Q4 2020 Phunware Inc Earnings Call
Good afternoon, ladies and gentlemen, and welcome to fund, whereas 2020 Investor Conference call. Currently all participants are in a listen only mode.
Joining me today are Alan asked and Pesky, President Chief Executive Officer, and co founder Rambo Crowder, Chief operating officer, and Matt on Chief Financial Officer. The format. Today will include prepared remarks by Alan Matt on Randalls, 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 impacts of the COVID-19 pandemic reflects current views as of today and are based on various assumptions that are subject to risks and uncertainties disclosed in the risk factors section I'm on.
The SEC filings actual results may differ materially on 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 the son wears website investors docks on whereas dot com.
A further encourage you to visit investors docs on where that comment to access not only the earnings press release, but also the current investor presentation, and SEC filings on additional collateral on footwear.
At this time I would like to turn things over to fund, where CEO Islands and the task you.
Sir Please proceed.
Thank you very much and welcome to our full year 2020 Investor Conference call. As a reminder, footwear 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 mass or multi screen as a service, which is available for licensing under a SaaS business model over one to five year contract periods worldwide.
Yeah.
This past year was the Genesis of an inflection point in our company's history as we shifted from a nonrecurring low margin transaction business to a far stickier more scalable recurring and high margin SaaS licensing business for our mass platform.
In addition to continued enterprise interest in our mass digital front door solution for health care and our mass smart workplace solution for corporations, we have resumed conversations with customers from sectors that were hit hard by the pandemic include.
Including the hospitality and real estate verticals.
In conjunction with our growing 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 an anchor distribution partner that will be formally announced during Q2.
In parallel we are excited about the completion of funnel wallet next month as we launch our blockchain ecosystem powered by fund Cohen and fund token we are on schedule to commercialize scale and monetize this part of our business and look forward to the accelerated global adoption of our blockchain enabled mass customer data platform and math.
The loyalty ecosystem away.
As with most businesses worldwide our team at fund, where it was materially affected by the COVID-19 pandemic and was in no way on the end of the operational challenges that resulted from widespread domestic and international stay at home orders and Lockdowns.
Many of our customers and partners were forced to operate remotely.
And are still on the process of reopening their venues facilities and offices as vaccines become more widely available and herd immunity is achieved throughout the balance of 2021 across cities states regions and countries and on.
Our case, we have seen specific examples of customers throughout North America that are still working actively to get back to a new state of normal. These.
These include Mount Sinai in New York, which still has stringent travel restrictions and health protocols and requirements for their medical operations at.
Atlantis and the Bahamas, which just reopened the resort in the past 30 days after an extended closure nor.
Norfolk Southern in Atlanta, which is still finalizing its returned to work schedule for its corporate employees contractors and support staff and.
And price Waterhouse Coopers in San Francisco, which is still finalizing its returned to work schedule accompanying the grand opening of its new corporate headquarters for worldwide operations.
We are completely focused on the future and what a post pandemic environment is going to look like for our business, but we also recognize and appreciate the 2020 represented a very interesting and unique challenge for all of Us we.
We saw on multiple months without strong bookings in the middle of last year during the heart of the pandemic as many of our customers and partners simply shut down there in person operations and shifted to either remote centric or remote only environments.
Going forward, however, 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, we'll have the world beginning to accelerate to a more normal and predictable operating environments.
Fundamentally we do not expect to have to face such a problem again for the foreseeable future and.
And our 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 product and solution offerings cash.
Capitalized on the needs of the health care sector.
Facilitated enterprise customers getting back to work more safely and supported the 2020 presidential election on mobile.
While we saw a decline on an annual revenue recognition associated with these initiatives when looking backwards at 2020, we expect to see a rebound here in 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.
<unk> 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 several quarters during lockdown and even more excited by what we see coming in the coming quarters ahead.
First we were able to complete three core customer and partner portals for scaling our business through indirect channels. These.
These included a mass software repository on Github at Www Dot Github Dot com slash funnel there.
Our mass documentation repository at docks dot <unk> dot com and.
In a mass training and fund where phenom certification repository at training Dot <unk> Dot 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 SaaS revenue recognition over the coming 12 months to 60 months rolling forward.
All these efforts did 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 Olney in his section of the earnings broadcast.
As a reminder, and with our mass sales cycles, typically representing two to four months on average.
<unk> and pending customer wins will start appearing on our P&L in the coming reporting periods ahead.
Third we have expanded our installed base a funnel of ideas on mass to more than 15 billion devices worldwide.
Including mass platform scalability capable of supporting up to 5 billion transactions per day.
500000 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 the detail data ontology and a comprehensive knowledge graph for one to one interactions and engagements.
And fourth we.
We will commercially launch our funnel wallet mobile applications on Apple iOS and Google Android next month.
In conjunction with our new mass blockchain ecosystem.
All powered by our fund Cohen and fund token crypto currencies.
Importantly, while fine point security tokens will not necessarily appear on our financials when live fun token utility tokens will actually flow transactions 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, a kin to Amazon AWS, which is what we will begin reporting incrementally rolling forward beginning with our 10-Q for Q.
