Phunware Inc
For the period ended Sep 30, 2024. Filed Nov 8, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 8, 2024
PHUN$1.75+1.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-09.
0001493152-24-031015
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-08.
0000950170-24-124197
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 92 previous paragraphs and 112 current paragraphs.
74 unchanged; 16 reworded; 21 added; 1 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 20 previous and 15 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (21)
Current report
Key Events & Recent Developments
Current report
On October 22, 2024, Michael Snavely tendered his resignation as Chief Executive Officer, and as a member of our Board of Directors, effective immediately. On the same date, our Board of Directors appointed Mr. Stephen Chen, our then existing Chairperson of our Board of Directors, as Interim Chief Executive Officer. In connection therewith, while Mr. Chen will continue to serve as member of the Board of Directors, effective October 22, 2024, Mr. Chen resigned as Chairperson of the Board and as a member of the Company’s Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee.
Current report
On November 1, 2024, Troy Reisner notified the Company that he intends to step down as our Chief Financial Officer and depart the Company on or after November 15, 2024 and prior to November 30, 2024. The Company has initiated a search for potential candidates to replace Mr. Reisner.
Current report
Please see the section captioned"Liquidity and Capital Resources" for additional discussion on additional recent developments.
Current report
Enterprise mobile software development kits (SDKs) including content management, location-based services, marketing automation, business intelligence and analytics, alerts, notifications and messaging, audience engagement and audience monetization;
Current report
Integration of our SDK licenses into existing applications maintained by our customers;
Current report
Cloud-based vertical solutions, which are off-the-shelf, iOS- and Android-based mobile application portfolios, solutions and services that address: the patient experience for healthcare, the shopper experience for retail, the fan experience for sports, the traveler experience for aviation, the luxury resident experience for real estate, the luxury guest experience for hospitality, the student experience for education and the generic user experience for all other verticals and applications; and
Current report
Application transactions for mobile audience building, user acquisition, application discovery, audience engagement and monetization, including our engagement-driven digital asset PhunToken.
Current report
In October 2024, we announced the commencement of the development of a new generative AI-driven software development platform that will democratize access to world-class design, user experience and content creation so that businesses of any size can design, create, build, and deploy high-quality custom mobile applications in days or even hours. The platform is designed to harness and integrate the power of generative AI in a manner that will enable businesses to quickly develop and monetize custom mobile app solutions at a lower cost, making them accessible to small and medium-sized businesses.
Current report
Bookings represents actual contracted value for a period, whether invoiced or not, to be invoiced and recognized as revenue over time. We believe that bookings reflects the current demand for our products and services and provides us insight into how well our sales and marketing efforts are performing.
Current report
Backlog represents future amounts to be invoiced under our active contracts. At any point in the contract term, there can be amounts that we have not yet been contractually able to invoice. Until such time as these amounts are invoiced, they are not recorded in revenue, deferred revenue, accounts receivable or elsewhere in our condensed consolidated financial statements and are considered by us to be backlog. We expect backlog to fluctuate up or down from period to period for several reasons, including the timing and duration of customer contracts, varying billing cycles and the timing and duration of customer renewals. We reasonably expect approximately 38% of our backlog as of September 30, 2024 will be invoiced during the subsequent 12-month period, primarily due to the fact that our contracts are typically one to three years in length.
Current report
Deferred revenue consists of amounts that have been invoiced but have not yet been recognized as revenues as of the end of a reporting period. Together, the sum of deferred revenue and backlog represents the total billed and unbilled contract value yet to be recognized in revenues and provides visibility into future revenue streams.
Current report
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 our ongoing operating performance for a particular period;
Current report
Our non-GAAP financial measures do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of ongoing operations; and
Current report
Other companies in our industry may calculate our non-GAAP financial measures differently than we do, limiting their usefulness as comparative measures.
Current report
Adjusted gross profit and adjusted gross margin are non-GAAP financial measures. We believe that adjusted gross profit and adjusted gross margin provide supplemental information with respect to gross profit and gross margin regarding ongoing performance. We define adjusted gross profit as net revenues less cost of revenue, adjusted to exclude one-time revenue adjustments, stock-based compensation and amortization of intangible assets. We define adjusted gross margin as adjusted gross profit as a percentage of net revenues.
Current report
Adjusted EBITDA is a non-GAAP financial measure. We believe adjusted EBITDA provides helpful information with respect to operating performance as viewed by management, including a view of our business that is not dependent on (i) the impact of our capitalization structure and (ii) items that are not part of day-to-day operations. We define adjusted EBITDA as net loss plus (i) interest expense, net of interest income (ii) income tax expense, (iii) depreciation, and further adjusted for (iv) non-cash impairment, (v) valuation adjustments and (vi) stock-based compensation expense.
