think about moving forward is, with this great revenue, with this high-quality revenue growth, when are we going to be profitable?

Let me walk you through now what I believe is one of the most important parts of our story, our path to profitability. As you can see, we have demonstrated meaningful progress in the last two quarters. What gives us confidence is that we now have two very clear drivers to continue this trajectory. The first is revenue growth. We are targeting approximately $4 million in quality revenue by Q3 2027, representing about 33% growth from our Q3 2026 level. We believe this growth can come from expanding our existing enterprise relationships, cross-selling our AI solutions, and leveraging Engine Room's mid-market distribution capabilities. And that is something, as you have seen in the last couple of quarters, we have demonstrated that growth. The second driver is AI-enabled operating efficiency. We are targeting more than $700,000 in additional quality cost efficiencies through AI automation, shared technology infrastructure, streamlined delivery, and greater operating discipline.

We've been working closely with our partners at Google in streamlining our cost structure with GCP, as well as all the other services and software that are needed to allow our solutions to scale. I'm very happy to report that we've found more efficiencies in that partnership with them, and more to come on that in the coming quarters. When you combine all of this stuff, this is where our business model becomes particularly compelling. We are building a capital-efficient AI software business where revenue can scale without requiring a proportional increase in operating costs. As you grow revenue and improve margins while reducing our cost structure, we believe we can generate increasing operating leverage. Our target is to achieve the positive Cash EBITDA and positive operating cash flow by Q3 2027. We have sufficient cash reserve today and do not need additional financing to reach this target.

Our focus, again, is not simply on growing a larger company. It is also building a scalable, financially sustainable, and ultimately profitable AI software business. Let me talk about capital structure. We recognize the importance of protecting shareholder value while maintaining enough flexibility to execute our business plan. In October this year, we announced a conditional 90-day standstill agreement with Avondale Capital, which is one of our investors, designed to provide greater predictability around specified equity issuance activity during the standstill period. It is important to be clear that the agreement is conditional and temporary, and the underlying financing obligations remain outstanding. Our board also authorized a share repurchase program for up to $1 million. This is an authorization, not a commitment to repurchase a fixed number of shares. Any purchases will be evaluated against liquidity, operating needs, market conditions, and applicable restrictions.