Q1 2021 Phunware Inc Earnings Call

[music].

President and Chief Executive Officer, and co founder.

Randall Crowder, Chief operating officer, and Matt <unk>, Chief Financial Officer. The format today will include prepared.

And 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.

The risk factors section of our S E SEC filing.

Actual results may differ materially and undue reliance should not be placed on them and.

Ali the matters being discussed today may include non G. A a P financial measures reconciliation of G. A a P to non G. A a P financial information is set forth and the earnings press release, which is available on the Investor Relations section of fun wary of website at investors that.

<unk> Dot com.

The further encourage you to visit investors not fun, where dot com to access not only the earnings press release, but also the current investor presentation S E SEC filings and additional collateral on front of where at this time I would like to turn things over to fun, where C E O Island and Tusky.

Sir Please proceed.

Thank you very much and welcome to our first quarter 2021 Investor Conference call. As a reminder, February the 12 year old Enterprise software company focused on the intersection of mobile and cloud and big data with business, the business and business and government customers worldwide.

And our mission is to provide everything you need to succeed on mobile.

And providing our customers with the products and solutions data and services for the digital transformation needs on Apple iOS, and Google Android devices and applications.

This effort is our enterprise cloud platforms, and mobile called mass or multi screen as the service, which is available from licensing address SaaS business model over one to five year contract periods worldwide.

The completion of the Q1 constitutes a positive operational inflection point for our business as we have quickly made our managed platform vision become reality across the number of key fronts non.

Not only we commenced the full rollout of our blockchain enabled mobile loyalty ecosystem specific the fund Jochen <unk> client and funnel of wallet as promise, but we have also executed of global distribution agreement with an anchor distribution partner that will be formally announced and the next several weeks.

And we continue to work through what appears to be the final stages of the COVID-19 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 from mobile big data and the cloud.

Importantly, these encompass all three of our core growth engines rolling forward, including our managed cloud or data driven loyalty marketplace and our secure blockchain enabled token client and wallet capabilities.

And as we suggested on our last earnings call. This past year was the Genesis of the transition of our company's history as we shifted from the nonrecurring low margin transaction business two of forest stickier and more scalable recurring and high margin SaaS licensing business for our mass platform.

And we remain in the midst of that transition. We are now at the ladder and of that process and expect the thrive rolling forward as a pure SaaS company.

In addition to continued enterprise interest and our math digital front door solution for healthcare and our mass smart workplace solution for corporations, and we have resumed conversation with customers from sectors that were hit hard by the pandemic, including.

Including in 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 announce later this quarter.

In parallel we are excited about the completion of fund the wallet and the launch of our blockchain ecosystem powered by Sun coin and fund token.

We are now live and excited the scale and monetize the 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 Archie and 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 and the process of reopening of their venues facilities and offices.

As such and and our case, we saw many pending deals that would normally of closed in Q1 now starting to close here in Q2. Instead of importantly, we are completely focused on the future and where the 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 shutdown there in person and operations and shifted the either remote centric or remote only environments. We are also announcing the benefits and importance of our backlog and deferred revenues specific to our SaaS 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 the 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 environment.

Fundamentally we don't 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 product and solution offerings and capitalize on the needs of the health care sector and facilitated enterprise customers getting more safely back to work.

And while we saw and declared a quarterly revenue recognition associated with these initiatives when compared to the first quarter of 2020 pre pandemic we.

We expect to see a rebound here and the balance of 2021 and 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 and parallel as.

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 state and federal.

Importantly, and independent of the pandemic, we're extremely excited by a number of development instead of occurred over the past quarter during lockdown and even more excited by what we see coming and the quarters ahead first we were able to launch three core customer and partner of hurdles for scaling our business through indirect channels. These.

These included of mass software repository on Github at Www Dot get of Dot Com Slash Spunware.

The mass documentation of repository and dock stop <unk> Dot com and a mass training and fund where fee non certification repository at training the <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.

And while these efforts did not provide instant or near term gratification on revenue recognition for our P&L day importantly, demonstrate the ongoing health and expansion of our business and will be broken down and further detail by our CFO, Matt Olney and his section of the earnings broadcast.

As a reminder, and with our mass sales cycle, typically representing 2% of four months on average recent and pending customer wins will start of hearing on our P&L in the coming reporting periods ahead.

