Phunware, Inc. Q4 FY2022 earnings call

• Phunware sits at the cross-section of three markets: ~$187B mobile application market (13.4% CAGR), ~$28B location-based services (LBS) market (23.5% CAGR), and ~$3.7B iPaaS market (30% CAGR).
• SaaS products enhance user experience with mapping, wayfinding, and mobile engagement. Notable partnerships include Gaylord Hotels by Marriott (Opryland, Texan, Rockies, Gaylord Palms and National live) and Atlantis Resort in the Bahamas (over $1.2M through app in less than a year).
• Blockchain initiative: PhunWallet app with PhunBlocks game, aiming for privacy-preserving and compliant offerings. PhunWallet 1.6 introduces videos and an offer wall.
• Lyte business unit: Relocated facility in Round Rock, Texas, implemented new ERP system, with priorities including introducing workstations and optimizing unit economics.

For 2022, net revenues totaled $21.8 million. Platform revenue was $6.5 million, representing 30% of net revenues. Hardware revenue (Lyte by Phunware) was $15.3 million, accounting for 70% of net revenues. Gross margin was 23.3%, while non-GAAP adjusted gross margin was 24.3%. Platform gross margin was 53.8%. Total operating expense was $34.6 million, up from $20.5 million in the prior year. Non-GAAP adjusted EBITDA loss was $23.5 million. Net loss was $50.9 million or $0.51 per share. Backlog and deferred revenue at quarter end totaled $8 million. Cash was $2 million, debt was $9.7 million, and approximately $6 million in cash was held in digital assets.

• Expect net revenues to be relatively flat year-over-year while expecting quarter-over-quarter growth in backlog and adjusted EBITDA.
• Aim to cut year-over-year losses and push toward cash neutrality.
• Board created a strategic transactions committee to explore inorganic growth opportunities.

• Crypto winter and regulatory headwinds for the blockchain initiative.
• Economic uncertainty, including inflation and possible recession, which could impact market penetration and customer spending.

Q: Regarding strategic objectives for the MaaS platform, what are the top three?

A: Top three priorities are bookings growth, product roadmap progress, and strengthening marketing and sales execution.

Q: How to improve gross margins?

A: More no code deployments like with Marriott (quickly deploying all locations without a lot of additional code) and getting more bookings to scale support organization without adding tons of resources.

Q: On M&A, what are focus on targets?

A: Looking for companies good alignment with core strategy around enterprise SaaS offering, either complementary offering, complementary market, or technology to accelerate product roadmap, and ensuring accretive on cash or breakeven at minimum.