SKYX - NASDAQ

Good day, and welcome to the SKYX Platforms Corporation Fourth Quarter 2024 Earnings Call. All participants’ will be in a listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note the event is being recorded. I would now like to turn the conference over to Mr. Rani Kohen, Founder, Inventor and Executive Chairman. Please go ahead, sir.

Thank you very much. Good afternoon. We will start our Fourth Quarter 2024 Earnings Call. And with that, I will have Steve Schmidt, our President start with the call. Thank you.

Rani, thank you very much. We have a lot to report, and let's start. First of all, I'm very pleased to talk about the fact that we grew our revenue 48% in 2024 from $58.8 million in '23 to $86.3 million in 2024. Net sales of our advanced and smart home-related products surged over 1,000%. We expect our products to be in 20,000 units and homes by Q1 '25 and additional tens of thousands of units and homes in 2025. We expect significant projects and order growth, resulting in becoming cash flow positive in the second half of 2025. We also achieved revenue growth in 4 consecutive quarters for 2024 from Q1 of $19 million to over $23.7 million in Q4 for record sales. Our safety code standardization, which is led by Mark Earley, Former Head of the National Electrical Code and Chief Engineer of the NFPA and still a member of the International Electrical Code together with Eric Jacobson, former President and CEO of the American Lighting Association. We anticipate major support from additional safety organizations and leading members for our safety mandatory standardization of our electrical sealing outlet receptible technology. We have recently received some indications that based on the significant safety aspects of our technology. We are being positively reviewed by leading personnel, including leading safety experts that are assisting us with our mandatory safety standardization process as they strongly believe our technology has met all the criteria to become mandatory. A few -- as we kind of look at it, we generated a record $23.7 million in revenue in Q3 '24, compared to $22.2 million in Q4 ‘23. We reported $15.5 million in cash, cash equivalents and restricted cash as of December '24, compared to $13 million as of September 30, of '24. In March ‘25, we secured additional $1.45 million of funding, including from a strategic investor through our $2 Series A-1 preferred offering. As is common with companies such as ours, when sales are converted into cash rapidly, often referred to as the Dell Working Capital Model, we continue to leverage our trades payable to finance our operations, to enhance our cash position and to lower our cost of capital. We reduced our G&A expenses by $5.7 million to $31.4 million in 2024 from $37 million as of December 31, 2023. We reported a $3.3 million decrease in total liabilities and a reduction of $3.9 million in net loss comparing 2024 to 2023. And as I said before, we plan to become cash flow positive in the second half of 2025. As we previously announced, we secured $11 million of equity preferred stock investment led by the Shaner Group, a leading Marriott hotel owner with over 70 hotels, including significant insider investing by myself at $500,000 and Co-CEO, Lenny Sokolow and John Campi at $250,000, added preferred investment representing the $2 per share of common stock with the warrants. We expect to grow increasingly units and growth to pro builders in retail segment. We continue to grow our market penetration of our advanced and smart plug & play products, expecting our products to be in 20,000 U.S. and Canadian homes and units by the end of Q1 2025. We expect our products to be in tens of thousands of additional homes incrementally this year. A big plus is our technology provides opportunities for recurring revenue through interchangeability, upgrades, monitoring and subscriptions. We continue to focus on our razor and blade model, and our product range includes our advanced ceiling and electrical outlet, the razor, our advanced smart home plug & play products, the blade, including lighting, chandeliers, pendants, ceiling fans, recessed lights, down lights, exit signs, emergency lights, holiday kids, themes lights, indoor/outdoor wall lights among other smart products. We continue to utilize our e-commerce platform with over 60 websites for lighting and home decor to educate and enhance our market penetration to both the retail and professional segments. From a partnership and collaboration standpoint, we have significant collaborations and partners with Home Depot and Wayfair for our advanced and smart plug & play products for both retail and professional segments. Our product offerings will include a variety of our advanced and smart plug & play products, including retrofit kits, smart light fixtures, smart ceiling fans, ceiling outlet receptacles, recessed lights and more. We continue to collaborate with U.S. and world-leading lighting companies, including Kichler, QOUI