Third we have expanded our installed base of fund varieties on mass to more than 15 billion devices worldwide, including mask platform scalability capable of supporting of the 5 billion transactions per day.

500000 transactions per second and 1 billion unique devices per month.

And with more than one petabyte of data typically growing at more than five terabytes per day are masked platform now provides a robust customer data platform inclusive of both a detailed data oncology and a comprehensive knowledge graph from one to one interactions and engagements.

And fourth we are commercially launching our funnel of wallet mobile applications on Apple iOS and Google Android and the next few weeks in conjunction with our recently launched mass blockchain ecosystem all powered by our fund Cohen and funds Hogan crypto currencies.

While the clinical and security tokens will not necessarily of tiered our financials when live from silicon utility tokens will actually flow transactions through our P&L as net new and virtually 100% gross margin revenue and.

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 10-Q for Q2 2020.

The one in mid August and.

At this time, our CFO of <unk> will 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 and February 2009.

Please go ahead.

Thanks, Alan and good afternoon, everyone I'd like to thank you all for joining us today or a review of our first quarter 2021 financial performance and 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 and provide a reconciliation of all GAAP and non-GAAP financial results.

Net revenues for the first quarter of 2021 totaled $1 6 million of which platform subscriptions and services revenue was $1 5 million.

Our focus continues to be on higher margin longer term software customers and we are pleased to have continued following the strategy and early 2021 with 92% of our net revenues derived from our mass platform subscriptions and services customers.

Gross margin was 58% compared to 58, 7% last year on a non-GAAP adjusted basis gross margin was 71% compared to 69% from the previous year.

That is more than a 1000 basis point improvement year over year, and a non-GAAP adjusted basis.

Total operating expense was $4 4 million down from $5 4 million last year.

Other non cash operating expense items were stock based compensation and amortization of intangibles and making up $9 million this year compared to <unk> 6 million and the prior year.

By excluding these onetime and noncash charges adjusted operating expense was $3 $5 million down from $4 $8 million last year.

The 27% improvement year over year.

Non-GAAP adjusted EBITDA loss was $2 4 million compared to $3 2 million last year.

Net loss was $12 $4 million or <unk> 19 per share compared to $4 million or <unk> 10 per share last year.

Backlog and deferred revenue at the end of the quarter totaled $7 7 million as.

And as one might expect companies inside of the pandemic as the reasons the delay the timing of booking business with us as companies begin to reinvest and the mobile application infrastructure, we expect our backlog and deferred revenue to increase going forward and believe Q1 will be a low point with respect of this metric.

I'd like to take a minute to review with everyone. Our prior financing activities.

As we mentioned and our year end earnings call in February we raised approximately $25 million and an underwritten public offering.

With the proceeds from the offering I'm pleased to announce we paid off the balances of the 2020 of convertible notes, which occurred over multiple payment in March and April.

We recorded various charges related to interest loss and extinguishment of debt and warrant liability revaluation of $8 8 million for the quarter and we expect to record approximately $3 8 million and Q2 related to the April payoff.

For further details please see the debt section of our subsequent events and our 10-Q, which we plan to file Friday after market close.

We closed the quarter with $23 5 million and cash from the balance sheet.

Subsequently using $13 nine millions of payoffs of 2020 convertible notes in full and the beginning of April.

We are beginning of Q2 of approximately $9 6 million of cash along with $25 eight bitcoin, we're holding to support our blockchain initiatives.

Looking at our current capital structure needs and strategy going forward I believe that we are very well positioned operationally first we've reduced our debt significantly and dramatically reshaped our capital structure.

And we have engaged B Riley securities and how the $25 million at the market offering and available for future fundraise and use.

Giving us flexibility to access cash from the capital markets, if we choose to do so.

And third we have available approximately $50 million of open shelf space on our $100 million registration statement.

Providing simplicity and optionality and any future capital needs to support both organic or inorganic growth opportunities.

In closing I think it's important to take a moment to emphasize the transformation of the company has gone through and how far we've come in the last 12 months for the first times of the public company, we have a strong balance sheet and the cash to execute against our short term and long term objectives are not the enterprise cloud platform is fully functional and we're starting to see more SKU.

