Phunware Q2 2024 Earnings Call Transcript

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Provided by Quartr
August 8, 2024

There are 6 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. Good afternoon, and welcome to the Funderwear's Second Quarter Conference Call. All participants are in a listen only mode. Participants of this call are advised that the audio of this conference call is being broadcast live over the Internet and is also being recorded for playback purposes. A webcast replay of the call will be available approximately 1 hour after the end of the call through August 8, 2025.

Operator

I would now like to turn the call over to Joey Delahuzzi of CORE IR, the company's Investor Relations firm. Please go ahead, sir.

Speaker 1

Thank you, operator. Good afternoon and thank you for participating in today's conference call. Earlier this afternoon, the company released its financial results for the quarter ended June 30, 2024. A copy of that press release can be found on the company's website at www funware.com by selecting Investors under the About tab from the corporate homepage. Joining me on today's earnings call from FundWear's management team are Mike Snavely, Chief Executive Officer and Troy Reisner, Chief Financial Officer.

Speaker 1

During this call, management will be making forward looking statements, including statements that address FundWear's expectations for future performance or operational results. Forward looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in FundWear's most recently filed Annual Report on Form 10 ks and subsequent periodic reports filed with the SEC and FundWear's press release that accompanies this call, particularly the cautionary statements in them. The content of this call contains time sensitive information that is accurate only as of today, August 8, 2024. Except as required by law, Fundware disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call.

Speaker 1

It is now my pleasure to turn the call over to CEO, Mike Snavely.

Speaker 2

Thanks, Joey, and good afternoon to everyone on the call. During the Q2 of 2024, we've continued building upon the momentum begun during our Q1. In quarter 2, we delivered 100 percent customer retention, strengthened our bench of advisors within the hospitality sector and most recently became part of the FTSE Russell Microcap Index. In the first half of twenty twenty four, our customer bookings, which are signed contracts with clients that generate revenues over the course of the multi year contract period, have already exceeded bookings for all of 2023 even as we preserve cash by reducing our team. This is a testament to the effectiveness and efficiency of our revamped sales team and our evolved sales model, which continues drive a strong and consistent pipeline, including over $7,000,000 in new pipeline identified so far in the Q3.

Speaker 2

As leaders in the mobile applications platform industry, I think it's valuable to take a moment and review what sets us apart. We provide location based services, content management, mobile engagement, audience monetization and application analytics that help our clients at every stage of mobile application lifecycle management. We help businesses create their ideal mobile app, monetize their audiences and create hyper personalized mobile experiences, all in the interest of ensuring our clients' customers fully utilize their offerings through mobile interactions. We've been in this business for about 15 years and we are its pioneers. The Funware platform is a fully integrated enterprise cloud for mobile devices that provides our clients with products, solutions, data and services necessary to engage with their audiences globally and manage and monetize their mobile app portfolios globally and at scale.

Speaker 2

Our model provides a faster time to market, requires less investment of resources and technical expertise and does not require customer managed integrations. We create a white label product that is fully brandable, industry specific, configurable and with reusable modules that offer over the air app updates for continuous learning and testing without app store approvals. Unlike other white label application services, the Funware application framework creates native applications that leverage device specific capabilities such as location technologies, sensors and operating system specific design patterns and guidelines. Because of the depth and scalability of our platform, we believe there are many other industries that we can serve. During the Q2, we plan to begin executing on elements of our go forward strategies to continue our growth and diversify our opportunities matrix.

Speaker 2

In our core markets, hospitality and healthcare, we will prudently increase marketing spend and build innovative programs to derive awareness and revenue. We are also focused on hiring and making productive new account executives, while also partnering with industry leaders to reach additional opportunities and to make the Funware the top of our prospects list. Our solution delivers strong ROI, which is driving new sales conversions in cementing the relationships with existing customers, which leads to that 100% customer retention stat I mentioned earlier. We are also seeing interest from the operators of multi property portfolios from regional resort destinations to some of the largest hospitality flags in the world. In addition to the organic growth strategies mentioned above, we also intend to grow in hospitality and elsewhere by investing in M and A.

Speaker 2

We are actively evaluating several potential transactions and may have announcements shortly. To identify the next growth markets, we are investing in research development and expect to reclaim our crown as an innovation leader. This will result in enhancements to and additional uses for our core product offering. We envision building more innovation capacity around our team of talented engineers and product managers by utilizing near and offshore engineering resources as needed. We expect this focus to bring forth new and differentiated products to serve markets beyond hospitality and healthcare.

Speaker 2

Now I'd like to turn the call over to Troy, who will review our financial results in more detail. Troy?

