Phunware Announces Third Quarter 2019 Financial Results

Download as PDF

Related Documents

Strong revenue and gross margin growth fuel progress towards cash neutrality

AUSTIN, Texas--(BUSINESS WIRE)-- 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, 2019, and provided an update on recent business developments.

“We continued to execute our organic growth strategies this quarter with key customer wins across our healthcare, real estate and travel verticals,” said Alan S. Knitowski, President, CEO and Co-Founder of Phunware. "We also look forward to further expanding our diverse customer base while controlling our spending, accelerating our growth and achieving self-sufficiency from operations.”

Third Quarter 2019 Financial Highlights

  • Net revenues increased 8% year-over-year to $5.6 million
  • Platform subscriptions and services revenue increased 19% year-over-year to $5.2 million
  • Gross margin was 57.1%, representing 9.0 percentage points higher than the prior year
  • Net loss was ($2.4) million, an improvement of $1.1 million year-over-year
  • Net loss per share improved $0.08 per share to ($0.06) compared to ($0.14), a 57% improvement year-over-year
  • Non-GAAP adjusted EBITDA loss improved $1.7 million to ($1.5) million, an improvement of 53% year-over-year
  • Net cash used in operating activities for the quarter was ($33) thousand, which represented a 98% lower quarter-over-quarter improvement

“We are pleased to see that our operational cash burn is decreasing in line with our expectations,” said Matt Aune, CFO of Phunware. “Our efforts to improve margins while lowering operational expenses continue to push us closer to zero operational cash burn by the end of the fiscal year.”

Recent Business Highlights and Announcements

Audiocast and Presentation Information

A pre-recorded audiocast announcement 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 audiocast and investor presentation 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 www.phunware.com, www.phuncoin.com, www.phuntoken.com, and follow @phunware, @phuncoin and @phuntoken on all social media platforms.

Phunware, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except per share information)

 

 

September 30,
2019

 

December 31,
2018

 

(Unaudited)

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash

$

 

68

 

 

$

 

844

 

Accounts receivable, net

 

3,241

 

 

 

3,606

 

Prepaid expenses and other current assets

 

637

 

 

 

272

 

Total current assets

 

3,946

 

 

 

4,722

 

 

 

 

 

Property and equipment, net

 

38

 

 

 

66

 

Goodwill

 

25,786

 

 

 

25,821

 

Intangible assets, net

 

315

 

 

 

521

 

Deferred tax asset – long term

 

64

 

 

 

64

 

Restricted cash

—

 

 

 

5,500

 

Other assets

 

276

 

 

 

187

 

Total assets

$

 

30,425

 

 

$

 

36,881

 

 

 

 

 

Liabilities, redeemable convertible preferred stock, and stockholders’ equity

Current liabilities:

 

 

 

Accounts payable

$

 

9,563

 

 

$

 

9,890

 

Accrued expenses

 

3,978

 

 

 

3,028

 

Deferred revenue

 

3,168

 

 

 

2,629

 

PhunCoin deposits

 

1,202

 

 

—

 

Factored receivables payable

 

1,546

 

 

 

2,434

 

Short term notes payable - related party

—

 

 

 

1,993

 

Total current liabilities

 

19,457

 

 

 

19,974

 

 

 

 

 

Convertible note payable

 

250

 

 

—

 

Deferred tax liability

 

64

 

 

 

64

 

Deferred revenue

 

4,167

 

 

 

5,622

 

Deferred rent

 

6

 

 

 

17

 

Total liabilities

 

23,944

 

 

 

25,677

 

 

 

 

 

Commitments and contingencies

—

 

 

—

 

Redeemable convertible preferred stock, $0.0001 par value

—

 

 

 

5,377

 

 

 

 

 

Stockholders’ equity

 

 

 

Common stock, $0.0001 par value

 

4

 

 

 

3

 

Additional paid in capital

 

126,651

 

 

 

118,062

 

Accumulated other comprehensive loss

 

(454

)

 

 

(418

)

Accumulated deficit

 

(119,720

)

 

 

(111,820

)