<unk> recurring and high margin SaaS licensing business.

The COVID-19 pandemic will likely continue to impact of the time to close new deals and the revenue recognition of these deals through the end of the year.

But we believe that we are past the worst of it and we will start to see more consistent growth as we head into the second half of 2021.

We will continue to be active and financial conferences and investor meetings throughout 2021, and our efforts to tell our story and further strengthen our corporate profile and the capital markets with that I would like to turn the call over to Randall.

Thanks, Matt and I think it's important for our shareholders to understand we are still dealing with the impact of COVID-19 has had on our target customers. While executives are now raising to embrace new digital transformation initiatives implementation timelines and sales cycle of our spill delayed as the economy opens back up and businesses adapt to what will become a new norm.

However, we learned a lot about our business and value proposition to both customers and partners and 2020, and we expect to capitalize on that momentum heading into the second half of 2021.

And that customer relationship management for cloud storage and our target customers increasingly want and out of the box solution that not only takes the guesswork out of deployment, but also offer the platform approach that can license.

As illustrated in the graphic <unk> closest competitors are often digital agencies of consultant fees or large software developers or cloud providers, however, and either.

Businesses, the required to make significant investments and their own development teams to design build and maintain and mobile application portfolio, which becomes a significant barrier to adoption with <unk> proven mass platform. They are able to seamlessly outsource their mobile strategy and take advantage of pre integrated map features and capabilities, which is.

All of them to focus on their core business loss rapidly and save on engineering and ICU cost.

Today, we see three key competitive advantages across our product offerings, which are designed to drive digital transformation and deliver contextual engagement and a mobile first world, but it's quickly becoming mobile only first our modular application framework.

Without access to a platform like mass mobile development of an error prone tasks and often results in applications that are both difficult and expensive to maintain just like Amazon web services enabled companies to standardize their cloud infrastructure on a proven platform with various module to support key features this framework insurers are fortunate.

500 customers and partners and standardize their mobile and digital transformation strategies on mass by seamlessly integrating module of the serve at the core building blocks for a new generation of mobile application solutions and engagement. This friction free modular approach will also make it far easier for our indirect channel partners.

And there is to sell deploy and manage the math offerings and packages to their customers and organizations worldwide grew funnel of global reseller network and the Phenom certification program.

The second our location based services funnel of patented math lbs software and Beacon maintenance solution delivers proximity sub one second and real time Blue Dot indoor positioning navigation and way finding functionality across campuses and facilities, while simplifying and streamlining the underlying beacon.

And the management for both facilities staff and administrators the software of not only Ada compliant and addressing the needs of anyone who of visually impaired hearing impair or wheelchair bound, but and also transition seamlessly between indoor and outdoor environments.

The <unk> blockchain enabled data exchange and mobile loyalty ecosystem, while fund Cohen is of regulated security token designed to help brands empower consumers and take control of and be compensated for their data fund token was developed as the utility token to encourage measure and track brand interest within our mobile <unk>.

Realty ecosystem, and ultimately drive profitable behavior. However, as components of mass. These features can be seamlessly integrated via our mass funding coin data SDK for Apple iOS, and Google Android or our math fund token loyalty SDK for Apple iOS and Google Android We are also excited.

The launch of fund wallet and the coming weeks once we receive the requisite approvals from Apple and Google This native mobile application and will allow consumers to manage both fund Cohen and fund token, while enabling <unk> to deliver contextual engagement opportunities through its own branded mobile application portfolio.

Although the unaware was the pioneer and the adoption of mobile application, especially and what we call the pass and verticals such as sports media and entertainment. We are most excited about verticals of just begun to implement and mobile strategy and the part of a larger of digital transformation over the past few months, we have seen a lot of interest and our platform from Corporation.

And is looking to deploy of smart workplace solutions and tech enabled their return to work as well as health systems looking to deploy of digital front door. The tech enabled the patient experience.

We have also seen increased activity from government officials interested and better engaging their constituency as well and hospitality and retail who are looking for new ways of engaging with consumers, while they are on site and driving profitable behavior and.

Our pipeline continues to grow shareholders should look for us to close on similar deals for the ones, we announced most recently.

And our model of application framework or smart workplace solution for Norfolk Southern is of Great example of an innovative company, whose leadership has embraced the digital transformation and taken full advantage of our map platform.

