Q4 2023 Phunware Inc Earnings Call

Operator: Good afternoon, ladies and gentlemen, and welcome to Phunware's fourth quarter and full year 2023 Investor Conference Call. Currently, all participants run a listen-only mode.

Good afternoon, ladies and gentlemen, and welcome to fund, where its fourth quarter and full year 2023 Investor Conference call.

Currently all participants are in a listen only mode.

Operator: Joining me today are Mike Snavely, Chief Executive Officer, and Troy Reisner, Chief Financial Officer. The format today will include prepared remarks by Mike and Troy, followed by a question and answer session. As a reminder, today's discussion will include forward-looking statements. These forward-looking statements reflect our current views as of today and are based on various assumptions that are subject to risks and uncertainties disclosed in the Risk Factors section of our SEC filing. Actual results may differ materially, and undue reliance should not be placed on them by you.

Joining me today are Mike Snavely, Chief Executive Officer, and Troy Reisner, Chief Financial Officer.

The format today will include prepared remarks by Mike and Troy, followed by a question and answer session.

As a reminder, today's discussion will include forward looking statements. These forward looking statements reflect current views as of today and are based on various assumptions that are subject to risks and uncertainties disclosed in the risk factors section of our SEC filings.

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

Operator: Additionally, the matters being discussed today may include non-GAAP financial measures. Reconciliation of GAAP to non-GAAP financial information is set forth in the earnings press release, which is available on the Investor Relations section of Phunware's website at investors.phunware.com. I further encourage you to visit investors.phunware.com to access not only the earnings press release but also the current investor presentation, SEC filings, and additional collateral on Phunware. At this time, I'd like to turn things over to Phunware CEO, Mike Snavely. Thank you, and we welcome our fellow shareholders to our fourth quarter and full year 2023 investor call. We're glad you've joined us.

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 <unk> website at investors dots on where dot com.

I further encourage you to visit investors Dot fund, where dot com to access not only the earnings press release, but also the current investor presentation, SEC filings and additional collateral on fund where.

At this time I'd like to turn things over to Sun wear CEO, Mike Snavely. Please proceed.

Thank you and we welcome our fellow shareholders to our fourth quarter and full year 2023 Investor call. We're glad you joined.

Michael Snavely: Last time I spoke with you, it was a couple of weeks after the board asked me to step into the role of CEO. In the 90 days or so since that earnings release, we've reshaped nearly every aspect of the company, with an eye toward delivering predictable, sustainable, and profitable growth for our shareholders. Troy will run through the details of those actions here.

Last time I spoke with you was a couple of weeks after the board asked me to step into the role of CEO.

In the 90 days or so since that earnings release, we've reshaped nearly every aspect of the company with an eye toward delivering predictable sustainable and profitable growth for our shareholders.

Roy will run through the details of those actions here shortly.

Michael Snavely: When I took over this role, there was a fair bit of cleanup that needed to be done. Our balance sheet was burdened with debt obligations. We had litigation exposure in various places. And we were burning too much cash, both in the core software business and the Ancillary Light. Most importantly, we lacked strategic focus.

When I took over this role there was a fair bit of clean up that needed to be done our balance sheet was burdened with debt obligations. We have litigation exposure in various places and we were burning too much cash both in the core software business ended the ancillary light business.

Most importantly, we lacked strategic focus.

Troy Lee Reisner: Most of these problems are solved, and all are well understood as we speak to you today. We built our go forward plan on a number of bright spots, a highly satisfied and referenceable customer base, clear ROI that our customers are achieving with our solutions, and a talented and experienced product engineer. From this strengthened foundation, we are on a new trajectory for 2024 and are bullish on Phunware's. I will turn it over to Troy to talk about our financial performance. After his remarks, I'll return to talk about our vision for the future of Phunware. Thanks, Mike. And good afternoon, everyone. I'd like to add my thank you for joining us today for a review of our full year 2023 financial performance and our progress against key costs, reduction in. For clarity, I'll be discussing GAAP financial measures unless otherwise specifically noted.

Most of these problems are solved and all are well understood as we speak to you today.

We built our go forward plan on a number of bright spots in the business.

Highly satisfied and referenced customer base.

Clear ROI that our customers are achieving with our solutions and a talented and experienced product engineering team.

From this strength and foundation, we are on a new trajectory for 2024 and are bullish on <unk> future I will turn it over to Troy to talk about our financial performance. After his remarks I'll return to talk about our vision for the future of fund where.

Thanks, Mike and good afternoon, everyone.

I'd like to add my thank you for joining us today for a review of our full year 2023 financial performance and our progress against key cost reduction initiatives.

Clarity I'll be discussing GAAP financial measures unless otherwise specifically noted.

Troy Lee Reisner: Our press release, AK, and website provide a reconciliation of all GAAP to non-GAAP financial results. In addition, I will provide insight into our operating expense run rate and how we have strengthened our balance sheet in early 2020. As a reminder, in November, we made the decision to shut down our hardware business, Light Technologies. In accordance with generally accepted accounting principles, Lyon is presented as a discontinued operation in the financial statements. The shutdown of Light was substantially completed in December.

Our press release 8-K and website provide a reconciliation of all GAAP to non-GAAP financial results.

In addition, I will provide insight into our operating expense run rate and how we have strengthened our balance sheet in early 2024.

As a reminder, in November we made the decision to shutdown our hardware business light technology.

In accordance with generally accepted accounting principles light is presented as a discontinued operation and the financial statements. The shutdown of life was substantially completed in December.

