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Phunware Announces Second Quarter 2019 Financial Results

Continued MaaS Subscription Revenue Growth Accompanies Improved Net Loss per Share

AUSTIN, TX–(BUSINESS WIRE)–#DecentralizeEverythingPhunware, 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, 2019, and provided an update on recent business developments.

Second Quarter 2019 Financial Highlights

  • Net revenues totaled $5.5 million
  • Platform subscriptions and services revenue totaled $5.1 million, or 92% of net revenues
  • Multiple consecutive quarters of platform subscription and services revenue growth
  • Gross margin was 50.6%, compared to 78.4% for the same period in the prior year
  • Non-GAAP gross margin was 51.2%, compared to 47.2% a year ago
  • Net loss was ($3.1) million. Net loss per share was ($0.08), an improvement of 34% quarter-over-quarter sequentially
  • Non-GAAP adjusted EBITDA loss was ($2.4) million, a $1.2 million improvement year-over-year

“Our first half financial performance has provided a strong foundation for our growth strategies throughout the balance of the year and into 2020,” said Alan S. Knitowski, CEO and Co-Founder of Phunware. “Our SaaS, data and blockchain offerings for mobile uniquely position us to deliver true digital transformation for our customers, enabling 1:1 real-time interactions between consumers and brands in both the virtual and physical world alike.”

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 http://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 the investor relations section on its website, https://www.phunware.com, as a means of complying with its disclosure obligations under Regulation FD. Accordingly, we recommend that investors should monitor the investor relations section on Phunware’s website in addition to following Phunware’s press releases, SEC filings, and public conference calls 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.

Condensed Consolidated Balance Sheets

(In thousands, except per share information)

 

June 30,

2019

 

December 31,

2018

 

(Unaudited)

 

 

Assets:

 

 

 

Current assets:

 

 

 

Cash

$

248

 

 

$

844

 

Accounts receivable, net

3,546

 

 

3,606

 

Prepaid expenses and other current assets

740

 

 

272

 

Total current assets

4,534

 

 

4,722

 

 

 

 

 

Property and equipment, net

36

 

 

66

 

Goodwill

25,817

 

 

25,821

 

Intangible assets, net

378

 

 

521

 

Deferred tax asset – long term

64

 

 

64

 

Restricted Cash

 

 

5,500

 

Other assets

187

 

 

187

 

Total assets

$

31,016

 

 

$

36,881

 

 

 

 

 

Liabilities, redeemable convertible preferred stock, and stockholders’ equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

9,083

 

 

$

9,890

 

Accrued expenses

3,357

 

 

3,028

 

Deferred revenue

2,101

 

 

2,629

 

PhunCoin deposits

1,181

 

 

 

Factored receivables payable

1,775

 

 

2,434

 

Short term notes payable – related party

 

 

1,993

 

Total current liabilities

17,497

 

 

19,974

 

 

 

 

 

Convertible note payable

250

 

 

 

Deferred tax liability

64

 

 

64

 

Deferred revenue

5,048

 

 

5,622

 

Deferred rent

14

 

 

17

 

Total liabilities

22,873

 

 

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

125,854

 

 

118,062

 

Accumulated other comprehensive loss

(421

)

 

(418

)

Accumulated deficit

(117,294

)

 

(111,820

)

Total stockholders’ equity

8,143

 

 

5,827

 

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

$

31,016

 

 

$

36,881

 

Phunware, Inc.