Virginia Hospital Center and Greater Baltimore Medical Center are also great. Examples of health systems that are looking to not only deploy a fully integrated digital front door, but also the transition from FX and my chart mobile application with limited functionality for our own native mobile application portfolio that is their brand their content and ulta.

Emily their experience that is unique to their specific continuum of care second our location based services. Our recent deployment of Baptist Health, South, Florida, where we cover over 6 million square feet and common spirit health previously known as dignity health, where we cover over two 2 million square feet are great examples of leading <unk>.

The system integrating our math lbs SDK.

High margin recurring revenue is usage based.

And on square footage and we anticipate announcing details about of major distribution agreement and we've executed with a key indirect channel partner later in the second quarter.

Lastly, we were thrilled to announce the launch of our funds flow can purchase portal this week, which not only enables consumers developers and brands to begin purchasing funds Hogan, but also provides spunware with an additional revenue stream.

Now I'd like to turn things back over to Alan for closing remarks.

Thanks, Randall and highlighted Joe today's call. We are extremely excited by the recent commercial launch of our mass blockchain ecosystem.

And what it means to me is that our decade plus of mass platform building across mobile and cloud and big data accompanied by our years of community engagement and blockchain and cryptocurrencies.

Have resulted and the culmination and convergence of massive global addressable markets and trends and can now act as strong wind at our backs to Reaccelerate our growth.

We expect this ecosystem the complement and supplement our 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 cryptocurrencies, both hardware and our executives have a long and distinguished history within the global digital asset community.

As such.

We expect to be of trusted bridge from Fortune 500, corporations and governments looking to leverage block chain.

Please look for additional announcements in the coming weeks and months ahead, as we enable consumers to not only of regain control of their data with suncor.

But also reward them for their engagement with fund token, which can now be purchased with U S dollars Bitcoin and ethereum online at by top fund token dot com and.

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 still have nothing yet to formally announce on this front, we expect to focus our merger and acquisition activity on accretive deals and areas that will provide more customers more partnerships and more distribution for our mass platform, especially in the international markets, including Europe Asia and South America.

<unk> and importantly, rolling forward and 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 fund of our family of worldwide I would like to now open up the call for questions through the operator of.

Operator go ahead please.

Thank you the floor is now open for questions. If you do have a question. Please press star one on the telephone keypad at this time questions will be taken and the order day wherever it is that anytime Youre question has been answered. Thank you.

And remove yourself from the queue by pressing one again, ladies and gentlemen, if you do have a question. Please press star one on your telephone keypad at the time, please hold while we poll for questions.

Okay. Our first question comes from Darren <unk> with Roth Capital Partners. Please state your question.

Hi, guys. How are you. Thanks for taking my question a few if I may.

On the.

The guidance and some things.

And you guys kind of gave the 30% and.

And kind of curious contextually, how this unnamed indirect distribution partner kind of fits into that is that something that will be marginal.

Dependent and then the second derivative of that question.

How many more of those kind of indirect type partners are kind of and the pipeline and do you expect and that's more of those later this year.

Yes, Thanks, Great question and thanks for joining the so yes.

I think and our last earnings call, we'd announce it and Q2, we do this announcement obviously, we're here doing this earnings call and it's just a matter of the few weeks of the good news is we've already signed our deal inked the deal Everything's and full kind of rollout mode. At this point, we expect the first initial sales will start at the end.

And of.

Q2 here and this last piece now that we are live and the.

And scale throughout Q3, Q4 and be full steam ahead throughout all of next year and beyond so.

And what we expect that Youre going to see as you are alluding to the growth rates and the other pieces, yes, absolutely. We've made a lot of investments and a partner portal and we've been doing a lot of training remotely during the downtime and.

And we're very excited to do a joint announcement, our partners actually start and already doing the individual announcements.

But we need to kind of button up some things before and we do the full joint announcement and go to market.

We do expect that the relationship will be quite material.

We do believe that all of our software is fundamentally just included inside of the products. They are selling it's not and up sell at start of cross sell it's core to the offering thats going to market sort of think of that like the white label, OEM, where and where fund where inside and.

And to your point about additional channel now that we've done all the work to activate the partner portal.