Two 2021 in mid August.
At this time, our CFO, Matt Olney will go deeper into our 2020 financial performance as reported and also highlight the dramatic improvement made to our balance sheet throughout the first quarter of 2021, including our recently announced institutional financing of more than $25 million.
Net.
Okay.
Thanks, Alan and good afternoon, everyone I'd like to thank you all for joining US today for a review of our full year 2020 financial performance on our progress on 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 2020 totaled $10 million of which platform subscriptions and services revenue was $9 1 million.
Our focus continues to be on higher margin longer term software customers and we're pleased to have continued to follow this strategy in 2020.
With over 91% of our net revenue is derived from our mouth platform subscriptions and services to customers.
Gross margin was $66 four per cent compared to 52, 9% last year.
Non-GAAP adjusted basis gross margin on 69, 4% compared to 53, 8% in the previous year.
That is more than 500 basis point improvement year over year on a non-GAAP adjusted basis.
This result continues to validate the decisions we made to focus on higher margin software and data deals on it.
Way from lower margin legacy application transaction.
Good funnel or a launching pad for more profitable and predictable revenues in the future.
Total operating expense was $24 1 million up from $22 4 million last year as.
As mentioned on our previous earnings call operating expenses for 2020 include a $4 $5 million legal settlement that we view as onetime in nature.
Other non cash operating expense items were stock based compensation and <unk>.
Monetization of intangibles, making up $4 3 million this year compared to $1 9 million in the prior year.
Excluding these onetime and noncash charges full year 2020, adjusted operating expense was $15 3 million down from $20 6 million last year or a 26% improvement year over year.
As we continue to navigate through the ongoing COVID-19 pandemic, we have made a priority to improve operational efficiency by cutting back operating expenses without sacrificing our ability to deliver to our customers and grow in the future.
Non-GAAP adjusted EBITDA loss was $8 4 million compared to $10 2 million last year I'm pleased with the progress we've made year over year. Despite the challenges we faced in the midst of the global pandemic.
Our strategic focus on profitable behaviors to increase margin and manage operating expenses continued to show cause effects.
Net loss for the year was $22 2 million or <unk> 50 per share.
<unk> to $12 9 million or <unk> 35 per share last year I'd.
I would like to remind everyone that this loss is inclusive of a 10% net loss per share from the extraordinary expense per legal settlement previously mentioned.
Moving to the balance sheet.
Ending cash for the year was $3 9 million with just under 11 million using cash from operations.
In Q1, 2021, we raised an additional $29 8 million with $5 1 million from our at the market offering and $24 7 million from our underwritten public offering.
These 2021 capital raising events have put us in a position to control our own destiny without the need to raise additional capital.
And removed any doubt as to whether or not we carry a going concern designation.
That being said, we are always looking for ways to opportunistically raise debt <unk> equity if it will help accelerate growth and help us to achieve our objectives faster.
As we look at our debt obligations, we now have the ability to initiate a pay off of our 2020 convertible notes should we decide to do so prior to December 31, 2021 maturity day, we can.
<unk> turned on applying for partial forgiveness of a PPP loan.
<unk> under SBA guidelines in coming months and anticipate starting making monthly payments later this year.
We're also working to reduce our accrued expenses and accounts payable balances, which will be reflected on our Q1 2021 and Q2 2021 results.
Backlog and deferred revenue at the end of the year totaled $9 1 million.
This is an encouraging sign as a growing backlog it means several things for our business, including one business is coming back from the closures caused by the pandemic to this as with first quarter backlog has grown since being a public company.
And three is a key indicator for our future revenues and predictability.
Closing out the year and then in the beginning of 2021, we have attended several financial conferences and met with many accredited institutional investors in our efforts to further strengthen our corporate profile on the capital market.
We will continue to tell our story and build a strong base of investors that will join us on the on word journey.
With that I would like to turn the call over to Randall.
Thanks, Matt.
Anyone expected a year like 2020, but with disruption comes opportunity at fun, where our opportunity is to do for mobile engagement, what Amazon did for cloud computing by standardizing on our platform enterprises can seamlessly drive digital transformation and a mobile first world, it's quickly becoming mobile only.
And COVID-19 has only accelerated both the need for and the adoption of technology like ours and in fact, the recent Mckinsey <unk> Company report, how COVID-19 has pushed companies over the technology tipping point and transformed the business forever found that companies have accelerated the digitalization of their customer interactions.
And if their internal operations by three to four years.
Although we specifically designed our mass platform to be industry agnostic. It excels in industries that struggled to manage complex customer journeys, such as health care hospitality and property management.
However, 2020 has generated increased interest in our cutting edge mass smart workplace solution for corporations, returning to work and our mass advocacy solution for politicians seeking to better engage their constituencies rigs.
Regardless of industry, a critical aspect of engagement and a competitive advantage for fun, where it's being able to identify and locate your target audience in real time.
