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Phunware Announces Second Quarter 2020 Financial Results

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AUSTIN, Texas–(BUSINESS WIRE)–$PHUN #PHUNPhunware, Inc. (NASDAQ: PHUN) (the “Company”), a fully-integrated enterprise cloud platform for mobile that provides products, solutions, data and services for brands worldwide, today announced financial results for its second quarter ended June 30, 2020, and provided an update on recent business developments.

“Independent of the ongoing pandemic, we continue executing our operational model and business strategy to become the premier digital transformation source for mobile initiatives worldwide,” said Alan S. Knitowski, President, CEO and Co-Founder of Phunware. ”Our latest quarter closed with nearly $10 million in Backlog and Deferred Revenue for our Multiscreen-as-a-Service (MaaS) platform, while most of our corporate customers remained in either a lockdown or remote, work-from-home operational status. While we do not expect our customers or partners to be back to normal operations until a COVID-19 vaccine becomes widely available, we are already seeing much more business activity with each passing week and month and believe that there is a lot of pent up demand tied to pending MaaS bookings that will be released throughout the balance of the year.”

Notably, the Company expects an acceleration of Net Revenues total for both the coming quarter and the balance of the year sequentially, and also believes that the most recent quarter represents a quarterly, annual and historic bottom for its revenue recognition as a public company.

Second Quarter 2020 Summary Financial Highlights

– Net Revenues for the quarter totaled $2.2 million

– Platform Subscriptions and Services Revenues were $2.0 million

– Gross Margin was 65.3%

– Net Loss was ($3.5) million

– Net Loss per Share was ($0.08)

– Non-GAAP Adjusted EBITDA Loss was ($1.8) million

“As we manage through the uncertainty of the ongoing pandemic, we are encouraged that we have been able to position ourselves for success in the future by strengthening our balance sheet and lowering our operational expenses,” said Matt Aune, CFO of Phunware. “In addition to our efforts reducing operational expense, we are pleased to see an improvement of nearly 1,500 basis points to year-over-year gross margin as we continue to focus on our higher margin longer term software customers.”

Recent Business Highlights and Announcements

Transcript Information

A transcript will be made available today at 1:30pm Pacific / 3:30pm Central / 4:30pm Eastern discussing the Company’s financial results, product announcements and business highlights. The transcript will be accessible on the Phunware Investor Relations website at investors.phunware.com.

Safe Harbor Clause and Forward-Looking Statements

This press release includes forward-looking statements. All statements other than statements of historical facts contained in this press release, including statements regarding our future results of operations and financial position, business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “expose,” “intend,” “may,” “might,” “opportunity,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements contained in this press release are based on our current expectations and beliefs concerning future developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors” in our filings with the Securities and Exchange Commission (SEC), including our reports on Forms 10-K, 10-Q, 8-K and other filings that we make with the SEC from time to time. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. These risks and others described under “Risk Factors” in our SEC filings may not be exhaustive.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this press release. In addition, even if our results or operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this press release, those results or developments may not be indicative of results or developments in subsequent periods.

Disclosure Information

Phunware uses and intends to continue to use its Investor Relations website as a means of disclosing material nonpublic information and for complying with its disclosure obligations under Regulation FD. Accordingly, investors should monitor the Company’s Investor Relations website, in addition to following the Company’s press releases, SEC filings, public conference calls, presentations and webcasts.

About Phunware, Inc.

Everything You Need to Succeed on Mobile — Transforming Digital Human Experience

Phunware, Inc. (NASDAQ: PHUN), is the pioneer of Multiscreen-as-a-Service (MaaS), an award-winning, fully integrated enterprise cloud platform for mobile that provides companies the products, solutions, data and services necessary to engage, manage and monetize their mobile application portfolios and audiences globally at scale. Phunware’s Software Development Kits (SDKs) include location-based services, mobile engagement, content management, messaging, advertising, loyalty (PhunCoin & Phun) and analytics, as well as a mobile application framework of pre-integrated iOS and Android software modules for building in-house or channel-based mobile application and vertical solutions. Phunware helps the world’s most respected brands create category-defining mobile experiences, with more than one billion active devices touching its platform each month. For more information about how Phunware is transforming the way consumers and brands interact with mobile in the virtual and physical worlds, visit https://www.phunware.com, https://www.phuncoin.com, https://www.phuntoken.com, and follow @phunware, @phuncoin and @phuntoken on all social media platforms.

