Phunware Inc

Previous wording

Phunware, Inc. offers a fully integrated software platform that equips companies with the products, solutions and services necessary to engage, manage and monetize their mobile application portfolios globally at scale. Our platform provides the entire mobile lifecycle of applications, media and data in one login through one procurement relationship. Our offerings include:

Current wording

We offer a mobile-application cloud-based platform that equips companies with the products, solutions and services necessary to engage, manage and monetize their mobile application portfolios. Our offerings include:

Previous wording

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 wording

A cloud-based application framework vertical solution license for iOS and Android-based mobile applications (apps). We have focused a majority of our recent sales efforts on addressing the patient experience for healthcare and the luxury guest experience for hospitality. However, our product capabilities also serve the employee experience in the workplace, the shopper experience for retail, the fan experience for sports, the traveler experience for aviation, the luxury resident experience for real estate and the student experience for education.

Previous wording

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 wording

Enterprise mobile software development kits (SDKs) including business intelligence and analytics, content management, alerts, notifications and messaging, and location-based services;

Previous wording

Application transactions for mobile audience building, user acquisition, application discovery, audience engagement and monetization, including our engagement-driven digital asset PhunToken.

Current wording

In-app advertising services for mobile audience building, user acquisition, application discovery, audience engagement and monetization.

Previous wording

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 wording

In October 2024, we announced the commencement of the development of a new generative AI-driven software development platform to enable businesses of any size to design, create, build, and deploy high-quality custom mobile applications in shorter periods of time. The platform will be designed to utilize generative AI in a manner that will enable businesses to develop and monetize custom mobile app solutions more quickly and at a lower cost, making them more accessible to small and medium-sized businesses.

Previous wording

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 wording

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 52% of our backlog as of March 31, 2025 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.

Previous wording

We report our financial results in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We also use certain non-GAAP financial measures that fall within the meaning of Securities and Exchange Commission Regulation G and Regulation S-K Item 10(e), which may provide users of the financial information with additional meaningful comparison to prior period results. Our non-GAAP financial measures include adjusted gross profit (derived from the GAAP measure of gross profit), adjusted gross margin (derived from the GAAP measure of gross margin) and adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) (derived from the GAAP measure of net loss from continuing operations) (our “non-GAAP financial measures”). Management uses these measures (i) to compare operating performance on a consistent basis, (ii) to calculate incentive compensation for our employees, (iii) for planning purposes including the preparation of our internal annual operating budget and (iv) to evaluate the performance and effectiveness of operational strategies.

Current wording

We report our financial results in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We also use certain non-GAAP financial measures that fall within the meaning of Securities and Exchange Commission Regulation G and Regulation S-K Item 10(e), which may provide users of the financial information with additional meaningful comparison to prior period results. Our non-GAAP financial measures include adjusted gross profit (derived from the GAAP measure of gross profit), adjusted gross margin (derived from the GAAP measure of gross margin) and adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) (derived from the GAAP measure of net loss) (our “non-GAAP financial measures”). Management uses these measures (i) to compare operating performance on a consistent basis, (ii) to calculate incentive compensation for our employees, (iii) for planning purposes including the preparation of our internal annual operating budget and (iv) to evaluate the performance and effectiveness of operational strategies.

Previous wording

Subscription revenue is derived from software license fees, which are comprised of subscription fees from customers licensing our Software Development Kits (SDKs), that include access to our platform. Services revenue is derived from development services around designing and building new applications or enhancing existing applications. Support revenue is comprised of support and maintenance fees of customer applications, software updates and technical support for application development services for a support term.

Current wording

Software subscription revenue is derived from software license fees, which are comprised of subscription fees from customers licensing our vertical solution application framework and SDKs, that include access to our platform. Services revenue is derived from development services around designing and building new applications or enhancing existing applications. Support revenue is comprised of support and maintenance fees of customer applications, software updates and technical support for application development services for a support term.

Previous wording

Subscriptions and services gross profit is equal to subscriptions and services revenue less the cost of personnel and related costs for our support and professional services employees, external consultants, stock-based compensation and allocated overhead. Costs associated with our development and project management teams are generally recognized as incurred. Costs directly attributable to the development or support of applications relating to platform subscription customers are included in cost of sales, whereas costs related to the ongoing development and maintenance of our software platform are expensed in research and development. As a result, platform subscriptions and services gross profit may fluctuate from period to period.

