Phunware Reports Third Quarter 2021 Financial Results

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The Company Records 50% Increase in Quarter-over-Quarter Net Revenues

AUSTIN, Texas, Nov. 11, 2021 (GLOBE NEWSWIRE) -- Phunware, Inc. (NASDAQ: PHUN) (“Phunware” or “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, 2021.

“We are extremely excited to post 50% sequential organic growth in net revenues quarter-over-quarter, demonstrating that we are now reaping the benefits of our direct and indirect go-to-market strategies for our MaaS enterprise cloud platform for mobile,” said Alan S. Knitowski, President, CEO and Co-Founder of Phunware. “Our team executed strongly over the past quarter on multiple fronts, executing deals with several prominent new customers and partners across different verticals, including scaling our dual token economy while actively pursuing our inorganic growth strategy and closing the acquisition of Lyte Technology. In conjunction with the organic growth announced, the closing of Lyte also adds immediate profitability, backlog and growth that will allow us to leverage a new, strategic distribution network to consumers to further scale and accelerate our blockchain initiatives. This past year has certainly been a pivotal and encouraging period for Phunware and I am confident that as we head into 2022, we will be firing on all cylinders with a dynamic organic and inorganic growth strategy that will have us poised for immense growth.”

Third Quarter 2021 Summary Financial Results

  • Net Revenues for the quarter totaled $2.2 million
  • Multiscreen-as-a-Service (MaaS) Platform Subscriptions and Services Revenues were $1.8 million
  • Net Income was $0.4 million
  • Net Income per Share was $0.01
  • Non-GAAP Adjusted EBITDA Loss was $(2.5) million

“We are pleased with the momentum achieved in the third quarter and are positioned well to finish the year with a great fourth quarter,” said Matt Aune, CFO of Phunware. “As we look forward to 2022, we are excited to have a fully funded operating plan that gives us the ability to drive organic and inorganic growth. In addition to executing on our operational objectives, the Company successfully raised more than $65 million and now holds approximately 129 bitcoin. Rolling forward, we are committed to not only growing our digital currency holdings in the future, but we also expect to add Decentralized Finance (DeFi) to our corporate treasury activities.”

Recent Business Highlights

Conference Call Information

Phunware management will host a conference call today (November 11, 2021) at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) to discuss its financial results for the third quarter ended September 30, 2021.

Interested parties may access the conference call by dialing 877-545-0523 in the United States, or 973-528-0016 from international locations with access code: 948061. 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 (the “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.

Phunware PR & Media Inquiries:
Email: press@phunware.com
Phone: (512) 693-4199

Phunware Investor Relations:
Matt Glover and John Yi
Gateway Investor Relations
Email: PHUN@gatewayir.com
Phone: (949) 574-3860


Consolidated Balance Sheets
(In thousands, except share and per share information)

  September 30,
2021 		  December 31,
2020
  (Unaudited)    
Assets      
Current assets:      
Cash $ 882     $ 3,940  
Accounts receivable, net of allowance for doubtful accounts of $606 and $356 at September 30, 2021 and December 31, 2020, respectively 1,223     664  
Digital currencies 789     —  
Prepaid expenses and other current assets 745     304  
Total current assets 3,639     4,908  
Property and equipment, net —     13  
Goodwill 25,883     25,900  
Intangible assets, net 38     111  
Deferred tax asset 537     537  
Restricted cash 91     91  
Right-of-use asset 1,486     —  
Other assets 276     276  
Total assets $ 31,950     $ 31,836  
Liabilities and stockholders’ equity (deficit)      
Current liabilities:      
Accounts payable $ 7,085     $ 8,462  
Accrued expenses 2,417     5,353  
Accrued legal settlement —     3,000  
Lease liability 486     —  
Deferred revenue 1,815     2,397  
PhunCoin deposits 1,202     1,202  
Current maturities of long-term debt, net 83     4,435  
Warrant liability 1,762     1,614  
Total current liabilities 14,850     26,463  
Long-term debt 849     3,762  
Long-term debt - related party 195     195  
Deferred tax liability 537     537  
Deferred revenue 1,262     2,678  
Lease liability 1,232     —  
Deferred rent —     180  
Total liabilities 18,925     33,815  
Stockholders’ equity (deficit)      
Common stock, $0.0001 par value; 1,000,000,000 shares authorized at September 30, 2021 and December 31, 2020; 75,556,118 and 56,380,111 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively 8     6  
Additional paid-in capital 180,887     144,156  
Accumulated other comprehensive loss (356 )   (338 )
Accumulated deficit (167,514 )   (145,803 )
Total stockholders’ equity (deficit) 13,025     (1,979 )
Total liabilities and stockholders’ equity (deficit) $ 31,950     $ 31,836  



