Quarterly Net Revenues Up 40%+ Sequentially to $3.13 Million, Driving Gross Margin Expansion to 71.3%, Reflecting Growing Customer Demand and Business Resiliency
AUSTIN, Texas–(BUSINESS WIRE)–$PHUN #PHUN—Phunware, 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 third quarter ended September 30, 2020.
“Our solid financial results for the third quarter of 2020 exceeded our upwardly revised financial guidance, highlighted by more than a 40% sequential increase in Net Revenues to $3.13 million,” said Alan S. Knitowski, President, CEO and Co-Founder of Phunware. “Perhaps even more encouraging is our expanded gross margin that exceeded 71%, along with our ability to reduce Adjusted EBITDA loss by nearly 30% sequentially. We have established solid operating momentum for entering 2021, positioning us to capitalize on the demand we’re seeing for our MaaS Smart Workplace solutions for corporations and our MaaS Digital Front Door solutions for healthcare organizations.”
Third Quarter 2020 Summary Financial Highlights
“We are thrilled to see continued sequential progress in our efforts to reduce operational cash burn, eliminate uncertainties and move toward break-even on an Adjusted EBITDA basis despite the ongoing pandemic,” said Matt Aune, CFO of Phunware. “As our Q3 results demonstrate, we are improving our cash position, eliminating our outstanding litigation and liabilities, and expanding our platform sales and related margins.”
Recent Business Highlights and Announcements
Conference Call Information
Phunware management will host a conference call today (November 9, 2020) at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) to discuss its financial results for the quarter ended September 30, 2020.
Interested parties may access the conference call by dialing (844) 369-8770 in the United States, or (862) 298-0840 from international locations. The conference call will be broadcast live and available for replay here and via the investor relations section of the company’s 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.
|
Consolidated Balance Sheets |
|||||||
|
|
|||||||
|
|
September 30, 2020 |
|
December 31, 2019 |
||||
|
|
(Unaudited) |
|
|
||||
|
Assets |
|
|
|
||||
|
Current assets: |
|
|
|
||||
|
Cash |
$ |
1,143 |
|
|
$ |
276 |
|
|
Accounts receivable, net of allowance for doubtful accounts of $123 and $3,179 at September 30, 2020 and December 31, 2019, respectively |
1,153 |
|
|
1,671 |
|
||
|
Prepaid expenses and other current assets |
462 |
|
|
368 |
|
||
|
Total current assets |
2,758 |
|
|
2,315 |
|
||
|
Property and equipment, net |
14 |
|
|
24 |
|
||
|
Goodwill |
25,828 |
|
|
25,857 |
|
||
|
Intangible assets, net |
143 |
|
|
253 |
|
||
|
Deferred tax asset |
241 |
|
|
241 |
|
||
|
Restricted cash |
91 |
|
|
86 |
|
||
|
Other assets |
276 |
|
|
276 |
|
||
|
Total assets |
$ |
29,351 |
|
|
$ |
29,052 |
|
|
|
|
|
|
||||
|
Liabilities and stockholders’ equity (deficit) |
|
|
|
||||
|
Current liabilities: |
|
|
|
||||
|
Accounts payable |
$ |
9,067 |
|
|
$ |
10,159 |
|
|
Accrued expenses |
5,555 |
|
|
4,035 |
|
||
|
Accrued legal settlement |
4,500 |
|
|
— |
|
||
|
Deferred revenue |
3,215 |
|
|
3,360 |
|
||
|
PhunCoin deposits |
1,202 |
|
|
1,202 |
|
||
|
Factored receivables payable |
439 |
|
|
1,077 |
|
||
|
Current maturities of long-term debt, net |
1,693 |
|
|
— |
|
||
|
Warrant liability |
1,242 |
|
|
— |
|
