I have waited patiently for someone on Wall Street to see what I saw the first time I met with Rani Kohen the founder of SKYX Platforms. When I met Rani and understood why he invented the W.S.C.R. as it is referred to in the N.E.C. Code book which is an acronym for (Weight Supporting Ceiling Receptacle) I understood the impact this product would have on not just one industry but many industries. However as I have learned throughout years of being involved with the stock market. No matter how good a product is or how obvious the benefits may be. It always takes longer for Wall Street to either figure it out. Or to start rewarding the company for its achievements, Wall Street will make you question your beliefs, your conviction in a company and its products. They will punish you for staying steadfast in the hopes of either wearing you out or scaring you out. That was a lesson I learned very early in my investing journey. That is why doing your homework and forming your own opinion is so critical when it comes to investing. I never doubted that someone on Wall Street would do their Due Diligence and figure it all out. I didn't know who it would be or when. Then a close friend that has a fund sent me a text and said that he is friends with this guy that owns a fund and he is a huge fan of SKYX and I think you should talk with him. I did just that it was a great conversation that was supposed to be forty five minutes and it lasted for two hours and forty five minutes. This gentlemen and myself share a lot of the same interests and philosophies when it comes to stock picking and looking for companies that are under appreciated, under valued or just plain misunderstood. He shared with me that he was writing an article on SKYX and I asked him to send it over when he had it completed. I will say this now. His article is the most in depth, well thought out and informative article or research report I have seen from anyone, Including myself. He poured a lot of hard work into this article and it shows. I have asked his permission to post the article here. He game me the green flag.. You can also go directly to the post with the link I have provided.
Click on the link that way you have all the graphics that are in the article as well.
1035 Capital Management SKYX
Please give the article a read. I am going to Interview this individual for my YouTube Channel this week, To talk about SKYX and the article but also to hear how he identifies potential investment candidates.
SKYX Platforms (SKYX): Revolutionizing Smart Homes with Strategic Investors and Partnerships Clearing the Path for Long Term Growth
Summary
SKYX is transforming home automation with its SkyPlug, ceiling outlet, Smart SkyPlug, and soon-to-launch Smart Home Platform, addressing key safety, efficiency, and convenience needs.
Signed a 5-year global licensing agreement with General Electric validating SKYX's patents and technology, while leveraging GE's expertise for worldwide standardization and patent defense.
Recent collaborations with Home Depot and Wayfair, coupled with SKYX’s 60 e-commerce sites, mark a significant step in scaling product availability and visibility.
Closed a strategic $11M preferred equity raise with a 250% conversion premium, with backing from influential players in the hotel and homebuilding industries, demonstrating confidence in SKYX’s long-term potential.
With growing adoption, robust partnerships, and code execution, SKYX is positioned to achieve strong revenue growth and cashflow breakeven in 2025.
Impressive leadership team of former CEOs and Senior Executives from Fortune 500 companies including Nielsen, Microsoft, Disney, Home Depot, GE and Office Depot.
Introduction: Innovating to Save Time, Money, and Lives
SKYX is redefining smart home technology and saving lives with its innovative SkyPlug and smart ceiling platform technologies. What began as a simple yet groundbreaking idea has evolved into a far more ambitious vision. The company is integrating its plug-and-play ceiling receptacle into a state-of-the-art smart home platform. Compatible with leading smart home devices like Apple, Google, Samsung, and Matter, the SKYX platform offers more than just convenience. With features like security monitoring, WiFi extension, CO2 monitoring, and music integration, SKYX promises to make homes "truly smart in minutes" and at a fraction of traditional costs.
At the heart of the business is the SkyPlug, the company’s first invention. The SkyPlug is an innovative life-saving solution: a ceiling receptacle that works like a wall outlet, enabling quick, safe, and tool-free installation of light fixtures. Once installed, the SkyPlug eliminates the need for hardwiring, a process that has historically been both time-consuming and hazardous. Lights like pendants, sconces, and emergency exit signs often require professional installation, contributing to hundreds of fatalities annually. The SkyPlug changes all that, saving time, money, and lives.
The journey to standardize this device hasn’t been easy, but it has helped the company build an enviable moat around the technology. Rani Kohen, SkyPlug’s inventor and SKYX’s Chairman, has spent nearly 15 years driving the technology toward adoption as a mandatory safety standard. Today, the SkyPlug has already been approved as the standard for ceiling outlets, but the goal of mandatory adoption now seems within reach. With 10 segments of the National Electrical Code (NEC) already recognizing the product under the trade name weight-supported ceiling receptacles (WSCR), it appears only a matter of time before mandatory adoption occurs.