Financial Results

Phunware, Inc.

Consolidated Balance Sheets

(In thousands, except per share information)

 

 

June 30,
2020

 

December 31,
2019

 

(Unaudited)

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash

$

154

 

 

 

$

276

 

 

Accounts receivable, net of allowance for doubtful accounts of $3,190 and $3,179 at June 30, 2020 and December 31, 2019, respectively

928

 

 

 

1,671

 

 

Prepaid expenses and other current assets

560

 

 

 

368

 

 

Total current assets

1,642

 

 

 

2,315

 

 

 

 

 

 

Property and equipment, net

15

 

 

 

24

 

 

Goodwill

25,781

 

 

 

25,857

 

 

Intangible assets, net

175

 

 

 

253

 

 

Deferred tax asset – long term

241

 

 

 

241

 

 

Restricted cash

91

 

 

 

86

 

 

Other assets

276

 

 

 

276

 

 

Total assets

$

28,221

 

 

 

$

29,052

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

9,737

 

 

 

$

10,159

 

 

Accrued expenses

4,415

 

 

 

4,035

 

 

Deferred revenue

2,980

 

 

 

3,360

 

 

PhunCoin deposits

1,202

 

 

 

1,202

 

 

Factored receivables payable

363

 

 

 

1,077

 

 

Current maturities of long-term debt, net

1,333

 

 

 

 

 

Total current liabilities

20,030

 

 

 

19,833

 

 

 

 

 

 

Long-term debt

3,810

 

 

 

910

 

 

Long-term debt – related party

555

 

 

 

195

 

 

Deferred tax liability

241

 

 

 

241

 

 

Deferred revenue

2,876

 

 

 

3,764

 

 

Deferred rent

195

 

 

 

83

 

 

Total liabilities

27,707

 

 

 

25,026

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

Common stock, $0.0001 par value

4

 

 

 

4

 

 

Additional paid in capital

132,045

 

 

 

128,008

 

 

Accumulated other comprehensive loss

(457

)

 

 

(382

)

 

Accumulated deficit

(131,078

)

 

 

(123,604

)

 

Total stockholders’ equity

514

 

 

 

4,026

 

 

Total liabilities and stockholders’ equity

$

28,221

 

 

 

$

29,052

 

 

Phunware, Inc.

Consolidated Statements of Operations and Comprehensive Income (Loss)

(In thousands, except per share information)

(Unaudited)

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2020

 

2019

 

2020

 

2019

Net revenues

$

2,213

 

 

 

$

5,510

 

 

 

$

4,853

 

 

 

$

10,825

 

 

Cost of revenues (1)

768

 

 

 

2,722

 

 

 

1,859

 

 

 

5,339

 

 

Gross profit

1,445

 

 

 

2,788

 

 

 

2,994

 

 

 

5,486

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing (1)

277

 

 

 

665

 

 

 

882

 

 

 

1,389

 

 

General and administrative (1)

3,760

 

 

 

3,970

 

 

 

7,705

 

 

 

7,945

 

 

Research and development (1)

378

 

 

 

1,077

 

 

 

1,239

 

 

 

2,386

 

 

Total operating expenses

4,415

 

 

 

5,712

 

 

 

9,826

 

 

 

11,720

 

 

Operating loss

(2,970

)

 

 

(2,924

)

 

 

(6,832

)

 

 

(6,234

)

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

Interest expense

(460

)

 

 

(151

)

 

 

(561

)

 

 

