Good afternoon, ladies and gentlemen. And welcome to Phunware’s Fourth Quarter and Full Year 2022 Investor Conference Call. Currently, all participants are in a listen-only mode. Joining me today are Russell Buyse, Chief Executive Officer; Randall Crowder, Chief Operating Officer; and Matt Aune, Chief Financial Officer. The format today will include prepared remarks by Russell, Matt and Randall, followed by a question-and-answer session. As a reminder, today’s discussion will include forward-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. I encourage you to visit that section to access not only the earnings press release, but also the current investor presentation, SEC filings and additional collateral on Phunware. At this time, I would like to turn things over to Phunware’s CEO, Russell Buyse. Sir, please proceed.

Thank you very much. And welcome to our fourth quarter and full year 2022 investor call. My first as Phunware CEO. Phunware has been on my radar for quite some time as I admired the company going back a decade when I was COO at Mutual Mobile. This organization has always been known for its great talent, top customer brands, and its great work. As the company recently transitioned its business model from custom app development to a SaaS product model, it’s at the stage where I can be the most effective in elevating our corporate trajectory to the next tier with my product orientation and operational focus. I won’t steal Matt’s thunder by going through the 2022 numbers. So I’ll talk about where we are and where we’re going in 2023. To start off, it’s safe to say we’re still in the early stages of enterprises adopting solutions to drive contextual engagement as they wrestle with digital transformation strategies. Phunware sits at the cross-section of three important markets to help them. First, the $187 billion mobile application market that is fairly mature, but still growing at a 13.4% CAGR. Second, the $28 billion location-based services market is growing at a 23.5% CAGR as technology improvements have helped customers realize its true promise. This is a nascent industry that remains in the early innings due to two tough years of the pandemic, the gradual unlocking afterward and then the economic uncertainty that arose during the past year. The third market is often referred to as integration Platform-as-a-Service, but at $3.7 billion and a 30% CAGR, it is becoming increasingly important as companies demand interoperability from disparate third-party systems. Although the pandemic delayed our market penetration, we have a robust product with immense upside potential, which is one of the key reasons I was drawn to leading Phunware as its new CEO. Our SaaS products enhance the user experience by providing consumer-grade state-of-the-art mapping and wayfinding and mobile engagement to help brands reach customers where they are, when they are most willing to engage in profitable behavior. This could be an opportunity to spend money or it may be an opportunity to take advantage of self-service tools that can significantly reduce operational costs. We are enhancing those products to provide more capabilities to consumers while creating revenue uplift and extending the reach of brands to improve the total experience. In particular, these provide a strong ROI to customers in the hospitality and healthcare verticals with leading brands guiding the way. And beyond those verticals, we have convention centers, smart workplaces, multi-dwelling units, sporting events, retail, entertainment, and more that all struggle to manage complex user journeys while still delivering best-in-class consumer engagement. For our go-to-market strategy, we’re strengthening our marketing efforts to drive awareness and accelerating sales through additional channel partners to complement our direct sales force. We’ve simplified pricing and packaging for customers by bundling modules into industry-specific solutions, enrolling the software, services, beacons, and implementation into one SaaS price. This makes it easier for them to say yes while retaining healthy margins over three-year to five-year agreements. Our deployment with Gaylord Hotels by Marriott has just finished. The Opryland, Texan, and Rockies properties have been fully operational and the Gaylord Palms and National are now live more than a week ahead of schedule. Another win we’re proud of is the Atlantis Resort in the Bahamas, which has notably helped the organization bring in $1.2 million through the app in less than a year and was recently recognized by HSMAI at the Adrian Awards. On the blockchain side, the idea behind PhunCoin and PhunToken is really outstanding, a marketplace between brands and consumers, where brands can reward consumers for the right to engage them. Brands benefit by being able to identify and engage more effectively, whereas consumers benefit through the tokenomics of the marketplace. This is a far superior model compared to the Web 2 economy where users’ data is someone else’s product and it doesn’t belong to them. Our objective with the blockchain initiative is to disintermediate that outdated Web 2 surveillance model. That said, we’re taking a slow and steady approach on this, given the current crypto winter and regulatory headwinds; our offerings will be privacy preserving and fully compliant. The first steps we’ve made are with the PhunWallet app and we’ve recently added the PhunBlocks game in Version 1.5, where users can earn and spend PhunToken. This proof-of-concept has consumers earning and spending crypto with a wallet. PhunWallet 1.6 introduces videos and an offer wall, allowing brands to reach and reward consumers for their participation. Eventually, we see this as part of our SaaS offerings for brands to engage with their customers. We’ll be able to include ads and offers as a module in our industry solutions that will let brands reach the audiences they want. On the hardware side, our Lyte business unit equips consumers with the gear they need, providing cost-effective high-end PCs to gamers. Now that the team has relocated its facility in Round Rock, Texas and implemented a new ERP system, we expect profitable operations and growth going forward. Lyte has several key priorities for 2023. We’re introducing workstations to the product mix, extending our reach to power business users. We’re also optimizing Lyte’s unit economics with firm targets for cost-per-acquisition and cost-per-build that will ensure profitable growth. And now our CFO, Matt Aune, will cover our financial performance.

