GlobeNewswire Inc | Nov 11, 2021 04:05PM EST

November 11, 2021

AUSTIN, Texas, Nov. 11, 2021 (GLOBE NEWSWIRE) -- Phunware, Inc. (NASDAQ: PHUN) (Phunware or the Company), a fully-integrated enterprise cloud platform for mobile that provides products, solutions, data and services for brands worldwide, today announced financial results for its third quarter ended September30, 2021.

We are extremely excited to post 50% sequential organic growth in net revenues quarter-over-quarter, demonstrating that we are now reaping the benefits of our direct and indirect go-to-market strategies for our MaaS enterprise cloud platform for mobile, said Alan S. Knitowski, President, CEO and Co-Founder of Phunware. Our team executed strongly over the past quarter on multiple fronts, executing deals with several prominent new customers and partners across different verticals, including scaling our dual token economy while actively pursuing our inorganic growth strategy and closing the acquisition of Lyte Technology. In conjunction with the organic growth announced, the closing of Lyte also adds immediate profitability, backlog and growth that will allow us to leverage a new, strategic distribution network to consumers to further scale and accelerate our blockchain initiatives. This past year has certainly been a pivotal and encouraging period for Phunware and I am confident that as we head into 2022, we will be firing on all cylinders with a dynamic organic and inorganic growth strategy that will have us poised for immense growth.

Third Quarter 2021 Summary Financial Results

-- Net Revenues for the quarter totaled $2.2 million -- Multiscreen-as-a-Service (MaaS) Platform Subscriptions and Services Revenues were $1.8 million -- Net Income was $0.4 million -- Net Income per Share was $0.01 -- Non-GAAP Adjusted EBITDA Loss was $(2.5) million

We are pleased with the momentum achieved in the third quarter and are positioned well to finish the year with a great fourth quarter, said Matt Aune, CFO of Phunware. As we look forward to 2022, we are excited to have a fully funded operating plan that gives us the ability to drive organic and inorganic growth. In addition to executing on our operational objectives, the Company successfully raised more than $65 million and now holds approximately 129 bitcoin. Rolling forward, we are committed to not only growing our digital currency holdings in the future, but we also expect to add Decentralized Finance (DeFi) to our corporate treasury activities.

Recent Business Highlights

-- Notable Corporate Developments: Appointed Former Congressman and Senior Technology Executive to its Board of DirectorsClosed Acquisition of High Performance Computer Provider Lyte TechnologyAcquired Additional Bitcoin

-- Notable Customer and Partner Wins: Launched Smart City Solution for the City of PasadenaCox Communications and Phunware Collaborate to Deliver a Premier Mobile Smart Hospital SolutionAnnounced Partnership with HID Global to Deliver Smart Workplace Solution on MobileVirginia Hospital Center Selects Phunware & Kontakt.io for Comprehensive Mobile Healthcare SolutionDignity Health, Yavapai Regional Medical Center Selects Phunware for Comprehensive Mobile Healthcare SolutionPhunware to Build New Headlines+ Website and Mobile Application Portfolio for IntermarketsAnnounced Partnership with Cooper Lighting Solutions to Integrate MaaS with Trellix

-- Notable Product Updates: Launched PhunCoinAnnounced New PhunWallet Release and Ten Million PhunToken SweepstakesIntegrated with Epic - MaaS Digital Front Door Now Available on Epic App Orchard MarketplacePhunware Now Accepts Bitcoin for Lyte Personal Computers

Conference Call Information

Phunware management will host a conference call today (November 11, 2021) at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) to discuss its financial results for the third quarter ended September30, 2021.

Interested parties may access the conference call by dialing 877-545-0523 in the United States, or 973-528-0016 from international locations with access code: 948061. The conference call will be broadcast live and available for replay here and via the investor relations section of the Companys website at investors.phunware.com.

