Good afternoon, ladies and gentlemen, and welcome to Phunware's 2020 Investor Conference Call. [Operator Instructions]. Joining me today are Alan Knitowski, President, Chief Executive Officer and Co-Founder; Randall Crowder, Chief Operating Officer; and Matt Aune, Chief Financial Officer. The format today will include prepared remarks by Alan, Matt and Randall, followed by a question-and-answer session. As a reminder, today's discussion will include forward-looking statements. These forward-looking statements, including any such statements referring to the potential effects or impact of the COVID-19 pandemic, reflect current views as of today and are based on various assumptions that are subject to risks and uncertainties disclosed in the Risk Factors section of our SEC filings. Actual results may differ materially, and undue reliance should not be placed on them. Additionally, the matters being discussed today may include non-GAAP financial measures. Reconciliation of GAAP to non-GAAP financial information is set forth in the earnings press release, which is available on the Investor Relations section of the 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 would like to turn things over to Phunware's CEO, Alan Knitowski. Sir, please proceed.

Thank you very much, and welcome to our full Year 2020 investor conference call. As a reminder, Phunware is a 12-year-old enterprise software company, focused on the intersection of mobile, cloud and big data with business-to-business and business to government customers worldwide. Our mission is to provide everything you need to succeed on mobile by providing our customers with the products, solutions, data and services for their digital transformation needs on Apple iOS and Google Android devices and applications. Central to this effort is our enterprise cloud platform for mobile called MaaS or Multiscreen-as-a-Service. Which is available for licensing under a SaaS business model over 1 to 5-year contract periods worldwide. This past year was the genesis of an inflection point in our company's history as we shifted from a nonrecurring low-margin transaction business to a far stickier, more scalable, recurring and high-margin SaaS licensing business for our MaaS platform. In addition to continued enterprise interest in our MaaS Digital Front Door solution for health care and our MaaS Smart Workplace solution for corporations, we have resumed conversations with customers from sectors that were hit hard by the pandemic, including the hospitality and real estate verticals. In conjunction with our growing portfolio of direct customers, we intend to expand our footprint globally by amplifying our go-to-market strategy with indirect sales and channel partners, including an anchor distribution partner that will be formally announced during Q2. In parallel, we are excited about the completion of PhunWallet next month as we launch our blockchain ecosystem powered by PhunCoin and PhunToken. We are on schedule to commercialize, scale and monetize this part of our business and look forward to the accelerated global adoption of our blockchain-enabled MaaS Customer Data Platform and MaaS Mobile Loyalty Ecosystem alike. As with most businesses worldwide, our team…

Thanks, Alan, and good afternoon, everyone. I'd like to thank you all for joining us today for a review of our full year 2020 financial performance 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 provide a reconciliation of all GAAP to non-GAAP financial results. Net revenues for the full year 2020 totaled $10 million, of which Platform Subscriptions and Services Revenue was $9.1 million. Our focus continues to be on higher-margin, longer-term software customers, and we are pleased to have continued to follow this strategy in 2020, with over 91% of our net revenues derived from our MaaS Platform Subscriptions and Services Customers. Gross margin was 66.4% compared to 52.9% last year. On a non-GAAP adjusted basis, gross margin was 69.4% compared to 53.8% in the previous year. That is more than a 1,500 basis point improvement year-over-year on a non-GAAP adjusted basis. This result continues to validate the decisions we made to focus on higher-margin software and data deals, and away from lower-margin legacy application transactions and give Phunware a launching pad for more profitable and predictable revenues in the future. Total operating expense was $24.1 million, up from $22.4 million last year. As mentioned on our previous earnings call, operating expenses for 2020 include a $4.5 million legal settlement that we view as onetime in nature. Other noncash operating expense items were stock-based compensation and amortization of intangibles, making up $4.3 million this year compared to $1.9 million in the prior year. By excluding these onetime and noncash charges, full year 2020 adjusted operating expense was $15.3 million, down from $20.6 million last year or a 26% improvement year-over-year. As we continue to navigate through the ongoing COVID-19 pandemic, we have…