Speaker 3

Thanks, Mike, and good afternoon, everyone. I'd like to thank you for joining us today for a review of our Q2 of 2024 financial performance. As usual, I'll be discussing GAAP financial measures unless otherwise specifically noted. Our press release, 8 ks and website provide a reconciliation of all GAAP to non GAAP financial results. As Mike indicated, of particular note is our bookings growth.

Speaker 3

Bookings is a forward looking metric that reflects the commitment from our customers to pay FundWear money for subscriptions and services that we provide over time. When we use the term bookings, it will reflect the total contract value with the customer that was executed within the period defined. Software bookings in 2024 have increased approximately 6 23% 939% for the Q2 of 2024 and the 6 month period then ended respectively as compared to the 2023 prior periods. Revenues the Q2 of 2024 were $1,000,000 nearly a 10% increase over the Q1 of 2024. And for the 6 month period ended June 30, 2024 revenues were $1,900,000 The decrease of approximately 0.7 $1,000,000 or 26.8 percent for the 6 months ended June 30, 2024 compared to the corresponding period in 2023 was primarily due to a customer breakage fee in 2023.

Speaker 3

Gross profit for the 3 months ended June 30, 2024 was 470 dollars which is consistent with the prior year period. Gross profit for the 6 months ended June 30, 2024 was $994,000 an increase of approximately $400,000 or 63% compared to the corresponding period in 2023. Total operating expenses for the 3 months ended June 30, 2024 were $3,400,000 which represents a decrease of over $3,200,000 or 48.6 percent from the same period 1 year ago. For the 6 months ended June 30, 2024, operating expenses were $6,800,000 which is a decrease of $6,500,000 or 49.2 percent from the same period ended June 30, 2023. On previous calls, I've shared the nature of our focus areas and these operating expense reductions have resulted from the new management team's execution of doing what we said we would do.

Speaker 3

Excluding non cash stock based compensation of approximately $1,300,000 from the 6 month period in 2024, our monthly operating expense run rate was approximately $930,000 per month as compared to approximately $1,800,000 per month for the prior year 6 month period. As Mike noted above, we plan to begin investing in sales and marketing, so we do expect a modest increase in this run rate over the back half of twenty twenty four. Net loss for the Q2 of 2024 was $2,600,000 or a per share loss of $0.32 as compared to $6,500,000 or a per share loss of $3.10 in the year ago quarter. The net loss for the 6 months ended June 30, 2024 was $4,900,000 or a per share loss of $0.65 as compared to a net loss of $10,800,000 or a per share loss $5.18 from the same period in 2023. Our balance sheet remains strong and as of June 30, we had cash of 20 point $4,000,000 In addition, during July, we opportunistically added approximately $16,200,000 of cash through net proceeds from selling approximately 2,700,000 shares via our ATM.

Speaker 3

Our cash position now provides the certainty and stability we need to navigate our path to profitability and to make the investments necessary to accelerate and sustain our growth. That concludes my prepared remarks And I'd like to turn the call back over to Mike for any remaining comments. Mike?

Speaker 2

Thank you, Troy. As these numbers demonstrate, we're diligently working on increasing our foothold within the hospitality and healthcare markets, while consciously controlling costs. I want to take a moment to acknowledge the tremendous work Fundware. We now look forward to scaling the core of Fundware and reaching new markets, creating new solutions and continuing to innovate. I also wish to acknowledge and thank our loyal shareholders who have entrusted us with the mantle to drive FundWear forward.

Speaker 2

Thank you for your trust. We are honored by it and are dedicated to delivering lasting shareholder value. Now I'd like to turn the call over to the operator so that we can begin the question and answer session. Operator?

Operator

Thank Your first question comes from the line of Darren Aftahi of ROTH Capital. The line is open.

Speaker 4

Hi. This is Dylan on for Darren. Thanks for taking my questions. To start, Mike, when we talk about investing in R and D and some new products for other markets, could you maybe talk about what exactly you need in terms of technology wise and why those other markets might be different from the hospitality and resort style that you're going after right now?

Speaker 2

Yes. Excuse me, sure enough, we have built, I mean, over the last 15 years, really an enormous capacity to deliver mobile applications at scale globally. And we have had that scale to 25,000,000 concurrent users at a video on demand streaming context and otherwise throughout the history of the company. What we're looking to do is to really point that terrific technology asset toward continually larger markets. So hospitality is a terrific market.

Speaker 2

We like it. We are really making some progress in that market as you can see from the numbers that we've just shown. But we believe that there are other and additional and substantially larger markets that we can point our technology stack at. So R and D is going to be more about identifying those additional larger markets that we can go point our tech at and then probably some evolution and modification of the platform to meet the unique needs of those markets.

Speaker 4

Got it. Thank you. And then in terms of bookings, like obviously another really strong quarter. I guess like when you're looking at 3 of your largest customers renewing, is that accounting for most of the strength you're seeing so far? Or how much is coming from new customers as well and what you need to do to get those across the finish line into sort of top line revenue?