Troy Lee Reisner: Net revenues from continuing operations for the full year of 2023 totaled $4.8 million, as compared to $6.5 million in the prior year. The decline in revenue is due to the sale of 1.5 million Phun tokens in the prior year. Gross margin from continuing operations was approximately 34.9% compared to approximately 53.8% last year, with the prior year margin again benefiting from the sale of Funtech. Operating expenses from continuing operations, inclusive of a goodwill impairment of $25.8 million, were approximately $47.4 million this year compared to approximately $27.5 million last year. Excluding the goodwill impairment, operating expenses from continuing operations were $21.6 million for 2023 compared to $27.5 million last year, which reflects the significant process we've made late in 2023 to reshape our costs.

Net revenues from continuing operations for the full year of 2023 totaled $4 8 million as compared to $6 5 million in the prior year.

Client in revenue is due to the sale of $1 5 million up five in the prior year gross margin from continuing operations was approximately 34, 9% compared to approximately 53, 8% last year with the prior year margin again benefited from the sale of October.

Operating expenses from continuing operations inclusive of goodwill impairment of $25 8 million.

We're approximately $47 4 million this year compared to approximately $27 5 million last year.

Excluding the goodwill impairment operating expenses from continuing operations were $21 6 million for clients 83, compared to $27 5 million last year.

This reflects the significant process, we've made late in 2023 to reshape our cost structure.

Troy Lee Reisner: For a better picture of the impact of our cost reductions, we note that the average monthly operating expense from continuing operations for Q4 of 2023 was approximately $1.1 million, as compared to an average of $2 million for the previous nine months of 2023. Other non-cash operating expense items related to continuing operations in 2023 were stock-based compensation and impairment of goodwill, which totaled approximately $30 million this year, compared to approximately $3.1 million in the prior year. By excluding these non-cash charges, adjusted operating expense was approximately $17.9 million this year compared to approximately $24.3 million last year. Our loss from discontinued operations for 2023 was approximately $10.9 million and $5.5 million in the prior year, which encompasses all the revenues and costs of life. Non-GAAP adjusted EBITDA loss from continuing operations was $15.5 million this year compared to $20.8 million last year, which reflects a 25.5% improvement.

For a better picture of the impact of our cost reductions. We note that the average monthly operating expense from continuing operations for Q4, 2023 was approximately $1 1 million as compared to an average of $2 million for the previous nine months of 2023.

Other noncash operating expense items related to continuing operations in 2023 were stock based compensation and impairment of goodwill, which totaled approximately $30 million this year compared to approximately $3 1 million in the prior year.

By excluding these noncash charges adjusted operating expense was approximately $17 9 million this year compared to approximately $24 3 million last year.

Our loss from discontinued operations for 2023 was approximately $10 9 million.

And $5 5 million in the prior year, which encompasses all the revenues and cost of life.

non-GAAP adjusted EBITDA loss from continuing operations was $15 5 million this year compared to 28.

$8 million last year, which reflects a 25, 5% improvement.

Troy Lee Reisner: In late February, we executed a 50-to-1 reverse stock split, which, under GAAP, all share information has been re- Shares used to calculate earnings per share were approximately $2.4 million this year versus approximately $2 million last year. So the net loss from continuing operations was $41.9 million, or $17.63 per share this year, compared to $45.4 million, or $22.95 per share last year. Our backlog and deferred revenue at the end of the quarter totaled approximately $4.7 million. Moving to the balance sheet, we closed the fourth quarter with $3.9 million in cash and $4.9 million in debt, which was down from the $9.7 million in debt at the end of the prior year. So with the historical numbers covered, I'm going to highlight other recent First, we reduce monthly cash burn by fruitfully restructuring operations. Here are some examples.

In late February we executed a 50 to one reverse stock split which under GAAP. All share information has been recast shares used to calculate earnings per share were approximately $2 4 million this year versus approximately $2 million last year.

So net loss from continuing operations was $41 9 million or $17 62 per share this year compared to $45 4 million or $22 95 per share last year.

Our backlog in deferred revenue at the end of the quarter totaled approximately $4 $7 million.

Moving to the balance sheet, we closed the fourth quarter was $3 $9 million in cash and $4 9 million in debt, which was down from the $9 7 million of debt at the end of the prior year.

So with our historical numbers covered I want to highlight other recent accomplishments first we reduced monthly cash burn by prudently restructuring operations here are some examples compensation expense, we're retaining key talent to support existing customers and initial growth projects, which resulted in reduced compensation related costs salaries.

Troy Lee Reisner: Compensation expense; we retain key talent to support existing customers and initial growth, which resulted in reduced compensation related costs, so salaries, payroll taxes, and benefits by approximately 55%. At the end of 2023, our total headcount was 25, and we're currently at 27 today. Rent expense.

Payroll taxes and benefits by approximately 55%.

At the end of 'twenty three our total head count was 25 and we're currently at 27 today.

Rent expense during 2023, we negotiated a termination of three of our five existing office space leases. We expect 2024 monthly lease expense net of sublease income to approximate 50.

Troy Lee Reisner: During 2023, we negotiated the termination of three of our five existing office spaces. We expect 2024 monthly lease Net Established Income to be approximately $50,000.00. We continue to pursue the sublease, or early termination, of our offices. Beyond compensation and facilities costs, our Q4 run rate for other expenses has decreased more than 50% compared to the beginning of 2020. Secondly, strong improvement in our financial position. Beginning with a small equity raise in December, followed by others in January, we were able to stabilize our financial position and fund our runway for the foreseeable future. For Somatic Context, in early March, we now have. Pricing with $17 million of cash on. The Road Guys.