The comparison to GFCI outlets—which were mandated after proving they significantly reduced electrocution risks in wet areas—is compelling. Like GFCIs, the SkyPlug and ceiling outlet have a clear, measurable impact on safety.
Source: SKYX July 2024 Presentation
While the SkyPlug’s life-saving potential is remarkable, the leadership behind SKYX is perhaps even more compelling. Backing Rani’s bold vision is a team as impressive as the technology itself. SKYX has assembled a powerhouse board and advisory team that includes:
Bob Nardelli, former CEO of Home Depot, Chrysler, and GE Power Systems.
Al Weiss, former President of Disney’s Worldwide Parks and Resorts.
Governor Tom Ridge, the first head of Homeland Security.
Mark Earley, former head of the National Electrical Code (NEC).
Eric Jacobson, former CEO of the American Lighting Association.
Khadija Mustafa, former head of Microsoft’s Global AI.
Source: SKYX July 2024 Presentation
Notably, Mr. Earley and Mr. Jacobson are leading SKYX’s push for mandatory inclusion in the NEC. While these two may be the least well-known, their expertise is critical in navigating the NEC application process, which requires approval from NEC members. During their careers, Mr. Earley and Mr. Jacobson have been influential in several code and safety updates in both the lighting and electrical industries. While the timeline for a vote remains uncertain, SKYX is confident it has met all requirements for inclusion. As mentioned earlier, SkyPlug is already referenced under its generic trade name, WSCR, in multiple NEC sections both of which are key milestones.
SKYX has achieved UL Certification and received a rare vote "For" a resolution by ANSI and NEMA, declaring that the SkyPlug meets the necessary safety conditions to become a ceiling safety standardization requirement for homes and buildings. Additionally, the product specifications have also been approved, which is an exceptional milestone, as fewer than 15 products have achieved such recognition in this category over the past 50 years.
The NEC has a history of adopting life-saving technologies. GFCIs (Ground Fault Circuit Interrupters) became mandatory when they were proven to reduce electrocution risks in wet environments, while AFCIs (Arc Fault Circuit Interrupters) were adopted for their ability to prevent electrical fires. SkyPlug’s contributions are similarly groundbreaking. The safe-to-touch design prevents electrocution, and its simplified installation reduces fire hazards linked to improper wiring. SKYX also highlights its potential to mitigate ladder-related injuries and deaths by minimizing time spent on ladders installing fixtures. Together, in our opinion, these benefits position SkyPlug as a strong candidate for an NEC mandate.
Source: NEC Code book
Article 90, shown above, discusses the enforcement of the NEC code as well as the expression of mandatory, permissive, and non-mandatory provisions. Specifically, we want to highlight Section A: “The purpose of this code is the practical safeguarding of persons and property from hazards arising from the use of electricity.” From Section B: “This Code contains provisions that are considered necessary for safety. Compliance therewith and proper maintenance that is essentially free from hazard.”
Finally, the Note highlights that hazards tend to occur due to installations not aligned with the code. In plain English, our reading of this article is that the purpose of the code is to safeguard people and property from electrical hazards such as electrocution, fire, and, if SKYX has its way, ladder falls. As a result, we believe the SkyPlug has a very high chance of becoming mandated in the not-too-distant future.
There is already precedent set with GFCIs and AFCIs that when a new product is developed and proven to reduce risks to human life, the NEC is open to adopting a mandatory standard for its inclusion. In the case of GFCIs, they were mandated in the code book under Article 210.8 once it was proven that they could significantly reduce the harm of electrocution in wet environments. AFCIs were mandated under Article 210.12 when it was demonstrated that they significantly reduced the risk of fires started by electric devices.
However, even without regulatory mandates, SkyPlug offers compelling economic benefits. Its ease of installation saves labor costs and risk, appealing to both professional electricians and DIY enthusiasts. Recognizing its broad market potential, SKYX has been very strategic in positioning itself for growth.
The strategic acquisition of Belami, a lighting e-commerce company generating $80 million in revenues annually, provided a direct channel for distributing SKYX products. Acquired for $24 million—two-thirds in SKYX stock—this move not only boosted revenue but also aligned the company with manufacturers. Belami’s platform has supported SKYX’s lead-and-seed rollout strategy. The recent partnerships with Home Depot, Wayfair, and Ruee Lighting further strengthen SKYX’s distribution network. Meanwhile, a global licensing deal with GE enhances its international reach and licensing opportunities.
The story of SKYX is as much about its innovation as it is about its agility. The evolution of SKYX’s technology from a practical hardware solution to a comprehensive smart home ecosystem marks a significant and compelling shift for the company. Additionally, we expect to see the SmartHome platform begin to unlock recurring revenue streams for the company later in 2025 and grow thereafter.
