All right. Good morning. Thanks for coming. I'm Dmitry. I am the CEO of Phunware, and we want to take you through what we're calling Phunware 2.0, how we are resetting the business and moving forward. These are the customary forward-looking statements. They're available on the investor site, and this presentation is there as well. I'm not going to go through them. You probably know them better than I do. I want to talk a little bit about Phunware 2.0 and why we're calling it 2.0. It's a transition from what we used to do, which was apps and wayfinding, into the future, which is AI forward and intelligence driven. We're going to mainly focus on hospitality, which is the category that provides the lowest hanging fruit, but I'll get into healthcare a little bit as well, where we have several marquee brands that we work with.
The technology translates extremely well into healthcare, and it allows us to leverage all of the investment we've done in wayfinding to date. The other transition that we're doing is, as I said, we're moving out from apps into a core platform with modular components. Previously, we only spoke with spatially complex resorts. That was a fairly narrow SAM because especially not every urban hotel needs wayfinding or mapping. We've updated our positioning and our technology to enable us to expand into a far broader market. What is the problem that we're solving today? In hospitality in particular, you have very disintermediated technology silos, the PMS, the POS, multiple POSs for a spa, for a cabana, for a restaurant, for a poolside bar. These systems don't speak to one another.
Especially now for properties are moving away from an ADR, an average daily rate, into TRevPAR, which is total revenue per available room. It means that they need to connect the dots on all of their ancillary incremental revenue in ways that they haven't before. I think some of the history is important. I'm not going to drone on too long, I promise. If you think about hospitality, you had the old days where you walk into a property, the property says, "Hi, Dmitry, great to have you here." The bellman shows you up to the room, shows you what all the buttons are. Somebody maybe unpacks your luggage. You're met with a glass of champagne. Today, as most of you have experienced, this check-in process is a lot different, and then that relationship that properties used to have with their guests is gone.
Part of why it's gone is online travel agents, evolution, right? We've moved from having this word of mouth and direct relationship into having value and choices. OTAs allow customers, guests to look at 400 properties in Jamaica. It allows for a property to get discovered by consumers. That all works, but that relationship is lost. When you get to the property and you start, whether it's you're in the booking journey or whether you're looking for a place to eat or you're looking for an activity to do when it's raining, all of that's disconnected. The property's no longer really providing that to you. We're connecting those dots, and we are translating them into TRevPAR so that properties can measure what that incremental performance lift is and how much of a share of wallet they're gaining. I'm going to try this remote.
So far, they've had technical challenges. I like to say that if Phunware were running this, we wouldn't have any, but we probably would with Microsoft. That did not land. It's okay, I'm trying. I want to explain what we mean by guest intelligence, what we mean by Phunware 2.0, and I'm going to bring a software example. In software, we moved out of customer service into customer success more than a decade ago. The reason we did that is we figured out that the more that a guest or a customer activates on a product, in the case of a property that's going to the spa, going to the restaurant, going to the golf course, hitting balls with a tennis pro, the more they activate on that property, the better their guest satisfaction is, the more that property is retaining that revenue.
And then what we're doing is we're learning from that, and we're feeding that back into our intelligence so that we can begin to anticipate that guest's needs. We can begin to give them the things that they didn't even know they wanted, collect that revenue, and that loop continues and the knowledge continues. And then operators are going to learn from what we're learning. And because we're not focused so much on the transaction, we're more focused on the engagement. We're able to get a much more direct and natural set of data out of that customer. So one example is we have something called AI Concierge. We launched that officially in January. We have extremely high adoption. Guests are asking questions. We're capturing that information.
E ven if the property doesn't know that the guest is into burgers over sushi, we're learning that when they ask us that question, and then we're able to tailor our recommendations based on that. It creates this feedback loop where as we talk to that guest more, as we learn more about their preferences, as we feed that back to the operators, the entire chain of that guest's journey and that entire experience improves. And we capture that revenue, and we share that revenue, and we eventually get into what's called RGI, which is the measure that allows properties to compare themselves to others in their cohort. And we're much more data focused today than when we were doing apps. How does this work in practicality? Man, I don't know if this pointer works. Okay, it doesn't. That's fine. Who needs it?