Current report
Total gross profit increased $0.1 million, or 6.0%, for the nine months ended September 30, 2024 compared to the corresponding period of 2023, as a result of a decrease of $0.3 million in stock-based compensation expense. Although the Company experienced a decrease of revenue, the company improved gross margin on customer projects in 2024.
Current report
Impairment of goodwill
Current report
We recorded an impairment of goodwill related to our Phunware operating segment for the three and nine months ended September 30, 2023. Refer to Note 3, "Supplemental Information,"in the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion.
Current report
During the three months ended September 30, 2024, we recorded other income of $0.4 million, primarily as a result of interest income from cash and cash equivalents. In addition, we incurred a $2.8 million charge related to a partial settlement of a lawsuit with an offsetting $2.8 million recovery to reflect proceeds to be paid by insurance carriers related to the settlement. Refer to Note 7, “Commitments and Contingencies,” in the notes to the condensed consolidated financial statements included in Item I, Part I of this Quarterly Report on Form 10-Q for further discussion related to the settlement and insurance recovery. During the three months ended September 30, 2023, we recorded other expense of approximately $0.4 million, primarily as a result of interest expense and a loss on extinguishment of debt on our 2022 Promissory Note, as amended.
Removed paragraphs (1)
Previous report
Total gross profit increased $0.4 million, or 63.2%, for the six months ended June 30, 2024 compared to the corresponding period of 2023, as a result of a $1.1 million decrease in cost of revenue which is comprised of $0.6 million in headcount cost as a result of an organizational change in the manner in which we deliver customer apps, $0.2 million in travel cost related to a customer onboarding in 2023 and $0.3 million in stock-based compensation. The decrease in costs were partially offset by a $0.7 million decrease in revenue noted above.
Reworded paragraphs (16)
Previous wording
Net revenues decreased $0.3 million, or (21.9)%, for the three months ended June 30, 2024 compared to the corresponding period in 2023, as a result of additional development fees recognized in 2023 and timing of advertising campaigns.
Current wording
Net revenues decreased $0.6 million, or (46.9)%, for the three months ended September 30, 2024 compared to the corresponding period in 2023, as a result of additional development fees recognized in 2023 and timing of advertising campaigns.
Previous wording
Net revenues decreased $0.7 million, or (26.8)%, for the six months ended June 30, 2024 compared to the corresponding period in 2023, primarily due to $0.3 million due to a specific customer contract termination, $0.2 million in revenue recognized in 2023 related to a customer onboarding and $0.1 million for customers who were customers in 2023, but are no longer customers in 2024.
Current wording
Net revenues decreased $1.3 million, or (33.3)%, for the nine months ended September 30, 2024 compared to the corresponding period in 2023, primarily due to $0.3 million due to a specific customer contract termination, $0.2 million in revenue recognized in 2023 related to a customer onboarding and $0.2 million for customers who were customers in 2023, but are no longer customers in 2024. Further decreases of $0.3 million are the result of advertising campaigns.
Previous wording
Total gross profit decreased $0.1 million, or (12.1)%, three months ended June 30, 2024 compared to the corresponding period in 2023, primarily as a result of the issues resulting in decreased revenue described above.
Current wording
Total gross profit decreased $0.3 million, or (49)%, three months ended September 30, 2024 compared to the corresponding period in 2023, primarily as a result of the issues resulting in decreased revenue described above.
Previous wording
Sales and marketing expense decreased $0.5 million, or (46.7)% and $0.9 million, or (47.3)%, for the three and six months ended June 30, 2024, respectively, compared to the corresponding periods of 2023, primarily due to a decrease in payroll and related expenses as a result of lower headcount.
Current wording
Sales and marketing expense decreased $0.2 million, or (26.2)% and $1.2 million, or (41.1)%, for the three and nine months ended September 30, 2024, respectively, compared to the corresponding periods of 2023, primarily due to a decrease in payroll and related expenses as a result of lower headcount.
Previous wording
General and administrative expense decreased $3.6 million, or (43.3)%, for the six months ended June 30, 2024 compared to the corresponding period of 2023, due to a $1.4 million decrease in payroll and related expenses as a result of lower headcount, $1.1 million decrease in professional expenses, mainly related to legal fees and $1.0 million decrease in stock-based compensation expense.
Current wording
General and administrative expense decreased $0.7 million, or (26.3)%, for the three months ended September 30, 2024 compared to the corresponding period of 2023, due to a $0.5 million decrease in payroll and related expenses as a result of lower headcount, $0.4 million decrease in stock-based compensation expense and $0.1 million in facilities costs. These decreases were partially offset by an increase of $0.3 million decrease in professional expenses, mainly related to legal fees.
