10-Q: CXApp Q3 2025: SaaS Focus Drives Margin Amid Revenue Decline

Sentiment:

Quarterly Report 12 November 2025 5:11 PM

CXApp Inc. reported a strategic shift to a SaaS-centric model in Q3 2025, improving gross margin to 88.96% despite a 35% revenue decrease for the nine months ended September 30, 2025, while addressing ongoing liquidity and internal control challenges.

Capital raiseEntered into a Securities Purchase Agreement (SPA) with Avondale Capital, LLC for up to $20,000 thousand in Pre-Paid Purchase Agreements.Received net proceeds of $3,990 thousand from the initial Avondale Pre-Paid Purchase on April 8, 2025.Received net proceeds of $3,000 thousand from the second Avondale Pre-Paid Purchase on August 7, 2025.$12,650 thousand remained available under the Avondale Capital SPA as of September 30, 2025.$3,520 thousand in funding remained available under the Streeterville Capital, LLC SPA as of September 30, 2025.Filed a shelf registration statement on Form S-3 on August 11, 2025, authorizing the future offering and sale of up to $150,000 thousand of various securities.Filed a prospectus supplement allowing for the issuance of up to $7,959 thousand of common stock under the shelf registration.Subsequent to the quarter, received $669 thousand and issued 782,102 shares of Class A common stock through Maxim Group LLC.Subsequent to the quarter, received net cash proceeds of $5,000 thousand from the third tranche of the Avondale Pre-Paid Purchase Agreement on October 17, 2025.

Better than expectedNet loss significantly reduced for both the three and nine months ended September 30, 2025, compared to the prior year periods.Gross margin improved substantially, indicating a successful shift to a higher-margin SaaS model.The proportion of subscription-based revenue increased significantly, enhancing revenue predictability.Operating expenses decreased for the nine-month period, reflecting effective cost management.Working capital deficiency improved, and cash and cash equivalents increased.The company secured substantial new financing, mitigating immediate going concern doubts.

Summary

Net loss significantly reduced to $7,912 thousand for the nine months ended September 30, 2025, from $16,072 thousand in the prior year.
Total revenue for the nine months ended September 30, 2025, decreased by 35% to $3,561 thousand, down from $5,481 thousand in the same period of 2024.
Gross margin improved to 87.53% for the nine months ended September 30, 2025, compared to 80.81% in the prior year, driven by a strategic shift to a SaaS-based model.
Subscription-based revenue accounted for 98.12% of total revenue for the nine months ended September 30, 2025, up from 86.70% in 2024.
Operating expenses decreased by $553 thousand to $14,798 thousand for the nine months ended September 30, 2025, compared to $15,351 thousand in 2024.
Cash and cash equivalents increased to $5,088 thousand as of September 30, 2025, from $4,880 thousand at December 31, 2024.
Working capital deficiency improved to $711 thousand as of September 30, 2025, from $4,496 thousand at December 31, 2024.
Net cash used in operating activities increased to $6,750 thousand for the nine months ended September 30, 2025, from $4,629 thousand in the prior year.
The company secured significant financing, with $12,650 thousand remaining available under the Avondale Capital SPA and $3,520 thousand under the Streeterville Capital SPA as of September 30, 2025.
Disclosure controls and procedures were deemed not effective as of September 30, 2025, with remediation efforts underway for material weaknesses.

Sentiment

Score: 6

Explanation: The company demonstrated significant improvement in net loss and gross margin, driven by a successful strategic shift to a high-margin SaaS model. Substantial financing has been secured, mitigating immediate going concern risks. However, the overall revenue decline and increased cash burn from operating activities, coupled with identified material weaknesses in internal controls, present ongoing challenges.