While some customers were forced to temporarily delay software deployment, others took the opportunity to invest in true digital transformation over the next few years, we expect this financial commitment to accelerate and in fact, the same Mckinsey <unk> Company report found that 80% fewer executives now ranked cost savings is one of the most important priorities.
For the digital strategies as more than half say they are investing in technology for competitive advantage or refocusing their entire business around digital technologies.
To ensure our customers achieve a competitive advantage by licensing our maps software we have made considerable progress across not only our products and solutions, but also our data and blockchain offerings for example, we.
We launched our modular application framework in 2020 to support the kind of rapid deployment of feature rich mobile application portfolios that makes it easier for our indirect channel partners to sell mass offerings through our global reseller network one of our most compelling solutions that have been gaining traction through our network of partners as our mass digital front.
Door to tech enabled the patient experience and there's always been a challenge to navigate the continuum of care, but COVID-19 has made the patient journey, even more complex as patients became reluctant to visit hospitals for the types of elective procedures that drive critical revenue streams are mass digital front door can not only provide re.
Maturing on site navigation capabilities and seamless access to health Records Bill pay and testing, but also a virtual care. If a patient is not yet ready to visit a health care facility in person. Our most recent deployments of our cutting edge platform include Greater Baltimore Medical Center in Virginia Hospital Center.
The tech enabled employee experience also became a pressing issue for corporations in 2020 as they wrestle with how to plan a safe return to work our mass smart workplace solution allows corporations to not only manage a safer returned to the office with critical features like contactless check in contact tracing and density management, but also improve.
<unk> operational efficiency with mobile room booking parking management and campus wide navigation, we were thrilled to announce that Norfolk Southern is deploying this comprehensive solution to drive to digital transformation at its new headquarters in Atlanta.
We also announced that our smart residential solution was deployed by property management group for Society, Los Altos, and Fort Lauderdale, which is the largest codell living development in the United States.
Luxury residents have grown to expect the kind of features or solution delivered out of the box, including keyless entry payments guest access control thermostat monitoring and delivery management all through their mobile devices.
Lastly, we established a new vertical by designing developing and deploying the official trumped 2020 mobile application portfolio and setting a new standard for constituency engagement on mobile our mass advocacy solution is now available to politicians, both domestically and abroad with one of the key features of this new.
Political vertical being the ability to support live rallies, which takes advantage of our proprietary mass location based services and mass mobile engagement software.
As I've said in the past you can't monetize what you can't engage and you can't engage which you can't locate mass lbs software is a key competitive advantage for us because we have to do more than just static way finding to drive true digital transformation, our software enables high precision indoor positioning.
And that's why it now covers 6 million square feet of Baptist Health, South, Florida, and over 22 million square feet across dignity health network with our latest deployment Yavapai Regional Medical center in Arizona.
Of note both of these latest lbs deployments were delivered through our partner network, which is critical to our success indirect channel sales will allow us to scale faster and more efficiently in 2021, because our mass offerings are such an accretive upsell opportunity for channel partners, including hardware vendors system integrators.
Software providers and carriers to enhance mobile engagement a key strategic initiative for us is to get our software bundled into offerings that are already being deployed by our channel partners.
I wrap up I want to highlight the importance of data because identification is an important aspect on engagement that provides important contextual information when lbs software is being used data is another competitive advantage for fun, where as we have not only generated over a petabyte of data and $15 billion fund where Ids, but.
Also develop the knowledge graph that curates actionable data from approximately 1 billion active devices a month at scale in 2020, we were thrilled to announce the launch of our mass customer data platform to further commercialize our persistent unified customer databases and help brands engage the right consumer in the right.
<unk> at the right time with the right content.
Leveraging information on the virtual world to inform real world experiences is the future of mobile engagement and it's a future we are well positioned to dominate to further enhance our position on the market. We are officially launching our blockchain ecosystem next quarter, which will not only help address the value of a consumer's digital identity, but also the.
Value of a consumer's engagement with the brand for more on that I would like to turn things back over to Alan.
Thanks, Randall as highlighted throughout today's call. We are all extremely excited by the pending commercial launch of our mass blockchain ecosystem. What it means to me is that our decade plus of mass platform building across mobile cloud and big data accompanied by our years of researching that.
Benefits of blockchain and crypto currencies has resulted in the culmination and convergence of massive global addressable markets and trends that can act that wind at our backs and accelerate growth.
We expect this ecosystem to complement or supplement our core mass offerings as we offer our enterprise customers additional capabilities to identify and engage their target audiences, while many corporations and individuals are newly familiar with blockchain and crypto currencies, both fund where on our executives have a long and distinguished history within the global digital asset community.
As such we expect to be a trusted bridge for fortune 500 corporations and governments looking to leverage blockchain.
Please look for additional announcements in the coming weeks and months ahead, as we enable consumers to not only regain control of their data with fun coin, but also reward them for their engagement with fund token.
In parallel and as we have suggested previously and would again reiterate here, we intend to complement and supplement our core organic growth activities through direct and indirect channels worldwide with opportunistic inorganic mergers and acquisitions, while we have nothing yet to formally announce on this front, we expect to focus our merger and.