From revolutionizing home safety to simplifying smart home adoption, SKYX demonstrates that life-saving technology can also be practical, affordable, and profitable. Following a strategic $11 million capital raise, SKYX now has more than $20 million in cash. These funds are expected to sustain operations as the company expands into new sales channels with Home Depot and Wayfair, enhances product offerings and margins through its Ruee partnership, and maximizes licensing opportunities with GE.
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Belami Acquisition: Dominating the E-Commerce Lighting Market
SKYX’s acquisition of Belami was a masterstroke in strategy, instantly solidifying its presence in the e-commerce lighting industry. With 60 lighting-focused websites across North America generating nearly $80 million in annual revenue, this move provided SKYX with scale, distribution, and direct access to retail clients as well as major lighting manufacturers. They have also built wholesale and commercial offerings to drive more commercial use via the websites.
When we asked Rani Kohen, the Chairman of SKYX, why Belami partnered with the company, he explained that Belami quickly saw the potential in the SkyPlug as well as the all-in-one smart home and what that could mean to the industry. Belami recognized that light fixture installation is one of the only parts of the house that hasn’t had a significant innovation in over 100 years. We’re still wiring light fixtures just like Edison did. SKYX will change that, driving much higher revenue and margins for themselves as well as the broader lighting business.
The Belami acquisition transformed SKYX into a key player in the marketplace. Belami’s strong market position allowed SKYX to introduce the SkyPlug to manufacturers eager to expand their distribution channels. Rather than pursuing manufacturers individually, SKYX leveraged its dominant e-commerce presence to attract them. These manufacturers now partner with SKYX and offer their products with optional SkyPlug compatibility—a win-win strategy that rapidly expands SKYX’s product assortment.
SKYX’s e-commerce model mimics the successful “direct sales” strategy pioneered by Michael Dell to use a negative cash conversion cycle as a growth driver. To better explain that, when SKYX sells a light through its websites, it receives customer payments within 48 hours. Meanwhile, payments to manufacturers are often deferred for 30 to 45 days, creating a negative cash conversion cycle. Or said differently, very low-cost, short-term financing for the business. This dynamic allows SKYX to fund inventory and growth without immediately tying up its own capital.
This approach offers significant benefits, but it also has one potential drawback: a relatively large accounts payable balance compared to available cash. SKYX’s favorable payment terms with manufacturers and the efficiency of the e-commerce model mitigate the concerns of a relatively large accounts payable for us. As long as SKYX continues to sell lights this strategy serves as a powerful tool for fueling future growth.
The negative accounts payable have, at times, confused investors and analysts alike. For some analysts, this has proven to be a concern, but we believe this is misunderstanding the dynamics of the sales model, as well as the favorable payment terms with the manufacturers.
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Redefining the Smart Home and Building a Recurring Revenue Business
The market is clearly shifting toward smart products. Every day, more devices—from TVs and refrigerators to thermostats, lights, and beyond—are becoming "smart." The potential for individual usage data, applications, and opportunities is immense. However, as the number of smart devices grows, managing them within separate ecosystems is becoming increasingly untenable. No one wants ten different smart home apps on their phone.
SKYX has recognized this market shift and integrated smart features into light fixtures with the second-generation Smart SkyPlug. This SmartPlug combines the original innovative installation device with the advanced smart applications consumers expect from smart lights. SKYX is now taking this concept even further with the next-generation all-in-one smart home Platform.
The smart home Platform addresses one of the biggest challenges in smart home development: integrating devices that “speak different languages.” While this might seem straightforward, it is far from simple. Numerous protocols and devices exist—some work seamlessly together, while others do not. To highlight this complexity, the IoT protocol Matter was developed to help address this and is now supported by over 600 manufacturers, improving interoperability and accelerating IoT device integration.
Entire businesses have been built around unifying smart devices into cohesive systems. For instance, in 2019, Control4—a major player in the smart home space—was acquired for nearly $680 million, equivalent to 2.25 times its forward-year sales, which were growing at about 10% annually. We invested with Control4 early, and we often heard two main complaints about the product: it was too expensive, and installation was too complex. Many customers even had to hire professional installers just to set up their smart homes due to the complexity.
Our experience with Control4 underscored how challenging and costly it can be to wire and integrate multiple devices into a single hub—often resulting in five- or six-figure installation costs and timelines spanning days or even weeks.
There had to be a better way! When we saw what SKYX was developing, we quickly realized we had found the solution.
SKYX has developed a SmartHub that connects to nearly every smart home device effortlessly—in minutes, not hours, days, or weeks. The SKYX SmartHome Platform simplifies what was once a daunting task. Unlike competitors that require a separate controller, the SKYX app on your smartphone handles device integration and gets everything running in minutes.
