Phunware, Inc. Q2 FY2023 earnings call

• Brought in new CFO Troy Reisner and implemented strong cost reductions. - Shifted lead generation to account-based approach and welcomed new customers like Thumper Pond Resort. - Exhibited at HITEC show in Toronto, generating over 50 direct leads from hospitality entities. - Made progress on mapping and engagement modules, improved locate tool. - Lyte unit introduced first workstations, with plans to optimize for profitability and evaluate strategic options. - Right-sized organization in July, reducing workforce by ~33% and expecting annual run rate cost savings of up to $5 million.

Net revenues for the second quarter of 2023 totaled approximately $3.5 million. Platform revenue represented 37% ($1.3 million) and hardware revenue represented 63% ($2.2 million). Gross margin was 13.1% (16.3% non-GAAP adjusted), with platform gross margin at 41.4% and hardware gross margin at negative 3.6%. A significant contributor to the drop in hardware gross margin was an increase in inventory reserve of approximately $300,000 during the quarter.

• Evaluating strategic options for Lyte Technology. - Focus on reducing cash burn and continuing sales momentum in the second half of 2023. - Expecting to see significant business in healthcare space later in the year. - Planning to issue PhunCoin this summer as part of the product road map.

• Significant drop in hardware gross margin due to inventory reserve increase. - Uncertainties related to evaluating strategic options for Lyte Technology. - Potential impact of external factors on smart building initiatives (e.g., higher interest rates).

Q: Thoughts on broader market approach in hospitality and progress in healthcare vertical?

A: Have multiple channels to reach hospitality brands, pipeline rich with healthcare and other verticals like smart workplace with significant business expected later in 2023.

Q: Evaluation of Lyte Technology and impact of workforce reduction on P&L?

A: Evaluating options for Lyte Technology; workforce reduction cost savings of $5 million, with full benefit to be seen in Q4 and part in Q3.

Q: Update on PhunCoin and Thumper Pond win details?

A: Planning to issue PhunCoin this summer; Thumper Pond win came from direct sales force.

Q: Talk on Houston luxury high rise and vertical potential?

A: Have partner involved in Houston opportunity, solution fits smart residential buildings, with plans for door access and other integrations.