<unk> activity on accretive deals in areas that will provide more customers more partnerships and more distribution for our mass platform, especially in international markets, such as Europe, Asia and South America.
Finally, and importantly, rolling forward.
We fully expect to maintain a laser focus on our core operating and financial model, which includes top line growth of 30% or more year over year and blended gross margins of 75% or greater.
With that and in conjunction with a sincere. Thank you for your ongoing interest and support and all of our activities on behalf of the entire <unk> family of worldwide I would now like to open up the call for questions to the operator go ahead. Please.
Thank you ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time.
We asked a lot of posing a question you. Please pick up your handset listening on speaker phone to provide optimum sound quality.
Please hold while we poll for questions.
On the first question is coming from Austin Molto Austin. Your line is live please announce your affiliation and pose your question.
Yeah, Hi, thanks for taking my questions.
Can you put into context, how meaningful.
Spansion is with our current customer like that.
<unk> South South Florida.
Signing a new customer.
Yes, I'd be happy to do that so when we actually see these there is usually two types of engagements, we see with the healthcare companies that focus on patient experiences.
Typically the initial engagement will be something that'll be mid six digits in size that will be typically tied not to their whole health system as step one, but usually they do a tiered rollout.
What we often see which has been the case in places like Baptist Health.
Any health care now.
Sinai Greater Baltimore on many of the other ones that we've been announcing recently typically you'd see something ranging in the 4% to 600000.
And usually about three year contract period, so you're kind of talking about 20 to $30000 per month of mass licensing and then typically as they expand into their other facilities and expand it to more square footage. We typically arrive at the low seven digit and then it expands up from there.
Okay, great. Thanks for that.
And.
Can you just sort of.
To your.
Channel partner pipeline for 2021, a little more.
Yes, absolutely great question.
For the most part leading up to the pandemic, we did mostly all direct selling.
Digital transformation was still net new there wasn't always that compelling reason for governments, especially and even large corporations, which we sell to.
To accelerate their digital transformation initiatives and needs.
It turned out for us what the pandemic did is it force companies to re look at how they operated both onsite and remote and they realize that digital transformation and especially the way in which they engaged on mobile became a matter of survival.
What we've seen.
As you know as you might expect a lot of 2020 was showcased by healthcare engagements because pandemic or no pandemic health care was essential it just got broken into that which supported COVID-19 and that was supported elective surgeries and all the other normal care.
They initially started diving into remote telehealth that became critical for them to be able to focus on triage.
And actually focusing on what they wanted to do remote versus who they wanted to show up and then how to separate COVID-19 and non COVID-19 patients.
So when we see this going forward as it relates to channel. The channels. We have are in four areas. We have hardware companies that typically take our software as a mobile activation layer. They will bundle it with their routers or switches or access points and they'll provide a package to a venue.
Hugh or an office, where they can get not just faster Wi Fi and more interactivity, but they have all the software they need to be able to tie those into those mobile applications for their employees their partners or their consumers.
In the area of our second partnerships that Youll expect to see will be in the service provider domain.
Where they're bundling voice video and data with our software to again give venues activation for digital transformation on this mobile applications.
Final two we're very traditional for software companies. They are software channels and their system integrator channel and in both of those cases. They are trying to provide digital transformation solutions to their customers and their licensing the <unk> software to help them engage manage and monetize well.
While it is that we're here in Q2 upcoming we already have assigned global distribution deal that will be providing details too we have not yet publicly done an announcement or a broken out on how that go to market will work, but now that it's been signed you should expect to see in Q2, a formal announcement of force.
I'm, a rollout that will really shine all the work that we've done in the last several quarters to activate these channels.
And we will expect to see the benefits of those rolling forward.
Alright, great. Thanks very much.
Thank you and the next question is coming from Howard Halpern Howard. Your line is live please announce your affiliation and pose your question.
Sure towers on tablets brothers.
Well congratulations on navigating a year.
Appreciate you got a good project Howard.
First question is with regards I think my understanding what you sort of said in the beginning.
From a modeling perspective, we can expect.
<unk>.
Sequential quarterly growth going forward in 2021.
Matt go ahead and take the day I know I.
I can take that.
Yeah, So we're not providing guidance.
This year at least yet obviously, there's you know there's.
There's a lot of factors that go into what we're doing in terms of timing and deliverables to customers and getting customers to sign up for deals.
R R.
As Ellen mentioned is to try to grow 30% year over year.
You've seen in the last you know the last several quarters.
Theres been some few dip there on there and that's really just been as a result of the timing issues.
So you know our focus for the full year will be the growth.
You know how that grows between quarter between quarters still we're working through that but obviously as we get more certainty and a that will.
Share that as we get to get to that point.
Okay.
And can you guys talk a little bit about the activity.
On a pent up demand you're seeing in Q1 as compared to the second half of last year.
Yes, let me start with that and then I'm going to have Randall finish up so I'll take it at the.