Total stockholders’ equity

 

6,481

 

 

 

5,827

 

Total liabilities, redeemable convertible preferred stock, and stockholders’ equity

$

 

30,425

 

 

$

 

36,881

 

Phunware, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(In thousands, except per share information)

(Unaudited)

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

Net revenues

$

 

5,637

 

 

$

 

5,215

 

 

$

 

16,462

 

 

$

 

24,380

 

Cost of revenues

 

2,418

 

 

 

2,707

 

 

 

7,757

 

 

 

8,643

 

Gross profit

 

3,219

 

 

 

2,508

 

 

 

8,705

 

 

 

15,737

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing

 

705

 

 

 

1,241

 

 

 

2,094

 

 

 

4,573

 

General and administrative

 

3,754

 

 

 

2,937

 

 

 

11,699

 

 

 

10,744

 

Research and development

 

1,052

 

 

 

1,671

 

 

 

3,438

 

 

 

5,689

 

Total operating expenses

 

5,511

 

 

 

5,849

 

 

 

17,231

 

 

 

21,006

 

Operating loss

 

(2,292

)

 

 

(3,341

)

 

 

(8,526

)

 

 

(5,269

)

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

Interest expense

 

(145

)

 

 

(148

)

 

 

(484

)

 

 

(533

)

Fair value adjustment for warrant liabilities

—

 

 

—

 

 

—

 

 

 

(54

)

Impairment of digital currencies

—

 

 

—

 

 

—

 

 

 

(334

)

Other income (expense)

 

11

 

 

 

(31

)

 

 

28

 

 

 

(22

)

Total other expense

 

(134

)

 

 

(179

)

 

 

(456

)

 

 

(943

)

Loss before taxes

 

(2,426

)

 

 

(3,520

)

 

 

(8,982

)

 

 

(6,212

)

Income tax expense

—

 

 

—

 

 

 

(5

)

 

—

 

Net loss

 

(2,426

)

 

 

(3,520

)

 

 

(8,987

)

 

 

(6,212

)

Other comprehensive loss

 

 

 

 

 

 

 

Cumulative translation adjustment

 

(33

)

 

 

(16

)

 

 

(36

)

 

 

(43

)

Comprehensive loss

$

 

(2,459

)

 

$

 

(3,536

)

 

$

 

(9,023

)

 

$

 

(6,255

)

 

 

 

 

 

 

 

 

Net loss per share, basic and diluted

$

 

(0.06

)

 

$

 

(0.14

)

 

$

 

(0.25

)

 

$

 

(0.24

)

 

 

 

 

 

 

 

 

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

 

39,027

 

 

 

25,885

 

 

 

36,034

 

 

 

25,411

 

Phunware, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Nine Months Ended
September 30,

 

 

2019

 

 

 

2018

 

Operating activities

 

 

 

Net loss

$

 

(8,987

)

 

$

 

(6,212

)

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

 

 

 

Depreciation

 

46

 

 

 

48

 

Loss on sale of digital currencies

 

4

 

 

 

21

 

Bad debt expense

 

79

 

 

 

135

 

Amortization of acquired intangibles

 

205

 

 

 

293

 

Change in fair value of warrants

—

 

 

 

54

 

Impairment of digital currencies

—

 

 

 

334

 

Stock-based compensation

 

1,111

 

 

 

285

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

 

291

 

 

 

1,914

 

Prepaid expenses and other assets

 

(86

)

 

 

166

 

Accounts payable

 

(327

)

 

 

3,391

 

Accrued expenses

 

973

 

 

 

(6,322

)

Warrant liability

—

 

 

 

450

 

Deferred revenue

 

792

 

 

 

(57

)

Net cash used in operating activities

 

(5,899

)

 

 

(5,500

)

Investing activities

 

 

 

Proceeds received from sale of digital currencies

 

88

 

 

 

913

 

Payments for note receivable

—

 

 

 

(462

)

Capital expenditures

 

(18

)

 

—

 

Net cash provided by investing activities

 

70

 

 

 

451

 

Financing activities

 

 

 

Proceeds from convertible note

 