Thanks, Russ, and good afternoon, everyone. I’d like to thank you all for joining us today for a review of our full year 2022 financial performance and our progress against key strategic initiatives. For clarity, 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. Net revenues for the full year 2022 totaled $21.8 million, which represents 105% growth year-over-year. Our platform revenue represented 30% of net revenues or $6.5 million. Our hardware revenue or Lyte by Phunware represented 70% of net revenues totaling $15.3 million. Gross margin was 23.3%, compared to 33.9% last year. On a non-GAAP adjusted basis, gross margin was 24.3%, compared to 43.9% last year. Platform gross margin was 53.8%, compared to 46.8% last year. We are encouraged to see platform gross margins increase year-over-year as we continue on our long-term goal to achieve 75% plus gross margins for platform revenue. Secondly, our new business line, Lyte by Phunware has a different gross margin profile than we have had in the past. We have done a lot to fully integrate Lyte into Phunware over the past year and we are pleased to see gross margin dollars increased nearly 7x from Q4 2021 to Q4 2022. As expected, with a full year of Lyte by Phunware operational expenses in 2022 versus just Q4 in 2021, we did see a significant increase in operational expenses. Total operating expense was $34.6 million, up from $20.5 million last year. Other non-cash operating expense items were stock-based compensation, amortization of intangibles, and impairment of goodwill in 2022, making up a combined $5.6 million this year, compared to $4.1 million in the prior year. By excluding these one-time and non-cash charges, adjusted operating expense was $29 million, compared to $16.3 million last year. Non-GAAP adjusted EBITDA loss was $23.5 million, compared to $11.7 million last year. Net loss was $50.9 million or $0.51 per share, compared to $53.5 million net loss or $0.71 per share last year. Shares used to calculate earnings per share were 99 million this year versus 75.4 million last year. Our backlog and deferred revenue at the end of the quarter totaled $8 million. Moving to the balance sheet, we closed the quarter with $2 million in cash and $9.7 million in debt. We currently hold approximately $6 million of cash in digital assets based on today’s prices. We are actively working on several options to expand our operational runway and have recently agreed to terms with Streeterville Capital to defer our final forward debt repayment to the second half of 2023. This will enable us to further evaluate various debt and equity options to fund operations as we continue to push towards cash neutrality. We will remain active with both financial conferences and investor meetings in our efforts to tell our story and further strengthen our corporate profile and capital market position. The next major financial conference we will be attending is the 18th Annual Needham Technology and Media Conference on May 16 through 18. We look forward to many one-on-one conversations and meetings with high-class institutional investors at the event and other financial conferences as opportunities present themselves.