Use this as a means to really dive deeply through how the training and certification works how the documentation works how the software repository works and then out of the order of mechanisms against the stock keeping units guidance for scaling.

So not only we get that work done. This deal signed we are using this deal as fine tuning all of the process and workflow that will go for the other deals that we do.

We haven't made anything public just yet this quarter, but we would expect that each quarter rolling forward, we should start having more information available to four key channel partners one.

One would be with a bundle of our software with their hardware and through hardware channels. Another will be aware of voice video and data bundles from service providers and carriers will bundle our software of foreign venues and facilities.

And third will be where we see traditional software channel and to take their software bundle it with ours and go to market and then finally the system integrator and consulting channels that are brought on to stitch together of hardware software solutions for corporations.

And we expect that will be the fourth area.

And this will be the blueprint for where scale really comes from because.

Other than the activating through our portal each sale.

We obviously don't have to go through any of that traditional sales process as they are selling and bundling together.

Great. That's helpful. If I could squeeze and into more.

On the fund token just curious on.

The initial uptake from developers and customers and I am.

I'm curious if fund token ends up being kind of and up sell for.

And mass where maybe customers that were looking at initially and then maybe last from Matt. If you could give us kind of the current share count that would be helpful. Thanks.

Alright, I will take the first piece and then I'll hand over to Matt for the share count.

When you think about fund token and in terms of upkeep. The first uptake that we see is when we go live on that.

Purchase portal.

And we've actually already been processing bitcoin and Ethereum U S dollar.

Purchases of the tokens and we will have the open perpetually going forward and there's two ways to get these tokens and one is to buy them and thats, where the purchase portal come through people have to go through of registration process.

<unk> process and AML piece and once all of their profile and certification is all done.

And then it's just a matter of processing the purchases and as I said it can be bitcoin either for a U S dollar wire transfers and so as those occur that will be one basket token holders that can then put them into their wallet.

And then separate from that obviously as we go live with the applications that are pending approval of Apple and Google.

And we can allow people that can also earn.

Through the mass data SDK, which is associated with fund coin and the mass loyalty SDK, which is associated with <unk> and the best way to think of those as the more information you provided about yourself and your identity your interest and they will earn fund client.

And that will bolster our data offering and exchanged and the.

And in parallel.

And for any of the profitable behaviors that folks see the like filling out a survey for our brand going to of physical location sharing content and these are activities that will be rewarded with fund token and.

And so when you see the uptake youre going to see folks at purchase it focus.

Secondarily on those that are going to participate in the ecosystem and earn the tokens and.

And then what Youll see across our customer base is that all of those that are already using mass and other software development kits, they simply need to drop in the mass data SDK and or the mass loyalty SDK and then the functionality of our ecosystem will come Nader.

At the end of their iOS and Android applications that they sell.

So I expect that thats kind of of the sequencing of of 123 purchasers of the token and those that are earning the token and then our partners and customers that just do that to your point upsell and cross sell of adding the SDK is in and then they get the full benefit of all of the block chain the loyalty and the data inside their applications.

And without having to build anything just dropping and this SD case.

And then let me turn it over to Matt for your question about share count.

Yeah, Hey, Darrin.

So as of this week Red 71 7 million.

And then at the end of the end of March we were at $71 2 million.

Great. Thanks, guys appreciate it.

And Ron.

Okay. Our next question comes from.

Howard Halpern with <unk> brothers. Please state your question.

Good afternoon guys.

Just wanted to add.

The way a little bit about.

Forecast.

And 30, and 30% and and 75% gross margin is that.

Basically you're looking at the starting that and the second half of this year and and for the 2022 fiscal year as.

We are still transitioning through the pandemic and the first half of this year.

Yes, it's probably fair the the reality is that right now I kind of look at it where by the end of this quarter I think everyone in the United States for sure is going to have the option to have either already taken their vaccine or decide they don't want to take the vaccine. Obviously the CDC came out today and said if you take the vaccine masks off.

Indoors outdoors.

There are some exceptions like airlines buses.

Homeless shelters prisons and citizens Theres, a handful I think and hospitals.

But the reality is that.