We continue to pursue the sublease or early termination of our off lease.

And compensation and facilities costs, our Q4 run rate for other expenses decreased more than 50% compared to the beginning of 2023.

Secondly, strong improvement in our balance sheet.

Beginning with a small equity raise in December followed by others in January we were able to stabilize our financial position and fund our runway for the foreseeable future.

For somatic context in early March we now have.

Approximately $17 million of cash on hand.

Euro debt.

Michael Snavely: Nearly two million of future lease obligations have been eliminated, and approximately $4 million of current liabilities have been reduced. We've settled a significant pending lawsuit, which was fully accrued in prior. And we have a clean capital stack consisting of just common. We will remain active at both financial conferences and investor meetings in our efforts to share our story and further strengthen our corporate profile in the capital market. The next major financial conference we will be attending is the 36th Annual Roth Conference on March 17th through the 19th. We look forward to many one-on-one conversations and meetings with long-term minded institutional investors at the event and other financial conferences where opportunities are presented. So with that, I want to turn the call back over to Mike for his discussion of our forward-looking strategy. Mike.

Nearly $2 million of future lease obligations eliminated.

Ultimately $4 billion of current liabilities paid.

We settled a significant pending lawsuit, which was fully accrued in prior years.

We have a clean capital stack consisting of just common stock.

We will remain active with both financial conferences, and investor meetings, and our efforts to share our story and further strengthen our corporate profile.

Capital markets. The next major financial conference, we will be attending the 36th annual Roth Conference on March 17th through the 19th.

We look forward to many one on one conversations and meetings with long term minded institutional investors that via debt and other financial conferences as opportunities present themselves.

So with that.

I will now turn the call back over to Mike for his discussion of our forward looking strategy Mike.

Michael Snavely: Thanks, Troy. Now that we have a solid foundation to work from, here is how we plan to build the future for our shareholders. Our commitment to our shareholders is one of sober execution. What does this mean?

Thanks Troy.

Although we have a solid foundation to work from here is how we plan to build the future for our shareholders.

Our commitment to our shareholders is one of sober execution. What does this mean solid steady growth careful stewardship of company assets driving the core software business toward breakeven and then profitability.

Michael Snavely: Solid Steady Growth and Careful Stewardship of Company Assets, driving the core software business toward breakeven and then profitability, and deployment of a portion of our capital against carefully considered opportunities that have a potential for outsized growth. Our strategy in software. Software has always been the core of our company. We believe that our software assets and our partnerships provide us with the ability to deliver the benchmark solution for the mobile engagement of our customer stake and to continue to be recognized as an indispensable revenue generator for Brain. This is the primary mission of our software, which is focused on hospitality, healthcare, and connected office environments like we have in place with Gaylord Hotels, Phoenix Children's Hospital, and Norfolk Southern's Corporate Campus, to name a few examples. In recent years, as our software business has evolved from a professional services software development model to SaaS licensing, our staff has become oversized in relation to the portfolio we have under management. We have right-sized that part of the business while preserving the institutional knowledge embodied in our leadership.

And deployment of a portion of our capital against carefully considered opportunities that have a potential for outsized returns.

Our strategy in software.

Software has always been the core of our company, we believe that our software assets and our partnerships provide us with the ability to deliver the benchmark solution for the mobile engagement of our customers stakeholders.

And to continue to be recognized as an indispensable revenue generator for brands.

This is the primary mission of our software business, which is focused on hospitality health care and connected office environments like we have in place with Gaylord hotels, Phoenix Children's Hospital, and Norfolk Southern's corporate campus to name a few examples.

In recent years as our software business has evolved from a professional services software development model to SaaS licensing.

Our staff had become oversized in relation to the portfolio, we have under management.

We have right sized that part of the business, while preserving the institutional knowledge embodied in our leadership team.

Michael Snavely: Our goal for the next few quarters is to deliver ever-increasing results from the software business, and we believe that we can do so based on achievable revenue growth goals and delivery. Since our last earnings call, we have added and launched new customers in Miami, Hawaii, and Montreal. These hospitality customers join a portfolio of existing customers that have consistently renewed and expanded their relationships with Phunware. Our solution is deemed indispensable by our customers to engage and monetize their guests, patients, and employees. The mobile applications and experiences we develop for our clients consistently win industry accolades, underscoring their effectiveness and reliability. Finally, we also consistently see the best indicators of customer satisfaction. Referrals and positive references to their peers in the, We continue to enhance our platform by internally developing new capabilities. For example, artificial intelligence that identifies customer desires based on location.

Our goal for the next few quarters is to deliver ever increasing results from the software business and we believe that we can do so based on achievable revenue growth goals and delivery efficiencies.

Since our last earnings call, we have added and launch new customers in Miami, Hawaii and Montreal.

These hospitality customers joined our portfolio of existing customers that have consistently renewed and expanded their relationships with fund where.

Our solution is deemed indispensable by our customers to engage and monetize their guests patients and employees.

The mobile applications and the experiences we developed for our clients consistently when our industry accolades underscoring their effectiveness and reliability.

Finally, we also consistently see the best indicator of customer satisfaction referrals and positive references to their peers in the industry.

We continue to enhance our platform by internally developing new capabilities.

For example, artificial intelligence that identifies customer desires based on location activity in profile.