Strategic level are the things that we've been seeing and then Randall can dive into some of the tactical things that we're seeing in parallel so when we look across.
Our platform can be sold to all fortune 5000 customers inclusive of governments.
When you deal with carving out health care, specifically and you carve out government specifically both of those verticals are fully active so independent of the pandemic looking backwards and independent of coming out of the pandemic post vaccine elimination of Lockdowns and shutdowns.
Those two verticals will be extremely active and we will stay similar to what we were seeing a year ago.
So that'll be 0.1.
0.2 would be those verticals that we saw that were really devastated by the pandemic things in the areas of travel live sports live music.
On a lot of the hospitality oriented things that were very much affected by all of us not being able to travel for.
For either work or pleasure and so we are seeing a lot more activity now on our call, we highlighted where literally the Wynn hotel in Vegas has been opened Macau has been open when you go into Boston, they're still in the process of expanding that opening.
However, if you take another customer that we highlighted Atlantis. They were shut down literally until about 30 days ago, So anything touching hospitality and travel I think youre going to see we've already seen a big uptick in Q1 of the activity and I think as they are opening those facilities in full travel is going up more people were.
On more flights.
We're going to see that progressively get better throughout the balance of the year.
In terms of other areas like media Entertainment.
I think we've seen that any other one doing distribution across their companion TV applications.
Their networks their shows and their content, obviously, a lot of us have been consuming that and that's been no different in the pass through the pandemic if anything it accelerated because we were all trapped at home and not really.
Out in about the way we normally are.
I think that the final comment I'll make before giving it too to Randall.
Would be as we get into areas as I said that looked like aviation and deal, especially with corporate campuses, we're seeing a big uptick in the activity around the corporate campus as people are getting work to.
Accustomed to back to work initiatives, we highlighted north, but what I want to do is hand, it over to Randall and he can give you some very specific customer examples to supplement the vertical areas that we're seeing.
Okay. Thanks out on I would say goodbye.
The best way to go.
Maybe after that.
Try to reinforce something that I think you are getting law.
At the end of the day, we have two primary competitive advantage.
One we can deploy feature rich mobile application portfolio faster and more scalable than pretty much anybody because we've been doing the simple for mobile applications were cool. So that's our modular application framework now when you when I say that you think will he doesn't most of the world have mobile application.
So that that helps us out of certain businesses like media NBC youre not going to come to us and say we want your modular application framework built on mobile application, but on health care and for corporations, who have never had a mobile application because they never needed one until now.
Wildly beneficial to them so off that'll have gotten by with a responsive mobile responsive web site.
I've gotten buyer wouldn't using for example, my chart, which is the mobile application provided by epic, which is just access to an EHR and then every corporation on who traditionally have been go on to the office you know what do they need a mobile application for right. You know you go to the office.
You really need to try to figure out something about the company you log on.
Go to Ww dot whatever that offices and you get on about a page on our contact a format and that's at the World is changing so now every corporation I'm trying to figure out how to manage it the work force. So a fortune 500 large corporation trying to figure out how to bring people back into the office activities off the charts.
Everybody you know nobody forget this idea that everyone just going to go remote forever we.
No you know people thought they would never fly after 911 and sure enough. A couple of years later it was back on normal. This is happening right now everyone's struggling with that so our most active sectors right now our corporations trying to come back into the office, who also need a mobile application in order to do that well health care.
Some that are trying to turn back on elective procedures, because that's literally their lifeblood.
We have to fall for digital transformation to make that happen beyond the operational efficiencies that just the mobile side of it now take that put it put a pin it on what's even more exciting is the location based services or other major competitive advantage. If you want to have smart venue. If you want to have smart space you have.
To have software that connects the mobile device to all these access points that were never designed in order to provide contextual location, that's what fund where does out of the box.
Our that middleware between a mobile device.
And you know, whether it's Wi Fi smart lighting anything else that you might have that actually sends out a signal we make sense of all of that so that you can identify a human being inside the way, we can use GPS to identify a device outside and so a lot of activity around that where it's Jeff I want to create smart space.
Now the future of mobile engagement is gonna be contextual and so anywhere you have like you know so.
Remember, we talked about for fiery with our other.
The larger.
Co living development in the U S in Fort Lauderdale.
He wants to do that now everybody wants to live work and play in the same space.
So as you start having the density.
Other people wanting to have grocery and restaurant and bar.
Rather than luxury high rise residential all in one place those kind of customer journeys has to be managed by an application and location based services like fun, where have so a lot of activity around that and those folks have five year development timeline.
I understand that Covid hit in 2020, but they're building these large developments and they're not going to abandon them. So we're seeing a lot of activity in that respect as well, so health care smart workplace and kind of a mixed use residential really exciting.
Okay.
Have you seen any near term.
On the stadiums.
And we're opening up.
It's across the country.
The challenge with that we've done so we did AT&T stadium in Dallas, you know the challenge with that is actually the business use cases, where you have the NFL team who pays for it right. So you have somebody that owns a stadium, but then you have a team that owns it then you have a sponsor wants to put their name on it and everybody is pointing at each other in order to pay for every other day where enterprise.