Consolidated Statements of Operations and Comprehensive Income (Loss)
(In thousands, except per share information)

  Three Months Ended
September 30, 		  Nine Months Ended
September 30,
  2021   2020   2021   2020
Net revenues $ 2,160     $ 3,130     $ 5,242     $ 7,983  
Cost of revenues 1,026     898     2,842     2,757  
Gross profit 1,134     2,232     2,400     5,226  
               
Operating expenses:              
Sales and marketing 715     383     1,910     1,265  
General and administrative 3,296     4,276     9,075     11,981  
Research and development 1,160     572     3,058     1,811  
Legal settlement —     4,500     —     4,500  
Total operating expenses 5,171     9,731     14,043     19,557  
Operating loss (4,037 )   (7,499 )   (11,643 )   (14,331 )
               
Other income (expense):              
Interest income (expense) 7     (1,362 )   (4,057 )   (1,923 )
Loss on extinguishment of debt —     (950 )   (7,952 )   (1,031 )
Impairment of digital currency —     —     (776 )   —  
Gain (loss) on change in fair value of warrant liability 1,501     1,244     (148 )   1,244  
Gain on forgiveness of PPP loan 2,850     —     2,850     —  
Other income 51     —     15     —  
Total other income (expense) 4,409     (1,068 )   (10,068 )   (1,710 )
Income (loss) before taxes 372     (8,567 )   (21,711 )   (16,041 )
Income tax expense —     —     —     —  
Net income (loss) 372     (8,567 )   (21,711 )   (16,041 )
Other comprehensive income (loss):              
Cumulative translation adjustment (33 )   47     (18 )   (28 )
Comprehensive income (loss) $ 339     $ (8,520 )   $ (21,729 )   $ (16,069 )
               
Net income (loss) per common share, basic $ 0.01     $ (0.19 )   $ (0.31 )   $ (0.38 )
Net income (loss) per common share, diluted $ —     $ (0.19 )   $ (0.31 )   $ (0.38 )
               
Weighted-average common shares used to compute net income (loss) per share, basic 74,347     44,304     70,185     42,089  
Weighted-average common shares used to compute net income (loss) per share, diluted 74,699     44,304     70,185     42,089  



Consolidated Statements of Cash Flows
(In thousands)

  Nine Months Ended
September 30,
  2021   2020
Operating activities      
Net loss $ (21,711 )   $ (16,041 )
Adjustments to reconcile net loss to net cash used in operating activities:      
Amortization of debt discount and deferred financing costs 2,770     1,217  
Loss (gain) on change in fair value of warrant liability 148     (1,244 )
Loss on extinguishment of debt 7,952     1,031  
Impairment of digital currencies 776     —  
Gain on forgiveness of PPP loan (2,850 )   —  
Stock-based compensation 3,933     3,458  
Other adjustments 297     145  
Changes in operating assets and liabilities:      
Accounts receivable (272 )   551  
Prepaid expenses and other assets (345 )   (94 )
Accounts payable (1,236 )   536  
Accrued expenses (2,891 )   1,332  
Accrued legal settlement (3,000 )   4,500  
Lease liability payments (662 )   —  
Deferred revenue (1,998 )   (1,906 )
Net cash used in operating activities (19,089 )   (6,515 )
Investing activities      
Purchase of digital currencies (1,497 )   —  
Net cash used in investing activities (1,497 )   —  
Financing activities      
Proceeds from borrowings, net of issuance costs 9,980     10,207  
Proceeds from related party bridge loans —     560  
Payments on senior convertible notes (25,116 )   (3,948 )
Payments on related party notes —     (200 )
Net repayments on factoring agreement —     (638 )
Proceeds from exercise of options to purchase common stock 73     95  
Proceeds from sales of common stock, net of issuance costs 32,610     1,341  
Net cash provided by financing activities 17,547     7,417  
Effect of exchange rate on cash and restricted cash (19 )   (30 )
Net (decrease) increase in cash and restricted cash (3,058 )   872  
Cash and restricted cash at the beginning of the period 4,031     362  
Cash and restricted cash at the end of the period $ 973     $ 1,234  
Interest paid $ 1,315     $ 681  
Income taxes paid $ —     $ —  


