Phunware, Inc. Q3 FY2024 earnings call

• Phunware's mission is to leverage mobile devices as a foundation for AI-driven personalized engagement to help businesses connect better with customers, partners, and employees.
• The company is a pioneer in mobile technology and is now focusing on mobile plus AI solutions, with a next-gen AI-driven SaaS platform launching mid-2025 to democratize mobile app creation.
• Partnership with MyCanvass to explore AI-powered solutions for civic engagement, combining mobile engagement with advanced AI capabilities for federal and local applications.
• Phunware is debt-free, has adequate resources to invest in AI, sales, and engineering, and has a robust level of liquidity for operational flexibility and growth.
• The company's legacy in mobile technology positions it well for the AI era, with a focus on scalable modular frameworks integrating with existing platforms.

Year-to-date software subscriptions and service bookings for the 9 months ended September 30, 2024 were approximately $2.2 million, a nearly 300% increase from $600,000 in 2023. Net revenues for Q3 2024 totaled approximately $665,000 compared to $1.3 million in Q3 2023 (2023 net revenue had a $300,000 contract breakage fee). YTD 2024 net revenues were $2.6 million vs $3.9 million in 2023. Gross margin for YTD 2024 was approximately 51% vs 32% in 2023; excluding noncash stock-based compensation, it was 56% vs 43%. Total operating expense for Q3 2024 was approximately $3.5 million vs $4.9 million in Q3 2023 (excluding $9 million goodwill impairment in 2023). Non-GAAP adjusted EBITDA loss for Q3 2024 was approximately $2.9 million vs $3.3 million in Q3 2023. YTD 2024 non-GAAP adjusted EBITDA loss was $7.3 million vs $13 million in 2023. Net loss from continuing operations for Q3 2024 was approximately $2.8 million or $0.25 per share vs $13.7 million or $5.72 per share in Q3 2023 (96% improvement). Cash at end of Q3 2024 was approximately $35.6 million, and by Nov 6, 2024, cash and cash equivalents were ~$100 million with no debt after utilizing the ATM equity program.

• Focus on automating the SaaS platform launch process and being cost-effective.
• Organic growth opportunities for the SaaS platform, with attention to scaling and testing price points.
• Judicious consideration of inorganic growth, looking for companies that fit market analysis, financial assessment, operational fit, technology evaluation, synergy assessment, regulatory compliance, and cultural fit.
• Using balance sheet strength to engage with enterprises and federal governments, leveraging historical legacy and building strong partnerships.

Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. Refer to risk factors described in Phunware's most recently filed annual report on Form 10-K and subsequent periodic reports filed with the SEC.

Q: Regarding some of your plans around your SaaS platform that you're set to launch sort of mid next year. Can you talk about some of your goals with that? And then do you have some of the resources that you need to get there such as staff or technology?

A: Stephen Chen says Phunware has been in mobile space for 19 years, historically could spin up apps in days/hours, currently automating back end of platform, focused on cost-effectiveness and mindful of shareholder dollars.

Q: And as a follow-up, with the balance sheet now, how do you think about growth sort of organically with some of the things you're working on and also inorganically? And then what sort of -- if it is through acquisition, what sort of companies would you be looking for?

A: Stephen Chen discusses organic growth for SaaS platform, M&A criteria including market analysis, financial assessment, operational fit, technology evaluation, synergy assessment, regulatory compliance, and cultural fit, emphasizing metric-based and rubric-based approach.

Q: Can you help us understand what exactly you're getting with MyCanvass and Campaign Nucleus? Is there a real revenue-generating business there? Or is it more about people and tech?

A: Stephen Chen talks about hyper local canvassing, data-effective process, civic engagement value, and the tremendous power of hyper localized contextual information combined with generative AI for civic engagement.

Q: Will you still predominantly focus on the U.S.? Or have you thought about international opportunities?

A: Stephen Chen says they plan to expand, but currently focus on U.S. with domestic partnerships, planning to launch pilot programs and case studies first before larger market outreach.

Q: What about the digital advertising part or opportunities out there? And might that bring in revenue quicker using the AI technologies?

A: Stephen Chen talks about focusing on transformation, engaging external sales consultant for SaaS, scalability, and profitability, shifting individuals to focus on SaaS and reducing burn while maintaining revenues.