Previous wording
General and administrative expense decreased $1.9 million, or (46.1)%, for the three months ended June 30, 2024 compared to the corresponding period of 2023, due to a $0.5 million decrease in payroll and related expenses as a result of lower headcount, $0.7 million decrease in professional expenses, mainly related to legal fees and $0.7 million decrease in stock-based compensation expense.
Current wording
General and administrative expense decreased $4.3 million, or (38.1)%, for the nine months ended September 30, 2024 compared to the corresponding period of 2023, due to $1.8 million decrease in payroll and related expenses as a result of lower headcount, $1.5 million decrease in stock-based compensation expense, $0.7 million decrease in professional expenses, mainly related to legal fees and $0.3 million decrease in facilities expenses.
Previous wording
Research and development expense decreased $0.7 million, or (59.1)%, and $2.0 million, or (67.1)%, for the three and six months ended June 30, 2024, respectively, compared to the corresponding periods of 2023, primarily as a result of decrease in payroll and related expenses as a result of lower headcount.
Current wording
Research and development expense decreased $0.4 million, or (41.3)%, and $2.4 million, or (60.4)%, for the three and nine months ended September 30, 2024, respectively, compared to the corresponding periods of 2023, primarily as a result of decrease in payroll and related expenses as a result of lower headcount.
Previous wording
During the six months ended June 30, 2024, we recorded other income of $0.9 million, primarily as a result of interest income and a recognized gain on the extinguishment of the 2022 Promissory Note. During the six months ended June 30, 2023, we recorded other income of $4.7 million, primarily as a result of gains on sales of our digital asset holdings. This was partially offset due to interest expense related to the 2022 Promissory Note, as amended.
Current wording
During the nine months ended September 30, 2024, we recorded other income of $1.3 million, primarily as a result of interest income and a recognized gain on the extinguishment of the 2022 Promissory Note. In addition, we incurred a $2.8 million charge related to a partial settlement of a lawsuit with an offsetting $2.8 million recovery to reflect proceeds to be paid by insurance carriers related to the settlement. Refer to Note 7, “Commitments and Contingencies,” in the notes to the condensed consolidated financial statements included in Item I, Part I of this Quarterly Report on Form 10-Q for further discussion related to the settlement and insurance recovery. During the nine months ended September 30, 2023, we recorded other income of $4.2 million, primarily as a result of gains on sales of our digital asset holdings. This was partially offset due to interest expense related to the 2022 Promissory Note.
Previous wording
As of June 30, 2024, we held total cash of $20.4 million, all of which was held in the United States. We have a history of operating losses and negative operating cash flows. As we continue to focus on growing our revenues, we expect these trends to continue into the foreseeable future.
Current wording
As of September 30, 2024, we held total cash of $35.5 million, all of which was held in the United States. We have a history of operating losses and negative operating cash flows. As we continue to focus on growing our revenues, we expect these trends to continue into the foreseeable future.
Previous wording
On August 22, 2023, we entered into a common stock purchase agreement with Lincoln Park Capital Fund, LLC (“Lincoln Park”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, we have the right, but not the obligation, to sell to Lincoln Park up to $30.0 million in value of shares of our common stock from time to time over the 24-month term of the purchase agreement. Concurrently with entering into the purchase agreement, we also entered into a registration rights agreement with Lincoln Park pursuant to which the Company agreed to register the sale of the shares of the Company’s common stock that have been and may be issued to Lincoln Park under the purchase agreement pursuant to the Company’s existing shelf registration statement on Form S-3. During the six-month period ended June 30, 2024, we did not sell any shares to Lincoln Park. As of the date of this Report, $29.0 million in value of shares of our common stock remains issuable pursuant to the purchase agreement with Lincoln Park.
Current wording
On August 22, 2023, we entered into a common stock purchase agreement with Lincoln Park Capital Fund, LLC (“Lincoln Park”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, we have the right, but not the obligation, to sell to Lincoln Park up to $30.0 million in value of shares of our common stock from time to time over the 24-month term of the purchase agreement. Concurrently with entering into the purchase agreement, we also entered into a registration rights agreement with Lincoln Park pursuant to which the Company agreed to register the sale of the shares of the Company’s common stock that have been and may be issued to Lincoln Park under the purchase agreement pursuant to the Company’s existing shelf registration statement on Form S-3. During the nine months ended September 30, 2024, we did not sell any shares to Lincoln Park. On October 24, 2024, we terminated the common stock purchase agreement with Lincoln Park effective October 25, 2024.