250

 

 

—

 

Proceeds from PhunCoin deposits

 

212

 

 

—

 

Net (repayments) proceeds from factoring agreement

 

(888

)

 

 

255

 

Proceeds from common stock subscriptions, net of issuance costs

—

 

 

 

5,448

 

Proceeds from warrant exercises

 

6,092

 

 

—

 

Proceeds from exercise of options to purchase common stock

 

165

 

 

 

139

 

Series A convertible preferred stock redemptions and dividend payments

 

(6,240

)

 

—

 

Deferred financing costs

—

 

 

 

(939

)

Net cash (used in) provided by financing activities

 

(409

)

 

 

4,903

 

Effect of exchange rate on cash and restricted cash

 

(38

)

 

 

(40

)

Net decrease in cash and restricted cash

 

(6,276

)

 

 

(186

)

Cash and restricted cash at the beginning of the period

 

6,344

 

 

 

308

 

Cash and restricted cash at the end of the period

$

 

68

 

 

$

 

122

 

Supplemental disclosure of cash flow information

 

 

 

Interest paid

$

 

510

 

 

$

 

534

 

Common stock issuances from subscription payable, net of fair value convertible stock warrants issued

$

 

—

 

 

$

 

9,604

 

Non-GAAP Financial Measures and Reconciliation

Adjusted Net Revenues and 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 revenues or 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 Net Revenues and Adjusted EBITDA 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) Adjusted Net Revenues and Adjusted EBITDA do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of ongoing operations, and (iii) other companies in our industry may calculate Adjusted Net Revenues or Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures.

We compensate for these limitations to Adjusted Net Revenues and Adjusted EBITDA by relying primarily on its GAAP results and using Adjusted Net Revenues and Adjusted EBITDA only for supplemental purposes. Adjusted Net Revenues and Adjusted EBITDA 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.

Phunware, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands)

(Unaudited)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands)

 

(in thousands)

Net revenues

$

 

5,637

 

$

 

5,215

 

$

 

16,462

 

$

 

24,380

 

Less: One-time revenue adjustments

—

 

—

 

—

 

 

(8,428

)

Adjusted net revenues

$

 

5,637

 

$

 

5,215

 

$

 

16,462

 

$

 

15,952

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2019

 

2018

 

 

2019

 

2018

 

(in thousands)

 

(in thousands)

Net loss

$

(2,426

)

 

$

(3,520

)

 

$

(8,987

)

 

$

(6,212

)

Add back: Depreciation and amortization

76

 

 

98

 

 

251

 

 

340

 

Add back: Interest expense

145

 

 

148

 

 

484

 

 

533

 

Add back: Income tax expense

—

 

 

—

 

 

5

 

 

—

 

EBITDA

(2,205

)

 

(3,274

)

 

(8,247

)

 

(5,339

)

Less: One-time revenue adjustments

—

 

 

—

 

 

—

 

 

(8,428

)

Add Back: Stock-based compensation

684

 

 

74

 

 

1,111

 

 

285

 

Adjusted EBITDA

$

(1,521

)

 

$

(3,200

)

 

$

(7,136

)

 

$

(13,482

)

Phunware, Inc.

Supplemental Information

(In thousands)

(Unaudited)

 

For the three months ended

Jun. 30, 2018

Sep. 30, 2018

Dec. 31, 2018

Mar. 31, 2019

Jun. 30, 2019

Sep. 30, 2019

Platform subscription and services revenue

$

6,448

 

$

4,349

$

4,608

$

4,821

$

5,092

$

5,152

Less: One-time revenue adjustments

 

(2,106

)

 

-

 

-

 

-

 

-

 

-

Adjusted platform subscription and services revenue

$

4,342

 

$

4,349

$

4,608

$

4,821

$

5,092

$

5,152

 

PR & Media Inquiries:
Brent Brightwell
bbrightwell@phunware.com
T: (512) 630-6669

Investor Relations:
Brendhan Botkin
bbotkin@phunware.com
T: (512) 394-6837

Source: Phunware, Inc.

Released November 14, 2019