Phunware, Inc.

Previous 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:

Current wording

We offer a fully integrated software platform that equips companies with the products, solutions and services necessary to engage, manage and monetize their mobile application portfolios and audiences. Our mobile software subscriptions and services offerings include a combination of application frameworks, SDKs, cloud-based services and related capabilities designed to support digital engagement, operational workflows and user experiences and include the following:

Previous 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.

Current wording

A cloud-based application framework vertical solution license for iOS and Android-based mobile experiences, enabling customers to deploy, manage and extend functionality across mobile applications and connected environments. We have focused a majority of our recent sales efforts on addressing the luxury guest experience for hospitality and the patient experience for healthcare. However, our product and service 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

Development services for customers who wish to have to have a customized application experience; and

Current wording

Development services for customers who wish to have a customized application experience; and

Previous wording

In October 2024, we announced the commencement of our investment into the field of artificial intelligence (AI). We plan to use AI in various contexts within our internal systems and products and services offerings.

Current wording

In October 2024, we announced the commencement of our investments into artificial intelligence (AI). We use, and plan to use, AI in various contexts within our internal systems and our software platform, products and services offerings.

Previous wording

The AI technology we initially used in the context of our platform is generative AI. We actively utilize generative AI tools to streamline internal processes and workflows for mobile app creation and development. We also plan to use predictive and agentic AI tools in the future to further enhance these processes. By applying these technologies, we expect to improve the quality and personalization of our mobile apps for customers and drastically reduce the time required to adapt our mobile app development framework to meet specific customer needs. We anticipate that these efficiencies will enable the Company to reduce mobile app development costs significantly and make high-quality customized mobile apps more accessible and affordable for small to medium sized businesses and enterprises.

Current wording

The AI technology we have initially used in the context of our platform to date is generative AI. We actively utilize generative AI tools to streamline internal processes and workflows for mobile app creation and development. We presently utilize generative AI in product features which are available for purchase by customers. We also plan to use predictive and agentic AI tools in the future to further enhance these processes and to create additional platforms, products and services involving predictive and agentic AI and related small language models. By developing and applying these technologies, we expect to improve the quality and personalization of our mobile apps for customers and drastically reduce the time required to adapt our mobile app development framework to meet specific customer needs. We anticipate that these efficiencies will enable the Company to reduce mobile app development costs significantly and make high-quality mobile apps more accessible and affordable for all sizes of businesses and enterprises, specifically in the hospitality, healthcare and other large property-related verticals.

Previous wording

We recently developed an AI Concierge generative AI product feature with functionalities to serve as a human-like interface in our mobile apps for our customers to enhance customer engagement with users and provide customers with innovative opportunities to further monetize their products and services with users. We are currently engaging with existing customers to run pilot testing programs with our AI Concierge feature in their existing mobile applications.

Current wording

We recently developed an AI Concierge generative AI product feature with functionalities to serve as a human-like interface in our mobile apps for hospitality customers to enhance customer engagement with guests and other visitors and provide customers with innovative opportunities to further monetize their products and services with those users. We are selling this AI product feature to current and existing customers. We also designed and demonstrated, at a major hospitality conference, an agentic AI hospitality-related product feature with functionalities to interact with and perform tasks for customer guests and are further developing this type of AI product feature and related functionalities as part of our platform for current and existing customers. For instance, we anticipate this type of AI product feature will be able to provide information about and book reservations for guests at restaurants located on customer properties and for other events. Our agentic AI product feature is still in the development and testing phase.

Previous wording

We continue to invest in AI, including generative AI and agentic AI, and in the integration of AI capabilities into our products and services. We will continue to evaluate our investments in AI and align investment and resource allocation in the products and markets where we believe we can generate the greatest benefits for customers and opportunities for shareholder returns. Our AI related investments are in the research and development phase, and we may choose not to continue pursuing some of our AI investments and some of the investments we pursue may not be successful. Refer to Risk Factors, located in Part I, Item 1A of our Annual Report on Form 10-K filed with the SEC on March 31, 2025.

Current wording

We continue to invest in AI, including generative, predictive and agentic AI, and in the integration of AI capabilities into our platforms, products and services. We will continue to evaluate our investments in AI and align investment and resource allocation in the platforms, products and markets where we believe we can generate the greatest benefits for customers and opportunities for shareholder returns. Our AI related investments are in the research and development phase. Refer to "Risk Factors", located in Part I, Item 1A of our Annual Report on Form 10-K filed with the SEC on March 27, 2026.

