CXApp Inc. Q2 FY2026 earnings call

• Acquisition of Engine Room

• The transformative Engine Room acquisition closed in June 2026, adding one month of revenue in Q2. It provides immediate scale, a profitable operating base, and a pre-built mid-market distribution channel that CXAI lacked previously. It also adds customer acquisition, performance marketing, and growth data context that expands CXAI's capabilities beyond just workplace intelligence to business growth intelligence.
• Cross-synergies are planned: CXAI will sell Sky AI capabilities to Engine Room's 50+ mid-market customers, while Engine Room will sell growth marketing services to CXAI's enterprise customers, creating a combined business with an enterprise anchor and mid-market growth engine.

• Product Development

• Sky 2.0, CXAI's agentic AI operating layer, has moved from vision to production deployment. It unifies three context domains: place (workplace flow and resource management), person (BEAT personal and team productivity tool launching Q4 2026), and business (growth intelligence from Engine Room).
• The new Events module for enterprise workplace event management will reach general availability in September 2026, solving the unmet need for unified end-to-end event workflow orchestration across internal departments and vendors.
• CXAI's underlying platform is built around the Bond multi-agent orchestration engine and Cortex intelligence layer, designed for enterprise requirements including security, governance, auditability, and multi-cloud compatibility, with no dependency on a single foundational AI model.

• Go-to-Market Strategy

• The legacy enterprise business continues to win large, regulated, complex deals, including a new 3-year multi-million dollar recurring revenue win in financial services and multiple large Fortune 500 customer renewals. Productization of enterprise capabilities now enables faster, lower-cost deployment for mid-market customers.
• Engine Room, based in Australia, serves mid-market customers across Australasia across diversified verticals including trades, construction, automotive, and professional services, with 13 years of profitable growth, 93% recurring revenue, and average client tenure exceeding 4 years.

For Q2 2026, overall company revenue was $1.7 million, up 79% sequentially from Q1 2026's $950,000 and up 42% year-over-year from Q2 2025's $1.2 million. Annual Recurring Revenue (ARR) increased to $11.5 million, a 156% year-over-year increase from Q2 2025's $4.5 million. Net revenue retention reached 99.3%, up from 98% sequentially and 94% year-over-year. Total operating expenses increased 5.6% quarter-over-quarter ($275,000), far outpaced by 79% revenue growth. Cash EBITDA improved to negative $2.68 million from negative $3 million sequentially, and was flat year-over-year at negative $2.7 million. EPS improved to negative $0.10 from negative $0.16 year-over-year. The recently acquired Engine Room segment contributes ~$8 million in annual revenue, ~$1.6 million adjusted EBITDA, 93% recurring revenue, and accounts for 66.7% of the combined $12 million annualized revenue. The legacy Sky enterprise segment contributes ~$4 million in annual revenue, representing 33.3% of combined annualized revenue, with strong enterprise retention and high-margin software offerings.

• Full Q3 2026 will include a full three months of Engine Room revenue, bringing combined annualized revenue to ~$12 million, with quarterly revenue reaching ~$3 million.

• Management targets sustained double-digit revenue growth for the combined company.
• The company maintains a directional, non-binding target of reaching operating breakeven in the second half of 2027, followed by profitable growth.
• Key financial targets for the operating model include: >95% recurring revenue, gross margins above 70%, software mix above 95%, and growing average revenue per customer (currently ~$150,000-$200,000 per client annually).
• Operating synergies from the Engine Room acquisition will be realized throughout the second half of 2026, 2027, with both cost and revenue synergies expected to increase over time.

• The Engine Room acquisition earn-out is tied to 2-year revenue growth targets, creating performance-based payout obligations if growth targets are met.

• Enterprise AI deployments have long sales cycles, and new mid-market go-to-market motion has not yet been proven at scale.
• Smaller mid-market customers have limited internal IT support, requiring CXAI to deliver fast, low-complexity deployments to drive adoption and retention.
• The AI market is highly competitive, with many players targeting enterprise and mid-market AI use cases, requiring CXAI to maintain its differentiation based on context and integration.
• Integration of two companies with different operating cultures and footprints carries execution risk that could delay synergy realization.

Q: How much cash does CXAI hold post-Engine Room acquisition, and what are the outstanding liabilities? / A: As of June 30 2026, cash on hand is $11.7 million. Most acquisition costs have already been paid. The only outstanding obligation is a performance-based earn-out for 35% of the purchase price, tied to 2-year revenue growth targets for Engine Room, with no other major liabilities.

Q: When will the full impact of the Engine Room acquisition show up in reported revenue? / A: Only one month (June) of Engine Room revenue was included in Q2 2026. The full three-month combined revenue contribution will be reflected in the Q3 2026 earnings report.

Q: How has the Google Cloud partnership benefited CXAI's product development and go-to-market? / A: Google provides secure, scalable cloud infrastructure for CXAI's deployments, and access to advanced Google AI products. The partnership enabled the new Events module to be developed and moved to production in under one quarter, leveraging existing CXAI workplace IP and Google's platform capabilities. CXAI is also preparing to launch its mid-market products on the Google Cloud Marketplace, which streamlines purchasing and reduces time-to-value for customers.

Q: What is CXAI's competitive moat for its AI products? / A: CXAI has pre-existing IP and enterprise-proven deployment in complex, regulated environments, with thousands of production users. Its agentic AI architecture delivers LLM-based capabilities at a fraction of the cost of generic solutions, and has unique proprietary context capabilities including spatial awareness of workplace environments. Unlike generic chatbots, CXAI builds end-to-end agentic solutions that execute actions for users, delivering a differentiated user experience that drives viral adoption within customer organizations and referrals.