Software company, we can deploy anywhere, but we're off to a very judicious about where's the low hanging fruit. So if all we did was dominated.
Getting people to return to work getting people to have a tech enabled patient experience.
Really dominating luxury residential and even what we're doing on our political vertical we did that well we'd be a fortune 100 company. So you know going in trying to target stadiums.
I'll, let them, we have some conversations going on.
But that's not necessarily a major free spot for us to be honest.
And actually supplement that a little bit how are just.
To your point, what you might expect is it state by state if youre talking domestic and it's still subject to the lockdown on shutdown differences. So if you actually said stadiums and arenas and we're dealing with March madness right now obviously for the NCAA.
Youre in Texas Youre in Florida things are pretty wide open then they're just managing are we going to allow full capacity or have capacity if you're in New York, If you're in California, Youre just not having these sporting events at all.
Even I think the UFC is.
Re locating itself back to the United States opening up stuff in Florida. So I think what Youre seeing is it's not so much.
Our holistic thing across these stadiums and arenas across the country, It's still which states are open which ones are not and the states that are open are being flooded with not just a professional sports, but going down into collegiate sports and youth sports as well, but I think over the next two quarters.
As California, and New York and other parts of the country start behaving more like Texas and Florida.
We're going to see an acceleration of that.
Okay, and one last one.
Regarding the Black sea.
Once it is it going to be any meaningful incremental costs that are your current infrastructure based on that launch going forward.
I'll take that one it's actually.
That's a really intuitive question on its great and it's what differentiates us from I would say 95 per cent of the rest of the blockchain crypto currency world.
If everybody got burned in 2017.
Everyone is looking for who's real who has the gumption on the wherewithal to get this done because decentralization for me oftentimes it means a rudderless ship and so you need people who have this as a part of their product roadmap, who have this as a part of their go to market strategy, who can push this forward or do you think.
They are never going to be adopted by the mainstream and so for us our existing engineers, who are world class our existing infrastructure to support the entire thing we don't have to go out on hire new people and build new features because we've been building mobile engagement tool for enterprise for more than a decade, and so theres no.
Additional major material incremental costs that we need to kind of incur but that being said, obviously as we grow as a company is on market cap expands and as we grow both organically and Inorganically. We will continue to build out that team. So we can deliver even more.
More features more capabilities and so it would just be a natural progression, but we don't have a separate engineering team for our blockchain initiative.
Incur some additional liability on our engineers have been working on that because we're building. It for the Fame enterprises that we built mobile application towards where you have the exact same design led thinking and that's why it's actually going to be successful.
And the one thing I'd want to highlight here that I think is super important about this is much like people got familiar with red hat as the safe on road for open source and Linux. If you were a corporation or government.
The trust, we've earned and working on mobile applications at scale and controlling up to 1 billion devices every month with our software and using literally hundreds of thousands of transactions per second.
But we're going to be able to do is a couple of interesting things one we'll be able to provide a safe on board for these enterprise customers government customers that want to tie into data and mobile loyalty and a safeway bridging through fund were to get into this new ecosystem.
On a way that they actually can trust as Randall said very very directly and very accurately. The other thing is that we're in.
Not aware and maybe you all know, but we believe that our launch of our full ecosystem tied to fund token and fund Cohen next month, we will represent the first ever crypto ecosystem ever launched by a public company that trades.
We know there is people that buy bitcoin with corporate Treasury as an example, we know theres people that are doing bitcoin mining.
We know that there are financial groups, offering etfs or funds or other things like that to try to get exposure. We even see some that are dealing with the trading aspects of security tokens or utility tokens, what we've yet to see and what we think we're going to be the first is a credible.
<unk> trading listed company fully audited.
With the pristine components of governance and everything that goes around this ecosystem launching.
An entire ecosystem to take advantage of what we're doing and to allow others to use it in a safe responsible compliant way. According to all the laws regulations and everything in between so we're really excited by that we've been doing this for years and now we finally get to hit the proverbial go button.
And that'll be something that as I said in my portion.
We will start having successes in the second quarter.
Those fund token that will actually flow through our P&L that'll be net new and then you'll start seeing those the way we report and I believe mid August for the second quarter.
Okay, I look forward to that keep up the good work guys.
I appreciate it.
Thank you once again, ladies and gentlemen, if there are any questions. Please press star one on your phone at this time.
The next question is coming from Ed Woo Ed. Your line is live please announce your affiliation and pose your question.
Sure Sandy.
Capital.
Congratulations on managing through what was a very challenging year. My question is as things get back to normal or do you think your sales lead time as well as your implementation software time is going on.
Net back to normal on and get be faster.
Yes, so I'll take that one I think what we've seen and what Randall highlighted we actually have on our vertical solutions the ability to provision solutions extremely quickly.
Two to four months, we typically talk about that you would see in an average sales cycle that may be in the engagement that may be an RFID RF SKU RFP responses, and then back and forth.