What our intelligence does is it connects a couple of different components. There are pieces that you know about your guest when they book that reservation. If they have loyalty information, you're capturing it. If they've stayed on the property before, you probably know whether they prefer a suite to a room, or if they want an ocean view to a city view. You're learning about if they're in a loyalty program, you understand what's passed over there. And then there are the things that the properties aren't seeing that only we see. We're connecting the dots on the POS. We're not crunching those numbers a month later and using them for a marketing campaign. We're using what they're buying, where they're eating, what they're seeing in real time to implement these recommendations. And then we're looking at third-party data.
You're staying in Cancun, it's going to rain tomorrow. That probably puts a damper on what you wanted to do. We're anticipating that, and we're sending you a notification that says, "Tomorrow's a rainy day. Can we redo your itinerary together?" Imagine the work that this would take in a property. We have one property with 3,800 rooms in the Bahamas. Imagine on a rainy day, 2,000 guest rooms going down to the concierge asking, "What are we going to do tomorrow?" We're solving that problem for them. All of this is being fed into intelligent profiles that we recalculate in real time on the fly. The output of that is today we already have distribution in the form of apps. In the absence of apps, modules such as push notification, AI Concierge, Itinerary Planner, that allow us to really directly impact this guest experience.
We can also do things on property, connected digital signage. We can enrich that property's or that operator's CRM, and ultimately push it to an external marketing stack, because if the guest is having a good time, the guest is an avid golfer. What's the sweet spot for most people coming back for vacation to rebook? It's usually that first week. You've come back. In my case, I live in New York. When I come back in February from anywhere sunny, I'm miserable automatically. That's the best time to get me to book again. You want me to book again, how do you personalize it? Sometimes the CRMs aren't even catching up to what that guest did on property, especially in that first week. We have the data, and we can push it.
Some of the proof points, and one of the things I mentioned is AI Concierge. We were beta testing in 2025. We rolled out in January of 2026. Out of our app users, we saw about 70% of them interacting with the guest, and we got 40% more interactions than we thought we would get at best. That's contributing to a very high retention rate that we have with all of our customers, and not just in hospitality, also in healthcare. We're able to provide value. They're seeing very good ROI numbers, and so they're staying with us. Then, of course, we have this massive investment that we did historically into wayfinding. That continues to be a big data differentiator.
Now, whether we use that as mapping, meaning how do I get from my room to the Shake Shack 15 minutes away, or whether we're doing it with location-based services, such as you just used your key card to go in the room, so I know that you're on property, or you're connected to the property Wi-Fi. We can use location as a way to say, "Hey, this guest is here." Take what you know about them and make sure that you're recommending a path forward. I'm using Wailea Beach Resort. I was joking earlier that I cannot mention the flag name because in hospitality, people are very circumspect about their brand coming up. Wailea Beach Resort, fairly well known. We've had our app there for a while. We're releasing AI Concierge with them. They've also signed up to be piloting Itinerary Planner.
They see 70% adoption of our app with their guests on property. They are also one of the highest, I believe, actually, they are the highest performing in ancillary revenue, that incremental revenue that is beyond the room, in that flag on the Hawaiian Islands. We were talking about how we compare, and we always need to show you what the competition is doing. I think the thing to take away here is, yes, wayfinding differentiates us, location-based services monetization, meaning, "Hey, I know they are in the room. Now is a good time to hit them up with an offer." Or, "I know that they have been by the spa 12x . Maybe we should give them a discount so that they convert." Yes, we do that.
I think what this chart doesn't show is that almost all of the AI Concierge and messaging employed today by sort of the competition is very transactional minded. "Hey, send me up a toothbrush. I need room service." None of it is really aware of what that guest wants. None of it is really aware of that guest's preferences. It is a glorified chatbot. There are a couple of apps. Again, I do not know that I can say them out loud, but I can certainly say them when we are not recording that you can download and you can play with our concierge yourself and see that it goes far more than that. You can tell it what you are interested in, it will help you find it.
We do not think that there is really anybody that is a direct competitor as much as there are people converging into our space. Everyone likes to say guest intelligence or guest experience, but what does that really mean? For most of them, it means an app, a site, a check-in process. We are trying to know that guest. We are trying to abstract that data at a higher level, and we are feeding that back to our properties to improve what they are doing. That is the differentiation between us, property management systems like Agilysys, guest portals. STAY has an app, Hudini has an app.
By the way, the way that we are building today, I mentioned that we are modular. We actually work with some of these guys directly and are integrated with their customers today. We do not really see them so much as a competitive set as much as we do an opportunity. There are clearly gaps that they have that we are already filling, and we are trying to work with more of them today. I have actually spoken with everyone except one company on that list, and we are already in conversations.