A recent conversation with Rani highlighted another critical issue in smart home development: signal strength. This insight added a new layer of understanding for us. Both smart homes and Wi-Fi networks face challenges with signal strength. Rani posed a thought experiment: if you have an empty room and want to install a light, where would you place it? The answer is the center of the ceiling, as this position allows the light to be distributed most efficiently across the room.
The same principle applies to wireless devices and smart hubs. The optimal position is also in the center of the ceiling. However, this space is typically occupied by a light fixture. The issue is evident with Wi-Fi routers and extenders, which are often placed low on walls—which is not optimal for signal distribution, leading to reduced coverage and performance, as illustrated below.
Source: Company Presentation
The SKYX SmartHub, shown on the right in the slide above, overcomes this challenge by integrating Wi-Fi extenders, smoke detectors, CO2 detectors, and more into the light fixture base, ideally positioned at the ceiling’s center. This innovative design positions SKYX at a major competitive advantage in the smart home industry, demonstrating the company’s forward-thinking approach.
Source: Company Presentation
The SmartHome Platform also presents numerous opportunities for recurring revenue. With sensors already integrated into the platform, SKYX has the potential to generate recurring revenue from services such as security, fire and CO2 monitoring, white-labeled subscription music services, and emergency internet. With over five times the silicon space of a typical smartphone, the SmartHome Platform has ample capacity for additional sensors and devices, expanding its use cases much like the app ecosystem on the iPhone.
While not every customer will opt for subscription services, we anticipate that 5–10% will, turning them into recurring customers. The data gathered from the various devices can then be anonymized and sold. Additionally, manufacturers believe that adopting the SkyPlug can shorten fixture replacement cycles, driving increased recurring fixture revenue for SKYX over time.
Finally, let’s address the blue box in the bottom-left corner of the slide above: “Management believes that in the future, regulators and insurance companies will encourage the use of the SKYX Platform due to its safety features.”
This bold statement was reiterated during the recent Q3 earnings call by SKYX President Steve Schmidt, who stated, “We expect that once it's completed, the entire range and variation of our safe plug-and-play products will start being recommended by insurance companies.” Rani Kohen echoed this optimism, saying, “Once we have the entire range of products here—and we believe it’s in the next coming months, hopefully by the end of this year—we strongly believe that we can be recommended by insurance companies.”
Given the safety features of the SkyPlug, we agree that once the full product line is available, insurance companies could begin offering discounts to homeowners or builders who use SkyPlug. Many insurers already provide discounts for security systems, smoke detectors, and similar safety-enhancing devices. The SkyPlug’s safety aspects and the third-generation all-in-one smart home platform features make a compelling case for insurance carriers to promote the product, even before mandatory code implementations.
To support this initiative, management has strategically positioned Paul Chernawsky—chair of the SKYX Insurance Advisory Board and an accomplished insurance professional—to help drive adoption within the industry. His expertise will be crucial, much like how Bob Nardelli’s contributions have been in securing partnerships with big-box retailers like Home Depot.
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Ruee Positions SKYX to Drive Margins and Scale
In April 2024 SKYX signed a very important deal with Ruee Appliances, which is “a leading Chinese lighting supplier and manufacturer for the US, Chinese, and European Markets.” The market appears to be dismissing the value of this partnership, but we think that is a mistake. As stated in the press release linked above, the Ruee partnership will provide production capabilities, distribution and financial support. Additionally, they believe this deal will help drive further margin improvement for the business.
What is the structure of an agreement that could achieve these objectives? SKYX is being a little secretive here so let’s try to figure out what (we think) they are implying. We believe this agreement takes the form of an inventory financing arrangement, as well as a shipping and logistics agreement. We also think that the manufacturing capabilities could be beneficial as the company ramps sales of their products across the various new sales channels, likely driving improved margins.
Digging into this relationship a bit further, we noticed that on the Aug 2024 call, referencing the negative cash conversion cycle created by the e-commerce sales, Rani mentioned that “Ruee and that great relationship also enhances our cash conversion cycle.” While it is unclear, exactly what he is referring to here, to us it indicates that SKYX has been able to negotiate a similar vendor financing arrangement with Ruee as they enjoy with their e-commerce business.
This assumption was further strengthened later in the call when Co-CEO Lenny Sokolow confirmed “So Ruee, and I think as we've discussed, it's multidimensional in terms of what they bring to the table, not only are they global manufacturer for global products, U.S., Europe, China, but their ability with our collaboration and partner -- financial partnership, we're able to leverage that -- that model, of course, with our -- the cash conversion cycle that's favorable similar to the Michael Dell cycle”
This is massively important, because this would then answer one of the remaining key questions, how will SKYX afford to finance the inventory needed to ramp sales with Home Depot and Wayfair? If we are correct, it appears, this issue has been solved via the partnership with Ruee, and the benefits of a negative cash conversion cycle.
