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Phunware Reports Second Quarter 2021 Financial Results


AUSTIN, Texas, Aug. 12, 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 second quarter ended June 30, 2021.

“We were extremely encouraged by the continued operational momentum for our business during Q2 despite the ongoing pandemic, as we further accelerated our MaaS platform vision and adoption across a number of key fronts including new product introduction and indirect channel expansion,” said Alan S. Knitowski, President, CEO and Co-Founder of Phunware. “Not only have we formally rolled out our entire blockchain-enabled Mobile Loyalty Ecosystem specific to PhunToken, PhunCoin and PhunWallet on a direct-to-consumer basis as promised, but we have also executed a brand new, global, multi-year distribution agreement with an anchor Fortune 500 distribution partner for our indirect channel. Looking ahead, I am confident that the near-term and long-term opportunities for our business are promising, as we enter the second half of the year with a solid balance sheet, a growing pipeline of customers and a robust slate of enterprise cloud solutions for mobile.”

Second Quarter 2021 Summary Financial Results

  • Net Revenues for the quarter totaled $1.4 million
  • Multiscreen-as-a-Service (MaaS) Platform Subscriptions and Services Revenues were $1.2 million
  • Net Loss was $(8.3) million
  • Net Loss per Share was $(0.12)
  • Non-GAAP Adjusted EBITDA Loss was $(2.7) million

“We are pleased with the efforts our team has made to build the pipeline and drive new customer and partner relationships in the face of continued headwinds from the COVID-19 pandemic,” said Matt Aune, CFO of Phunware. “These relationships take time to build, but we are pleased to see that total backlog is trending up quarter over quarter and we are working hard to build off that momentum into the second half of 2021. Phunware is well positioned for success as we continue to reduce liabilities, eliminate debt and focus efforts on both organic and inorganic growth opportunities.”

Recent Business Highlights

  • Notable Corporate Developments:
  • Notable Customer and Partner Wins:
  • Notable Product Updates:

Conference Call Information

Phunware management will host a conference call today (August 12, 2021) at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) to discuss its financial results for the second quarter ended June 30, 2021.

Interested parties may access the conference call by dialing 844-369-8774 in the United States, or 862-298-0844 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 (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)

  June 30,
2021
  December 31,
2020
  (Unaudited)    
Assets      
Current assets:      
Cash $ 2,714     $ 3,940  
Accounts receivable, net of allowance for doubtful accounts of $242 and $356 at June 30, 2021 and December 31, 2020, respectively 659     664  
Digital currencies 773      
Prepaid expenses and other current assets 1,586     304  
Total current assets 5,732     4,908  
Property and equipment, net     13  
Goodwill 25,915     25,900  
Intangible assets, net 54     111  
Deferred tax asset 537     537  
Restricted cash 91     91  
Right-of-use asset 1,606      
Other assets 276     276  
Total assets $ 34,211     $ 31,836  
Liabilities and stockholders’ equity (deficit)      
Current liabilities:      
Accounts payable $ 7,039     $ 8,462  
Accrued expenses 1,972     5,353  
Accrued legal settlement 1,500     3,000  
Lease liability 516      
Deferred revenue 2,010     2,397  
PhunCoin deposits 1,202     1,202  
Current maturities of long-term debt, net 83     4,435  
Warrant liability 1,836     1,614  
Total current liabilities 16,158     26,463  
Long-term debt 3,720     3,762  
Long-term debt – related party 195     195  
Deferred tax liability 537     537  
Deferred revenue 1,779     2,678  
Lease liability 1,343      
Deferred rent     180  
Total liabilities 23,732     33,815  
Stockholders’ equity (deficit)      
Common stock, $0.0001 par value; 1,000,000,000 shares authorized at June 30, 2021 and December 31, 2020; 72,742,689 and 56,380,111 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively 7     6  
Additional paid-in capital 177,254     144,156  
Accumulated other comprehensive loss (323 )   (338 )
Accumulated deficit (166,459 )   (145,803 )
Total stockholders’ equity (deficit) 10,479     (1,979 )
Total liabilities and stockholders’ equity (deficit) $ 34,211     $ 31,836  
               

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

  Three Months Ended
June 30,
  Six Months Ended
June 30,
  2021   2020   2021   2020
Net revenues $ 1,436     $ 2,213     $ 3,082     $ 4,853  
Cost of revenues 1,124     768     1,816     1,859  
Gross profit 312     1,445     1,266     2,994  
               
Operating expenses:              
Sales and marketing 639     277     1,195     882  
General and administrative 3,021     3,760     5,779     7,705  
Research and development 846     378     1,898     1,239  
Total operating expenses 4,506     4,415     8,872     9,826  
Operating loss (4,194 )   (2,970 )   (7,606 )   (6,832 )
               