Thanks, Matt. I don't think anyone expected a year like 2020. But with disruption comes opportunity. At Phunware, our opportunity is to do for mobile engagement what Amazon did for cloud computing. By standardizing on our platform, enterprises can seamlessly drive digital transformation in a mobile-first world that's quickly becoming mobile-only. And COVID-19 has only accelerated both the need for and the adoption of technology like ours. In fact, the recent McKinsey & Company report how COVID-19 has pushed companies over the technology tipping point and transformed business forever found that companies have accelerated the digitization of their customer interactions and of their internal operations by 3 to 4 years. Although we specifically designed our MaaS platform to be industry agnostic, it excels in industries that struggle to manage complex customer journeys, such as health care, hospitality and property management. However, 2020 has generated increased interest in our cutting-edge MaaS Smart Workplace solution for corporations returning to work and our MaaS Advocacy Solution for politicians seeking to better engage their constituencies. Regardless of industry, a critical aspect of engagement and a competitive advantage for Phunware is being able to identify and locate your target audience in real time. While some customers were forced to temporarily delay software deployments, others took the opportunity to invest in true digital transformation. Over the next few years, we expect this financial commitment to accelerate. In fact, the same McKinsey & Company report found that 80% fewer executives now rank cost savings as one of the most important priorities for the digital strategies. As more than half say they're investing in technology for competitive advantage or refocusing their entire business around digital technologies. To ensure our customers achieve a competitive advantage by licensing our MaaS software, we have made considerable progress across not only our…

Thanks, Randall. As highlighted throughout today's call, we are all extremely excited by the pending commercial launch of our MaaS blockchain ecosystem. What it means to me is that our decade-plus of MaaS platform building across mobile, cloud and big data, accompanied by our years of researching the benefits of blockchain and cryptocurrencies has resulted in the culmination and convergence of massive global addressable markets and trends that can act as wind at our backs and accelerate growth. We expect this ecosystem to complement and supplement our core MaaS 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 Phunware and our executives have a long and distinguished history within the global digital asset community. As such, we expect to be a trusted bridge for Fortune 500 corporations and governments looking to leverage blockchain. Please look for additional announcements in the coming weeks and months ahead, as we enable consumers to not only regain control of their data with PhunCoin, but also reward them for their engagement with PhunToken. In parallel, and as we have suggested previously and would again reiterate here, we intend to complement and supplement our core organic growth activities through direct and indirect channels worldwide with opportunistic inorganic mergers and acquisitions. While we have nothing yet to formally announce on this front, we expect to focus our merger and acquisition activity on accretive deals in areas that will provide more customers, more partnerships and more distribution for our MaaS platform especially in international markets such as Europe, Asia and South America. Finally, and importantly, rolling forward, we fully expect to maintain a laser-focus on our core operating and financial model which includes top line growth of 30% or more year-over-year and blended gross margins of 75% or greater. With that, and in conjunction with the sincere thank you for your ongoing interest and support in all of our activities on behalf of the entire Phunware family worldwide. I would now like to open up the call for questions through the operator. Go ahead, please.

[Operator Instructions]. And the first question is coming from Austin Maldo [ph].

Can you put into context how meaningful an expansion is with a current customer like Baptist Health South Florida versus signing a new customer?

Yes, I'd be happy to do that. So when we actually see these, there's usually 2 types of engagements we see with the health care companies that focus on patient experiences. Typically, the initial engagement will be something that will be mid-6 digits in size that will be typically tied not to their whole health system as step 1, but usually, they do a tiered rollout. So what we often see, which has been the case in places like Baptist Health, Dignity Health Care, Mount Sinai, Greater Baltimore, many of the other ones that we've been announcing recently. Typically, you could see something ranging in the 400,000 to 600,000 and usually about 3-year contract period. So you're kind of talking about $20,000 to $30,000 per month of MaaS licensing. And then typically, as they expand it to their other facilities and expand it to more square footage, we typically arrive at the low 7 digit, and then it expands up from there.

Okay. Great. And can you just sort of speak to your channel partner pipeline for 2021 a little more?