Michael Snavely: Activity and Profile, and Surfaces offers at the right time. However, we also believe that acquisitions and strategic partnerships will play a significant role in expanding our footprint in the markets we serve. To that end, we are actively seeking relationships that align with and support our strategy of delivering a complete end-to-end solution for end-user engagement that directly drives revenue for our patent monetization. We are committed to protecting our company's rights against any patent infringement that we can identify and to engaging in efforts for recovery of damages. We believe that our patent portfolio, built up over the past 15 years, covers some of the most fundamental methods for the way data is managed and distributed on the internet and in mobile.

And surfaces offers at the right time.

However, we also believe that acquisitions and strategic partnerships will play a significant role in expanding our footprint in the markets we serve.

To that end, we are actively seeking relationships that align with <unk>.

And support our strategy of delivering a complete end to end solution.

Our end user engagement that directly drives revenue for our customers.

On patent monetization.

We are committed to protecting our company's rights against any patent infringement that we can identify.

And to engaging in efforts for recovery of damages.

We believe that our patent portfolio built up over the past 15 years.

Cover some of the most fundamental methods of the way data is managed and distributed on the Internet and in mobile and.

Michael Snavely: And we intend to aggressively identify and hold infringers to account. We've already seen the first fruits of progress on this. A jury in the U.S. District Court in Los Angeles has found that U.S. patent number 8989715, also known as the 715 patent, is infringed by Netflix video streaming service. While we previously sold this patent to GOTV Streaming, we retain a significant economic interest in all future enforcement, licensing, and other recoveries related to this patent, including damages from the Netflix case. For more information on this action, including the current status of a motion for a new trial on damages..., please see Go TV streaming LLC versus Netflix, filed in the U.S. District Court for the Central District of California.

And we intend to aggressively identify and hold infringers to account.

We've seen the first fruits of progress on this front.

Jewelry in the U S District Court in Los Angeles has found that U S patent number 8989715.

Also known as the 715 patent.

Is infringe by Netflix video streaming services.

While we previously sold this patent to go TV streaming we retain a significant economic interest in all future enforcement licensing and other recoveries related to this patent including damages from the Netflix case.

For more information on this action, including the current status of our motion for a new trial on damages.

Do you see go TV streaming LLC versus Netflix Inc filed.

<unk> in the U S District Court for the Central District of California.

Michael Snavely: Today we have 16 other issued patents and 8 pending. We are conducting an evaluation of our remaining patent portfolio and look to partner with one or more entities in the near future to assert our rights and to monetize some or all of these assets on digital assets, including funds. Digital assets will also be part of our strategy moving ahead. Given the expansion and broader acceptance of Bitcoin, Ethereum, and other digital assets, and the growth of related networks, together with what we believe to be increasing regulatory certainty on digital assets, we believe the time has never been better to refocus on this area, separately and as part of our software offering. We have been a pioneer and innovator as a public company in the digital assets space. For example, we created and developed our own native tokens, FunCoin and FunToken.

Today, we have 16 other issued patents and eight pending.

We are conducting an evaluation of our remaining patent portfolio and look to partner with one or more entities in the near future to assert our rights and to monetize some or all of these assets.

On digital assets, including fun coin.

Digital assets will also be part of our strategy moving ahead.

Given the expansion in broader acceptance of bitcoin, a theory and other digital assets and the growth of related networks.

Together with what we believe to be increasing regulatory certainty on digital assets. We believe the time has never been better to refocus in this area separately and as part of our software offerings.

We have been a pioneer and innovator as a public company in the digital asset space for.

For example, we created and developed our own native tokens fun coin in fund token.

Michael Snavely: And we created and launched the PhunWallet application. We had made tremendous progress on implementing our multifaceted digital asset-related business by mid-2022. However, increasing regulatory uncertainty and unexpected events in the digital asset market, coupled with changes in management, forced us to put our digital assets business implementation on hold until. It will take us some time, but we are committed to building a successful, multi-faceted digital asset business with differentiated offerings. Today we are confirming some initial steps for our multifaceted digital assets business. Number one, issuance of We will finalize the structure of FunCoin and its related ecosystem, solidify the role of Phuntoken within the ecosystem, and complete our initial issuance of FunCoin at the earliest practicable opportunity.

And we created and launched upon wallet application.

We had made tremendous progress on implementing our multifaceted digital assets related business by mid 2022.

Increasing regulatory uncertainty and unexpected events and the digital asset markets, coupled with changes in management.

Asked us to put our digital assets business implementation on hold until now.

It will take us some time, but we are committed to building a successful multifaceted digital assets business with differentiated offerings.

Today, we are confirming some initial steps for our multifaceted digital assets business strategy.

Number one issuance of fun coin.

We will finalize the structure of fun coin and its related ecosystem.

Solidified the role of fund token within the ecosystem.

And complete our initial issuances of fun coin at the earliest practicable opportunity.

Michael Snavely: We are engaged daily in the work required to get this. We may make some changes to FundCoin in the ecosystem that we believe will benefit our digital asset holders and stakeholders. Number two, we have built IP that will take our digital assets strategy well beyond the issuance of coins and tokens. For example, we have been issued U.S. Patent 11829996, described as a hybrid organizational system for data management and tracking, to cover certain elements embodied in FunWallet, including the ability to share consumer data for value. We have also conceptualized and applied for a patent on what we call the Global Crypto Passport, which we believe will be an important method for connecting traditional financial institutions to the crypto-economy.

We are engaged daily in the work required to get this done.

We may make some changes to fund coin in the ecosystem that we believe will benefit our digital asset holders and stakeholders.

Number two we have built IP that we will take our digital asset strategy well beyond the issuance of coins and tokens.

For example, we have been issued U S. Patent 118 to 9996 described as hybrid organizational system for data management and tracking.