(339

)

 

Loss on extinguishment of debt

(81

)

 

 

 

 

 

(81

)

 

 

 

 

Other income

 

 

 

13

 

 

 

 

 

 

17

 

 

Total other expense

(541

)

 

 

(138

)

 

 

(642

)

 

 

(322

)

 

Loss before taxes

(3,511

)

 

 

(3,062

)

 

 

(7,474

)

 

 

(6,556

)

 

Income tax expense

 

 

 

(5

)

 

 

 

 

 

(5

)

 

Net loss

(3,511

)

 

 

(3,067

)

 

 

(7,474

)

 

 

(6,561

)

 

Other comprehensive loss:

 

 

 

 

 

 

 

Cumulative translation adjustment

(3

)

 

 

(30

)

 

 

(75

)

 

 

(3

)

 

Comprehensive loss

$

(3,514

)

 

 

$

(3,097

)

 

 

$

(7,549

)

 

 

$

(6,564

)

 

 

 

 

 

 

 

 

 

Net loss per common share, basic and diluted

$

(0.08

)

 

 

$

(0.08

)

 

 

$

(0.18

)

 

 

$

(0.19

)

 

 

 

 

 

 

 

 

 

Weighted-average common shares used to compute net loss per share, basic and diluted

41,869

 

 

 

38,810

 

 

 

40,982

 

 

 

34,537

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Includes stock-based compensation as follows:

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

$

62

 

 

 

$

24

 

 

 

$

113

 

 

 

$

38

 

 

Sales and marketing

22

 

 

 

9

 

 

 

29

 

 

 

(16

)

 

General and administrative

1,039

 

 

 

349

 

 

 

1,638

 

 

 

372

 

 

Research and development

(8

)

 

 

34

 

 

 

(30

)

 

 

33

 

 

Total stock-based compensation

$

1,115

 

 

 

$

416

 

 

 

$

1,750

 

 

 

$

427

 

 

Phunware, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Six Months Ended
June 30,

 

2020

 

2019

Operating activities

 

 

 

Net loss

$

(7,474

)

 

 

$

(6,561

)

 

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

Depreciation

9

 

 

 

30

 

 

Amortization of acquired intangibles

78

 

 

 

143

 

 

Amortization of debt discount and deferred financing costs

227

 

 

 

 

 

Loss on sale of digital currencies

 

 

 

4

 

 

Loss on extinguishment of debt

81

 

 

 

 

 

Non-cash interest expense

55

 

 

 

 

 

Bad debt (recovery) expense

(63

)

 

 

132

 

 

Stock-based compensation

1,750

 

 

 

427

 

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

815

 

 

 

(71

)

 

Prepaid expenses and other assets

(193

)

 

 

(99

)

 

Accounts payable

356

 

 

 

(807

)

 

Accrued expenses

877

 

 

 

330

 

 

Deferred revenue

(1,268

)

 

 

606

 

 

Net cash used in operating activities

(4,750

)

 

 

(5,866

)

 

 

 

 

 

Investing activities

 

 

 

Proceeds received from sale of digital currencies

 

 

 

88

 

 

Net cash provided by investing activities

 

 

 

88

 

 

 

 

 

 

Financing activities

 

 

 

Proceeds from borrowings, net of issuance costs

5,436

 

 

 

250

 

 

Proceeds from related party bridge loans

560

 

 

 

 

 

Payments on senior convertible note

(455

)

 

 

 

 

Payments on related party notes

(200

)

 

 

 

 

Net repayments on factoring agreement

(714

)

 

 

(659

)

 

Proceeds from PhunCoin deposits

 

 

 

191

 

 

Proceeds from warrant exercises

 

 

 

6,092

 

 

Proceeds from exercise of options to purchase common stock

85

 

 

 

52

 

 

Series A convertible preferred stock redemptions and dividend payments

 

 

 

(6,240

)

 

Net cash provided by (used in) financing activities

4,712

 

 

 

(314

)