Positives

Net loss significantly reduced to $7,912 thousand for the nine months ended September 30, 2025, from $16,072 thousand in the prior year.
Gross margin improved to 87.53% for the nine months ended September 30, 2025, compared to 80.81% in the prior year, reflecting a successful strategic shift to a high-margin SaaS model.
Subscription-based revenue now constitutes 98.12% of total revenue for the nine months ended September 30, 2025, up from 86.70% in 2024, indicating improved revenue predictability.
Operating expenses decreased by $553 thousand for the nine months ended September 30, 2025, demonstrating effective cost management.
Working capital deficiency improved to $711 thousand as of September 30, 2025, from $4,496 thousand at December 31, 2024.
Cash and cash equivalents increased to $5,088 thousand as of September 30, 2025, from $4,880 thousand at December 31, 2024.
Secured substantial financing with $12,650 thousand remaining available under the Avondale Capital SPA and $3,520 thousand under the Streeterville Capital SPA, providing liquidity through Q4 2026.
Basic and diluted net loss per share improved to $(0.38) for the nine months ended September 30, 2025, from $(1.04) in the prior year.

Negatives

Total revenue decreased by 35% to $3,561 thousand for the nine months ended September 30, 2025, from $5,481 thousand in the prior year, primarily due to a decline in non-recurring Professional Services and hardware revenue.
Net cash used in operating activities increased to $6,750 thousand for the nine months ended September 30, 2025, from $4,629 thousand in the prior year, indicating higher cash burn.
The company has recurring losses and cash utilization, raising substantial doubt about its ability to continue as a going concern, although management believes this has been mitigated for 12 months.
Disclosure controls and procedures were deemed not effective as of September 30, 2025, with material weaknesses identified in internal control over financial reporting.
Loss from operations increased to $(11,681) thousand for the nine months ended September 30, 2025, from $(10,922) thousand in the prior year.

Risks

The Company's recurring losses and cash utilization raise substantial doubt about its ability to continue as a going concern.
The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan, expand its customer base, introduce monetizable features, and drive recurring revenue growth.
Financial instruments (cash, cash equivalents, accounts receivable) are subject to concentration of credit risk, and a material loss from financial institution failure or significant default could adversely affect liquidity.
Various social and political circumstances globally (wars, conflicts, trade tensions, terrorist acts, catastrophic events, global health epidemics) may contribute to increased market volatility and economic uncertainties, potentially affecting the Company's ability to complete a Business Combination.
The Company's disclosure controls and procedures were not effective as of September 30, 2025, indicating material weaknesses in internal control over financial reporting.
The Company's election to use the extended transition period for complying with new or revised accounting standards under the JOBS Act may make comparison of its financial statements with other public companies difficult.

Future Outlook

Management is committed to balancing innovation with financial discipline, aiming for long-term profitability and strategic growth by leveraging its AI-driven platform and expanding its enterprise footprint. The company plans to continue expanding AI-native capabilities, integrating agentic AI for desk booking, advanced analytics, and developing seamless integrations with key enterprise platforms. It will also target new verticals, strengthen partnerships, and optimize costs to enhance profitability and maintain financial discipline. Management estimates available cash and committed funding will sustain operations through Q4 2026.

Management Comments

At CXApp, we are at the forefront of transforming the modern workplace through AI-powered solutions that enhance employee experience, operational efficiency, and workplace intelligence.
Our investment in state-of-the-art AI infrastructure in partnership with Google Cloud (GCP) is enabling intelligent and scalable solutions that will transform the modern workplace.
Recurring SaaS revenue accounted for 99.46% of total revenue in Q3 2025, underscoring the effectiveness of our recurring business model.
These actions demonstrate our ability to manage spend responsibly while building a more predictable, capital-efficient business model.
Management believes this demand aligns with the Company's strategy to scale AI-enabled solutions that address evolving operational needs.
Management remains focused on executing cost management strategies to optimize the Company's expense structure and enhance operational efficiency.
The Company is committed to expanding its customer base, introducing monetizable features, and driving recurring revenue growth in next 12 months.
By leveraging its current cash position, financing agreements, and strategic initiatives, management is confident in CXAI's ability to meet its obligations and support its operations for at least the next 12 months.