||
|
Total current liabilities |
26,913 |
|
|
19,833 |
|
||
|
Long-term debt |
4,272 |
|
|
910 |
|
||
|
Long-term debt – related party |
555 |
|
|
195 |
|
||
|
Deferred tax liability |
241 |
|
|
241 |
|
||
|
Deferred revenue |
2,003 |
|
|
3,764 |
|
||
|
Deferred rent |
178 |
|
|
83 |
|
||
|
Total liabilities |
34,162 |
|
|
25,026 |
|
||
|
|
|
|
|
||||
|
Commitments and contingencies |
|
|
|
||||
|
|
|
|
|
||||
|
Stockholders’ equity (deficit) |
|
|
|
||||
|
Common stock, $0.0001 par value |
5 |
|
|
4 |
|
||
|
Additional paid-in capital |
135,239 |
|
|
128,008 |
|
||
|
Accumulated other comprehensive loss |
(410 |
) |
|
(382 |
) |
||
|
Accumulated deficit |
(139,645 |
) |
|
(123,604 |
) |
||
|
Total stockholders’ equity (deficit) |
(4,811 |
) |
|
4,026 |
|
||
|
Total liabilities and stockholders’ equity (deficit) |
$ |
29,351 |
|
|
$ |
29,052 |
|
|
Consolidated Statements of Operations and Comprehensive Loss |
|||||||||||||||
|
|
|||||||||||||||
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||
|
Net revenues |
$ |
3,130 |
|
|
$ |
5,637 |
|
|
$ |
7,983 |
|
|
$ |
16,462 |
|
|
Cost of revenues |
898 |
|
|
2,418 |
|
|
2,757 |
|
|
7,757 |
|
||||
|
Gross profit |
2,232 |
|
|
3,219 |
|
|
5,226 |
|
|
8,705 |
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Operating expenses: |
|
|
|
|
|
|
|
||||||||
|
Sales and marketing |
383 |
|
|
705 |
|
|
1,265 |
|
|
2,094 |
|
||||
|
General and administrative |
4,276 |
|
|
3,754 |
|
|
11,981 |
|
|
11,699 |
|
||||
|
Research and development |
572 |
|
|
1,052 |
|
|
1,811 |
|
|
3,438 |
|
||||
|
Total operating expenses |
5,231 |
|
|
5,511 |
|
|
15,057 |
|
|
17,231 |
|
||||
|
Operating loss |
(2,999 |
) |
|
(2,292 |
) |
|
(9,831 |
) |
|
(8,526 |
) |
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Other expense: |
|
|
|
|
|
|
|
||||||||
|
Interest expense |
(1,362 |
) |
|
(145 |
) |
|
(1,923 |
) |
|
(484 |
) |
||||
|
Loss on extinguishment of debt |
(950 |
) |
|
— |
|
|
(1,031 |
) |
|
— |
|
||||
|
Gain on change in fair value of warrants |
1,244 |
|
|
— |
|
|
1,244 |
|
|
— |
|
||||
|
Legal settlement |
(4,500 |
) |
|
— |
|
|
(4,500 |
) |
|
— |
|
||||
|
Other (expense) income |
— |
|
|
11 |
|
|
— |
|
|
28 |
|
||||
|
Total other expense |
(5,568 |
) |
|
(134 |
) |
|
(6,210 |
) |
|
(456 |
) |
||||
|
Loss before taxes |
(8,567 |
) |
|
(2,426 |
) |
|
(16,041 |
) |
|
(8,982 |
) |
||||
|
Income tax expense |
— |
|
|
— |
|
|
— |
|
|
(5 |
) |
||||
|
Net loss |
(8,567 |
) |
|
(2,426 |
) |
|
(16,041 |
) |
|
(8,987 |
) |
||||
|
Other comprehensive loss: |
|
|
|
|
|
|
|
||||||||
|
Cumulative translation adjustment |
47 |
|
|
(33 |
) |
|
(28 |
) |
|
(36 |
) |
||||
|
Comprehensive loss |
$ |
(8,520 |
) |
|
$ |
(2,459 |
) |
|
$ |
(16,069 |
) |
|
$ |
(9,023 |
) |
|
|
|
|
|
|
|
|
|
||||||||
|
Net loss per common share, basic and diluted |
$ |
(0.19 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.38 |
) |
|
$ |
(0.25 |
) |
|
|
|
|
|
|
|
|
|
||||||||
|
Weighted-average common shares used to compute net loss per share, basic and diluted |
44,304 |
|
|
39,027 |
|
|
42,089 |
|
|
36,034 |
|
||||
|
(1) Includes stock-based compensation as follows: |
|
|
|
|
|
|
|
||||||||
|
Cost of revenues |
$ |
104 |
|
|
$ |
68 |
|
|
$ |
217 |
|
|
$ |
106 |
|
|
Sales and marketing |
15 |
|
|
30 |
|
|
44 |
|
|
14 |
|
||||
|
General and administrative |
1,530 |
|
|
492 |
|
|
3,168 |
|
|
864 |
|
||||
|
Research and development |