Current wording

Software subscriptions and services gross profit is equal to software subscriptions and services revenue less the cost of personnel and related costs for our support and professional services employees, external consultants, stock-based compensation and allocated overhead. Costs associated with our development and project management teams are generally recognized as incurred. Costs directly attributable to the development or support of applications relating to platform subscription customers are included in cost of sales, whereas costs related to the ongoing development and maintenance of our software platform are expensed in research and development. As a result, platform subscriptions and services gross profit may fluctuate from period to period.

Previous wording

We also generate revenue by charging advertisers to deliver advertisements (ads) to users of digitally connected devices. Depending on the specific terms of each advertising contract, we generally recognize revenue when the ad loads onto the device of a user. We generally sell our ads by cost per thousand impressions and generally, an impression results when the user has the potential to see the ad.

Current wording

We also generate revenue by charging advertisers to deliver advertisements (ads) to users of mobile connected devices. We generally sell our ads by cost per thousand impressions and recognize revenue when the ad loads onto the device of a user.

Previous wording

Application transaction gross profit is equal to application transaction revenue less cost of revenue associated with application transactions. Application transaction gross profit is impacted by the cost of advertising traffic we pay to our suppliers and amount of traffic which we can purchase from those suppliers. As a result, our application transaction gross profit may fluctuate from period to period due to variable costs of advertising traffic.

Current wording

Advertising gross profit is equal to advertising revenue less cost of revenue associated with advertising traffic we pay to our suppliers and amount of traffic which we can purchase from those suppliers. As a result, our advertising gross profit may fluctuate from period to period due to variable costs of advertising traffic.

Previous wording

Gross margin measures gross profit as a percentage of revenue. Gross margin is generally impacted by the same factors that affect changes in the mix of platform and hardware revenue.

Current wording

Gross margin measures gross profit as a percentage of revenue. Gross margin is generally impacted by the same factors that affect changes in the mix of revenue.

Previous wording

Sales and Marketing Expense. Sales and marketing expense is comprised of compensation, commission expense, variable incentive pay and benefits related to sales personnel, along with travel expenses, other employee related costs, including stock-based compensation and expenses related to marketing programs and promotional activities. In order to grow revenues, we may increase the size and spend of our sales and marketing organization. As a result, our sales and marketing expenses may increase in absolute dollars but may fluctuate as a percentage of our total revenue from period to period.

Current wording

Sales and Marketing Expense. Sales and marketing expense is comprised of compensation, commission expense, variable incentive pay and benefits related to sales personnel, along with travel expenses, other employee related costs, including stock-based compensation and expenses related to marketing programs and promotional activities. Our sales and marketing expense may increase in absolute dollars as we increase our sales and marketing organizations as we plan to increase revenue but may fluctuate as a percentage of our total revenue from period to period.

Previous wording

General and Administrative Expense. General and administrative expense is comprised of compensation and benefits of administrative personnel, including variable incentive pay and stock-based compensation, bad debt expenses and other administrative costs such as facilities expenses, professional fees and travel expenses. We incur general and administrative expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and listing standards of Nasdaq, additional insurance expenses, investor relations activities and other administrative and professional services. We also expect, over time, to increase the size of our general and administrative function to support the growth of our business. As a result, our general and administrative expenses may increase in absolute dollars but may fluctuate as a percentage of our total revenue from period to period.

Current wording

General and Administrative Expense. General and administrative expense is comprised of compensation and benefits of administrative personnel, including variable incentive pay and stock-based compensation, bad debt expenses and other administrative costs such as facilities expenses, professional fees and travel expenses. We expect to incur additional general and administrative expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and listing standards of Nasdaq, additional insurance expenses, investor relations activities and other administrative and professional services. We also expect to increase the size of our general and administrative function to support the growth of our business. As a result, our general and administrative expenses may increase in absolute dollars but may fluctuate as a percentage of our total revenue from period to period.

Previous wording

Research and Development Expense. Research and development expenses consist primarily of employee compensation costs and overhead allocation. We believe that continued investment in our platform is important for our growth. As a result, our research and development expenses may increase in absolute dollars but may fluctuate as a percentage of revenue from period to period.

Current wording

Research and Development Expense. Research and development expenses consist primarily of employee compensation costs and overhead allocation. We believe that continued investment in our platform is important for our growth. As a result, our research and development expenses may increase in absolute dollars as our business grows but may fluctuate as a percentage of revenue from period to period.

Previous wording

We also may seek additional debt financing to fund the expansion of our business or to finance strategic acquisitions in the future, which may have an impact on our interest expense.

Current wording

During 2024, interest expense included interest related to our outstanding debt, including amortization of discounts and deferred issuance costs. We also may seek additional debt financing to fund the expansion of our business or to finance strategic acquisitions in the future, which may have an impact on our interest expense.