Speaker 2

Yes. I don't have the specific breakdown in front of me, but what I'll say is that we have excuse me, we're continually identifying new opportunities and moving them down the sales pipeline. I think we've identified last quarter, I think we identified something like $5,500,000 in total contract value. This quarter, we've already identified approximately $7,000,000 on top of that. And we expect to liquidate a reasonable percentage of those over a period of time.

Speaker 2

So I think the sales machine is really starting to work.

Speaker 4

Great. Thank you. I'll pass it on.

Operator

Thank you. Your next question comes from the line of Howard Halpern from Taglich Brothers. Your line is open.

Speaker 5

Congratulations. Great quarter. In terms of implementing those customers, can you talk a little bit about the implementation cycle and what you expect in the second half in terms of deployments?

Speaker 2

Yes, you bet. We have I would say, if you think about the happy path for an implementation, it's about a 30 day process. Now that assumes that customer dependencies are fulfilled timely. It assumes that we have the delivery capacity available to deliver those applications. But don't forget that our platform is mostly a configuration engine.

Speaker 2

So we ingest customer content, we work with the customer to ensure that the content meets brand standards and is the correct description of the things that they want to display in the application. And so for that we are substantially relying upon the customer. We've seen implementations go as quickly as a week. We've seen other implementations take 6 months. So I would say that our average is on in that 30 to 45 day range, probably shading a little closer to the 45.

Speaker 5

Okay. I believe in the previous call this year, you talked about seeking, I guess, customers within the hospitality vertical, but in events customers or conventions and such, have you had any success in that area yet or is it coming in the pipeline?

Speaker 2

Yes, it's coming in the pipeline. And so let me speak about that. So the bull's eye of our hospitality market is really going to be a destination property. Now it could be a destination property for a couple of reasons. Reason number 1 could be that it's a beautiful beach resort.

Speaker 2

Reason number 2 could be that it's a convention property. And so our relationship with Gaylord Hotels, for example, kind of falls into more of the convention category. And we're actually expanding our relationship with those guys to accommodate certain of their convention related facilities and activities. And we are also partnering with a couple of major players in the hosting of conventions to really penetrate that market. And the convention market is actually really interesting for us.

Speaker 2

And I'd say that we're making good progress and we'll certainly keep you apprised of that progress as those customer wins come in.

Speaker 5

Okay. Well, thanks and keep up the great work.

Speaker 2

Thanks, sir.

Operator

Thank you. And our next question comes from all right, I apologize. Our next question comes from the line of Ed Woo from Ascendiant Capital. Your line is open.

Speaker 2

Congratulations on the progress. My question is, have you seen any changes in the sales cycle, whether customers have been more cautious or has it been about the same in the past quarter? It's really about the same. I mean, we're looking at roughly speaking 90 day sales cycle. Sometimes it's shorter, sometimes it's faster.

Speaker 2

And we continue to work on our sales process to see if we can reduce the cycle time. Now notably, we are also highly focused on identifying one to many relationships. And here's what I mean by that. So it's one thing to sell an individual property. That's terrific and we love our customers.

Speaker 2

It's another thing altogether to approach management companies, property portfolio owners and others in such a way as to penetrate multiple properties at once. And so we have some very interesting conversations going on right now with such groups where we could potentially spend a similar amount of time on the sales cycle, but pick up 5 properties, 10 properties at a time. So that's where I think that you're going to see what I would characterize as the pace of rooftop wins increasing because we're looking at those one to many relationships. Great. Well, thank you for answering my questions and I wish you guys good luck.

Speaker 2

Thank you. Thanks very much, Ed.

Operator

Thank you. Seeing as there are no more questions in the queue, that concludes our question and answer session. I will now turn the call back over to Mike Snavely for closing remarks.

Speaker 2

Yes. And I wanted to do these closing remarks live. I want to acknowledge that we've had a tough 2021 through 2023 and we've had to batten down the hatches, we had to shed cost and we had to buy time for the company. As you can see, we're off to a good start here in 2024. We've delivered a couple of successive quarters of growth and improvement to our bottom line, particularly when you look at it comparable to the previous year, we've stored up our balance sheet and we've gotten our sales rhythm down.

Speaker 2

Now we have the benefit of time, capital and great interest amongst our loyal investors along with a seasoned management team and a board with a big vision. We also have a track record of value delivery to the best brands in the world, including Fox, NBC, the Dallas Cowboys Stadium along with more recent customers like Ryman Entertainment and various Marriott properties. From this platform, we could not be more excited about what markets we can tackle and the plays that we can run-in software innovation, crypto and AI. We intend to turn the attentions of tens of millions of eyes back on Funware and our solutions and to make Funware great again. Thanks a lot everybody.

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