To cover certain elements and Boddington fund wallets, including the ability to share consumer data for value.

We have also conceptualized and applied for a patent on what we call the global Crypto passport, which we believe will be an important method for connecting traditional financial institutions to the crypto ecosystem.

Michael Snavely: In summary, we believe that we have solved the majority of challenges facing the company. 2023 is in the past, and we are moving ahead, unencumbered by debt, with the right management team in place, and with access to the capital and runway that will allow us to fulfill the mission I've just described. Our goal is to deliver results with sober and responsible execution, in the interest of building long-term, buy-and-hold shareholder value. I would like to open up the call now for questions through the operator... Operator, please go ahead.

In summary, we believe that we have solved the majority of challenges facing the company.

2023 is in the past and we are moving ahead.

Unencumbered by debt with the right management team in place and with access to the capital and runway that will allow us to fulfill the mission I've just described.

Our goal is to deliver results with sober and responsible execution.

In the interest of building long term buy and hold shareholder value.

I would like to open up the call now for questions through the operator.

Operator, Please go ahead.

Operator: Certainly. Everyone will be conducting a question and answer session at this time. If you have any questions or comments, please press star 1 on your phone at this time. We do ask that while you're asking your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality. Again, if you have any questions or comments, please press star 1 on your phone.

Certainly everyone. At this time, we'll be conducting a question and answer session. If you have any questions or comments. Please press star one on your phone at this time.

We do ask while posting a question. Please pickup your handset if you're listening on speaker phone to provide optimum sound quality.

Once again, if you have any questions or comments. Please press star one on your phone.

Operator: Please hold while we poll for questions. Your first question is coming from Darren Aftahi from Roth MKM. Your line is live. Hi, Mike. Hi, Troy.

Hold while we poll for questions.

Your first question is coming from Darren <unk> from Roth M. K M. Your line is live.

Hi, Mike Hi, Charlie Thanks for taking the questions and good to hear this.

Darren Paul Aftahi: Thanks for taking questions and good to hear the strategic focus going forward. If I could ask a couple, I guess first, when you think about the software as a service business, you guys have made inroads into the three kinds of verticals you talked about. I guess. Now that you've sort of got some of the heavy lifting done with restructuring the company, where do you see the most opportunity in those three verticals?

Is your focus going forward.

If I can ask a couple I guess first when you think about the software as a service business.

Guys, who have made inroads into the three kind of verticals you you talked about I guess.

Now that you're sort of.

With the heavy lifting done with restructuring the company, where do you see the most opportunity in those three verticals.

Michael Snavely: And then, I guess, my second question. As we think about the mix of revenue going forward, how impactful are digital assets going to be on your 2024 P&L, or is that going to be more of a long-term strategy? Hey, Darren, it's Mike.

And then I guess my second question as we think about like mix.

<unk>.

Revenue going forward.

How impactful is digital assets going to be on your 2024, P&L or is that going to be more of a long term strategy.

Michael Snavely: And thanks for the questions. So let me start with the first one, which is, you know, what verticals do you think are most promising within the software business? Think of our software portfolio as a digital companion to an in-person experience. And so we've identified, and we have traction in, hospitality, which is, you know, people maximizing the value of the big investment they make in going to a resort property, let's say. Number two, in health care, where it's of literally critical importance that they get to their appointments on time and are able to access the information they need in that building.

Hey, Darrin its Mike and thanks for the questions. So let me let me start with the first one which is you know what verticals do you think are most promising within the software business.

<unk> of our software portfolio is a digital companion to an in person experience and so we've identified and we have traction in hospitality.

Which as you know people maximizing the value of the big investment they make in going to a resort property, let's say.

Number two in health care words of literally critical importance that they get to their appointment.

On time and are able to access the information they need on their premises and then within their connected workspace.

Michael Snavely: And then within the connected workspace segment, where it's important for employees to be able to access various services on a complex corporate campus, you can extrapolate that concept of the digital companion to an in-person experience for lots of different things. So think about university campuses, think about arenas, think about, you know, we had an historic airport business, et cetera. So all that to say that we believe that we have the ability to deliver an end-to-end guest experience, specifically in hospitality, because of some of the nuances and systems that are in place for some of those major resort properties. There are several hundred really large resort properties around the world, and we're going to be super focused on that in the immediate term and more opportunistic on the other segments that we've identified. Relative to the impact of digital assets on the balance sheet or in the financials of the company for this year, we expect it's going to take a little bit of time to get this right. I'm personally very bullish on the idea of a global crypto passport.

Workspace segment, where it's important for employees to be able to access various services on complex corporate campuses.

You can extrapolate that concept of digital companion to an in person experience to lots of different things. So think about university campuses think about arenas I think.

About we had an historic airport business et cetera, So all that to say that we believe that we have the ability to deliver an end to end guest experience specifically in hospitality because of some of the nuances and systems that are in place for some of those major resort properties. There are several hundred.

Really large.

Resort properties around the world and we're gonna be Super focused on that in the immediate term.

More opportunistic on the other segments that we've identified.

Relative to the impact of digital assets on the balance sheet or in the financials of the company for this year, we expect it's going to take a little bit of time to get this right.

I'm personally very bullish on this idea of the global crypto passports in fact I'll be at the Roth Conference next week.

Michael Snavely: And in fact, I'll be at the Roth conference next week, talking to investors and others, analysts like yourself, about what our thoughts are there. Those thoughts are still crystallizing and coming together. But I think we're really on to something here, specifically when it comes to connecting sort of legacy financial institutions to the crypto ecosystem. And we'll have a little bit more material that we can talk about then in terms of sharing our vision for that segment of the market. Great

Talking to investors and others analysts like yourself.