Previous 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.

Current wording

Total gross profit decreased 0.2 million, or (31.5%), three months ended March 31, 2025 compared to the corresponding period in 2024, primarily as a result of the revenue items described above.

Previous 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.

Current wording

Sales and marketing expense increased $0.5 million, or 102.3% for the three months ended March 31, 2025, compared to the corresponding periods of 2024, primarily due to an increase in corporate marketing and sales consultants.

Previous 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.

Current wording

General and administrative expense increased $1.0 million, or 40.2%, for the three months ended March 31, 2025 compared to the corresponding period of 2024, due to a $1.5 million increase in professional fees, mainly related to legal fees for the Company's Wild Basin litigation. This increase was partially offset by a $0.5 million decrease in stock-based compensation expense.

Previous 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.

Current wording

Research and development expense increased $0.3 million, or 68.0%, for the three months ended March 31, 2025, compared to the corresponding periods of 2024, primarily as a result of an increase in payroll and related expenses as a result of higher headcount and an increase in consulting fees for engineering consultants.

Previous wording

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.

Current wording

During the three months ended March 31, 2025, we recorded other income of $1.1 million, primarily as a result of interest income from cash and cash equivalents. During the three months ended March 31, 2024, we recorded other income of approximately $0.6 million, primarily as a result of gain on extinguishment of debt on our 2022 Promissory Note, as amended.

Previous 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.

Current wording

As of March 31, 2025, we held total cash of $109.7 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

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.

Current wording

On June 4, 2024, we entered into an Equity Distribution Agreement with Canaccord Genuity LLC (“Canaccord”), as representative of certain agents, pursuant to which we could offer and sell, from time to time, shares of our common stock for aggregate gross proceeds of up to $120 million, through the agents. On November 1, 2024, we entered into an Amended and Restated Equity Distribution Agreement (amending the June 4, 2024 Equity Distribution Agreement) with Canaccord, and filed a registration statement on Form S-3MEF relating to the Company's existing registration statement on Form S-3 originally filed in 2022, pursuant to which we increased the aggregate amount of shares of our common stock that we were entitled to sell under our at-the-market facility to an aggregate offering price of approximately $171.5 million. During the three months ended March 31, 2025, we sold an aggregate of 14,210 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 $0.1 million. On February 9, 2025, the aforementioned registration statement on Form S-3 expired (including the subsequent registration statement on Form S-3MEF), and as a result, the Amended and Restated Equity Distribution Agreement with Canaccord terminated.

Previous wording

Our future capital requirements will depend on many factors, including our pace of growth, subscription renewal activity, the timing and extent of spend to support development efforts, the expansion of sales and marketing activities and the market acceptance of our products and services. We believe that it is likely we will in the future enter into arrangements to acquire or invest in complementary businesses, technologies and intellectual property rights. We may be required to seek additional equity or debt financing, or issue securities under our effective registration statement described above. If additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us, or at all. If we are unable to raise additional capital when desired and/or on acceptable terms, our business, operating results and financial condition could be adversely affected.

Current wording

Our future capital requirements will depend on many factors, including our pace of growth, subscription renewal activity, the timing and extent of spend to support development efforts, additional investments in AI technology and infrastructure, the expansion of sales and marketing activities and the market acceptance of our products and services. We believe that it is likely we will in the future enter into arrangements to acquire or invest in additional companies and assets, technologies, intellectual property rights and digital assets. We may be required to seek additional equity or debt financings. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us, or at all. If we are unable to raise additional capital when desired and/or on acceptable terms, our business, operating results and financial condition could be adversely affected.

Previous 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.

Current wording

We utilized $3.3 million of cash from operating activities during the three months ended March 31, 2025, resulting in a net loss of $3.7 million. The net loss included non-cash charges of $0.2 million, primarily consisting of stock-based compensation. In addition, certain changes in our operating assets and liabilities resulted in a cash increase of $0.2 million, primarily relating to an increase in accounts payable and accrued expenses partially offset by an increase in accounts receivable.

Previous 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.

Current wording

We utilized $5.5 million of cash from operating activities during the three months ended March 31, 2024, resulting in a net loss of $2.3 million. The net loss included non-cash charges of $0.4 million, primarily consisting of stock-based compensation. In addition, certain changes in our operating assets and liabilities resulted in a cash decrease of $3.5 million, primarily relating to a decrease in accounts payable and accrued expenses.

Previous 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.

Current wording

Our financing activities during the three months ended March 31, 2025 and 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 on the Company's financing activities.