On the papering of deals that you win so we think that that cycle is going to stay very consistent what.
What we expect though to overlay that.
Is actually two things one is all this pent up demand.
Our company is really we are deferring budget and deferring initiatives.
Deferring rollout of their solutions, even for their employee bases. In addition to consumers until their facilities, we're reopening and we see that that acceleration that we're highlighting the delays that we've seen in some of our customers and partners we expect there.
There's going to be a lot of pent up demand that's going to go with that.
The other thing is that we see all the work that we put into creating a full software repository on get.
A full documentation training and certification set of repository is all that work we setup for our indirect channels.
We're really looking forward to making those announcements in Q2 to show, where that's going to be a one day, many deployment, where it's not even an upsell or cross sell but we will have our software bundled with product and every time those products ship, we're going to actually receive a license.
135 years across those venues and that square footage to Randall is playing across those.
Those venues in those facilities that they're trying to activate for digital transformation on mobile.
Yes.
Oh that sounds great and then my.
Last question is on in terms of.
Average deal size as well as average duration I know you guys have done a very good job.
Get bigger deals them for longer time period is there a <unk>.
Specific target that you guys wanted to get your average duration of new contracts.
Going forward.
So I'll take the contract duration.
Go ahead, Matt actually you can take the sorry, I was talking about were each other can take that.
So typically as we've said before we.
And typically looked at 1% to five years.
For us we want to.
Wanted to have people sign up for as long as possible are our typical deals in the vertical that we've been focused on over the last kind of six months to 12 months have been three years long.
On an.
Deal sizes are anywhere from.
700000 up well over $1 million and so.
For us the three years is a good time frame for us a lot of the customers we're dealing with.
If we're talking about big health care customers.
I want to sign up per year, and then have to go through the whole process again and so.
We were able to sign on for three five years without a problem and then from there really are our next focus is how do we expand that and like we've talked about with with Baptist health on some of our other customers. We start with initial engagement and then we really focus on on pushing with the customer and getting more and more on extending that that overall.
One in terms of how long their day before.
Great well, thanks for answering my questions and I wish you guys. Good luck.
Thanks.
Thank you and the next question is coming from Mike Lattimore, Mike. Your line is live please announce your affiliation and pose your question.
Hi, guys.
So on for Mike.
Could you give me on.
Data on how myself.
Include location based services.
And how our debt revenue retention rate.
Matt you can probably talk about we haven't been breaking them out that out on the path I think we can have that question on before as part of the question could you could you repeat that I apologize.
Yeah. So how much of your pipeline include location based services.
Well, let me, let me start Matt.
Got to clean it up you know one important point that I kind of note.
We deploy our platform, it's kind of like Microsoft Office, just because I think nobody on this call Ive ever youth access doesn't mean, you still don't get it.
There's a lot of our platform and I think people have misconceptions about we're deploying math and map with fully feature rich now certain customers will choose a turn on certain features but they are licensing that base platform and so we've never actually had the need to kind of break out.
Well, you're only using <unk> using that same analogy youre only using access versus this customer using powerpoint versus those customers using only outlook and so I don't think we have those numbers, Matt I know, we were going to look at it and maybe we can do it in a follow up with Mike as I know, we have a couple of calls with north on that we need to hold.
But is there anything that we have shared before.
At that point, a little bit for example, Baptist Health, South, Florida, They already had a mobile application and so they only licensed our location based service to software so that one's easy.
6 million square feet, it's a million total contract value and we love that day.
A lot higher margin because now they're just licensing our location based services software and it's not that kind of integration and design component that we normally have with mobile application that we help out with but.
But do we have any numbers tied to the ones that are similar to Baptist health map.
Yes.
On the West we're sitting on right now.
We do have some numbers that can go back and take a look with the team and see if there's something we can pull up to help better represent the.
A portion of that utilizing the lbs portion.
So let me, let me take that down and see if there's something I can I can pull up on that and we can we can certainly get back to you.
I did want to address the second part of the question I believe that it was related to churn.
And so you know.
For us as we've said before.
Where we're selling to customers now and kind of a three to five year on tour.
This is really a culmination of a lot of development, we've been around 12 years.
On our platform is fully ready now and it's really over the last year plus we've been selling.
These types of deals and so for us it's a little bit early to say hey, the churn rate of this when we're signing customers up at three to five year terms.
For us if we if we look a.
One layer deeper on how we approach churn.
Our typical LTV on initial gauge minutes.
Is it going to be greater than our cost to acquire that customer.
So for us where the math works for us going out and getting customers.
We feel that our deal sizes more than cover how much it cost to get these customers, but for us really as I mentioned earlier. The focus then becomes on customer success and customer like the HFF or expanded.
<unk> expanded 3 million to over 6 million square feet in total.
This is just another example, where the customer become stickier and the churn one turn window was pushed out in the other vuzix.
Extended and so those are the types of things we look at now.
We are.
Overtime or to get a better idea on how things turn but just to be clear. This isn't our businesses in a business, where we're going to see customers, having an opportunity to turn on and off every month, we're signing up for longer term deals and we're cognizant of how.
