Phunware, Inc.

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Good afternoon, ladies and gentlemen. Welcome to Fundware's first quarter 2021 investor conference call. Currently, all participants are in a listen-only mode. Joining me today are Alan S. Natowski. President, Chief Executive Officer, and Co-Founder, Randall Crowder, Chief Operating Officer, and Matt Ong, Chief Financial Officer. The format today will include prepared by Allen, 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, including any such statements referring to the potential effects or impact of the COVID-19 pandemic, reflect current views as of today and are based on various assumptions that are subject to risks and uncertainties disclosed in the risk factor section of our SEC filing. 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 Fundware's website at investors.fundware.com. I further encourage you to visit investors.fundware.com to access not only the earnings press release, but also the current investor presentation, SEC filings, and additional collateral on Funware. At this time, I would like to turn things over to Funware CEO, Alan Natowski. Sir, please proceed.

Thank you very much, and welcome to our first quarter 2021 investor conference call. As a reminder, Funware is a 12-year-old enterprise software company focused on the intersection of mobile, cloud, and big data. with business-to-business and business-to-government customers worldwide. Our mission is to provide everything you need to succeed on mobile by providing our customers with the products, solutions, data, and services for their digital transformation needs on Apple iOS and Google Android devices and applications. Central to this effort is our enterprise cloud platform for mobile called MAPS, or Multi-Screen as a Service. which is available for licensing under a SaaS business model over one to five-year contract periods worldwide. The completion of Q1 constitutes a positive operational inflection point for our business as we have quickly made our mass platform vision become reality across a number of key fronts. Not only have we commenced the full rollout of our blockchain-enabled mobile loyalty ecosystem specific to FundToken, FundCoin, and FundWallet as promised, but we have also executed a global distribution agreement with an anchor distribution partner that will be formally announced in the next several weeks. While we continue to work through what appears to be the final stages of the COVID pandemic operationally, we are both excited and comforted by the dramatic increase in business activity across all aspects of our software product and solution offerings for mobile, big data, and the cloud. Importantly, These encompass all three of our core growth engines rolling forward, including our mass cloud, our data-driven loyalty marketplace, and our secure blockchain-enabled token, coin, and wallet capabilities. As we suggested on our last earnings call, this past year was the genesis of a transition in our company's history as we shifted from a non-recurring, low-margin transaction business to a far stickier, more scalable, recurring, and high-margin SaaS licensing business for our mass platform. While we remain in the midst of that transition, we are now at the latter end of that process and expect to thrive rolling forward as a pure SaaS company. In addition to continued enterprise interest in our mass digital front door solution for healthcare and our mass smart workplace solution for corporations, we have resumed conversation with customers from sectors that were hit hard by the pandemic. including the hospitality and real estate verticals. In conjunction with growing our portfolio of direct customers, we intend to expand our footprint globally by amplifying our go-to-market strategy with indirect sales and channel partners, including the recently signed Anchor Distribution Partner that will be formally announced later this quarter. In parallel, we are excited about the completion of FundWallet and the launch of our blockchain ecosystem powered by FundCoin and FundTokens. We are now live and excited to scale and monetize as part of our business and look forward to the accelerated global adoption of the blockchain-enabled mass customer data platform and mass mobile loyalty ecosystem commercially deployed. As with most businesses worldwide, our team continues to see the lingering effects of the pandemic despite more widely available vaccines and more recent or pending openings from previously imposed stay-at-home orders and lockdowns both domestically and abroad. Many of our customers and partners are still operating remotely and are still in the process of reopening their venues, facilities, and offices. As such, and in our case, we saw many pending deals that would normally have closed in Q1 now starting to close here in Q2 instead. Importantly, we are completely focused on the future and what a post-pandemic environment is going to look like for our business, while also recognizing and appreciating that the last year has represented a very interesting and unique challenge for all of us. While we saw multiple months without strong bookings during the heart of the pandemic, as many of our customers and partners simply shut down their in-person operations and shifted to either remote-centric or remote-only environments, we are also now seeing the benefits and importance of our backlog and deferred revenues specific to our SAS model and the positive effects that we expect to see during the second half of the year. Going forward, and especially in light of the scale of vaccinations being delivered right now globally, we are assuming that each month and each quarter for the balance of 2021 will have the world beginning to accelerate to a more normal and predictable operating environment. Fundamentally, we do not expect to have to face such a problem again for the foreseeable future, and are extremely comforted by our operating performance during this difficult period. We not only made the most of the opportunity by streamlining our cost structure, but we also enhanced our mass products and solution offerings, capitalized on the needs of the healthcare sector, and facilitated enterprise customers getting more safely back to work. While we saw a decline in quarterly revenue recognition associated with these initiatives when compared to the first quarter of 2020 pre-pandemic, We expect to see a rebound here in the balance of 2021 as the operational downtime provided by COVID-19 allowed us more time to foster and improve our existing relationships while also establishing and bolstering brand new indirect sales channels and partnerships in parallel. As always, we will continue our core go-to-market strategy centered on direct and indirect agreements and contracts with Fortune 5000 customers, especially in the Fortune 100 size range, and governments ranging from local and county to state and federal. Importantly, and independent of the pandemic, we are extremely excited by a number of developments that have occurred over the past quarter during lockdown and even more excited by what we see coming in the quarters ahead. First, we were able to launch three core customer and partner portals for scaling our business through indirect channels. These included a mass software repository on GitHub at www.github.com slash funware, a mass documentation repository at docs.funware.com, and a mass training and funware phenom certification repository at training.funware.com. Second, we were able to add to our mass bookings, backlog, and deferred revenues for future revenue recognition over one- to five-year contract periods that will ultimately provide SAS revenue recognition over the coming 12 to 60 months rolling forward. While these efforts do not provide instant or near-term gratification on revenue recognition for our P&L, they importantly demonstrate the ongoing health and expansion of our business and will be broken down in further detail by our CFO, Matt Alney, in his section of the earnings broadcast. As a reminder, and with our mass sales cycle typically representing two to four months on average, recent and pending customer wins will start appearing on our P&L in the coming reporting periods ahead. Third, we have expanded our install base of funder IDs on mass to more than 15 billion devices worldwide, including mass platform scalability capable of supporting up to five billion transactions per day 500,000 transactions per second and 1 billion unique devices per month with more than one petabyte of data, typically growing at more than five terabytes per day. Our mass platform now provides a robust customer data platform inclusive of both a detailed data ontology and a comprehensive knowledge graph for one to one interactions and engagements. And fourth, we are commercially launching our FundWallet mobile applications on Apple iOS and Google Android in the next few weeks in conjunction with our recently launched mass blockchain ecosystem, all powered by our FundCoin and FundToken cryptocurrencies. While FundCoin security tokens will not necessarily appear in our financials when live, FundToken utility tokens will actually flow transactionally through our P&L as net new and virtually 100% gross margin revenue. As an analogy rolling forward, please consider our core mass licensing activities akin to Amazon, which is what we are reporting today, while considering our new mass blockchain activities akin to Amazon AWS, which is what we will begin reporting incrementally rolling forward, beginning with our next 10Q for Q2 2021 in mid-August. At this time, our CFO, Matt Bowney, We'll go deeper into our first quarter 2021 financial performance as reported, and also highlight the dramatic improvements made to our balance sheet throughout the first four months of 2021, including a record quarterly closing cash balance of $23.5 million, the largest since our inception in February 2009.