Yes, absolutely. And great question. For the most part, leading up to the pandemic, we did mostly all direct selling. Digital transformation was still net new. There wasn't always that compelling reason for governments, especially and even large corporations, which we sell to, to accelerate their digital transformation initiatives and needs. As it turned out for us what the pandemic did is it forced companies to relook at how they operated, both on-site and remote. And they realize that digital transformation and especially the way in which they engaged on-mobile became a matter of survival. What we've seen is, as you might expect, a lot of 2020 was showcased by health care engagements because pandemic or no pandemic, health care was essential. It just got broken into that, which supported COVID and that which supported elective surgeries and all of the other normal care. They initially started diving into remote telehealth. That became critical for them to be able to focus on triage and actually focusing on what they wanted to do remote versus who they wanted to show up and then how to separate COVID and non-COVID patients. So when we see this going forward as it relates to channels, the channels we have are in 4 areas. We have hardware companies that typically take our software as a mobile activation layer. They'll bundle it with their routers, their switches or access points, and they'll provide a package to a venue or an office where they can get not just faster WiFi and more interactivity, but they have all the software they need to be able to tie those into those mobile applications for their employees, their partners or their consumers. In the area of our second partnerships that you'll expect to see will be in the service provider domain, where they're bundling voice, video and data with our software to again give venues activation for digital transformation on those mobile applications. The final two are very traditional for software companies. They are software channels and they're system integrator channels. And in both of those cases, they're trying to provide digital transformation solutions to their customers and they're licensing the Phunware's software to help them engage, manage and monetize. While I teased that we're here in Q2 upcoming, we already have a signed global distribution deal that we'll be providing details to. We have not yet publicly done an announcement or broken out how that go-to-market will work. But now that it's been signed, you should expect to see in Q2 a formal announcement, a formal rollout that will really shine all the work that we've done in the last several quarters to activate these channels. And we'll expect to see the benefits of those rolling forward.

And the next question is coming from Howard Halpern.

Howard from Taglich Brothers. Congratulations on navigating the year.

Appreciate that. Good to talk to you, Howard.

Yes. First question is with regards to -- I think my understanding what you sort of said in the beginning, from a modeling perspective, we can expect sequential quarterly growth going forward in 2021?

Matt, you go ahead and take that.

Yes, Yes. No, I can take that. Yes, yes. So we're not providing guidance for this year, at least yet. Obviously, there's a lot of factors that go into what we're doing in terms of timing and deliverables to customers and getting customers to sign up for deals. So our reaching focus, as Alan mentioned, is to try to grow at 30% year-over-year. You've seen in the last several quarters, there's been some few dips here and there, and that's really just been as a result of timing issues. And so our publication for the full year will be the growth, how that grows between quarter -- between quarters, still -- we're working through that. But obviously, as we get more certainty into that, we'll share that as we get to that point.

Okay. And can you guys talk a little bit about the activity or pent-up demand you're seeing in Q1 as compared to the second half of last year?

Yes. Let me start with that, and then I'm going to have Randall finish up. So I'll take it at the strategic level with the things that we've been seeing and then Randall can dive into some of the tactical things that we're seeing in parallel. So when we look across, we -- our platform can be sold to all Fortune 5000 customers, inclusive of governments. When you deal with carving out health care specifically, and you carve out government specifically, both of those verticals are fully active. So independent of the pandemic, looking backwards and independent of coming out of the pandemic post-vaccine, elimination of lockdowns and shutdowns those 2 verticals will be extremely active and will stay similar to what we were seeing a year ago. So that will be point one. Point two would be those verticals that we saw that were really devastated by the pandemic, things in the areas of travel, live sports, live music, and a lot of the hospitality oriented things that were very much affected by all of us not being able to travel for either work or pleasure. And so we are seeing a lot more activity now. On our call, we highlighted we're literally the Wynn Hotel in Vegas has been open. Macau has been open. When you go into Boston, they're still in the process of expanding that opening. However, if you take another customer that we highlighted Atlantis, they were shut down literally until about 30 days ago. So anything touching hospitality and travel, I think you're going to see -- we've already seen a big uptick in Q1 of the activity. And I think as they're opening those facilities in full, travel is going up, more people are on more flights. And I think that we're going to see that progressively get better throughout the balance of the year. In terms of other areas like media entertainment, I think we've seen that any of the one doing distribution across their companion television applications. Their networks, their shows and their content. Obviously, a lot of us have been consuming that, and that's been no different in the past through the pandemic. If anything has accelerated because we were all trapped at home and not really out and about the way we normally are. I think that the final comment I'll make before giving it to Randall would be as we get into areas, as I said, that look like aviation and deal, especially with corporate campuses, we're seeing a big uptick in the activity around the corporate campus as people are getting work to -- accustomed to back to work initiatives. We highlighted Norfolk. But what I want to do is hand over to Randall, and he can give you some very specific customer examples to supplement the vertical areas that we're seeing.