Laying the Groundwork: Partnerships, Licenses and Product Availability
Management has been transparent about the weakness in the broader home improvement market since the Belami acquisition. While this has posed a revenue headwind, we are encouraged by the company’s significant progress in aligning with key industry players, including recent partnerships with GE, Home Depot, and Wayfair.
We see these partnerships as the company laying the groundwork for meaningful sales growth despite the recent weakness in the industry. Combined with the strong Ruee manufacturing partnership, it’s clear why industry and management are increasingly confident about the business’s prospects in 2025 and beyond. Importantly, management expects to turn cash flow positive in 2025, marking a significant milestone for the company.
2024 started strong with SKYX signing a 5-year global licensing agreement with GE. This partnership is critical for SKYX as it allows global licensing and manufacturing of its products while validating the patents and strengthening its position in any future patent disputes. Under the agreement, GE will audit manufacturers and defend the patents worldwide, while SKYX collects sales and remits GE’s portion.
When we asked management if the GE deal had any special terms or features, they explained that it was a straight forward non-exclusive licensing agent deal where they expect mid-80% margins on these licenses, with GE presumably receiving the remainder.
The GE partnership provides a fast and efficient way for the SkyPlug receptacle to become a global standard, leveraging GE’s unparalleled expertise in licensing and setting global standards. While the company currently focuses on North America, the combination of GE’s global reach and Ruee’s manufacturing and logistics capabilities positions SKYX for rapid international expansion.
However, one question arises: what’s in it for GE? Their relatively small share of the license suggests either SKYX’s team negotiated exceptionally well, or GE recognizes the product’s enormous potential. Conceptually, if the SkyPlug gains traction organically or via mandated inclusion in the codebook, it could become a massive product, justifying GE’s involvement despite a relatively small cut of the license revenue.
SKYX’s partnership with Home Depot was recently announced but we believe it began years earlier when former Home Depot CEO Bob Nardelli joined the SKYX advisory board. His influence is now apparent, and we expect him and others advisors to continue driving high-value partnerships for the company in the future.
Starting now and continuing over the next few quarters, we expect to see an expanding selection of fixtures on the Home Depot website. Management anticipates that the top 5% of these products will be placed in stores. Over time, we expect to see dozens of products in stores and hundreds more online. Additionally, SkyPlug receptacles are already rolling out in roughly 100 Home Depot locations.
The Home Depot partnership has significant potential to drive sales as it matures. For example, SKYX recently introduced an innovative all-in-one fan and space heater, shown below, perfect for that underutilized three-season room!
Source: Company Presentation
For context, Home Depot operates approximately 2,200 stores. If each store sold just one unit per week, it would total 115,000 units annually. Assuming a $250 price per unit, this could generate nearly $30 million in high-margin sales—an impressive figure compared to their current annual run rate of just over $80 million. As you can see, even modest product success could significantly boost revenue and margins.
About a month ago, SKYX added Wayfair to its roster of key partnerships. Wayfair, one of the world’s leading home décor websites, and will carry all generations of the SkyPlug receptacle, alongside compatible ceiling fans, lights, recessed lights, retrofit kits, and more.
We believe Wayfair partnered with SKYX because of the ease of installation and interchangeability of light fixtures. Wayfair appears focused on growing its sales with architects and interior designers—an audience perfectly suited for SKYX’s safety and installation benefits. This partnership could even open a new revenue stream for interior designers, offering installation or light-exchange services for events or seasonal needs.
When asked how SKYX decides which products to offer on Wayfair or Home Depot online, Rani, with a big smile, gave a simple but insightful answer: “What do you think the 60 websites are for?” This answer highlights the value of SKYX’s data aggregation capabilities.
While Belami brought SKYX revenue, scale, manufacturing contacts, and cash flow, perhaps its most valuable asset is its vast database. SKYX now owns one of the most comprehensive lighting databases in the industry, offering insights into buyer preferences, trending styles, and best-sellers. This data is invaluable for guiding product decisions and stocking for Home Depot and Wayfair.
With distribution, manufacturing contacts, and proprietary technology in place, SKYX has the potential to design and produce on-trend fixtures to capture the luxury and smart home markets. While SKYX seems hesitant to compete directly with partners, collaboration with a manufacturer could be a strategic move. When we asked Rani about this, he again smiled but this time changed the topic—perhaps hinting at future plans.