This is a bit of a wild card, right? You want to show a big number and claim, "Look, our TAM is X." I think in this case, we really do fall into these categories. Conversational AI, as I said, we are doing it. You guys can download the app and speak with our AI Concierge. In hospitality solutions, everyone is calling themselves a smart hospitality solution, but the differentiator is that we are moving beyond the PMS and the POS, and so that is a very viable category for us. Patient engagement, as I said, we are mainly talking about hospitality today, but we are in multiple marquee healthcare systems, and there the opportunity is with patients and also with doctors. We are talking to one healthcare system.
They have 18,000 staff members operating across multiple buildings in a large campus, and in some cases, across multiple campuses. There, our wayfinding background and investment really makes sense because I do not know about you guys, I go to NYU on 32nd Street, and literally, true story, a week ago, my daughter had a bad stomach ache. We end up there. They want to take us to the CT scan from the emergency room. It was a new guy, so it took us about 10 minutes to get there. The way back, it was 30 ft. He could not find it. We are solving that problem for them today. We are also helping patients get to their appointments. The industry loses $150 billion a year in the U.S. on late and missed medical appointments.
The same technology that we have built in hospitality, Itinerary Planner, wayfinding, push notification reminders, all of that we can bring to bear in healthcare, and we are doing that. Then we talked about how we price this. We have moved away from consultative selling. If you know our history, we did a lot of consultative selling. We came in and we said, "Hey, we will build you an app." What is the value of that? We are not really sure. Today, we are moving away from that. We have a platform subscription that gives you the data, that gives you access to creating campaigns, that gives you the ability to silence phones. Not really. We are going to add that, though. We will add that. No, I am picking on you. I am surprised it is on my phone. Then we are selling these as modules.
If you have an urban tower, you probably do not need wayfinding. Guests are not getting lost on property. You know what? Are they going to your restaurant? Are they going to your gym? If you think back to that customer success model, where the more a guest activates on property, the better experience that they have, how do you convey that in an urban tower where every urban tower thinks that they are a unique and special flower? I think I am butchering Brad Pitt now, but anyway. You are not a unique snowflake, right? What was the movie? Fight Club? Everyone does think they are a unique snowflake. We give that essence, and we convey that essence. We learn about what is on that property. We learn about the history. We learn what is around it.
We learn what they are recommending people, where they recommend people go eat, and what they recommend they do, and we can feed all of that back to guests. We track the revenue, and we report the revenue. Then we are expanding the portfolio, and this may be the biggest shift for us, even bigger than the technology piece, which is when we were out selling to resorts, we talked to one property at a time. The problem is that the sales cycle for one property is the same as the sales cycle for an entire flag. Also, when you are selling to one property, you are typically selling to a GM or a head of marketing. I do not know how familiar you guys are with hospitality, but GMs are a little bit busy.
They don't have time to sit at a console to look at all of this stuff. Property owners and operators really do want to see their TRevPAR, really do want to see where they fit into the cohort of their fellow properties. We are now doing all of our sales motion directed at flags. We reset our sales team. They came in in the last four months. One of the requirements for hiring them was you have to come in with a Rolodex. The sad part is one of them had to look up what a Rolodex is. There is an age piece here, but they all came in with a network that they can bring to the table, and they are filling our pipeline with a network. Meanwhile, we reset our marketing.
Aaron Burcell, the gentleman in the snappy blue blazer over there, is running marketing for us. He comes out of Silicon Valley, a lot of experience in building new marketing motions and a lot of operations experience as well. We are now going after these portfolios instead of individual brands. The guys that we are talking to have anywhere from 34 to 50+ properties that are in play for us today. I am not going to say the description of the slide that comes into mind, but bottom line is we don't have debt. We have plenty of cash flow to execute on the vision. We have a very long runway. We are in a very good position on the balance sheet to go do this. We don't really need to have a dilutive event.
What we really need to continue doing, which we are, is filling pipeline, building product, and selling. We now have the right team to do it. I mentioned, well, there is me. How I got here was years ago, I worked at a company called Responsys, run by a guy named Dan Springer, who took DocuSign public after. At Responsys, what I did was my job was to connect first-party email data to third-party display data to create new intent graphs. Coming out of that business, I built a machine learning system for hospitality and retail. Some of that knowledge about combining different systems and then one plus one equals three, turning something more out of them is why I am here. Nick Farrell worked at a company called IDeaS, that is revenue management. They have, I believe it is 20,000 or 30,000 properties under their belt.