Thank you. Thank you very much, I appreciate it. Just to recap a little bit, besides the SKYX reporting the 48% growth and revenues from $58.8 million in 2023 to $86.3 million in 2024. We generated a record $23.7 million in revenue in Q4, compared to $22.2 million in Q4 2023. We reported -- as Steve mentioned, we're reflecting the Dell Working Capital Model. So our cash conversion is very rapid and we're leveraging our trade payables as we continue to grow our operations. The -- we anticipate, as Steve mentioned, number one, the significance projects and orders. And in addition, and in light of that, we anticipate that will become cash flow positive during the second-half of 2025. We reported a reduction in general and administrative expense by $5.7 million to $31.4 million as of December 31, 2024 from $37 million at the end of December 31, 2023. We reported in addition, a $3.3 million decrease in total liabilities from '23 to '24 and a 10% reduction of approximately $3.9 million in net loss. Our adjusted EBITDA loss per share is a non-GAAP measure amount announced it's a $0.13 per share in 2024, as compared to $0.17 loss per share in 2023. The company also reported a 14% decrease in loss to $13.1 million in 2024 from $15.2 million in 2023. Before interest, taxes, depreciation and amortization as adjusted for share-based payments or adjusted EBITDA, which is a non-GAAP measure. And of significance is that our gross profit increased 36% year-over-year by approximately $6.5 million. So with that, in light of those highlights, Rani, anything further?

Thank you very much, Steve, and thank you very much, Lenny. I just would like to emphasize that, as Steve mentioned our leading code members, Mark Earley, former Head of the National Electrical Code; and Eric Jacobson, former President and CEO of American Lighting Association are receiving great support now to the code efforts. There are several organizations that can help expedite that process. And we're working together, they're working together with those teams to expedite. As Steve mentioned, we feel we met all this criteria, and there are some organizations that can help expediting that product process and we also got some leading members that are helping us on a national level and the co-team are feel that they're very confident on their new path here. And that's something we're happy about. We're obviously encouraged by quarter-to-quarter growth in revenues and also very happy about the razor and the blade model. As Steve mentioned, using this is really to start penetrating with more builders as you saw we start announcing some collaborations with builders. And as Steve and Lenny mentioned, we anticipate to have to announce additional projects, additional builders on some leading projects that we have here. So overall, we feel that the razor and the blade model is really working for us. And as we said many times before, we're penetrating first and foremost, rating a new, I would say, way to enhance our sales by providing our ceiling outlook here, you can see on the left, we had a 24 pack. We have a 24-pack, 8-pack and 4-pack and 1-pack of the ceiling outlet receptacle, what we call our razor and we anticipate enhancing and growing our market penetration with those razors. And as Steve mentioned, we expect those razors to create or those ceiling outlets to create recurring revenues from different types of fixtures, intentionability and then also down the road with smart products with monitoring subscription, data aggregation and AI and other features. We also are very proud that our members here, our leading members that are helping us with the code in addition to our leading members in other areas. We also have Paul Janoski, Entrepreneur of the Year, second from right here, former Entrepreneur of the year by E&Y is an insurance guy, and we are also encouraged with some initial discussions that we're having with insurance companies that are all waiting for our products, the entire assortment to arrive and to be accessible in several places, not only in our 60 websites, but also with Home Depot, with Wayfair and with other places that we're working on. So we're very happy from the progress that we're and feedback receiving using, again, the razor and the blade model to penetrate, and we're getting great reaction from builders and also from hotels. We're working on with changer group that owns over 60 Marriotts and 20 other hotels. We're working on some of their renovations that once we have some products in the market the entire assortment, we believe we can start working towards, hopefully, hotel renovations and definitely grow our builder and our pro segments that we have. In addition to this, we as Steve mentioned, we have blessed to join the company, Huey Long, he is E-commerce leading -- U.S. leading member, was one of directors for Amazon when they started was also head of E-commerce and Marketing for Walmart and also with Ashley Furniture grew their business substantially when it comes to e-commerce. And joining him, he anticipates to deliver real strong numbers with our e-commerce platform, and we'll share more about this in the coming months. But one of his main goals is also to enhance our B2B to reward the Pro and the Builders through our e-commerce currently high 90% is retail and really single-digit, small single-digit is Pro. And now bringing all this assortment, you see a great opportunity to grow the B2B with the plug & play products. We also had a former Lighting Head of Home Depot joined us. So to accommodate our growth with Home Depot, and we hope to share more news on other companies and other growth opportunities, including the existing one with Home Depot and others, but also with hopefully new accounts. So in general, we're happy. We're working very hard. We're growing our business, and we're optimistic our co-team is very optimistic on some things that help and assistance we're getting here. With that being said, thank you, everyone, and we're probably going to open up to Q&A.

Thank you. We will now begin the question-and-answer session. [Operator Instructions]

Okay. So maybe, Pat, from Noble.

Hey, Rani. Thanks for taking my questions, and congrats on the strong quarter and the strong year. First, I just wanted to ask about, I think, it's almost a mandatory question probably is about the tariffs. Could you just touch on your partnership with Ruee? And how you may be able to avoid some of the impacts? How that might -- how you might be able to mitigate some of those risks?

