Cxapp Inc. (CXAI) - Q2 2024 10-Q Summary
Business Context and Reporting Period
Cxapp Inc. (CXAI) is a SaaS provider delivering intelligent enterprise workplace experiences through a platform combining customer experience (CX) and artificial intelligence (AI). The company operates as a single segment focused on the hybrid workplace market. This report covers the quarter and six months ended June 30, 2024. The company is classified as a non-accelerated filer, smaller reporting company, and emerging growth company.
Key Financial Metrics
| Metric (in thousands) | Q2 2024 (3 Months) | YTD 2024 (6 Months) | Q2 2023 (3 Months) | YTD 2023 (6 Months) |
|---|---|---|---|---|
| Revenue | $1,766 | $3,584 | $1,915 | $2,257 |
| Gross Profit | $1,413 | $2,904 | $1,435 | $1,690 |
| Gross Margin | 80.0% | 81.0% | 74.9% | 74.9% |
| Net Loss | $(5,256) | $(10,426) | $(14,730) | $(11,972) |
| Net Loss Per Share (Basic/Diluted) | $(0.34) | $(0.68) | $(1.05) | $(0.85) |
| Cash and Equivalents (End of Period) | $6,160 | $6,160 | $4,543 | $4,543 |
| Working Capital Deficit | $(6,807) | $(6,807) | Not Reported | Not Reported |
| Operating Cash Flow | Not Reported | $(2,560) | Not Reported | $(6,598) |
Material Changes vs. Prior Period
- Revenue Decline: Q2 2024 revenue decreased 7.8% year-over-year to $1.766 million, primarily driven by a reduction in professional services revenue as the company transitions to a full SaaS model.
- Improved Margins: Gross margin improved to 80% in Q2 2024 from 75% in Q2 2023, reflecting lower costs associated with the shift away from professional services.
- Reduced Net Loss: Net loss narrowed significantly to $5.256 million in Q2 2024 from $14.730 million in Q2 2023. This improvement is largely attributable to a decrease in the non-cash loss from the change in fair value of warrant liabilities ($1.051 million in Q2 2024 vs. $12.040 million in Q2 2023).
- Debt and Liquidity: The company incurred a working capital deficit of $6.807 million as of June 30, 2024. Total liabilities increased to $17.294 million from $11.183 million at year-end 2023, driven by a rise in warrant liability (to $4.206 million) and new convertible debt.
Guidance, Outlook, and Risks
- Going Concern: Management has identified substantial doubt regarding the company's ability to continue as a going concern due to recurring losses and cash utilization. However, they believe recent funding is sufficient to meet obligations for at least 12 months.
- Cost Reductions: In January 2024, the company laid off approximately 20% of its global headcount to conserve cash. In March 2024, D&O insurance premiums were reduced by 50%.
- Strategic Partnerships: In February 2024, Google agreed to add the CXAI platform to the Google Marketplace and signed a go-to-market partnership.
- Financing: In May 2024, the company entered a Securities Purchase Agreement with Streeterville Capital, LLC, issuing a convertible Pre-Paid Purchase with a principal of $2.65 million, receiving net proceeds of $2.48 million in June 2024.
- Controls: Management concluded that disclosure controls and procedures were not effective as of March 31, 2024, due to material weaknesses previously disclosed.
Investor Verification Checklist
- Liquidity Runway: Verify the sufficiency of the $6.16 million cash balance against the $6.8 million working capital deficit and upcoming debt maturities (notably the $3.885 million promissory note principal due within 12 months).
- Warrant Liability Volatility: Monitor the fair value of the $4.206 million warrant liability, as fluctuations significantly impact reported net loss without affecting cash flow.
- Revenue Mix Transition: Assess the sustainability of the shift from professional services to subscription revenue and its impact on future top-line growth.
- Debt Covenants: Review terms of the Streeterville Capital convertible debt and promissory note for potential dilution or default triggers.
- Internal Controls: Track progress on remediation of material weaknesses in internal controls over financial reporting.