Condensed 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,

 

2019

 

2018

 

2019

 

2018

Net revenues

$

5,510

 

 

$

14,185

 

 

$

10,825

 

 

$

19,165

 

Cost of revenues

2,722

 

 

3,069

 

 

5,339

 

 

5,936

 

Gross profit

2,788

 

 

11,116

 

 

5,486

 

 

13,229

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing

665

 

 

1,414

 

 

1,389

 

 

3,332

 

General and administrative

3,970

 

 

3,318

 

 

7,945

 

 

7,807

 

Research and development

1,077

 

 

1,718

 

 

2,386

 

 

4,018

 

Total operating expenses

5,712

 

 

6,450

 

 

11,720

 

 

15,157

 

Operating (loss) income

(2,924

)

 

4,666

 

 

(6,234

)

 

(1,928

)

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

Interest expense

(151

)

 

(183

)

 

(339

)

 

(385

)

Fair value adjustment for warrant liabilities

 

 

 

 

 

 

(54

)

Impairment of digital currencies

 

 

(21

)

 

 

 

(334

)

Other income

13

 

 

10

 

 

17

 

 

9

 

Total other expense

(138

)

 

(194

)

 

(322

)

 

(764

)

(Loss) income before taxes

(3,062

)

 

4,472

 

 

(6,556

)

 

(2,692

)

Income tax expense

(5

)

 

 

 

(5

)

 

 

Net (loss) income

(3,067

)

 

4,472

 

 

(6,561

)

 

(2,692

)

Other comprehensive loss

 

 

 

 

 

 

 

Cumulative translation adjustment

(30

)

 

(81

)

 

(3

)

 

(27

)

Comprehensive (loss) income

$

(3,097

)

 

$

4,391

 

 

$

(6,564

)

 

$

(2,719

)

 

 

 

 

 

 

 

 

Net (loss) income per share, basic

$

(0.08

)

 

$

0.18

 

 

$

(0.19

)

 

$

(0.11

)

Net (loss) income per share, diluted

$

(0.08

)

 

$

0.17

 

 

$

(0.19

)

 

$

(0.11

)

 

 

 

 

 

 

 

 

Weighted-average shares used to compute net (loss) income per share, basic

38,810

 

 

25,396

 

 

34,537

 

 

25,174

 

Weighted-average shares used to compute net (loss) income per share, diluted

38,810

 

 

26,164

 

 

34,537

 

 

25,174

 

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

June 30,

 

Six Months Ended

June 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands)

 

(in thousands)

Net revenues

$

5,510

 

 

$

14,185

 

 

$

10,825

 

 

$

19,165

 

Less: One-time revenue adjustments

 

 

(8,428

)

 

 

 

(8,428

)

Adjusted net revenues

5,510

 

 

5,757

 

 

10,825

 

 

10,737

 

 

 

 

 

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands)

 

(in thousands)

Net (loss) income

$

(3,067

)

 

$

4,472

 

 

$

(6,561

)

 

$

(2,692

)

Add back: Depreciation and amortization

84

 

 

118

 

 

175

 

 

242

 

Add back: Interest expense

151

 

 

183

 

 

339

 

 

385

 

Less: Income tax benefit

5

 

 

 

 

5

 

 

 

EBITDA

(2,827

)

 

4,773

 

 

(6,042

)

 

(2,065

)

Less: One-time revenue adjustments

 

 

(8,428

)

 

 

 

(8,428

)

Add Back: Stock-based compensation

416

 

 

62

 

 

427

 

 

211

 

Adjusted EBITDA

$

(2,411

)

 

$

(3,593

)

 

$

(5,615

)

 

$

(10,282

)

Phunware, Inc.

Supplemental Information

(In thousands)

(Unaudited)

31-Mar-18

 

30-Jun-18

 

30-Sep-18

 

31-Dec-18

 

31-Mar-19

 

30-Jun-19

Platform subscriptions and services revenue

$

4,004

$

6,448

$

4,349

$

4,608

$

4,821

$

5,092

Less: One-time revenue adjustments

 

 

(2,106)

 

 

 

 

Adjusted platform subscriptions and services revenue

$

4,004

$

4,342

$

4,349

$

4,608

$

4,821

$

5,092

 

Contacts

PR & Media Inquiries:

Brent Brightwell

bbrightwell@phunware.com

T: (512) 537-8301

Investor Relations:

Brendhan Botkin

bbotkin@phunware.com

T: (512) 394-6837

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