About what our thoughts are there those thoughts are still crystallizing and coming together, but I think we're really onto something here specifically when it comes to connecting.

Our legacy financial institution, so the crypto ecosystem, and we'll have a little bit more material that we can talk about that in terms of sharing our vision for that segment of the market.

Yeah.

Michael Snavely: And then just two more, if I may, your sort of legacy SaaS business had some channel partner relationships now that you've pinned out headcount, like how important is that to growth going forward? And then I know you talked about M&A being important in a go-forward strategy. I'm more curious, is that a horizontal or more of a vertical? and Debra.

Great and then just two more if I may.

Sort of legacy business had some channel partner relationships now that you've.

Build out head count like how important is that the growth going forward and then I know you've talked about.

M&A being.

Important in the go forward strategy Im more curious is that a horizontal or more of these vertical endeavor. Thanks.

Michael Snavely: Sure. Well, we're still pretty... Uhh, Channel's still pretty important to us. And, you know, as I said on the last earnings call, about 30% of our pipeline comes from channel partners. Those are typically going to be systems integrators and others who are proposing large, you know, complex technology solutions for new buildings or potentially renovations of existing buildings, etc. That remains important. On the M&A front, I think that we're looking at targets that will potentially provide us with acceleration for feature function and integrations that will serve the hospitality and healthcare space. Great, I appreciate the call. Thanks.

Sure.

We're still.

Pretty.

Channel is still pretty important to us and as I said on the last earnings call about 30% of our pipeline comes from channel partners. Those are typically going to be systems integrators, and others, who are proposing large.

Complex technology solutions for Newbuild, new buildings or.

Potentially renovations of existing buildings et cetera, so that remains important.

On the M&A front I think that will we're looking at targets that will potentially provide us with acceleration for feature function and integrations that will serve the hospitality and health care spaces.

Great appreciate the color thanks, Mike.

Scott Christian Buck: You bet. Thank you. Your next question is coming from Scott Buck from HC. Your line is live.

You bet.

Thank you. Your next question is coming from Scott Buck from H C. Wainwright Your line is live.

Scott Christian Buck: Hi, good afternoon, guys. Thanks for taking my questions. Mike, I was hoping maybe you could expand a little bit more on that last question. I'm curious, you know, any real changes to the way you're approaching sales on the location platform versus maybe the last regime? Yeah, so.

Hi, Good afternoon, guys. Thanks for taking my questions. Mike I was hoping maybe you could expand a little bit more on that last question I am curious.

Any real changes to the way you are approaching sales in the on the location platform versus maybe the last regime.

Yeah. So.

Michael Snavely: Based on where we are in terms of staffing size, et cetera, we're gonna have to be really smart about creating distribution leverage. And so, you know, I brought in a couple of people who are, you know, sort of tried and true in terms of their effectiveness in not only selling but also leading the sales function. We're going to be investing in demand generation and other traditional B2B marketing techniques to serve our direct sales force. In addition to that, and I'm personally going on the road and having discussions with some other ecosystem players specific to the hospitality segment. To be clear, I conducted one of those meetings last week. I've got another one coming up right after the ROC conference next week.

Based on where we are in terms of staffing size et cetera, we're going to have to be really smart about creating distribution leverage.

And so I brought in a couple of people who are sort of tried and true in terms of their effectiveness in not only selling but also leading the sales function, we're going to be investing in demand generation or other traditional marketing techniques to serve our direct sales force.

In addition to that I'm personally going on the road and having discussions with some other ecosystem players specific to the hospitality segment to be clear.

<unk> conducted a one of those meetings last week I've got another one coming up right up to the Roth Conference next week.

Michael Snavely: And these are folks who have sales forces of dozens and hundreds of reps who can, in theory, take our solution to market as a complementary product offering to the solutions that they provide, whether they're technology, hardware, or otherwise. So, I suppose the point is that our intention is not to hire a bunch of direct sales reps and hope that they go out and sell. It's going to be to carefully and organically cultivate and grow an internal sales force, feeding them with the appropriate marketing, but then really kind of exploring outside of the company to identify and leverage a distribution that's already in place with complementary solutions within the markets that we serve. That's helpful.

These are folks who have sales forces dozens or hundreds of reps.

Who can hypothetically take our solution to market as a complementary.

Offering to the solutions that they provide whether they're technology.

Hardware or otherwise so.

I suppose the point is that we're our intention is not to hire a bunch of direct sales reps.

And you know.

Hope that they go out and sell it's going to be to carefully inorganically cultivating grow and internal sales force feeding them with the appropriate marketing, but then really kind of exploring outside of the company to.

Two identify and leverage.

Distribution, that's already in place with complementary solutions with them within the markets that we serve.

Perfect. That's helpful and then in terms of business cadence from from here.

Scott Christian Buck: And then, in terms of business cadence from here, it sounds like all the noise is really in the past, and from here on out, we should, you know, really look at this as a fresh restart on the business. Is that fair?

It sounds like all the noise is really in the past and from here on out we should.

Really look at this as a fresh restart on the business is that fair.

Okay.

Troy Lee Reisner: I'm gonna ask Troy to answer that because I need to take a sip of water, but I think you're probably right. Thanks, Mike, Scott. Thanks for the question, and yeah, we're looking at this as a restart. You know, when I joined back in June, we had a lot of heavy lifting. And we've accomplished the vast majority of that.

I'm going to ask Troy to answer that because I need to take a sip of water, but I think I think youre probably right.