Unfortunately, the full product range is not yet available. The company currently offers pendant lights, chandeliers, and similar items, which are low-volume segments of the market. This has limited adoption so far. However, during our visit to headquarters a few weeks ago, we saw demonstration units from all product categories and observed shipments arriving—which we understood to be the first wave of their broader assortment. Management expects the full product assortment, shown below, to launch no later than Q1 2025, bolstering optimism for a strong year ahead.
Source: Company Presentation
Both Wayfair and Home Depot appear particularly interested in recessed lighting, a product category that SKYX recently introduced. This interest is not surprising given a global recessed lighting market valued at $33 billion and growing at over 11% annually. According to Straits Research, one barrier to even greater growth has been the installation difficulty and cost of traditional recessed lighting—issues that SKYX’s innovative design addresses while tapping into the increasing demand for smart lighting and automation.
The SkyPlug receptacle typically sells 3–12 months before associated light fixtures. As such, tracking the number of homes with SkyPlugs installed is critical for forecasting long-term revenue. Currently, SKYX has installed SkyPlugs in over 10,000 homes, with projections to reach 15,000 by year-end. For 2025, management anticipates adding an incremental, tens of thousands more homes.
Each home averages about 30 lights, so the number of homes with SkyPlugs installed provides a strong indicator of future sales potential. While the vast majority of current installations are retail involving 1–2 SkyPlugs per home. As we see broader adoption, that number could approach the total light count per home, particularly as residential and commercial projects ramp up. We expect to see commercial customers become the majority of receptacle sales in 2025 for the first time compared to 10-20% currently.
Although the product rollout has been slower than investors hoped, management has focused on ensuring quality and reliability before scaling production. Simultaneously, they’ve built partnerships with major players, laying the groundwork for a strong 2025 and beyond—especially in the latter half as product assortments and partnerships ramp up. We also expect additional tier-one partnerships with homebuilders, hotels, and insurers in the coming months, further fueling growth.
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Opportunities in High-Volume Markets: Builders, Owners, and Hotels
As alluded to above, one of the most promising opportunities for SKYX lies in its potential to collaborate with high-volume users of lighting and fixtures, such as homebuilders, commercial builders, building owners, and hotel operators. These groups stand to benefit significantly from the time, cost, and safety advantages of SKYX’s innovations.
As discussed earlier, wiring a home for smart technology is often costly and time-intensive, but the complexity increases dramatically with commercial properties like hotels and offices. The SKYX Smart Platform aims to revolutionize this process, slashing both time and cost. For instance, the platform can transform a single room into a smart environment in minutes, compared to days with traditional technologies. Scaling this concept across hotels or apartments could generate substantial savings for builders and property owners.
According to SKYX, converting a hotel to smart technology with existing methods can take up to a year. In contrast, the SKYX automation platform can accomplish this in weeks. Beyond cost and time savings, building owners can likely charge a premium for smart-enabled rooms, while also enjoying lower operating costs, and maintaining properties that are both future-proof and highly customizable.
Source: Company Presentation
Homebuilders also stand to benefit significantly from SKYX’s solutions. The first homebuilder to sign with SKYX, committing to 1,000 homes and up to 30,000 fixtures, recognized the potential for higher-priced homes and better margins. The luxury of a smart home combined with the ease of installation of the all-in-one smart home platform enables builders to boost profitability without straining budget constraints.
As of late 2023, SKYX has begun formally focusing on onboarding homebuilders and renovation customers. Management reports having over 50 signed business accounts—an impressive feat within just a year. We expect this number to grow rapidly as the full product assortment becomes available into year-end 2024 and early 2025.
According to a 2022 report citing Redfin and NASB, "smart homes sell up to 38% faster than traditional homes and at prices over 21% higher." While these figures may be optimistic, even more conservative estimates suggest a 5–10% pricing premium. For builders, this combination of higher prices and faster sales translates into a meaningful financial advantage.
To contextualize, the median U.S. home price now exceeds $420,000, based on FRED data. Assuming a 12.5% price premium for a smart home, this equates to an additional $50,000 in revenue per home. Meanwhile, outfitting a home with SKYX’s platform costs under $10,000—including approximately 30 light fixtures, receptacles, and the all-in-one smart platform itself. This value proposition explains why SKYX is attracting significant interest from homebuilders.
During the Q3 earnings call, Rani Kohen highlighted progress with their first signed builder, noting that SKYX expects to begin supplying products, read receptacles, early in 2025. He also mentioned ongoing discussions with major players in the builder and hotel owner markets, pending the launch of the complete product line.
SKYX’s partnerships with Home Depot and Wayfair have helped bolster its position in the commercial markets. The receptacle, the razor of the SKYX product platform, is now available in bulk packs (1, 4, 8, and 24), signaling a focus on commercial contractors.