He has been in hospitality tech sales for the last 20 years, and he is now heading sales for us. Jason Powell, he has shifted. He ran our engineering team. He is really more of a CISO role today, but he brings to bear all the knowledge on the investment that went into wayfinding and app development. Chris is our Chief Legal Officer, and if you have a problem with the books, you blame the last guy. I think it is really important to talk about the rest of the team. Michael Cerdá is an interesting guy. In hospitality, you normally do not have access to Silicon Valley talent. Michael Cerdá built Facebook News Feed. He was one of the adults in the room that Sheryl Sandberg brought in in front of Zuckerberg. He also built Disney+'s streaming service. He also built Univision's. He was the CPO of Marcus for Goldman Sachs.
Why did I bring a guy that had been building media businesses in? Because he built systems that are algorithmic and that scale. Today, over 1 billion people use his products, and they're stable. That's what I wanted to do when we're building this thing. I mentioned Aaron Burcell. He has a fairly storied Silicon Valley career in marketing and operations. I guess I can't reveal this, but let's just say that our current lead gen, demand gen efforts are, forget about 10x, they're completely different than they were last year. We actually have real pipeline. We actually have real line of sight to additional business. Michael Crooks was the partner at PwC in hospitality. He brings a lot of VAR system integrator and channel building abilities to us.
Aaron Holloway, he's been working in healthcare data systems for the last 20 years and is a very strong technology leader, so we've integrated him as well. We wanted to bring actual SMEs with actual, pardon my French, Rolodexes to come in and help us move this business forward. We think we're well-positioned. We have this axis of guest experience, which is the app and wayfinding, and then we have all of the guest intelligence and more that we're rolling out, which is location-informed push, its AI Concierge, and its Itinerary Planner. All of our AI capabilities being built by Michael Cerdá, a guy who's pretty good at this stuff. As I said, our expansion is portfolio over property, and of course, we have runaway with healthcare as well, with numerous marquee brands.
This took a little longer than I thought it would. Maybe it's the tech setup, but we have about 2.5 minutes if there's any Q&A. Go ahead.
When it comes to the contracts that you build out if you're going after a hotel room, for example, I assume there's some level of customization to fit in with whatever platform, whatever branding, et cetera, et cetera, which is an upfront cost for the company. So for your contract terms, it's a subscription base. Is there a minimum term that they have to commit to that's non-cancelable? How do you[crosstalk].
Yeah, our typical contract. It varies by flag and property. The typical contract that we've had is about 30- 36 months, and so far that's continuing. That's what we're getting in our renewals. We do have one flag that we're speaking with that does it on an annual basis. The reality is, once you've integrated us, and once we're looking at all of these systems, you're not going to want to rip us out. As I mentioned, our retention rate is 95%, so most customers, I believe, would back that claim. Go ahead.
What LLM are you using for your AI-native features, and how are you managing token costs relative to your seat-based revenue model?
Without getting too far into it, we use multiple LLMs, and to date, tokens have not been an issue. In fact, the margin that we're seeing on AI Concierge is incredible because we're teaching them about the property. We're not teaching them about the world. It's really an SLM model, though, of course, we're using some of the frontier LLMs for some of the crunching at the back end. But it's almost like load balancing, right? We go to where the right model is for us. Please.
Well, I have a different question to ask quickly, but on the tokenization question, are the tokens that you're using almost like reward points to get people? Like is it analogous to that in getting more engagement? I want to understand better how you're[audio distortion].
No tokenization, we're talking about AI usage. Yeah. We've explored gamification. Frankly, the adoption rates don't really justify the expense, so we're laser-focused on the intelligence. What was your other question?
My other question had to do, it looks like you have zero debt. You are in a very solid position not to take dilutive financing and so on, but to expand the way you'd like to all these flags worldwide, why not? Do you mind just talking a little bit about what your needs might be over the course of the next year in terms of financing?
Honestly, there aren't any.
This is not a deal roadshow.
It's not a deal roadshow. We want people buying our stock in the open market. We think we're undervalued significantly, and we want to make you guys aware of us.
[audio distortion] Thank you so much. Unfortunately, that is our time.
Thank you.