59 |
|
|
94 |
|
|
29 |
|
|
127 |
|
||||
|
Total stock-based compensation |
$ |
1,708 |
|
|
$ |
684 |
|
|
$ |
3,458 |
|
|
$ |
1,111 |
|
|
Consolidated Statements of Cash Flows |
|||||||
|
|
|||||||
|
|
Nine Months Ended September 30, |
||||||
|
|
2020 |
|
2019 |
||||
|
Operating activities |
|
|
|
||||
|
Net loss |
$ |
(16,041 |
) |
|
$ |
(8,987 |
) |
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
||||
|
Depreciation |
10 |
|
|
46 |
|
||
|
Amortization of acquired intangibles |
110 |
|
|
205 |
|
||
|
Amortization of debt discount and deferred financing costs |
1,217 |
|
|
— |
|
||
|
Gain on change in fair value of warrants |
(1,244 |
) |
|
— |
|
||
|
Loss on sale of digital currencies |
— |
|
|
4 |
|
||
|
Loss on extinguishment of debt |
1,031 |
|
|
— |
|
||
|
Non-cash interest expense |
55 |
|
|
— |
|
||
|
Bad debt (recovery) expense |
(30 |
) |
|
79 |
|
||
|
Stock-based compensation |
3,458 |
|
|
1,111 |
|
||
|
Changes in operating assets and liabilities: |
|
|
|
||||
|
Accounts receivable |
551 |
|
|
291 |
|
||
|
Prepaid expenses and other assets |
(94 |
) |
|
(86 |
) |
||
|
Accounts payable |
536 |
|
|
(327 |
) |
||
|
Accrued expenses |
1,332 |
|
|
973 |
|
||
|
Accrued legal settlement |
4,500 |
|
|
— |
|
||
|
Deferred revenue |
(1,906 |
) |
|
792 |
|
||
|
Net cash used in operating activities |
(6,515 |
) |
|
(5,899 |
) |
||
|
|
|
|
|
||||
|
Investing activities |
|
|
|
||||
|
Proceeds received from sale of digital currencies |
— |
|
|
88 |
|
||
|
Capital expenditures |
— |
|
|
(18 |
) |
||
|
Net cash provided by investing activities |
— |
|
|
70 |
|
||
|
|
|
|
|
||||
|
Financing activities |
|
|
|
||||
|
Proceeds from borrowings, net of issuance costs |
10,207 |
|
|
250 |
|
||
|
Proceeds from related party bridge loans |
560 |
|
|
— |
|
||
|
Payments on senior convertible notes |
(3,948 |
) |
|
— |
|
||
|
Payments on related party notes |
(200 |
) |
|
|
|||
|
Net repayments on factoring agreement |
(638 |
) |
|
(888 |
) |
||
|
Proceeds from PhunCoin deposits |
— |
|
|
212 |
|
||
|
Proceeds from warrant exercises |
— |
|
|
6,092 |
|
||
|
Proceeds from exercise of options to purchase common stock |
95 |
|
|
165 |
|
||
|
Proceeds from sales of common stock, net of issuance costs |
1,341 |
|
|
— |
|
||
|
Series A convertible preferred stock redemptions and dividend payments |
— |
|
|
(6,240 |
) |
||
|
Net cash provided by (used in) financing activities |
7,417 |
|
|
(409 |
) |
||
|
|
|
|
|
||||
|
Effect of exchange rate on cash and restricted cash |
(30 |
) |
|
(38 |
) |
||
|
Net increase (decrease) in cash and restricted cash |
872 |
|
|
(6,276 |
) |
||
|
Cash and restricted cash at the beginning of the period |
362 |
|
|
6,344 |
|
||
|
Cash and restricted cash at the end of the period |
$ |
1,234 |
|
|
$ |
68 |
|
|
Supplemental disclosure of cash flow information: |
|
|
|
||||
|
Interest paid |
$ |
681 |
|
|
$ |
510 |
|
|
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 |
$ |
1,240 |
|
|
$ |
— |
|
|
Issuance of common stock upon partial conversions of Senior Convertible Note |
$ |
2,266 |
|
|
$ |
— |
|
|
Reacquisition of equity component of Senior Convertible Note |
$ |
(1,388 |
) |
|
$ |
— |
|
|
Equity classified cash conversion feature of Senior Convertible Note |
$ |
219 |
|
|
$ |
— |
|
|
Waiver of sponsor promissory note |
$ |
— |
|
|
$ |
1,993 |
|
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.