As previously noted, the receptacle acts as the “razor,” while fixtures serve as the “blade.” This approach positions SKYX to generate sustained revenues as more receptacles are installed, with the potential for a shorter replacement cycle due to the SkyPlug’s ease of use and enhanced safety.
Notably, the lead investor in SKYX’s recent strategic offering is a Marriott hotel developer who owns over 60 hotels. According to Co-CEO Larry Sokolow, this investor has considerable influence within the franchise community and chose to invest in preferred equity with a conversion feature at a nearly 250% premium to SKYX’s then-market price. This is a nod of confidence in SKYX, and the opportunity for the product in his industry.
Success with this investor could pave the way for widespread adoption across other hotel franchises. SKYX’s platform offers a clear return on investment through cost savings and guest experience enhancements. Additionally, recurring upgrades every 6–8 years create ongoing opportunities for the platform’s usage and cost savings in many hotel chains.
With significant savings, premium revenue potential, and scalability across diverse commercial and residential markets, SKYX is positioned to capture substantial market share. As partnerships expand and the product assortment grows, we anticipate SKYX will become a key player in the smart building revolution.
Valuation
Valuing SKYX, a pre-earnings company, requires a focus on sales. With limited historical data and the recent acquisition of Belami occurring during a cyclical peak, the company’s performance must be analyzed within the context of a challenging home improvement market. Despite these headwinds, SKYX is on track to exceed $80 million in sales this year, with consensus estimates projecting nearly $125 million in 2025.
Currently, SKYX trades at an enterprise value-to-sales (EV/Sales) multiple of 1.25x, a reflection of its acquired revenue base and cashflow-negative position. However, the recent strategic capital raise, coupled with management’s guidance to achieve cashflow positivity by 2025, addresses two critical investor concerns.
As organic sales growth accelerates in 2025, SKYX could command a higher EV/Sales multiple of 3–5x, suggesting a potential valuation of approximately $3 per share today. Applying this multiple to 2025 projections results in a target price range of $5–7, reflecting meaningful upside.
Looking ahead, 2025 appears poised to be a breakout year for the company. Broader product availability, deeper retail penetration, and increasing adoption by homebuilders and hotel operators should drive strong organic growth. As more projects incorporate SKYX’s expanded product range, the company is well-positioned for sustained high growth, bolstered by a sizable addressable market and key strategic partnerships for years to come.
Beyond near-term valuation metrics, SKYX’s technology platform and the recurring revenue streams from its smart home ecosystem represent transformational opportunities. Companies with strong organic growth and high-margin recurring revenues often command EV/Sales multiples in the 8–10x range or higher. SKYX’s trajectory bears parallels to Microsoft’s evolution from software sales to subscription-based software sales, which significantly boosted its valuation multiple as recurring revenue became a larger share of its mix.
While SKYX’s business model differs from Microsoft’s, its potential to deliver robust organic growth and expand margins through partnerships and platform sales is unmistakable. The addition of recurring revenues from its smart home services, even with modest adoption rates, coupled with reduced installation barriers for fixtures, is expected to accelerate product sales through their own e-commerce business as well as retail channels like Home Depot, Wayfair and we expect soon others.
A major catalyst on the horizon is the potential for the National Electrical Code (NEC) to mandate the SkyPlug as a safety standard in the U.S. Such a mandate could dramatically scale SKYX’s revenues, transforming annual sales of $100–$200 million into monthly figures of the same magnitude or more. While this approval is not necessary for the company’s current growth trajectory, it represents a transformative opportunity that could propel the stock well into double digits or higher.
If management executes effectively, SKYX has the potential to evolve into a cashflow powerhouse over the next 3–5 years and beyond. Although not an overnight success story, the company’s ability to capture a significant share of the smart home and lighting markets could make it a major player in the industry in the coming years. We believe that investors who begin building positions during market dips—like the current one—may see substantial long-term gains as the company executes its business plan, far beyond the returns implied by todays undervalued conditions based on sales metrics.
One aspect being overlooked by investors currently is the recent addition of Kadija Mustafa, formerly of Microsoft’s Global AI unit, to SKYX’s tech advisory board. This move signals the company’s broader vision for its smart home platform and hints at future integration of cutting-edge AI capabilities.
Equally overlooked is the immense value of the data SKYX will collect via its all-in-one smart home platform. With the platform’s ability to connect to nearly any smart device, SKYX is poised to act as the router for an entire ecosystem of smart home data. This data, when anonymized, could open significant monetization opportunities. Over time, we believe, the value of this data alone could surpass the lighting business itself.