And now that everything's starting to reopen and a lot of the things that we originally were thinking were going to be closing in Q1 and after the new year I think before the vaccines were really made available and scaled a lot of the big companies and even some of the government customers. We have I think Q1 and they basically just took a wait and see.

And they paused a lot of their spending Wade.

Waiting to see what was going to happen with the vaccines I think what we saw as the deals that were kind of pending and Q1 started signing here in Q2, and we're seeing an acceleration of that and I think that's going to maintain its course the other.

The reason why we talk about a 30% obviously, we're only going to have about half of this quarter and specific to the recent launch of fund token and some of these other elements so and.

Even with the deal we alluded to with the partner that we've signed the deal, but we haven't formally announce it but will and the next couple of weeks.

All of that activity means that that revenue recognition and anything thats going to hit is going to be and the tail of half of this current quarter and then I think as we're getting into Q3 Q4, we're going to start getting back to a very more normal scenario, where that 30% youre going to be comparing.

Against Q3, Q4, and we expect normalcy.

Internally, we are forecasting that it's probably going to be January of next year before we see a similar situation around the world like we're seeing here and the United States I think Israel led the way U S was probably second clearly theres challenges in Europe, and India, especially.

South America, especially Brazil and pockets in Asia. So we believe that the vaccine rollout internationally are going to be a lot more of what Q3 and Q4 look like and the rest of this is honestly just how quickly the people want to get back to their facilities.

But thats kind of our planning and we expect to your point that all of the benefits of both of this indirect channel deal and the launch of our ecosystem, we're going to get call. It about little over just under half of the current quarter. We're in and then we will start having the first full quarters of those in Q3.

And and.

And you talked about deal closing and the <unk>.

Second quarter, what kind of verticals are you seeing.

The activity in.

Yes, so I would say and sequence the most active vertical is healthcare first.

And Thats coast to coast. So this is <unk>.

During the period of the pandemic, we saw it was sort of how do they provide COVID-19 versus non COVID-19 services, especially elective procedures.

So I think that what we've seen is just an immense amount of activity from coast to coast.

We recently launched and as Randall suggested both Baltimore and Virginia Health systems, we've been expanding with Baptist Health, South, Florida, We've done the add ons up and New York when Youre dealing with kind of our NYU land gone and the Mayo clinic of that out west it's more about dignity health care, which is now called <unk>.

And spirit post M&A and.

And so we're seeing a very vibrant healthcare market and we expect that to continue the second biggest market. We're seeing has definitely been around corporations in terms of corporate campuses smart campuses and this is about getting people safely back to work in the event something goes wrong.

On an ability contact tracing and a bunch of other provisions and side, we did talk about Norfolk southern.

And instances like that we're seeing full speed ahead, and they keep expanding the kinds of things, they're doing with us and.

And they are opening up to more and more facilities faster.

And any of the corporate engagements we were doing that look after feel like New York, California, and a few of the other I'll, just say kind of Blue States.

And those are still and a slow open mode and some of those.

The customers and partners we've seen the.

And believe that day will start trying to get people back in Q3 tried to finish that up and Q4 and there'll be full speed ahead and January I think and some of the Red States, Florida, Texas and <unk> been much more open a much quicker and.

And that's been consistent across the price of third group that we see Thats, most active which is and the property management real estate hospitality side, where whether it's been Atlanta Bahamas debt reopened the only in may.

Or whether it's the win when youre dealing with the casinos, obviously theyre more open and fully and Las Vegas up in Boston, a little bit of different Macau, a little bit different.

But if you go and sequencing healthcare is one corporate is two three is kind of the real estate and hospitality and.

And then fourth is really government.

Interestingly, we're seeing a lot more of an uptick of conversations and activity amongst local cities.

Launched Pasadena, Texas, which is a large suburb outside of Houston, but were having a lot more activity, where city councils and mayor's of realizing they need to have a much better means to interface with both visitors of the city and residents and constituents that are local.

<unk> and a lot of the what I call Smart city activity in terms of network hardware and sensors and other kind of standard access security and control features and.

And what we're finding is that our software is the interface through mobile that you would then access all of those existing services.

And that's kind of where I would put it for now.

I do think Q3 Q4, and the next big wave of customers that are going to be coming back and earnings power or youre going to see things like sports, especially live events stadiums arenas and others just flat out of kind of shutdown during the window of what's been happening <unk>.