How much it cost to get that customer and what's the lifetime value of that customer.
I think what youre getting that and which is important.
Reframe the question just a little bit so we can get you the right answer if not who's getting location based services.
Who's getting that plus something else and so the reason you come to find where is because of our ability to contextually engage and thats location and.
So we're not out there selling a bunch of non location enabled mobile software to the hospital every single hospital. We're working with is working with us because we can make things contextual with net location base services software and so there's almost a guarantee at a number right now will be.
Pretty much 90% or more of our revenue is like comparing our location based services and software to the question is how many of them are also doing a full feature rich mobile application portfolio using our modular application framework, So Baptist health, South, Florida, only licensing location based services.
Software, Virginia Hospital Center in Greater Baltimore Medical Center. They are also licensing location based services software, but in addition to that they also needed us to build their digital front door. So everyone gets location service and software.
Only some people need us to actually also build them to mobile applications that makes sense.
Yeah Yeah.
And.
How many salespeople do you.
<unk> and <unk>.
How many miles in your existing yet.
Okay.
Okay.
On random lengths argue yes, sorry, I was coming up.
On a 505 right now we're actively hiring more and so.
That's right.
The price primary youth.
So you know obviously went out to the $25 million round.
North on and Roth and so.
That's not to address a lot of tech debt that's to address.
Very small sales and marketing team.
Our ideal operating model is kind of affordable on LTV to CAC.
We really went on.
They sell a lot of it is tied more around kind of this idea of engaging these channel partner relationship not direct selling so where these folks are our experienced sales executive and we're out buying kind of a young team of people who've hammer on the arm. These are 20 year veteran of selling enterprise software through channel.
So that we're getting orders of magnitude from their participation. So five now and we are aggressively hiring right now more.
I can tell you what we're going to end at the end of the year.
It will also depend on how fast we activate some of these channel because some of these sales folks will also be working with those channel to kind of you know.
Further.
Activate new customers within those channel so five now I'd like to get another five.
At the end of the first half of this year and then what kind of scale from there.
Alright.
Last one.
Yes.
Sure.
Revenue growth faster than revenue this year.
Repeat that question again.
Yes.
Deferred revenue growth faster than revenue this year.
I'm not here on the first part of it is cutting out for me, Matt can you hear the.
You're referring to deferred revenue growth.
So for this year in terms of how it's going to grow versus revenue.
Gotcha.
Matt go ahead and take that one yes, we certainly are already turning on the quarter and we feel like we're at an inflection point that began adding back your backlog and deferred revenue.
Yeah.
I think that.
Deferred revenue growth.
Said it before.
Deferred revenue backlog are key indicator for us and certainly.
Our focus is to build that.
As much as possible.
That being said I think that on.
On the deferred revenue basis.
We are able to deploy quicker faster now so youre not going to see projects that are that are held on for several months because of that maybe in the past might've been development issues upfront with our customer.
Now we have a fully capable platform and products that we can deliver quicker.
But that being said, we're continuing to invoice annual in advance.
And to build that and so we do expect to see growth there.
And we'll see how things play out with our strategy in terms of obviously, we're continue on a direct sales.
That we've been doing for years, but really this indirect.
<unk> sales that were focusing on this year could have a fairly big impact on that.
And so we'll update everybody as we kind of get through that as Ellen mentioned, we got.
We've got some partners, we're working with them.
There could be some some opportunities there we're going to the other scale up.
Our revenue and backlog.
Okay.
And remember that's going to be the biggest differentiator everything black share and even the previous year to this year.
Growth is our ability to generate revenue both Alan already made.
You made a good point out that I hope everybody understand.
What we're doing around blockchain actually showing up as revenue because we have a live product and alive ecosystem with our fund wallet right now, it's just like selling digital goods. So you know for US it's no different selling a fund token then it would be selling location based services software that should be very compelling.
Shareholder perspective of saying okay.
How do we really began ramping revenue a lot faster that's one the other.
I want to Hammer this point home on the indirect channel partner relationships and so you'll see a big move over the next couple of years to this idea of usage based pricing.
For us that means square footage and so our usage based pricing with square footage.
Depending on the complexity of yours.
You want to become a smart venue.
Once were bundled and someone else's offering.
They already have access to that customer on the doors already wide open and they're just upselling them or turning on additional features and capabilities.
Collecting revenue at that point great margin.
And you know its price based on square footage and so that that is a totally different thing I think is still a lot of people feel like we have to engage in these year long sales cycle to sell some large brand like Fox and then.
Slow roll of trying to develop the actual engine that they want and then we finally get to recognize revenue.
On that very well on the path we've done it very well on the passion verticals and we still do that a little bit faster clip, but we'll do it for hospitals and corporation, but when we start bundling things like our location software and other people's offerings.
It will fundamentally change our revenue ramp.
Got it.
Thank you.
Thank you ladies and gentlemen at this time. This concludes the company's question and answer session. If your question was not taken you may contact <unk> Investor Relations team.
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