Previous wording

We intend to continue investing for long-term growth. We have also invested and expect to continue investing in the expansion of our ability to market, sell and provide our current and future products and services to customers globally. We plan to continue investing in the development and improvement of new and existing products and services to address customers’ needs. We currently do not expect to be profitable in the near future.

Current wording

We intend to continue investing in AI, and continue innovating and evolving our platforms, products and services, for long-term growth and enterprise value. We have also invested and expect to continue investing in the expansion of our ability to market, sell and provide our current and future products and services to customers globally. We plan to continue investing in the development and improvement of new platforms, products and services to address customers’ needs. We currently do not expect to be profitable in the near future.

Previous wording

Our management regularly monitors certain financial measures to track the progress of our business against internal goals and targets. We believe that the most important of these measures include backlog and deferred revenue.

Current wording

Our management regularly monitors certain financial measures to track the progress of our business against internal goals and targets. We believe that the most important of these measures include bookings, backlog and deferred revenue.

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 48% of our backlog as of September 30, 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.

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 75% of our backlog as of March 31, 2026 will be invoiced during the subsequent 12-month period.

Previous wording

The follow table sets forth our deferred revenue and backlog:

Current wording

The follow table sets forth our backlog and deferred revenue:

Previous 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, software 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 software 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, software subscriptions and services gross profit may fluctuate from period to period.

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. 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.

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, travel expenses, other employee related costs such as 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

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.

Current wording

Research and Development Expense. Research and development expenses consist primarily of employee compensation costs, software platform and AI development and maintenance 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

Net revenue decreased $0.8 million, or (32.0%), for the nine months ended September 30, 2025 compared to the corresponding period in 2024, as a result of a decrease in advertising campaigns mainly due to softening market demand from advertising agency partners.

Current wording

Net revenue decreased by approximately $0.15 million, or (21.2%), for the three months ended March 31, 2026, compared to the corresponding period in 2025, as a result of a decrease in development fees related to customer contract deliveries.

Previous wording

Sales and marketing expense increased $0.2 million, or 29.2% for the three months ended September 30, 2025, compared to the corresponding period in 2024, due to an increase in sales consultants as a result of increased investment in our sales function after cost cutting measures instituted in 2024.

Current wording

Sales and marketing expense decreased approximately $0.07 million, or (7.9%) for the three months ended March 31, 2026, compared to the corresponding period in 2025, due to a decrease in full-time headcount, offset by an increase in sales and marketing related consultants.

Previous wording

During the three months ended September 30, 2025 and 2024, we recorded other income of approximately $1.1 million and $0.4 million, respectively, primarily as a result of interest income earned from cash and cash equivalents.

Current wording

During the three months ended March 31, 2026 and 2025, we recorded other income of approximately $0.83 million and $1.09 million, respectively, primarily as a result of interest income earned from cash and cash equivalents.

Previous wording

As of September 30, 2025, we held total cash of $103.8 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, 2026, we held total cash of approximately $97.9 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

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.

Current wording

Our future capital requirements will depend on many factors, including our pace of growth, subscription renewal activity, the timing and extent of spending to support development efforts, additional investments in AI technology platform and systems 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, digital assets and build and develop additional platforms and systems for our products and services and create new products and services. 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 $9.3 million of cash from operating activities during the nine months ended September 30, 2025, resulting in a net loss of $9.3 million. The net loss included non-cash charges of $0.6 million, primarily consisting of stock-based compensation. In addition, certain changes in our operating assets and liabilities resulted in a cash decrease of $0.6 million.

Current wording

We utilized $2.7 million of cash from operating activities during the three months ended March 31, 2026, resulting in a net loss of $3.2 million. The net loss included non-cash charges of $0.1 million, primarily consisting of stock-based compensation. In addition, certain changes in our operating assets and liabilities resulted in a cash increase of $0.3 million.

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 lease liability payments.

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 did not have any investing activities during the nine months ended September 30, 2025 and 2024.

Current wording

We did not have any investing activities during the three months ended March 31, 2026 and 2025.

Previous wording

Our financing activities during the nine months ended September 30, 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.

Current wording

We did not have any financing activities during the three months ended March 31, 2026. Our financing activities during the three months ended March 31, 2025 consisted of 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.