Thanks, Matt. I also want to thank the analysts and shareholders who have continued to support Phunware despite what feels like one market catastrophe after another, from the pandemic, to the war in Ukraine, to inflation and possible recession, we’ve weathered the storm. Of course, Roosevelt did warn, a smooth sea never made a skilled sailor. I assure you we are skilled, resolved, and charting the right course. As I mentioned last November, I intend to focus my comments around five core objectives. First, improving the features and scalability of Phunware to not only drive adoption and shorten our sales cycle, but also enhance our margin profile. What excites me most is we now have notable reference customers in three of the largest markets where our solution can solve the biggest pain points: healthcare, hospitality, and the workplace. Digital transformation in healthcare alone is a $0.5 trillion market, with the largest driver being eHealth due to its ability to increase patient satisfaction and reduce operational costs. While our feature-rich Digital Front Door is an industry leader, scalability will rely on our ability to measure and justify a more definitive return on investment. To address this head on, we’ve engaged an expert third-party to help analyze and define the financial impact of our Digital Front Door, as well as our location-based services solution. We expect to begin sharing the results of this study by the end of Q2. While the global market for Smart Hospitality is projected to reach $60 billion by 2028, it’s growing at nearly double the rate of healthcare, and we’re seeing analogous interest across our pipeline. As Russ highlighted earlier, our Smart Hospitality Solution at Atlantis, Bahamas generated over $1.2 million in 2022, but over half of that was prior to guest arrival. Guests were downloading the app, exploring all 140 acres of Paradise Island, planning their experiences and spending money all from the comfort of home. This kind of success is how we sold Gaylord Hotels by Marriott. In six months, we’ve deployed our Smart Hospitality Solution across the entire Gaylord Hotels portfolio, which at over 12 million square feet represents five of the top 10 largest non-gaming convention center hotels in the United States. However, what I’m most proud of with this deployment is that it required no new code, which is a testament to our engineers and the investment we made in our platform during the pandemic. Going forward, this will greatly improve our margin profile as well as help us scale more strategic accounts. I’m also thrilled to announce we have begun rolling out a configurable location-based services solution to specifically target convention centers. This dynamic mapping and wayfinding capability will help attendees navigate to the right exhibits, while organizers can message attendees based on proximity or persona. Organizers and venues can seamlessly reconfigure convention center space and our routes will adjust to account for any new layouts without additional hardware or fingerprinting. Lastly, on the product front, we recently announced the availability of our Experience Optimizer. This feature enables a single mobile application to autonomously deliver any number of experiences by seamlessly configuring and launching a unique JavaScript object notation that contains specific information on layout, features, themes, content, integrations, and maps. Although each experience is launched from a single mobile application, every experience can function like its own native mobile application based on building persona or even sub-brand. Of course, no amount of features will matter if we don’t solve for our second core objective of scaling revenue, as well as activating indirect channels by ensuring our partners have the training, collateral, and proper incentive structures in place to be successful. We recently executed partner agreements with Diversified, Ingram Micro, and Siemens that are considerably more coordinated and directive than past relationships. For example, Ingram Micro has already committed to upwards of five qualified leads per quarter, while Diversified hosted company-wide training on Phunware for all of its representatives this month. We believe this kind of channel partner buy-in and engagement will be critical to scaling revenue this year. However, given the nature of the healthcare and hospitality industry in particular, some of our customers may ultimately represent our most important channels. To that end, we are in the process of deploying another Marriott property, Wailea Beach Resort in Maui, but that new customer has led to strategic discussions with Marriott about how to more effectively partner going forward. To support these sales efforts, and with the help of a third-party expert, we are in the process of auditing our entire sales process along with associated collateral. Expect to see tighter language around our fundamental value propositions with objective ROI justification to help us not only prospect but also shorten our sales cycle. Another important change we’ve made to shorten our sales cycle is streamlining our contracts and pricing. Our new approach to selling is an all-in methodology that accounts for software licenses, hardware, professional services, and support at one easy-to-understand price per year. Despite this purposeful focus on our SaaS solutions, we remain committed to our third core objective of launching a compliant blockchain ecosystem that better incentivizes and authenticates consumer engagement. We don’t believe blockchain is a pivot or a distraction, but rather a natural extension of our SaaS offerings that seeks to re-imagine how brands engage with consumers. Imagine a resort rewarding you for following a treasure hunt to exciting new amenities just as easily as the hospital rewarding you for showing up on time. As Russ already highlighted, we have made significant advances to PhunWallet that will help us better integrate this kind of functionality and generate revenue while offering consumers additional opportunities to engage and earn PhunToken. In parallel, we are excited to announce that we are working closely with Securitize to target the first half of this year for an initial issuance of approximately 25% of PhunCoin’s maximum supply with regulated trading to follow shortly thereafter. We also remain committed to our fourth core objective of ramping sales and improving margins of Lyte by streamlining operations and being more disciplined with our marketing efforts. By targeting a cost-per-acquisition of $120 and a cost-per-build of $20, we are confident in our ability to not only drive Lyte to breakeven but also position the business to scale profitably. In Q2, we also plan to launch new lines, such as workstations, to increase the size of our serviceable market and take advantage of our growing brand awareness. Last but certainly not least, the ongoing transition to Russ’s leadership has furthered our fifth core objective to engage more investors with a focus on institutions to drive awareness, volume, and stronger price appreciation. We will continue to work closely with Gateway, ROTH Capital, and H.C. Wainwright to attend conferences and participate in non-deal roadshows to share the Phunware story more broadly. We have also been given great opportunity to engage new shareholders through partnerships with industry luminaries. In closing, I want to personally thank all 106 of Phunware’s employees and reiterate our ten operational goals this year: foster teamwork and minimize distractions, be more disciplined in the allocation of resources, align resources with core competencies, focus on ideal customers and partners, update positioning and marketing to better sell our core value proposition, productize internal tools, identify inorganic targets to accelerate commercialization of key capabilities, launch PhunCoin, reduce cash burn, and minimize dilution.