|
Reconciliation of GAAP to Non-GAAP Financial Measures |
|||||||||||||||
|
|
|||||||||||||||
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||
|
|
(in thousands) |
|
(in thousands) |
||||||||||||
|
Net loss |
$ |
(8,567 |
) |
|
$ |
(2,426 |
) |
|
$ |
(16,041 |
) |
|
$ |
(8,987 |
) |
|
Add back: Depreciation and amortization |
33 |
|
|
76 |
|
|
120 |
|
|
251 |
|
||||
|
Add back: Interest expense |
1,362 |
|
|
145 |
|
|
1,923 |
|
|
484 |
|
||||
|
Add back: Income tax expense |
— |
|
|
— |
|
|
— |
|
|
5 |
|
||||
|
EBITDA |
(7,172 |
) |
|
(2,205 |
) |
|
(13,998 |
) |
|
(8,247 |
) |
||||
|
Add Back: Stock-based compensation |
1,708 |
|
|
684 |
|
|
3,458 |
|
|
1,111 |
|
||||
|
Add Back: Legal settlement |
4,500 |
|
|
— |
|
|
4,500 |
|
|
— |
|
||||
|
Add Back: Loss on extinguishment of debt |
950 |
|
|
— |
|
|
1,031 |
|
|
— |
|
||||
|
Less: Fair value adjustment for warrant liabilities |
(1,244 |
) |
|
— |
|
|
(1,244 |
) |
|
— |
|
||||
|
Adjusted EBITDA |
$ |
(1,258 |
) |
|
$ |
(1,521 |
) |
|
$ |
(6,253 |
) |
|
$ |
(7,136 |
) |
|
Supplemental Information |
||||||||||||||
|
|
||||||||||||||
|
|
Three Months Ended September 30, |
|
Change |
|||||||||||
|
|
2020 |
|
2019 |
|
Amount |
|
% |
|||||||
|
|
(in thousands) |
|
|
|
|
|||||||||
|
Net Revenues |
|
|
|
|
|
|
|
|||||||
|
Platform subscriptions and services |
$ |
2,860 |
|
|
$ |
5,152 |
|
|
$ |
(2,292 |
) |
|
(44.5 |
)% |
|
Application transaction |
270 |
|
|
485 |
|
|
(215 |
) |
|
(44.3 |
)% |
|||
|
Net revenues |
$ |
3,130 |
|
|
$ |
5,637 |
|
|
$ |
(2,507 |
) |
|
(44.5 |
)% |
|
Platform subscriptions and services as a percentage of net revenues |
91.4 |
% |
|
91.4 |
% |
|
|
|
|
|||||
|
Application transactions as a percentage of net revenues |
8.6 |
% |
|
8.6 |
% |
|
|
|
|
|||||
|
|
Nine Months Ended September 30, 2020 |
|
Change |
|||||||||||
|
|
2020 |
|
2019 |
|
Amount |
|
% |
|||||||
|
|
(in thousands) |
|
|
|
|
|||||||||
|
Net Revenues |
|
|
|
|
|
|
|
|||||||
|
Platform subscriptions and services |
$ |
7,274 |
|
|
$ |
15,065 |
|
|
$ |
(7,791 |
) |
|
(51.7 |
)% |
|
Application transaction |
709 |
|
|
1,397 |
|
|
(688 |
) |
|
(49.2 |
)% |
|||
|
Net revenues |
$ |
7,983 |
|
|
$ |
16,462 |
|
|
$ |
(8,479 |
) |
|
(51.5 |
)% |
|
Platform subscriptions and services as a percentage of net revenues |
91.1 |
% |
|
91.5 |
% |
|
|
|
|
|||||
|
Application transactions as a percentage of net revenues |
8.9 |
% |
|
8.5 |
% |
|
|
|
|
|||||
Contacts
Phunware PR & Media Inquiries:
press@phunware.com
(512) 693-4199
Phunware Investor Relations:
Matt Glover and John Yi
Gateway Investor Relations
Email: PHUN@gatewayir.com
Phone: (949) 574-3860
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