Industry Context

The global employee experience and workplace technology market is projected to grow at a compound annual growth rate (CAGR) exceeding 20% in the coming years, driven by enterprise investment in hybrid workplace enablement, data-driven decision-making, and employee-centric technology platforms. CXApp believes its AI-driven platform offers differentiated capabilities compared to traditional workplace management systems by integrating real-time analytics, behavioral insights, and predictive modeling, positioning it well to address the evolving needs of distributed workforces and dynamic office environments despite macroeconomic uncertainty.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Internal Control Weaknesses	Disclosure controls and procedures were not effective as of September 30, 2025, due to material weaknesses in Tax Accounting Controls, Expense Accrual Process, and Fair Value Election and Embedded Derivatives.	2025-09-30	Requires significant remediation efforts to ensure reliable financial reporting and compliance, potentially impacting investor confidence and operational efficiency.
Remediation Plan for Internal Controls	Implemented enhanced review procedures and automated reconciliation for tax accounting, revised period-end close procedures with standardized checklists and enhanced management review for expense accruals, and enhanced accounting policy framework with valuation specialists and structured contract review for fair value/embedded derivatives.	Ongoing	Aims to improve completeness, accuracy, and timeliness of financial reporting and strengthen the overall internal control environment.

Stakeholder Impact

Shareholders: Potential for increased value from improved gross margins and reduced net losses, but diluted by ongoing share issuances for debt conversion and capital raises. Risk of further dilution from available financing agreements. Uncertainty due to 'going concern' warning and internal control weaknesses.
Employees: Strategic workforce realignments and cost discipline initiatives may impact employee morale or job security, but also a focus on high-impact growth areas.
Customers: Continued investment in AI-first product innovation and expansion of SaaS offerings aim to enhance customer experience and operational efficiency.
Creditors: Convertible debt holders are converting debt into equity, reducing debt obligations but increasing equity dilution. New financing provides liquidity to meet obligations.

Next Steps

Further implement the business plan, expand customer base, introduce monetizable features, and drive recurring revenue growth in the next 12 months.
Continue executing cost management strategies to optimize expense structure and enhance operational efficiency.
Continue expanding AI-native capabilities, integrating agentic AI for desk booking, advanced analytics, and developing seamless integrations with key enterprise platforms.
Target new verticals and strengthen partnerships with cloud providers and key technology platforms to increase market share and drive cross-selling opportunities.
Monitor and complete additional enhancements to internal control environment to address identified material weaknesses.
Evaluate and disclose any material issuances under the shelf registration in future reporting periods.