Thanks, Randall. I’ve been at the Board for about three months now and I can confidently say I am excited for the progress we’ve made in my short tenure and the trajectory we’re positioning ourselves for. We started the year with a renewed focus on marketing and sales execution in this unpredictable economy. We are working to aggressively grow our platform bookings to improve overall gross and net margins. As we transition the majority of our energy to platform sales, we expect overall net revenues to be relatively flat year-over-year, while expecting quarter-over-quarter growth and improvements to both our backlog and adjusted EBITDA. That said, we also expect to cut year-over-year losses as we continue to push toward cash neutrality. Finally, we are encouraged that the M&A market has become more attractive for buyers. We are excited to announce that our Board of Directors has created a strategic transactions committee led by Stephen Chen to enhance our efforts to creatively grow the business through inorganic transactions. I want to thank all of the Phunware employees, customers, and shareholders for the opportunity and the honor to lead the next chapter of this emerging success story. We may not always get everything right, but we will be bold and put the full weight of our effort into maximizing shareholder value as we re-imagine how brands engage consumers in a mobile-first world. I would like to open up the call now for questions to the operator. Operator, please go ahead.

Thank you. Our first question comes from Darren Aftahi with ROTH MKM. Please go ahead.

Hey, guys. Thanks for taking my questions and hi, Russ, good to speak with you. So you guys detailed a lot of different things, a lot of moving parts. It seems like you’ve had tremendous success with your MaaS platform in hospitality and healthcare. And I just think with the back-to-work debate continuing, I’m curious about your strategic objectives, Russ, for the MaaS platform, maybe top three going forward. I guess, what really are those? And then maybe one for you and Randall, it’s good to see the gross margin on the MaaS segment grow, how, on a calculus basis, do you kind of funnel down improvements in operations down to that 75% target? Thanks.

Thanks for the question. So our top three priorities for the MaaS platform, I would say, is bookings growth, that’s number one. We have a good working solution, a very solid product, and very happy customers with it. The second would be product roadmap progress, which is further enhancements and development on the platform itself to make it more compelling and provide higher value-add functionality to our customers to give them greater revenue uplift and a better ROI. The third priority for that line of business, I would say, would be to strengthen our marketing and sales execution, so to increase our footprint there. There’s a little bit of customer education and market education here and we want to be the thought leader in this space. And by the way, Randall is not available for Q&A. It’s baby time for him. So let’s wish daddy some good luck and the new mom here, too.

Hey, Darren. I’ll help out with that gross margin question as well. I think for us to improve the margins above the line, we need to have more kind of no-code deployments, and that’s really like what we did with Marriott where we were able to quickly deploy all of the locations without a lot of additional code, which means essentially we’re not doing services above the line. And so that’s kind of first and foremost what does it. The other thing is, kind of back to Russ’ first point, we’ve got to get more bookings, and have to get more deals. We’ve got a great support organization that mostly is charged above the line and they can scale up a lot more. So, I think as we get more deals, they’re going to be able to scale up more without adding a ton of resources. So I think those are kind of the two ways that we improve gross margins.

Is the no-code solution relevant for all verticals at this stage? Have you noticed a reduction in the agreement to deployment cycle because of this, or is Gaylord perhaps an exception?

We actually expect more engagements in the future to look like Gaylord, where it’s out of the box, it’s an industry template solution, and there’s no custom code. It’s just the configuration of the solution in their environment. And because we’ve also previously built integrations to, say, electronic health record systems in healthcare and corollaries in hospitality, we don’t think there’s as much work to do there. There may be some customers that may have specific systems they want custom integrations for, but we expect that to represent the minority of the work supporting those improved margins.

That’s helpful. Thanks, guys.

Thank you. Our next question is coming from Scott Buck with H.C. Wainwright. Please go ahead.

Hi. Good afternoon, guys. Thanks for taking my questions. First one, you had some nice big customer wins here over the last few months between Gaylord and the expansion of VHC. But I’m curious what the current selling environment looks like for some of these larger deals, just given what seems like an ever-increasing level of macro uncertainty?

Well, we’ve seen continued evolution in our pipeline opportunities. They have not changed their pace as a result of the bank takeovers and other recent uncertainties. So we’ve not seen any impact there as far as our process and sales. And further, just on a macro basis, we expect hospitalities as an industry to grow 6%, 7% this year. So there’s really no good reason for them to slow down either.