Safe Harbor Clause and Forward-Looking Statements

This press release includes forward-looking statements. All statements other than statements of historical facts contained in this press release, including statements regarding our future results of operations and financial position, business strategy and plans, and our objectives for future operations, are forward-looking statements. The words anticipate, believe, continue, could, estimate, expect, expose, intend, may, might, opportunity, plan, possible, potential, predict, project, should, will, would and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements contained in this press release are based on our current expectations and beliefs concerning future developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading Risk Factors in our filings with the Securities and Exchange Commission (the SEC), including our reports on Forms 10-K, 10-Q, 8-K and other filings that we make with the SEC from time to time. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. These risks and others described under Risk Factors in our SEC filings may not be exhaustive.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this press release. In addition, even if our results or operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this press release, those results or developments may not be indicative of results or developments in subsequent periods.

Disclosure Information

Phunware uses and intends to continue to use its Investor Relations website as a means of disclosing material nonpublic information and for complying with its disclosure obligations under Regulation FD. Accordingly, investors should monitor the Companys Investor Relations website, in addition to following the Companys press releases, SEC filings, public conference calls, presentations and webcasts.

About Phunware, Inc.

Everything You Need to Succeed on Mobile Transforming Digital Human Experience

Phunware, Inc. (NASDAQ: PHUN), is the pioneer of Multiscreen-as-a-Service (MaaS), an award-winning, fully integrated enterprise cloud platform for mobile that provides companies the products, solutions, data and services necessary to engage, manage and monetize their mobile application portfolios and audiences globally at scale. Phunwares Software Development Kits (SDKs) include location-based services, mobile engagement, content management, messaging, advertising, loyalty (PhunCoin & Phun) and analytics, as well as a mobile application framework of pre-integrated iOS and Android software modules for building in-house or channel-based mobile application and vertical solutions. Phunware helps the worlds most respected brands create category-defining mobile experiences, with more than one billion active devices touching its platform each month. For more information about how Phunware is transforming the way consumers and brands interact with mobile in the virtual and physical worlds, visit https://www.phunware.com, https://www.phuncoin.com, https://www.phuntoken.com, and follow @phunware, @phuncoin and @phuntoken on all social media platforms.

Phunware PR & Media Inquiries:Email: press@phunware.comPhone: (512) 693-4199

Phunware Investor Relations:Matt Glover and John YiGateway Investor RelationsEmail: PHUN@gatewayir.comPhone: (949) 574-3860

Consolidated Balance Sheets(In thousands, except share and per share information)

September December 30, 31, 2021 2020 (Unaudited) Assets Current assets: Cash $ 882 $ 3,940 Accounts receivable, net of allowance for doubtfulaccounts of $606 and $356 at September30, 2021 and 1,223 664 December31, 2020, respectivelyDigital currencies 789 ? Prepaid expenses and other current assets 745 304 Total current assets 3,639 4,908 Property and equipment, net ? 13 Goodwill 25,883 25,900 Intangible assets, net 38 111 Deferred tax asset 537 537 Restricted cash 91 91 Right-of-use asset 1,486 ? Other assets 276 276 Total assets $ 31,950 $ 31,836 Liabilities and stockholders? equity (deficit) Current liabilities: Accounts payable $ 7,085 $ 8,462 Accrued expenses 2,417 5,353 Accrued legal settlement ? 3,000 Lease liability 486 ? Deferred revenue 1,815 2,397 PhunCoin deposits 1,202 1,202 Current maturities of long-term debt, net 83 4,435 Warrant liability 1,762 1,614 Total current liabilities 14,850 26,463 Long-term debt 849 3,762 Long-term debt - related party 195 195 Deferred tax liability 537 537 Deferred revenue 1,262 2,678 Lease liability 1,232 ? Deferred rent ? 180 Total liabilities 18,925 33,815 Stockholders? equity (deficit) Common stock, $0.0001 par value; 1,000,000,000 sharesauthorized at September30, 2021 and December31,2020; 75,556,118 and 56,380,111 shares issued and 8 6 outstanding as of September30, 2021 and December31,2020, respectivelyAdditional paid-in capital 180,887 144,156 Accumulated other comprehensive loss (356 ) (338 )Accumulated deficit (167,514 ) (145,803 )Total stockholders? equity (deficit) 13,025 (1,979 )Total liabilities and stockholders? equity (deficit) $ 31,950 $ 31,836