Key Dates

Date	Description
2023-03-10	KINS stockholders approved the 2023 Equity Incentive Plan.
2023-12-15	Entered into a note purchase agreement (Streeterville note) with Streeterville Capital, LLC for an unsecured promissory note of $3,885 thousand.
2024-02-06	Granted 705,000 stock options to employees and consultants.
2024-05-22	Entered into a Securities Purchase Agreement (SPA) with Streeterville Capital, LLC for up to $10,000,000 in funding and issued an unsecured convertible Pre-Paid Purchase #1.
2024-06-03	Received net proceeds from Streeterville Capital, LLC for Pre-Paid Purchase #1.
2024-06-30	Net exercise of 70,350 options to purchase shares of common stock, resulting in issuance of 12,570 shares.
2024-08-26	Board approved the award of 230,000 options to purchase common stock to Joy Mbanugo, CFO.
2024-09-30	Issued an unsecured convertible Pre-Paid Purchase #2 to the Lender (Streeterville Capital, LLC).
2024-10-10	Issued 40,000 shares of Class A Common Stock as commitment shares for the Streeterville SPA.
2024-12-09	Issued an unsecured convertible Pre-Paid Purchase #3 to Streeterville Capital, LLC.
2024-12-31	Issued 246,220 shares of Class A Common Stock (net of withholding tax) for vested Restricted Stock Units.
2025-01-17	The entire Streeterville note was paid down.
2025-03-14	Entered into a Directors & Officers (D&O) insurance agreement with Oakwood D&O Insurance.
2025-03-26	Entered into a Securities Purchase Agreement (SPA) with Avondale Capital, LLC for up to $20,000 thousand in Pre-Paid Purchase agreements.
2025-03-31	Issued 554,274 shares of Class A Common Stock to satisfy obligations under the promissory note and convertible debt.
2025-04-04	Board approved the award of 350,000 options to purchase common stock to Khurram Sheikh (CEO) and Joy Mbanugo (CFO).
2025-04-08	Received net proceeds of $3,990 thousand from the initial Pre-Paid Purchase (Pre-Paid Purchase #1) with Avondale Capital, LLC.
2025-04-14	The first of ten separate monthly installment payments for D&O insurance began.
2025-04-30	Issued 971,213 shares of Class A Common stock to satisfy obligations under convertible debt.
2025-05-08	Issued 80,000 shares of Class A Common Stock as commitment shares for the Avondale SPA.
2025-05-21	Issued 112,192 shares of Class A Common stock to satisfy obligations under convertible debt.
2025-05-31	The lease for the Manila, Philippines office premises expired.
2025-06-30	Issued 471,973 shares of Class A Common stock to satisfy obligations under convertible debt.
2025-07-31	Issued 834,762 shares of Class A Common stock to satisfy obligations under convertible debt.
2025-08-07	Received net proceeds of $3,000 thousand from the second tranche of the Avondale convertible Pre-Paid Purchase #2.
2025-08-11	Filed a shelf registration statement on Form S-3 with the SEC, authorizing future offering and sale of up to $150,000 thousand of various securities.
2025-08-31	Issued 2,074,223 shares of Class A Common stock to satisfy obligations under convertible debt.
2025-09-30	Issued 1,500,030 shares of Class A Common stock to satisfy obligations under convertible debt.
2025-09-30	The entire outstanding balance of Pre-Paid Purchase #3 was converted into equity.
2025-10-17	Received net cash proceeds of $5,000 thousand from the third tranche of the Pre-Paid Purchase Agreement with Avondale.
2025-10-17	Issued approximately 1,583,633 shares of Class A common stock in connection with conversions of Avondale Prepaid Purchase #1 Convertible Notes.
2025-11-11	As of this date, 28,629,315 shares of Class A common stock were issued and outstanding.
2025-11-12	Date of filing of the Quarterly Report on Form 10-Q.
2026-04-30	United States office lease expires.
2026-05-31	Canada office lease expires.
2026-12-31	Management estimates available cash and committed funding will sustain operations through Q4 2026.
2028-03-15	Public Warrants expire.

Recommendation

hold

While CXApp Inc. has demonstrated positive momentum with a significantly reduced net loss and improved gross margins driven by a strategic shift to a high-margin SaaS model, several factors warrant a 'hold' recommendation. The company successfully secured substantial financing, mitigating immediate going concern risks and providing liquidity through Q4 2026. However, the overall revenue decline, increased cash burn from operating activities, and the acknowledged material weaknesses in internal controls introduce considerable uncertainty. The ongoing dilution from debt conversions and capital raises also needs to be carefully monitored. Investors should observe the effectiveness of the remediation efforts for internal controls and the company's ability to translate its SaaS focus into sustainable revenue growth before considering a stronger position.

Keywords

CXApp, CXAI, SaaS, Workplace Experience, Artificial Intelligence, AI-powered, Hybrid Workplace, SEC Filing, 10-Q, Financial Results, Software, Corporate Governance, Liquidity, Convertible Debt, Stock-based Compensation, Internal Controls

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