Previous wording
During the six months ended June 30, 2024, we sold an aggregate of 500,051 shares of our common stock under our At Market Issuance Sales Agreement with Wainwright and Equity Distribution Agreement with Canaccord for aggregate gross cash proceeds of $4.2 million. Transaction costs were $0.2 million. From July 1, 2024 through the date of this Report, we sold additional shares of our common stock under the Equity Distribution Agreement with Canaccord for aggregate gross proceeds $16.6 million. As of the date of this Report, up to $101.7 million of shares of our common stock remain available for offer and sale pursuant to the Equity Distribution Agreement with Canaccord.
Current wording
During the nine months ended September 30, 2024, we sold an aggregate of 3,611,187 shares of our common stock under our At Market Issuance Sales Agreement with Wainwright and Equity Distribution Agreement with Canaccord for aggregate gross cash proceeds of approximately $22.2 million. Transaction costs were $0.7 million. From October 1, 2024 through the date of this Report, we sold additional shares of our common stock under the Equity Distribution Agreement, as amended, with Canaccord for aggregate gross proceeds $81.1 million. On November 1, 2024, we entered into an Amended and Restated Equity Distribution Agreement with Canaccord, as representative of certain agents, pursuant to which we increased the aggregate amount of shares of our common stock that we may sell under our at-the-market facility to an aggregate offering price of $171,520,779. As of the date of this Report, up to $70.8 million of shares of our common stock remain available for offer and sale pursuant to the Amended and Restated Equity Distribution Agreement with Canaccord. Refer to Note 10 “Subsequent Events” in the notes to the condensed consolidated financial statements included Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on our Amended and Restated Equity Distribution Agreement with Canaccord.
Previous wording
We utilized $8.2 million of cash from operating activities during the six months ended June 30, 2024, resulting in a net loss of $4.9 million. The net loss included non-cash charges of $1.2 million, primarily consisting of stock-based compensation. In addition, certain changes in our operating assets and liabilities resulted in a cash decrease of $4.5 million, primarily relating to a decrease in accounts payable and accrued expenses.
Current wording
We utilized $10.6 million of cash from operating activities during the nine months ended September 30, 2024, resulting in a net loss of $7.7 million. The net loss included non-cash charges of $1.6 million, primarily consisting of stock-based compensation. In addition, certain changes in our operating assets and liabilities resulted in a cash decrease of $4.3 million, primarily relating to a decrease in accounts payable and accrued expenses and lease liability payments.
Previous wording
We utilized $12.6 million of cash from operating activities during the six months ended June 30, 2023, resulting in a net loss from continuing operations of $8.1 million. The net loss included a gain on the sale of digital assets of $5.3 million and other non-cash charges of approximately $3.8 million, primarily consisting of stock-based compensation. In addition, certain changes in our operating assets and liabilities resulted in a cash decrease of $1.5 million, primarily relating to a decrease in deferred revenue. Further cash decreases were the result of $1.4 million from the discontinued operations of Lyte.
Current wording
We utilized $15.9 million of cash from operating activities during the nine months ended September 30, 2023, resulting in a net loss from continuing operations of $21.8 million. The net loss included non-cash charges of $9.0 million primarily related to an impairment of goodwill and stock-based compensation, offset by gain on the sale of digital assets. In addition, certain changes in our operating assets and liabilities resulted in a cash decrease of $1.7 million, primarily relating to a decrease in deferred revenue and lease liability payments. Further cash decreases were the result of $1.3 million from the discontinued operations of Lyte.
Previous wording
Investing activities for the six months ended June 30, 2023 consisted mainly of the sales of our digital asset holdings.
Current wording
Investing activities for the nine months ended September 30, 2023 consisted mainly of the sales of our digital asset holdings.
Previous wording
Our financing activities during the six months ended June 30, 2023 consisted of payments on our 2022 Promissory Note of $4.3 million, $0.5 million for repurchases of shares of our common stock and $1.0 million in proceeds from the sale of our common stock.
Current wording
Our financing activities during the nine months ended September 30, 2023 consisted of $6.9 million in proceeds from the sale of our common stock. We also had payments on our 2022 Promissory Note of $5.1 million and $0.5 million for repurchases of shares of our common stock.
Previous wording
Our financing activities during the six months ended June 30, 2024 consisted of various sales of our common stock. Refer to the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information.
Current wording
Refer to the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information on the Company's financing activities.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Our financing activities during the nine months ended September 30, 2024 consisted of various sales of our common stock.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
During the three months ended June 30, 2024, we recorded other income of $0.3 million, primarily as a result of interest income from cash on-hand. During the three months ended June 30, 2023, we recorded other income of approximately $1.7 million, primarily as a result of gains on sales of our digital asset holdings. This was partially offset due to interest expense related to the 2022 Promissory Note, as amended.