Thank you. And we are -- last call, we also was at the same questions, and we didn't know those new tariffs will happen. But the good news is we -- even the last call, we answered that we're already working with factories in Vietnam, in Taiwan and now in Cambodia and even Ruee, since last year way before those tariffs came has opened other options, including Cambodia and Vietnam that he can supply products from there. And I must say the first two years of the tariff with COVID and everything else happened. I think a lot of people didn't take it serious, but I must say that in the past two years, the Chinese manufacturers are taking those tariffs very seriously as they saw the tremendous business was lost in China, and it didn't -- until it didn't hurt them, they didn't find choices. So the good news is they're already working for two years on those solutions and happens to be that, that really serves us well with the new tariffs that no one expected, but really that should not affect us as we already have in place and I said in the last earnings call, the same. So we're added there that time, and we definitely are utilizing it for now, so it won't affect our business here. But thank you for the question.

Great. And if I could squeeze in one more. I was just also wondering if you mentioned earlier about the mandatory approval process and that there are some organizations that could sort of help expedite that process. So I was wondering if you could give any more insight into what sorts of organizations those would be? Have you had any examples in mind? Or any more color you could give there?

And the standardization?

Yes.

Yes. So what we're finding out and I don't want to mention names at that point, but we're finding out working with very high-level people that working with our code team that between Mark Earley and Eric Jacobson, they actually created more or influence more standardizations in electrical and the lighting industry than any else in the past 35-years in the U.S. So getting support for them or they feel very confident that there are several other paths of safety organizations that have a criteria to help in situations like this. And as we are starting our process in the last several weeks, the team, the co-team are very optimistic on several options and organizations that are looking into it and some people that understand that type of business really think is that we, hey we met, as Steve mentioned, all the criteria to become mandatory and it's very obvious. There are hundreds of millions of times people go here in the U.S. on ceilings and touching hazardous wires, staying on time as on ladders would create electrocution, ladder fall, fires and many other hazardous incidents. And now that, that brought to attention of leading very high-level leading members, they're kind of "state of shock" and how long it's taking. So our co-team feel quite confident with that. And we hope we can announce some things in the next coming months and to give some more colors. But I think some doors have opened to us that we were not aware of or we did not have ways to explore in the past few weeks. And we hope that, that's going to lead to some things we can share in the near future.

Great. I appreciate the additional commentary Rani. I'll pass the floor.

Thank you. And Jack from Maxim. Hi Jack, how are you?

Hey Rani, doing well. Thanks for taking my questions guys. So it's great to see the continued momentum behind the scenes and definitely see a good control over the operating expenses. I do want to touch on the fourth quarter gross margin. So that did dip down a bit. Just wondering if there's anything you touched on that, is this a blip? Is this seasonality? And then what kind of can we expect for gross margin in the first half of the year, which might be seasonally slower? Thanks.

Yes. So with the gross margins, as we -- as you know, we're starting to -- and I -- we showed it on our slides earlier today, we're starting to bring all our products in with several joint ventures that we announced. And those products have really much higher gross margins than our standard e-commerce products have. And we're blending -- we're starting to blend in great products in. And really, what we have is just to put more and more products. We're going to start ceiling fans. It looks like very soon towards the summer with high margins, we're going to start some wall sconces, recessed lights, indoor and outdoor wall sconces, including a variety of chandeliers and down lights among exit sings, and emergency lights and we anticipate a very high gross margins. And our goal is just to blend them more in our system and that's in the process. Once we have the entire assortment and we anticipate Q2 will be -- we probably can announce the entire assortment is in place to see that affecting our gross margins. In addition to that, as we do in the razor and the blade model, we currently going with our razors receptacles into the market once the blades hit the -- smart ceiling fans, smart light features and other light features, that also will help our gross margins. And we also mentioned that we're working anticipating some major projects and major hopefully, significant orders that come. So all of this together, we anticipate will significantly improve our gross margins as we keep on coming with more products from our joint ventures and collaboration.

Okay. No, that's very helpful. Can I zero in maybe on -- you have tons of recent new announcements. Obviously, there's so much to talk up, but just not take up everyone's time. Let me just drill down on the Home Depot and Wayfair collaborations real quick. Can I get an update just kind of how those relationships are performing or moving along? I think you were expected to be in 100 initial Home Depot stores or online locations. Can you just give an update on how that's been going and what you can expect in 2025 from maybe Home Depot and Wayfair just in general? Thanks.

