Phunware, Inc. Q1 FY2024 earnings call

• 2024 Q1 is a strong start with sales traction, new logos and bookings up, solutions gaining traction in hospitality and healthcare with strong ROI, renewing and extending customer relationships. - Costs down, gross margin dramatically improved. - Executed term sheet for patent monetization. - Troy briefed on Q1 financial results, including net revenues, gross profit, operating expenses, non-GAAP measures, and balance sheet strength. - Internal net revenue goal for 2024 is $6 million to $8 million, back-end loaded to second half. - Started strategically investing in sales and marketing teams in Q2. - Attended 36th Annual ROTH Conference and plan to attend HITEC 2024 Industry Conference.

For the first quarter of 2024, net revenues were approximately $921,000, exceeding internal plan by 5%. Gross profit was $524,000 for Q1 2024 versus $73,000 for Q1 2023, resulting in gross margin of 56.9% and 5.4% respectively, and adjusted gross margin of 61.8% compared to 23.4% for the respective quarters. Total operating expense was approximately $3.4 million for Q1 2024 versus approximately $6.8 million for Q1 2023, a 49.8% decrease. Adjusted operating expense was approximately $2.8 million in Q1 '24 compared to approximately $5.7 million in Q1 '23. Non-GAAP adjusted EBITDA loss was $2 million in Q1 '24 compared to a loss of $5.2 million in Q1 '23, a 61.1% reduction in the loss. Net loss for Q1 2024 was approximately $2.3 million or $0.33 per share compared to a net loss of approximately $4.3 million or $2.07 per share for Q1 2023.

• Internal net revenue goal for 2024 is between $6 million and $8 million, back-end loaded to the second half of the year. - Began strategically investing in sales and marketing teams in Q2 to contribute to achieving net revenue plan for 2024.

• Forward-looking statements reflect current views based on assumptions subject to risks and uncertainties disclosed in the Risk Factors section of SEC filings. Actual results may differ materially from these assumptions.

Q: Could you talk about how much of the Q1 bookings is from existing expansions and renewals versus net new logos?

A: Very roughly 50-50 between renewal of existing business and brand new logo wins, including new logo wins from major hospitality brands and renewal of tentpole customers.

Q: What is the time line for turning on some of those customers from bookings to actual revenue generation?

A: Our implementation time frame is roughly 30 days.

Q: Any color on the monetization of the patents, what opportunities and when it might roll out?

A: Video stream patent monetization expected to happen at the end of this calendar year. For additional patent families, expect to file specimen lawsuits against infringers and follow with letter writing campaign, but can't give when dollars will start coming in.

Q: Any color on the shape of margins in the back end specifically?

A: Margins are going to continue to be in the range seen in Q1, though quarter's margin might ebb and flow in terms of timing of revenue and cost recognition.

Q: Could you give color on the hire in the hospitality side and additional investments in that vertical?

A: Hired Paul Ruffino and [Dannie Nunez], Paul to access decision makers in hospitality and help evolve product, [Dannie] for convention attendee in-event experience. Progress expected with implementation time frame of ~30 days for bookings to contribute to revenues.

Q: How should we look at the breakdown between subscription and services and application transaction going forward?

A: Focused on SaaS business with 1 to 3-year contracts for software license fee. Application transactions business will be largely same with slight increase in 2024 over 2023. Services will be a very trivial amount of revenues moving forward.

Q: Have you seen any change in competition and how do you think the sales cycle is going to go throughout this year?

A: Competitors are small app companies building wayfinding and other apps for hospitality. Our ability to access multiple properties and portfolios is increasing, and expect additional material announcements on go to market strategy in next quarter or 2.