Consolidated Statements of Operations and Comprehensive Income (Loss)(In thousands, except per share information)

Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020Net revenues $ 2,160 $ 3,130 $ 5,242 $ 7,983 Cost of revenues 1,026 898 2,842 2,757 Gross profit 1,134 2,232 2,400 5,226 Operating expenses: Sales and marketing 715 383 1,910 1,265 General and administrative 3,296 4,276 9,075 11,981 Research and development 1,160 572 3,058 1,811 Legal settlement ? 4,500 ? 4,500 Total operating expenses 5,171 9,731 14,043 19,557 Operating loss (4,037 ) (7,499 ) (11,643 ) (14,331 ) Other income (expense): Interest income (expense) 7 (1,362 ) (4,057 ) (1,923 )Loss on extinguishment of ? (950 ) (7,952 ) (1,031 )debtImpairment of digital ? ? (776 ) ? currencyGain (loss) on change infair value of warrant 1,501 1,244 (148 ) 1,244 liabilityGain on forgiveness of PPP 2,850 ? 2,850 ? loanOther income 51 ? 15 ? Total other income (expense) 4,409 (1,068 ) (10,068 ) (1,710 )Income (loss) before taxes 372 (8,567 ) (21,711 ) (16,041 )Income tax expense ? ? ? ? Net income (loss) 372 (8,567 ) (21,711 ) (16,041 )Other comprehensive income (loss):Cumulative translation (33 ) 47 (18 ) (28 )adjustmentComprehensive income (loss) $ 339 $ (8,520 ) $ (21,729 ) $ (16,069 ) Net income (loss) per common $ 0.01 $ (0.19 ) $ (0.31 ) $ (0.38 )share, basicNet income (loss) per common $ ? $ (0.19 ) $ (0.31 ) $ (0.38 )share, diluted Weighted-average commonshares used to compute net 74,347 44,304 70,185 42,089 income (loss) per share,basicWeighted-average commonshares used to compute net 74,699 44,304 70,185 42,089 income (loss) per share,diluted

Consolidated Statements of Cash Flows(In thousands)

Nine Months Ended September 30, 2021 2020Operating activities Net loss $ (21,711 ) $ (16,041 )Adjustments to reconcile net loss to net cash used in operating activities:Amortization of debt discount and deferred financing 2,770 1,217 costsLoss (gain) on change in fair value of warrant 148 (1,244 )liabilityLoss on extinguishment of debt 7,952 1,031 Impairment of digital currencies 776 ? Gain on forgiveness of PPP loan (2,850 ) ? Stock-based compensation 3,933 3,458 Other adjustments 297 145 Changes in operating assets and liabilities: Accounts receivable (272 ) 551 Prepaid expenses and other assets (345 ) (94 )Accounts payable (1,236 ) 536 Accrued expenses (2,891 ) 1,332 Accrued legal settlement (3,000 ) 4,500 Lease liability payments (662 ) ? Deferred revenue (1,998 ) (1,906 )Net cash used in operating activities (19,089 ) (6,515 )Investing activities Purchase of digital currencies (1,497 ) ? Net cash used in investing activities (1,497 ) ? Financing activities Proceeds from borrowings, net of issuance costs 9,980 10,207 Proceeds from related party bridge loans ? 560 Payments on senior convertible notes (25,116 ) (3,948 )Payments on related party notes ? (200 )Net repayments on factoring agreement ? (638 )Proceeds from exercise of options to purchase common 73 95 stockProceeds from sales of common stock, net of issuance 32,610 1,341 costsNet cash provided by financing activities 17,547 7,417 Effect of exchange rate on cash and restricted cash (19 ) (30 )Net (decrease) increase in cash and restricted cash (3,058 ) 872 Cash and restricted cash at the beginning of the 4,031 362 periodCash and restricted cash at the end of the period $ 973 $ 1,234 Interest paid $ 1,315 $ 681 Income taxes paid $ ? $ ?