Okay. Thanks, Mike.

<unk>.

Thanks for the question and yet.

We're looking at that as a restart.

You know when I joined back in June.

We have bought it and it would be lifting.

And we've we've.

Uh huh.

The vast majority of that we've.

Troy Lee Reisner: We've got our costs under control. We have a plan to break even. One of the things we've been fighting for a while, the potential NASDAQ deal, is deemed for trading under a dollar.

We've got our costs.

Under control.

We have a plan to breakeven.

One of the things we've been fighting.

For a while.

The potential.

Add back the USD four trading under a dollar.

Troy Lee Reisner: Obviously, we did a reverse stock split, and I can share with you guys that today we received a letter from NASDAQ that we're back in compliance. We'll be filing an 8k on that here in the near future. So we've come out of this period of time cleaning up the cost structure, cleaning up the balance, and maintaining our liquidity options going forward. So, yeah, it's a new day. Great, thanks for that, Troy.

Yeah.

I think we did a reverse stock split and I can share with you guys that today, we received a letter from NASDAQ that we were back in back in compliance.

Be filing an 8-K on that here in the near future.

We've come out of this period of time with that.

Cleaning up the cost structure cleaning up the balance sheet.

And maintaining our liquidity options going forward so.

Yes.

Hey, Dave Scott.

Alright, thanks for that Troy and I guess last one.

Troy Lee Reisner: And I guess last one, in terms of the current cost infrastructure, how much... What support did that give you as revenue begins to ramp? I mean, are we at trough levels, or is this something you can hang on to while revenue grows kind of 2 or 3x where we are today? Yeah, good question.

In terms of like the current cost infrastructure.

How much support does that give you and as the revenue begins to ramp I mean is this are.

Are we at trough levels or is it something you can hang onto while revenue growth in two or three X where we are today.

Yes, good question.

No.

We're early stages I believe we're going to have to make some investment as we grow.

Troy Lee Reisner: You know, we're, we're, in the early stages; I believe we're going to have to make some investment as we grow. I think that investment probably starts to modestly ramp up mid-year. And then we'll evaluate what the backlog looks like and invest accordingly. We're going to be, you know, conservatively aggressive, but we want to make sure that we're not getting too far in front of our revenue stream and get back into the situation where we're burning just too much cash. I appreciate that. Thanks for the time, guys.

Got that.

Investment probably starts to moderate.

<unk> ramp.

Mid year, and then we'll evaluate what the backlog looks like.

And invest accordingly, we're going to be.

Conservatively aggressive but.

But we wanted to make sure that we're not getting too far in front of our our revenue stream in and.

Get back into the situation, where we're burning just too much cash.

I appreciate that thanks for the time guys.

Troy Lee Reisner: Thank you. Your next question is coming from Ed Woo from Ascendian Capital. Your line is live.

Thank you. Your next question is coming from Ed Woo from <unk> capital. Your line is live.

Edward Moon Woo: Yeah, congratulations on all the progress on the turnaround. My question is, what are you seeing out there in terms of the sales cycle in your business? I think, as you have reached a much better state of the company, has that improved when you make your pitches to your potential clients? Yes, it's starting to, we're starting to see evidence of improvement.

Yes, congratulations on all the progress on the turnaround. My question is what are you seeing out there in terms of the sales cycle in your business. I think now you have reached a much better state of the company has that improved.

When you make your pitches to your potential clients.

Yes, it's starting to we're starting to see evidence of improvement let me, let me speak to that a little bit so.

Michael Snavely: Let me speak to that a little bit. So, you know, part of our strategy in really being reliant upon, in part, an organic sales force, and then the sort of third-party distribution represented by partners, etc., is that those are very different kinds of sales cycles and different kinds of maturities. And so our job is to do a better job of identifying direct sales opportunities where we can. We are working pretty hard on referral programs from existing, happy, satisfied, renewing customers. And I'll give you just one really quick anecdote.

Part of <unk>.

Being.

Part of our strategy and really being relying upon in part in organic sales force.

And then the sort of the.

Third party distribution represented by partners et cetera is that those are very different kinds of sales cycles and different kinds of maturities and so our job is to do a better job of identifying direct sales opportunities, where we can we are working.

Pretty hard referral programs from existing happy satisfied renewing customers.

Give me just one really quick anecdote. So we recently launched in a particular property under the Marriott umbrella.

Michael Snavely: So we recently launched in a particular property under the Marriott umbrella, and that implementation went really well. The general manager of that property said, look, I'm really enjoying what I'm seeing here in terms of the app and the engagement it's driving. Let me introduce you to my friend over here, who runs another resort in a different part of the country. And that sales cycle is maturing very, very rapidly. I think it's probably sort of in the 45 to 60 day closed time frame as distinct from some of the other beachhead accounts that may have taken many months to win. So in addition to that, we've got a fair bit of what I characterize as incremental demand within our existing customer base, and those should heat up quicker as well.

That implementation went really well.

The general manager of that property, so look I am really enjoying what I'm seeing here in terms of the App and the engagement. It's driving let me introduce you to my friend over here who runs another resort.

Part of the country.

And that sales cycle is maturing very very rapidly.

I think it's probably sort of in the 45 to 60 day close timeframe as distinct from some of the other beachhead.

Beachhead accounts that may have taken many months to win.

So in addition to that we've got.

Fair bit of what I'd characterize as incremental demand within our existing customer base, those should boil quicker as well.