Moreover, SKYX holds substantial intellectual property assets, including 90+ pending and issued patents, most of which focus on smart home technologies. From our perspective, SKYX is not just a lighting company; it’s a smart home technology platform disguised as a lighting company. As the market recognizes this, the potential for a significant re-rating of its valuation multiple becomes clear, alongside its already impressive growth prospects, which we believe will lead to a much higher stock price over time.
Why Do We Like SKYX Now?
We have followed SKYX for several years, but the last 12 months have marked a pivotal shift in the company’s trajectory. SKYX has made significant strides in laying the foundation for sustainable, rapid growth. While Q3 sales fell $1.2 million short of analyst expectations—primarily due to overly optimistic analyst expectations about the speed of the full product rollout—the company delivered an EBITDA beat of $1.5 million and made considerable operational progress, signing several meaningful partnerships and notably reducing cash burn.
While cash burn has long been a concern for investors, SKYX is making meaningful progress toward its goal of achieving cash flow breakeven by 2025. The company further solidified its financial position with a successful $11 million preferred stock issuance after the end of Q3, boosting its cash reserves to over $20 million, providing a solid runway to achieve its cash positive milestone.
Additionally, SKYX has strengthened its partnerships with industry leaders, refined its business model, and advanced its regulatory and product development efforts over the last year. These strategic moves position the company for what we anticipate will be a near-term sales inflection point.
We view SKYX as a "triple threat," a company poised to deliver accelerating sales growth, margin expansion, and improving asset efficiency and we expect to see multi-year improvements beginning in 2025. These three levers align SKYX with the profile of some of our most successful investments.
That said, we caution that the next 3–6 months may be a transitional period, as significant sales acceleration is unlikely until early next year. This delay stems from the typical 3–12 month lag between the installation of receptacles (the “razor”) and the purchase of fixtures and related products (the “blades”). SKYX is continuing to expand its product range and increase receptacle installations in new homes, setting the stage for stronger revenue growth once the full product suite becomes widely available.
While the receptacle itself is not a major revenue driver, it is a critical leading indicator of adoption. As mentioned earlier, management reported penetration into 10,000 homes in Q2, with this number expected to grow to 15,000 by year-end. This momentum is promising, even before SKYX’s partnerships with major retailers like Home Depot, Wayfair, and GE begin to scale. Such early traction highlights the potential of SKYX’s innovative technology to deliver meaningful time, cost, and safety benefits across industries.
We believe, SKYX’s SkyPlug could significantly shorten fixture replacement cycles, thereby expanding the addressable market. Meanwhile, the smart home platform offers an additional layer of growth through data aggregation and monetization from connected devices that could be valuable to insurers, manufacturers, advertisers, and others. Recurring subscription revenue streams further enhance SKYX’s margin potential, solidifying its position as more than just a lighting company—it is a leading smart home ecosystem with lighting as a foundational component.
In summary, SKYX has laid an impressive foundation to become a mandated feature in homes across North America and beyond. Its strategic partnerships, e-commerce positioning, and cross-industry appeal present a rare opportunity in a misunderstood and undervalued public company. For forward-thinking investors, SKYX currently represents a compelling entry point in what we expect to become a long-term compounding growth story.
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Risks
· Technology adoption
· Technology development
· Unexpected regulatory changes
· Inability to penetrate new markets
· Inability to procure regulatory mandates
· Inability to pay down, refinance or convert debt financing
· Competition pressures pricing
· Inability to add new partners
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Full Disclosure
During our work on this article, and for several years previously, we have had a series of conversations with Rani Kohen the founder and Chairman of SKYX, which may lead to an engagement with the company to support their investor communications. To underscore my perspective, I have requested that a significant portion of any compensation be in equity, as I believe in the company’s potential and am optimistic about its growth.
Importantly, at the time of publishing we have no formal engagement or compensation agreement in place. Furthermore, writing this article is not part of any future agreement. We are writing this article to help organize our own thoughts while also highlighting the opportunity for our followers. Additionally, SKYX was one of the largest positions in our small-cap fund even prior to any conversation of this engagement, reflecting our confidence in the company's prospects.
With that context, the views expressed here are our own and should not be taken as financial advice or guarantees of future performance.
Given the unique situation and potential for conflicts of interest, we are publishing this article in full, for all subscribers with this clear disclosure. For our free subscribers, this is an example of the type of analysis that we provide on unloved and underfollowed companies. For our paid subscribers, consider this a bonus idea, with another new idea to follow soon.
Disclosure: I/we have a beneficial long position in the shares of SKYX either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from subscribers on Substack). I do or expect to have a business relationship with SKYX whose stock is mentioned in this article.
1035 Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.
Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Substack as a whole.