  Nine Months Ended
September 30,
  2021   2020
Supplemental disclosures of non-cash financing activities:      
Proceeds not yet received for sales of common stock $ 97     $ —  
Issuance of common stock for payment of legal, earned bonus and board of director fees $ 66     $ 1,239  
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  


Non-GAAP Financial Measures and Reconciliation

Our non-GAAP financial measures include adjusted gross profit, adjusted gross margin and adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") (our "non-GAAP financial measures"). Our non-GAAP financial measures should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. They are not measurements of our financial performance under GAAP and should not be considered as alternatives to revenue or net 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. Our non-GAAP financial measures have limitations as analytical tools 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) Our non-GAAP financial measures do 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 our non-GAAP financial measures differently than we do, limiting their usefulness as comparative measures.

We compensate for these limitations to our non-GAAP financial measures by relying primarily on our GAAP results and using our non-GAAP financial measures only for supplemental purposes. Our non-GAAP financial measures include 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
(In thousands, except percentages)

  Three Months Ended
September 30,		   Nine Months Ended
September 30,
(in thousands) 2021   2020   2021   2020
Net income (loss) $ 372     $ (8,567 )   $ (21,711 )   $ (16,041 )
Add back:  Depreciation and amortization 17     33     75     120  
(Less) Add back: Interest (income) expense (7 )   1,362     4,057     1,923  
EBITDA 382     (7,172 )   (17,579 )   (13,998 )
Add back: Stock-based compensation 1,495     1,708     3,933     3,458  
Add back: Legal settlement —     4,500     —     4,500  
Add back: Loss on extinguishment of debt —     950     7,952     1,031  
Add back: Impairment of digital currencies —     —     776     —  
Less: gain on forgiveness of PPP loan (2,850 )   —     (2,850 )   —  
(Less) add back: (Gain) loss on change in fair value of warrant liability (1,501 )   (1,244 )   148     (1,244 )
Adjusted EBITDA $ (2,474 )   $ (1,258 )   $ (7,620 )   $ (6,253 )


  Three Months Ended
September 30,		   Nine Months Ended
September 30,
(in thousands, except percentages) 2021   2020   2021   2020
Gross profit $ 1,134     $ 2,232     $ 2,400     $ 5,226  
Add back:  Amortization of intangibles —     4     7     17  
Add back:  Stock-based compensation 352     104     884     217  
Adjusted gross profit $ 1,486     $ 2,340     $ 3,291     $ 5,460  
Adjusted gross margin 68.8 %   74.8 %   62.8 %   68.4 %


Supplemental Information
(In thousands, except percentages)

  Three Months Ended
September 30,		   Change
(in thousands, except percentages) 2021   2020   Amount   %
Net Revenues              
Platform subscriptions and services $ 1,771     $ 2,860     $ (1,089 )   (38.1)%
Application transaction 389     270     119     44.1%
Net revenues $ 2,160     $ 3,130     $ (970 )   (31.0)%
Platform subscriptions and services as a percentage of net revenues 82.0 %   91.4 %        
Application transactions as a percentage of net revenues 18.0 %   8.6 %        


  Nine Months Ended
September 30, 2021		   Change
(in thousands, except percentages) 2021   2020   Amount   %
Net Revenues              
Platform subscriptions and services $ 4,472     $ 7,274     $ (2,802 )   (38.5)%
Application transaction 770     709     61     8.6%
Net revenues $ 5,242     $ 7,983     $ (2,741 )   (34.3)%
Platform subscriptions and services as a percentage of net revenues 85.3 %   91.1 %        
Application transactions as a percentage of net revenues 14.7 %   8.9 %        


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Source: Phunware, Inc.

Released November 11, 2021