Michael Snavely: And so, you know, we're employing kind of an all of the above strategy, identifying direct deals within existing customers and their, you know, friends and family, so to speak, while we're waiting for some of these deals that are coming through the channel to mature on their own time. Great, well, thanks for the color, and I wish you guys good luck. Thank you. Thank you, Ed. Thank you. Your next question is coming from Howard Halpern from Taglitz Brothers. Your line is live.

So you know, we're employing kind of an all of the above strategy identifying direct deals within existing customers and they are.

Friends and family so to speak.

While we are waiting for some of these deals that are coming through channel to mature on their own timeline.

Great well, thanks for the color and I wish you guys. Good luck. Thank you.

Thank you Ed.

Thank you. Your next question is coming from Howard Halpern from tablets Brothers. Your line is live.

Howard Allen Halpern: Congratulations on all the hard work that you've accomplished so far. Could you, I guess, provide some call..., verticals, and are you looking at, Maybe initially, maybe a smaller deal size so you can..., forward with, you know, incremental growth within new. Yeah, so we're actually kind of going the opposite direction. Let me, let me, let me tell you what I mean by that.

Congratulations on all the hard work that you've accomplished so far.

Could you I guess provide some color on ideal size within within the different verticals and are you looking at.

Maybe initially maybe a smaller deal size. So you can move forward with incremental growth within new customers.

Yes, so where we're actually kind of go in the opposite direction. Let me let me let me tell you what I mean by that.

Michael Snavely: So we're kind of rejiggering the way that we tell the story of value that we deliver to our customers. And so, you know, our goal, and I'm speaking specifically to hospitality, the economics and the healthcare space are a little bit different, and they're also different from the connected workspace. But as I mentioned, hospitality is going to be one of our primary focuses in the immediate term. We're really talking about this as turning our digital companion to the in-person experience into a revenue-generating concierge-type service. And what I mean by that is that it's essentially a digital companion sitting in the pocket of all the guests, in such a way as to be able to allow them to transact.

So we're kind of re jiggering the way that we tell the story of value that we deliver to our customers.

And so our goal and I'm speaking, specifically to hospitality of the economics and the.

Health care space or a little bit different and there are also different from their connected workspace, but as I mentioned hospitality is going to be one of our primary focuses in the immediate term.

We're really talking about this is turning our digital companion to the in person experience into a revenue generating concierge type service and what I mean by that is that it's essentially a digital companion sitting in the pocket of all of the guests in such a way as to be able to allow them to transact and we've got some good data.

Michael Snavely: And we've got some good data from a couple of customers that tend to indicate that they're generating many hundreds of thousands of dollars per quarter through our application. So we're gonna lean into that, we're gonna charge for the value we're delivering, and we're also gonna be bundling in a deeper level of customer success into the relationship with these customers in such a way as to really allow them to extract more of that value without having to add staff on their side. And we can do all of that without, you know, kind of linear scaling; we can do that supported by artificial intelligence and various playbooks that we've built based on the best practices that are available or that we've identified through, you know, the partners that we have, our customers, rather, that we have that are achieving good results. So I think that our ticket's going to go up as this sales strategy takes hold, but I think it's kind of early days, and I'd hate to say anything definitive until we have some more data to help you with your forecast.

From a couple of customers that tend to indicate that they are generating many hundreds of thousands of dollars per quarter through our application.

So we're going to lean into that we're going to charge for the value. We're delivering and we're also gonna be bundling in a deeper level of customer success into the relationship with these with these customers in such a way as to really allow them to extract.

<unk> of that value without having to add staff on their side and we can do all of that without.

Kind of linear scaling we can do that supported by artificial intelligence and various playbooks that we built based on the best practices that are available are that we've identified through.

The partners that we have.

Our customers rather that we have that are achieving one of the good results.

So I think that our ticket is going to go up.

As this sales strategy takes hold but I think it's kind of early days.

And I'd hate to say anything definitive until we have some some more data to.

To help US help you with your forecasting.

Michael Snavely: And can you talk to, you know, I guess your engineering and software teams, have they... and I are implementations in the past, and how was that? They sure have. In fact, I must confess that I really don't know all the details because I'm really not a technical person. But, long story short, we've identified some ways to really compress the timeframe and the level of effort required to implement a new solution. And that has to do with some of the ways that we've updated our app framework, some of the ways that we have identified certain capabilities within the implementation workflows that allow us to ingest data in mass and otherwise use that to kind of cascade through the app, distinct from some of the manual work that was being done before And we'll continue to focus on ways to decrease the time to market and decrease, frankly, the level of effort and cost associated with delivering these solutions.

And can you talk to your I guess your engineering and software teams have they.

Developed a methodology for maybe quicker implementations and in the past and how was that how does that relate to potential growth opportunities.

They should have and in fact.

I must confess that I really know all the details because I'm really not a technical person, but long story short.

We've identified some ways to really compress the time frame and the level of effort required to implement a new solution and that has to do with some of the ways that we've.

Updated our App framework.

Some of the ways that we have identified certain capabilities.

Within the implementation workflows that allow us to.

Just data in mass and otherwise use that as kind of cascade through the app distinct from some of the hand work that was being done before and we will continue to focus on ways.

To decrease the time to market and decreased frankly, the level of effort and cost associated with delivering new solutions.

Michael Snavely: Okay, well, thanks and keep up the great work. You betcha. Thank you, sir. Thank you. That concludes our Q&A session. Everyone, this concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.

Okay, well, thanks, and keep up the great work.

You bet you. Thank you Sir.

Thank you that completes our Q&A session everyone. This concludes today's event you may disconnect at this time and have a wonderful day. Thank you for your participation.

Okay.