Phunware, Inc. (NASDAQ:PHUN) Q1 2024 Earnings Call Transcript May 9, 2024
Phunware, Inc. beats earnings expectations. Reported EPS is $-0.00033, expectations were $-0.46. PHUN isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good afternoon, ladies and gentlemen. Welcome to Phunware’s first-quarter 2024 investor conference call. Currently, all participants are in listen-only mode. Joining me today are Mike Snavely, Chief Executive Officer, and Troy Reisner, Chief Financial Officer. The format today will include prepared remarks by Mike and Troy, followed by a question and answer session. As a reminder, today’s discussion will include forward-looking looking statements. These forward-looking statements reflect current views as of today and are based on various assumptions that are subject to risks and uncertainties disclosed in the Risk Factors section of our SEC filings. Actual results may differ materially and undue reliance should not be placed on them.
Additionally, the matters being discussed today may include non-GAAP financial measures. Reconciliation of GAAP to non-GAAP financial information is set forth in the earnings press release, which is available on the Investor Relations section of Phunware’s website at investors.phunware.com. I further encourage you to visit investors.phunware.com to access not only the earnings press release, but also SEC filings and additional collateral on Phunware. At this time, I would like to turn things over to Phunware’s CEO, Mike Snavely. Please proceed.
Mike Snavely: Fellow shareholders, welcome. I’m happy to tell you that we’re off to a strong start in 2024, and that our plan to focus on the fundamentals of our SaaS businesses work. The first quarter of 2024 is the first evidence of sales traction for quite a while. New logos and bookings are up. Our solutions continue to gain traction with customers across the hospitality and healthcare sectors by delivering strong ROI. As a result, we continue to both renew and extend our existing customer relationships, and win new business in competitive situations in hospitality and healthcare. In fact, in the first quarter, we’ve seen more than 60% of the total bookings we did in all of 2023. Costs are down. We previously announced expense cuts that took full effect in the first quarter.
Our gross margin has dramatically improved as a result, and Troy will brief you on those details. On the patent monetization front, we have executed a term sheet to engage a partner to work on our behalf in monetizing additional patent families. Now I’ll ask our CFO, Troy Reisner to run through the details of first quarter results. Troy?
Troy Reisner: Thanks, Mike, and good afternoon, everyone. I’d like to thank you all for joining us today for a review of our first quarter of 2024 financial performance. I’ll be discussing GAAP financial measures unless otherwise specifically noted. Our press release, 8-K, and website provide a reconciliation of all GAAP to non-GAAP financial results. In addition, a quick reminder, we shut down Lyte Technologies in 2023, and the business was reflected as a discontinued operation. Prior quarterly information has been updated to reflect such. With that said, let’s take a look at the numbers. For the first quarter of 2024, net revenues were approximately $921,000, which exceeded our internal plan by 5%. While Phunware continues to not provide detailed earnings guidance, we do believe it helpful to our investors and others to share that our internal net revenue goal for 2024 is between the range of $6 million and $8 million, which will be back-end loaded to the second half of the year.
Gross profit was $524,000 for Q1 2024 versus $73,000 for Q1 2023, which resulted in gross margin of 56.9% and 5.4%, respectively for the quarters. Adjusted gross margin was 61.8% compared to 23.4% for the respective quarters. While the 2023 margins were impacted by the timing and recognition of certain product costs, 2024 are also benefited from improvements in streamlining our product delivery processes and a significant decrease in stock-based compensation. Total operating expense was approximately $3.4 million for Q1 2024 versus approximately $6.8 million for Q1 2023 or a 49.8% decrease. Other non-cash operating expense items for the quarter were stock-based compensation and depreciation, making up a combined /$600,000 for Q1 2024 compared to $1.1 million in Q1 2023.
By excluding these noncash charges, adjusted operating expense was approximately $2.8 million in Q1 ’24 as compared to approximately $5.7 million in Q1 ’23. The notable decrease in operating expenses reflects our disciplined approach to managing costs, and our ability to execute as a much leaner organization. On our last call, I said we would begin making investments in the business. And during Q2, we have started to strategically make investments by prudently expanding our sales and marketing teams, which we believe will directly contribute to achieving our net revenue plan for 2024. Non-GAAP adjusted EBITDA loss was $2 million in the first quarter of ’24 compared to a loss of 5.2 million in the first quarter of ’23, or 61.1% reduction in the loss.
Our net loss for the first quarter of 2024 was approximately $2.3 million, or $0.33 per share, compared to a net loss of approximately $4.3 million or $2.7 per share for the first quarter of 2023. The weighted average shares used to calculate earnings per share was approximately $6.9 million versus approximately $2.1 million, which reflects the reverse stock split effectuated in February. Moving to the balance sheet, we closed the fourth quarter with approximately $21.6 million in cash, zero debt, and settled a long outstanding legal matter. We were able to achieve this balance sheet transformation through proceeds from the sale of equity and strategic decision making. We believe our financial strength positions us well to not only strategically invest in the growth of our software business, but to also have optionality to pursue M&A opportunities to accelerate growth.
And finally, during the quarter, we attended the 36th Annual ROTH Conference, and we plan to attend the high-tech 2024 industry conference in late June, we expect to remain active with both financial conferences and investor meetings in our efforts to tell our story and further strengthen our corporate profile in the capital markets. And with that, I will turn the call back over to Mike for closing remarks. Mike?
Mike Snavely: Thank you, Troy. We appreciate the patience and continued support from our shareholders as we continue to turn the company around. We’re off to a great start in ’24, and we’re looking forward to continuing to deliver for you. I’d like to open up the call now for questions through the operator. Operator, please go ahead.
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