Oxiclean.

Okay and.

And one last one since you brought up the government and the.

The government, especially the local government start implementing.

Good day actually be of source to grow your <unk> ecosystem as.

Means to get.

You know the local on the local people in the town too.

Use the W.

The air Mask technology.

Well, we believe the answer to that it should be yes, and we think anyone progressively if you look across the country.

Again, and throw politics out and even though theres lots of politics involved with local government.

Youre seeing the state of California. The state of New York has had a lot more challenges and the state of Texas or the state of Florida as an example.

Youre seeing examples where the mayor of Miami at a local level is leading a boom and recruitment and activity and how can I help and getting.

Not just blockchain crypto financial companies to move down into South Florida of the massive recruitment out of Silicon Valley and the west coast to get Big.

Big tests to move as well so we think that Theres a big difference there is two <unk>.

Groups that are engaging in big ways, we do think that residents and visitors constituents and need to have a means to interface.

With their local government and a much more productive way and we do think people need to be able to understand how to take advantage of the services that are offered and a much more productive way.

So we were excited to get some of these solutions live and.

And we're definitely seeing a big uptick because I think what we've found through the pandemic is.

And with people working remote they now have options to work not just for the companies they want to choose but the geography, they want to use where they want to spend their time, how they want to live their lives and what that has done is it has really opened up.

Competition for talent and resources nationwide.

And everything's on the table and governors and.

Even county Commissioners and there is they're starting to realize taken fundamentally.

Change the landscape of what their local economy looks like and so we see our solutions as a means to help facilitate that dialogue.

And let people work through and explore options and obviously for lots of visitors, whether it's for fun or on business conferences, we think that it's important for people to be able to access the services when youre and unfamiliar cities.

Okay.

Thanks for answering my questions guys.

Again, ladies and gentlemen, if you have a question. Please press star one on your telephone keypad at this time.

Our next question comes from Ed Woo with ex India Cabinet capital. Please state your question.

Okay.

My question is you mentioned that you guys are looking for M&A opportunities acquisition of opportunistic basis, what are you seeing out there and in terms of valuations and opportunity.

Yes, so lets say its a wildly competitive market.

And importantly from our standpoint, we put.

Probably $150 million over our existence into the development of our enterprise cloud platform for mobile so when we're thinking.

Talking about M&A, we're not trying to find products or solutions or technology or anything that we need the bolt onto our platform and we feel quite comfortable with that.

And what we're actually most focused on for any activity one as Matt would reinforce accretive deals that are going to be.

Financially beneficial to the company.

And with a focus on expansion in new geographies inclusive of Europe, South America, and Asia and the biggest thing that we're interested when we're thinking about acquisitions.

Our customer oriented and channel oriented so that we can amplify and not only our core customer base.

But we can access channel to market. So that's really where the focus is at in terms of the second part of your question on valuation.

And I, probably smile at me and we laugh a little bit there still is a lot of competition and a lot of unrealistic expectations on what valuations look like.

When you are private.

And Youre seeing a lot of the angel backed and venture backed companies.

And at elevated valuations, where they probably haven't grown into the financials just yet.

And therefore, you see a bit of a disconnect often between those who might want to buy and where they are valued at relative to where the financials really are when you get into the larger private companies and.

And you start out and a lot more of the competition between the corporate strategic buyer.

Youre getting a lot of private equity firms that might be trying to find deals without people going public and then of course of the special purpose acquisition companies. When we use the stack to go public years ago.

It wasn't quite as fashionable and if it is now now everyone's using stock as an alternative to a traditional IPO were of direct listing and.

And you're seeing lots of competition because all of those factor on timeline, where they either have to find the deal consummated deal and get a public where they have to return all of the trust money and shut the stack down and the listing is done.

So I think youre seeing a lot more competition and across the whole spectrum.

When you actually get internationally I think there is a little bit more rationality so to speak.

But so far I think that we're really not trying to do anything unless it's a good fit first and foremost.

Operationally efficient, it's financially accretive and if it's not going to add to our customers our distribution for our platform or get us entry into new markets for us, we're going to be diligent and take our time and just focus on organic growth out of the pandemic.

Great. That's the great answer and thank you for answering my questions and good luck.

Thank you.