Nine Months Ended September 30, 2021 2020Supplemental disclosures of non-cash financing activities: Proceeds not yet received for sales of common stock $ 97 $ ? Issuance of common stock for payment of legal, earned bonus $ 66 $ 1,239 and board of director feesIssuance of common stock upon partial conversions of senior $ ? $ 2,266 convertible noteReacquisition of equity component of senior convertible note $ ? $ (1,388 )Equity classified cash conversion feature of senior $ ? $ 219 convertible note

Non-GAAP Financial Measures and Reconciliation

Our non-GAAP financial measures include adjusted gross profit, adjusted gross margin and adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") (our "non-GAAP financial measures"). Our non-GAAP financial measures should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. They are not measurements of our financial performance under GAAP and should not be considered as alternatives to revenue or net loss, as applicable, or any other performance measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other businesses. Our non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our operating results as reported under GAAP. Some of these limitations include: (i) 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 its ongoing operating performance for a particular period, (ii) Our non-GAAP financial measures do not reflect the impact of certain charges resulting from matters we consider not to be indicative of ongoing operations, and (iii) other companies in our industry may calculate our non-GAAP financial measures differently than we do, limiting their usefulness as comparative measures.

We compensate for these limitations to our non-GAAP financial measures by relying primarily on our GAAP results and using our non-GAAP financial measures only for supplemental purposes. Our non-GAAP financial measures include adjustments for items that may not occur in future periods. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our business and complicate comparisons of our internal operating results and operating results of other peer companies over time. Each of the normal recurring adjustments and other adjustments described in this paragraph help management with a measure of our operating performance over time by removing items that are not related to day-to-day operations or are non-cash expenses.

Reconciliation of GAAP to Non-GAAP Financial Measures(In thousands, except percentages)

Three Months Ended Nine Months Ended September 30, September 30,(in thousands) 2021 2020 2021 2020Net income (loss) $ 372 $ (8,567 ) $ (21,711 ) $ (16,041 )Add back:Depreciation and 17 33 75 120 amortization(Less) Add back:Interest (7 ) 1,362 4,057 1,923 (income) expenseEBITDA 382 (7,172 ) (17,579 ) (13,998 )Add back: Stock-based 1,495 1,708 3,933 3,458 compensationAdd back: Legal settlement ? 4,500 ? 4,500 Add back: Loss on ? 950 7,952 1,031 extinguishment of debtAdd back: Impairment of ? ? 776 ? digital currenciesLess: gain on forgiveness (2,850 ) ? (2,850 ) ? of PPP loan(Less) add back: (Gain)loss on change in fair (1,501 ) (1,244 ) 148 (1,244 )value of warrant liabilityAdjusted EBITDA $ (2,474 ) $ (1,258 ) $ (7,620 ) $ (6,253 )

Three Months Ended Nine Months Ended September 30, September 30,(in thousands, except percentages) 2021 2020 2021 2020Gross profit $ 1,134 $ 2,232 $ 2,400 $ 5,226 Add back:Amortization of ? 4 7 17 intangiblesAdd back:Stock-based compensation 352 104 884 217 Adjusted gross profit $ 1,486 $ 2,340 $ 3,291 $ 5,460 Adjusted gross margin 68.8 % 74.8 % 62.8 % 68.4 %

Supplemental Information(In thousands, except percentages)

Three Months Ended Change September 30,(in thousands, except 2021 2020 Amount %percentages)Net Revenues Platform subscriptions and $ 1,771 $ 2,860 $ (1,089 ) (38.1)services %Application transaction 389 270 119 44.1%Net revenues $ 2,160 $ 3,130 $ (970 ) (31.0) %Platform subscriptions andservices as a percentage of 82.0 % 91.4 % net revenuesApplication transactions as a 18.0 % 8.6 % percentage of net revenues

Nine Months Ended Change September 30, 2021(in thousands, except 2021 2020 Amount %percentages)Net Revenues Platform subscriptions and $ 4,472 $ 7,274 $ (2,802 ) (38.5)services %Application transaction 770 709 61 8.6%Net revenues $ 5,242 $ 7,983 $ (2,741 ) (34.3) %Platform subscriptions andservices as a percentage of 85.3 % 91.1 % net revenuesApplication transactions as a 14.7 % 8.9 % percentage of net revenues