 

 

 

 

 

Effect of exchange rate on cash and restricted cash

(79

)

 

 

(4

)

 

Net increase (decrease) in cash and restricted cash

(117

)

 

 

(6,096

)

 

Cash and restricted cash at the beginning of the period

362

 

 

 

6,344

 

 

Cash and restricted cash at the end of the period

$

245

 

 

 

$

248

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

Interest paid

$

328

 

 

 

$

361

 

 

Income taxes paid

$

 

 

 

$

 

 

Supplemental disclosures of non-cash financing activities:

 

 

 

Issuance of common stock for payment of legal, earned bonus and board of director fees

$

1,014

 

 

 

$

 

 

Issuance of common stock upon partial conversions of Senior Convertible Note

$

2,266

 

 

 

$

 

 

Reacquisition of equity component of Senior Convertible Note

$

(1,299

)

 

 

$

 

 

Equity classified cash conversion feature of Senior Convertible Note

$

219

 

 

 

$

 

 

Non-GAAP Financial Measures and Reconciliation

Adjusted EBITDA should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”). It is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net income (loss), as applicable, or any other performance measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other businesses. Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our operating results as reported under GAAP. Some of these limitations include: (i) Non-cash compensation is and will remain a key element of our overall long-term incentive compensation package, although we exclude it as an expense when evaluating its ongoing operating performance for a particular period, (ii) Adjusted EBITDA does not reflect the impact of certain charges resulting from matters we consider not to be indicative of ongoing operations, and (iii) other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures.

We compensate for these limitations to Adjusted EBITDA by relying primarily on its GAAP results and using Adjusted EBITDA only for supplemental purposes. Adjusted EBITDA includes adjustments for items that may not occur in future periods. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our business and complicate comparisons of our internal operating results and operating results of other peer companies over time. Each of the normal recurring adjustments and other adjustments described in this paragraph help management with a measure of our operating performance over time by removing items that are not related to day-to-day operations or are non-cash expenses.

Phunware, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands)

(Unaudited)

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

2020

 

2019

 

2020

 

2019

 

 

 

 

Net loss

$

(3,511

)

 

 

$

(3,067

)

 

 

$

(7,474

)

 

 

$

(6,561

)

 

Add back: Depreciation and amortization

38

 

 

 

84

 

 

 

88

 

 

 

175

 

 

Add back: Interest expense

460

 

 

 

151

 

 

 

561

 

 

 

339

 

 

Add back: Income tax expense

 

 

 

5

 

 

 

 

 

 

5

 

 

EBITDA

(3,013

)

 

 

(2,827

)

 

 

(6,825

)

 

 

(6,042

)

 

Add Back: Stock-based compensation

1,115

 

 

 

416

 

 

 

1,750

 

 

 

427

 

 

Add Back: Loss on extinguishment of debt

 

81

 

 

 

 

 

 

 

 

81

 

 

 

 

 

 

Adjusted EBITDA

$

(1,817

)

 

 

$

(2,411

)

 

 

$

(4,994

)

 

 

$

(5,615

)

 

Phunware, Inc.

Supplemental Information

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

Net Revenues

 

 

 

 

 

 

 

Platform subscriptions and services

$

2,023

 

 

$

5,092

 

 

$

4,414

 

 

$

9,913

 

Application transaction

190

 

 

418

 

 

439

 

 

912

 

Net revenues

$

2,213

 

 

$

5,510

 

 

$

4,853

 

 

$

10,825

 

Platform subscriptions and services as a percentage of net revenues

91.4

%

 

92.4

%

 

91.0

%

 

91.6

%

Application transactions as a percentage of net revenues

8.6

%

 

7.6

%

 

9.0

%

 

8.4

%

 

Contacts

PR & Media Inquiries:
Lauren Beaubien

lbeaubien@phunware.com
T: (512) 522-9568

Investor Relations:
Brendhan Botkin

bbotkin@phunware.com
T: (512) 394-6837