All right. That’s helpful. And then could you remind us the seasonality of the Lyte business? I guess I’m a bit surprised to see relatively flat revenue versus the third quarter despite the holiday season?

Yeah. I can take.

Yeah.

Typically, we see more bookings in the fourth quarter. The backlog tends to increase, and usually, the fourth and first quarters are the stronger periods. More specifically regarding Lyte, we will provide additional details once we file the K. Last year, we focused more on profitability in the fourth quarter compared to previous quarters. We aim to increase our topline revenue but are also working to reduce CPA costs, which may have had some effect. However, this approach allowed us to improve our margins.

Great. Matt, that’s helpful. And then last one for me, you had a bit of recovery with some of the digital currency valuations. I’m curious kind of what the plan is with the remaining digital assets you have on the balance sheet?

We still have some Bitcoin and Ethereum in our balance sheet. Our current approach, as mentioned during the call, allows us some time to decide on our next steps regarding debt or equity. From our perspective, after discussions with investors and the Board, it's crucial that if we need to use digital assets, we will liquidate them as necessary for our operations. This approach helps minimize the risk of further dilution or incurring additional debt. We are focused on managing this closely. As the value increases, it benefits us, and we are assessing this on a daily and weekly basis regarding how we liquidate or hold onto these assets. This strategy will be part of our future plans, and we will determine our long-term strategy in the coming months.

Great. I appreciate the additional color. Thank you very much.

Thank you. Our next question is coming from Ed Woo with Ascendiant Capital. Please go ahead.

Yeah. Welcome, Russ. My question is on M&A. You mentioned that you guys are going to be evaluating it. Have you seen significant improvement in or depressed pricing for M&A targets, and what are any particular focus on targets that you guys are interested in?

I can't comment on pricing at this moment, but I can say that more individuals are open to discussions considering current market conditions and their future prospects. We are searching for companies that align with our core strategy concerning the enterprise SaaS offering. This includes companies with a complementary offering in a related market or technology that can help us speed up our product roadmap. Matt can also provide details on the financial criteria we are considering, as he chooses.

Yeah. I think, like Russ said, we’re not down the road far enough where we’re seeing pricing in terms of more depressed pricing. I think we all expect that. Yeah, and I think, first and foremost, obviously, the type of companies we are looking at, Russ explained, but certainly, we’re not looking to add any more burn rate onto the company or bring in any companies that are not going to be at least accretive on cash or breakeven at a minimum. So those are kind of criteria and we’ll see. I mean our expectation is that we’ll be able to get a better deal in the second half of the year than we may have in the middle of 2022 or 2021.

Great. Well, thanks for answering my questions and I wish you guys good luck. Thank you.

Thanks, Ed.

Thank you. Our next question is coming from Howard Halpern with Taglich Brothers. Please go ahead.

Good afternoon, guys.

Hi.

Welcome, Russ.

Hi, Howard.

In terms of potential bookings growth, are you seeing maybe some flow from your newer integrators or newer partners rather than some of them that have been around a longer period of time?

We are definitely seeing active interest and movement from our newer partners. I wish Randall were here to fill your question about some of our longstanding partners as well, since I’m a little bit less acquainted with their activity. But we are definitely seeing excitement and interest from our new partners that, of course, supplements our current partners and our direct sales effort.

And are you seeing potentially these smaller deals that can get done quicker and that build into larger deals? Is that maybe part of the game plan to basically get in and then move within an organization?

Definitely. So one of the things that we’ve done, like Randall talked about, is simplify our packaging and pricing. We also want to be competitive in the pricing area, and one of the ways that we’re also trying to do that, because our product works so solidly, is do a proof-of-concept where that’s appropriate, or if it’s a customer who has multiple locations, to do a pilot at one of those locations to show them how well it works, because we’re quite confident in any kind of trial that we’re going to come out as the winner.

Okay. Okay, guys. Everything else was asked and answered. So thanks, and keep up the good work.

Thank you.

Thanks, Howard.

Thank you. We have reached the end of the question-and-answer session. So I will now turn the call back over to Mr. Buyse for closing remarks.

Well, I’d just like to thank you all for coming to this session today. This is my first. And so I also appreciate the growth here as I get used to this cycle. I am very optimistic about this coming year. I am really looking to be very aggressive with bookings on the enterprise SaaS side and profitable unit economics and growth with the Lyte unit. So we’ve got a lot of work to do, but I also feel very good about the mission and the team we’ve got to do it and the markets that we’re going to serve.

Thank you. This does conclude today’s conference, and you may disconnect your lines at this time. We thank you for your participation.