Other expense:              
Interest expense (1,845 )   (460 )   (4,064 )   (561 )
Loss on extinguishment of debt (2,184 )   (81 )   (7,952 )   (81 )
Impairment of digital currency (776 )       (776 )    
Gain (loss) on change in fair value of warrant liability 663         (222 )    
Other income (expense) 43         (36 )    
Total other expense (4,099 )   (541 )   (13,050 )   (642 )
Loss before taxes (8,293 )   (3,511 )   (20,656 )   (7,474 )
Income tax expense              
Net loss (8,293 )   (3,511 )   (20,656 )   (7,474 )
Other comprehensive income (loss):              
Cumulative translation adjustment 5     (3 )   15     (75 )
Comprehensive loss $ (8,288 )   $ (3,514 )   $ (20,641 )   $ (7,549 )
               
Net loss per common share, basic and diluted $ (0.12 )   $ (0.08 )   $ (0.30 )   $ (0.18 )
               
Weighted-average common shares used to compute net loss per share, basic and diluted 71,620     41,869     68,103     40,982  

Consolidated Statements of Cash Flows
(In thousands)

  Six Months Ended
June 30,
  2021   2020
Operating activities      
Net loss $ (20,656 )   $ (7,474 )
Adjustments to reconcile net loss to net cash used in operating activities:      
Amortization of debt discount and deferred financing costs 2,770     227  
Loss on change in fair value of warrant liability 222      
Loss on extinguishment of debt 7,952     81  
Impairment of digital currencies 776      
Stock-based compensation 2,438     1,750  
Other adjustments 142     79  
Changes in operating assets and liabilities:      
Accounts receivable 237     815  
Prepaid expenses and other assets (416 )   (193 )
Accounts payable (1,282 )   356  
Accrued expenses (3,334 )   877  
Accrued legal settlement (1,500 )    
Lease liability payments (434 )    
Deferred revenue (1,286 )   (1,268 )
Net cash used in operating activities (14,371 )   (4,750 )
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 9,981     5,436  
Proceeds from related party bridge loans     560  
Payments on senior convertible notes (25,095 )    
Payments on related party notes     (455 )
Net repayments on factoring agreement     (714 )
Proceeds from PhunCoin deposits     (200 )
Proceeds from exercise of options to purchase common stock 70     85  
Proceeds from sales of common stock, net of issuance costs 29,670      
Series A convertible preferred stock redemptions and dividend payments      
Net cash provided by financing activities 14,626     4,712  
Effect of exchange rate on cash and restricted cash 16     (79 )
Net decrease in cash and restricted cash (1,226 )   (117 )
Cash and restricted cash at the beginning of the period 4,031     362  
Cash and restricted cash at the end of the period $ 2,805     $ 245  
Supplemental disclosure of cash flow information:      
Interest paid $ 1,287     $ 328  
Income taxes paid $     $  
  Six Months Ended
June 30,
  2021   2020
Supplemental disclosures of non-cash financing activities:      
Proceeds not received related to sales of common stock $ 867     $  
Issuance of common stock for payment of legal, earned bonus and board of director fees $ 66     $ 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

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 June 30,   Six Months Ended June 30,
(in thousands) 2021   2020   2021   2020
Net loss $ (8,293 )   $ (3,511 )   $ (20,656 )   $ (7,474 )
Add back:  Depreciation and amortization 25     38     58     88  
Add back:  Interest expense 1,845     460     4,064     561  
EBITDA (6,423 )   (3,013 )   (16,534 )   (6,825 )
Add back: Stock-based compensation 1,383     1,115     2,438     1,750  
Add back: Loss on extinguishment of debt 2,184     81     7,952     81  
Add back: Impairment of digital currencies 776         776      
(Less) Add back: (Gain) Loss on change in fair value of warrant liability (663 )       222      
Adjusted EBITDA $ (2,743 )   $ (1,817 )   $ (5,146 )   $ (4,994 )
  Three Months Ended June 30,   Six Months Ended June 30,
(in thousands, except percentages) 2021   2020   2021   2020
Gross profit $ 312     $ 1,445     $ 1,266     $ 2,994  
Add back:  Amortization of intangibles 3     6     7     13  
Add back:  Stock-based compensation 323     62     532     113  
Adjusted gross profit $ 638     $ 1,513     $ 1,805     $ 3,120  
Adjusted gross margin 44.4 %   68.4 %   58.6 %   64.3 %

Supplemental Information
(In thousands, except percentages)

  Three Months Ended June 30,   Change
(in thousands, except percentages) 2021   2020   Amount   %
Net Revenues              
Platform subscriptions and services $ 1,180     $ 2,023     $ (843 )   (41.7 ) %
Application transaction 256     190     66     34.7   %
Net revenues $ 1,436     $ 2,213     $ (777 )   (35.1 ) %
Platform subscriptions and services as a percentage of net revenues 82.2 %   91.4 %        
Application transactions as a percentage of net revenues 17.8 %   8.6 %        
  Six Months Ended June 30,   Change
(in thousands, except percentages) 2021   2020   Amount   %
Net Revenues              
Platform subscriptions and services $ 2,701     $ 4,414     $ (1,713 )   (38.8 ) %
Application transaction 381     439     (58 )   (13.2 ) %
Net revenues $ 3,082     $ 4,853     $ (1,771 )   (36.5 ) %
Platform subscriptions and services as a percentage of net revenues 87.6 %   91.0 %        
Application transactions as a percentage of net revenues 12.4 %   9.0 %        

Phunware Inc



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