Okay, I'll turn the call back over to Alan for closing remarks.

Yes, I'll have a few closing remarks.

And also allowed and then Matt to kind of give a few final comments I think what's really important for everybody to understand as everyone knows the pandemic and set of pain.

We can look backwards and see all of the interesting decisions governments of man corporations of made what we've all lived through it is what it is the good news is we're here.

Looked and put the past behind US we now know that everything is starting to reopen and we think that the reopening is going to start accelerating as we finish off Q2, I think it is going to be better and Q3, even better and Q4, and then 2022 right now barring any other kind of big shocking surprised event.

We're going to be in a position, where we're able to have a fully funded company executing normally.

And the markets that are provided.

And we clearly were not as beneficially.

The focus at <unk>.

Some companies were when they were getting and the meal kit delivery or the <unk>.

<unk> services are all sorts of other things that worked very well when everyone was and shutdown lockdown of remote.

Also we are and as hurt and some of the folks and hospitality or areas, where things just flat out shut down.

I think what's important to realize is where we were at a year ago.

We're at now we finished the last quarter with a record cash balance.

Anyone out there betting that were going away is wrong. They will continue to be wrong. That's off the table. We worked through the pandemic to do what we said we would do which was the eliminate debt eliminate liability bolster the balance sheet and flexibility and we've done all of those things as we can.

Promised as well, we said that we were going to continue our full transition to SaaS.

We're getting dangerously close to the end of that process and then we'll be focusing on one to five year licensing deals and our gross margins continuing to expand from the licensing of data and software the <unk>.

Final thing I would probably say is part of that is.

And we were working and the world of blockchain and crypto currency going back long before we were public.

And before the last kind of bitcoin cycle.

And early 17.

And it's not anything new to us.

And as we were working through the process of getting of this point.

All of the activity by and data and loyalty candidly, we were too early when we were still private to be diving in the institutional acceptance wasn't yet their corporations didn't use things like bitcoin is of treasury asset before.

The Big Wall Street money funds pension funds and down Thats Nobody was involved in this space and now and we've seen both people diving in to a trillion dollar market. We see more people that want the same path to get into this world.

And we acquit ourselves a lot like the way to get into blockchain and crypto for corporations and governments. The way people used to go through Red hat to get to open source and Linux and so we're super excited that we now sit where we have the money we need we actually have a balance sheet that is strong and now we have the ability with.

A cost efficient infrastructure to start scaling out and anchor that with a great global distribution partner that we'll be announcing shortly let.

Let me get them out of the opportunity to highlight a couple of those key elements financially and then we'll wrap it up.

Yeah. Thanks, John.

And we're running out of time here, So I think Alan obviously set at best and a lot of.

The things that was going to say I mean, just the position of our out right now.

To the last year, we feel great, where we are and we appreciate everyone's support and theres lots of bigger and better things to come.

And we'll continue to we'll continue to fund the company and execute operationally and build shareholder value and.

And thus our extreme focus right now and.

All I can say again is thanks for your time and and please look out for us in the in the next couple of months as the gain will be active the conferences and.

Happy to take calls as needed and true.

And to get as many people to learn more and off on where and.

Joe and the journey with us.

So in closing I'd, just like to say as a reminder for any of you that are net new the blockchain crypto currency, we have lots of information that go along with how our royalty and data from operators and we'd encourage you to get part of the front of our ecosystem by going to buy the fund token dot com and you can start diving in and be a part of this brand new.

<unk> system I'm very proud that I believe you can fact check me on this all you want.

We're the first NASDAQ or the New York Stock Exchange listed company and the history of the World that has launched its own captive crypto ecosystem with both of the security token any utility token.

And I've seen people out of buying bitcoin for corporate Treasury and we've seen people that are doing the mining we have yet to see anyone anywhere worldwide.

Especially trading on NASDAQ of the NYSE that can get the full regulatory compliance with a public listed audited company and the activation of all of these assets. So we will look forward to sharing that with you. We appreciate you being on the journey with us and from our funnel of our family dollar.

All of you and thank you very much.

Yes.

Thank you. This concludes today's conference call. We thank you for your back of the pace.

You may disconnect the lines at this time and have a great day.

At the toward the first and the Biopharma.

[music].

Okay.