Yes, sure. As we -- for the other -- for our E-commerce 60 websites, we're using the same products, plug & play products, including ceiling fans and smart ceiling fans, smart lighting, recessed lights and all the emergency lights and exit signs, and indoor/outdoor wall lights to arrive. And as they're arriving, we're also enhancing our product assortment in both Home Depot and in Wayfair and Home Depot are also getting into stores, and we hope that the more stores -- the more products we have online, the percentage of products going to store will grow. We're working on some in-store programs that we can't disclose yet, but it's really -- for us, it's all about to have more and more product coming in. We're very encouraged that the last several months since our last call, every month, I would say, products, more and more products are coming into the country, and we're continuing that training of products and that supply chain to grow. And the more we grow it is going to influence positively both our programs in Home Depot and in Wayfair.

Okay. Great. I appreciate the color. I look forward to watching you guys execute. I'll hop back in the queue.

Thank you. And then we have Gerry from ROTH Capital.

This is Brandon Rogers on for Gerry Sweeney. Can you guys hear me?

Yes. Hello?

Yes. So I just had a question about bringing on Mr. Long. Given his background, does this have any impact to your strategy? Any changes you guys are looking to implement in 2025 and any challenges on this front?

Related to tariffs, you mean?

No. In terms of -- just given his e-commerce background, is there any difference in...

With Huey Long?

Yes, correct.

Yes, yes. So yes, Huey is really a veteran and well-known -- actually was the Director in Amazon and created Amazon's main brand, Amazon Basics, that was their first brand out there, Today they have 100. And he's really U.S. leading e-commerce expert and to bring that level high-level talent in his level, he probably saw something into what we have. And I'll take his word, he started his career as a buyer in Circuit City then he opened his own sourcing company, grew it up from 0 to $800 million at that time and then sold it to the CEO of Circuit City and then we announced the Amazon and Jeff Basis that he sold his company, they grabbed them. And I'm saying that because his Circuit City experience is saying, we're going to have 60 websites and hopefully, a lot of them soon, starting to do plug & play and down the rig plug & play only and that's going to give us -- and we can still have competitive pricing that we don't need to significantly, if at all, to increase cost. And that's kind of -- you said with the Circuit City, this is like selling TVs, the Circuit City was LTVs with remote controls when the competitors will send them without. So I think he's very optimistic and we're very happy to have a guy and that caliber come and explore and also some software options that can increase our conversion rates and competitive edge that he's working on. So we're quite excited. And as I answered earlier, I think another question, I think we'll have some announcements together with him in the coming months.

And if I could just ask another one. Can you give me any updates on continued expansion into the residential homebuilder channel? I know you said that you expect 20,000 homes by end of 1Q and an additional tens of thousands of units in 2025. Any additional color on this front?

Yes. So as we announced, we believe this quarter is we're going to be around 20,000 units/homes with our products, and we have indications and started a well supply, we believe, tens of thousands, hopefully on higher side of tens of thousands, but additional pipelines that we have here, and that's with a variety of projects, and we hope to be able to announce some of them in the coming months. But we really have great feedback from builders, pro segment, hotel owners. I don't know if we mentioned this, but not only the Shaner Group with 60 hotels invested with us, but a 60 Marriott and probably 20 Hilton and intercontinental that they own globally, and we hope to grow with them globally, but we also have one of our -- that round another leading investor that owns Waldorf Astoria and several maybe 10 or more Hilton, they're also very excited. So for us, it's just to get the products here and it's coming. It's slowly but surely, and again I want to remind everyone, it's a raise on the blade model. The razor always goes first, the ceiling receptacle. And sometimes it can take three to six to nine months until the blades come in, that's where the revenue growth is anticipated. So we're very encouraged on our razor and the blade model, and we think that this program is really a great success for us. We just need to get more blades as we say, more products down here to accommodate demand.

And then if I could just ask one more. You mentioned cash flow positive during the second-half 2025. Could you just walk me through what you need to accomplish to get cash flow positive? You mentioned significant projects and orders, any more to add there?

So it's a combination of orders that we anticipate and there is in the blade model to more blades, more fixtures into the market and going our collaborations with -- that we announced on higher gross margins and getting more products here. So our management is confident that we have in the second half of the year, a path to get cash flow positive as we are going to get more products and more projects out there and anticipate them announcing some projects and orders in combination with our collaborations that all are in the direction of increasing gross margins what we anticipate and expect that, that can bring us to cash flow positive in the second-half of 2025.

Awesome. Thank you, Rani, I appreciate it. Thanks for taking my call.

Sure. Okay thank you very much, everyone. We're looking forward to talk to you more, and hopefully, we can share more things that we're doing once we may come to fruition, but we're quite confident in the company's direction and we would like to say thank you, Steve Schmidt, our President and our Co-CEO, Lenny Sokolow and thank you for you participating in that call. Looking forward for our next call. Thank you.