Okay. Thanks, Alan. I mean I would say the best way to intermediate to that is to try to reinforce something that I think keeps getting lost. At the end of the day, we have two primary competitive advantages. One, we can deploy future rich mobile application portfolios faster and more scalable than pretty much anybody because we've been doing this since before mobile applications were cool. So that's our modular application framework. Now when you -- when I say that, you think, well, hey, doesn't -- most of the world have mobile applications. So that cuts us out of certain businesses like media. MBC is not going to come to us and say, we want your modular application framework to build a mobile application. But in health care, and for corporations who have never had a mobile application because they never needed one until now, that's wildly beneficial to them. So hospitals have gotten by with responsive -- mobile responsive websites. They've gotten by using, for example, MyChart, which is a mobile application provided by Epic, which is just access to an EHR. And then every corporation who traditionally has been going to the office, what do they need a mobile application for, right? You go to the office, and if you really need to try to figure out something about the company, you log in or you go to www. whatever that office is, and you get an about us page and a contact us form. And that's it. The world is changing. So now every corporation is trying to figure out how to manage its workforce. So Fortune 500, large corporations, trying to figure out how to bring people back into the office, activity is off the charts. Everybody -- nobody -- forget this idea that everyone…

Okay. And are you seeing any near term or like when the stadiums are opening up across the country?

No, the challenge with that, we've done -- so we did AT&T Stadium in Dallas. The challenge with that is actually just business use cases. You have the NFL team, who pays for it, right? So you have somebody that owns a stadium, but then you have a team that owns it, then you have a sponsor that wants to put their name on it and everybody is pointing at each other in order to pay for it. At the end of the day, we're an enterprise software company. We can deploy anywhere, but we're also very judicious about where is the low-hanging fruit. So if all we did was dominate, we're getting people to return to work, getting people to have a tech-enabled patient experience. Really dominating luxury, residential and even what we're doing in our political vertical. If we did that well, we'd be a Fortune 100 company. So going and trying to target stadiums we'll let them -- we have some conversations going on, but that's not necessarily a major sweet spot for us, to be honest.

And to actually supplement that a little bit, Howard, just to your point, what you might expect is it's state-by-state if you're talking domestic, and it's still subject to the lockdown and shutdown differences. So if you actually said stadiums and arenas, yes, we're dealing with March madness right now, obviously, for the NCAA. If you're in Texas, if you're in Florida, things are pretty wide open, then they're just managing, are we going to allow full capacity or half capacity. If you're in New York, if you're in California, you're just not having these sporting events at all. Even I think the UFC is relocating itself back to the United States, opening up stuff in Florida. So I think what you're seeing is it's not so much a holistic thing across these stadiums and arenas across the country, it's still which states are open, which ones are not. And the states that are open are being flooded with not just professional sports, but going down into Collegian sports and use sports as well. But I think over the next two quarters, as California, New York and other parts of the country start behaving more like Texas and Florida, we're going to see an acceleration of that.

And one last one with -- regarding the blockchain launch. Is there going to be any meaningful incremental cost to that? Or is your current infrastructure-based on that launch going forward?

I'll take that one. It's actually -- it's actually a really intuitive question, and it's great. And it's what differentiates us from, I would say, 95% of the rest of the blockchain cryptocurrency world. After everybody got burn in 2017, everyone is looking for who's real, who has the gumption and the wherewithal to get this done. Because decentralization, for me, oftentimes means a rudderless ship. And so you need people who have this as a part of their product road map, who have this as a part of their go-to-market strategy, who can push this forward. Or these things are never going to be adopted by the mainstream. And so for us, our existing engineers who are world class, our existing infrastructure supports the entire thing. We don't have to go out and hire new people and build new features because we've been building mobile and engagement tools for enterprise for more than a decade. And so there's no additional major material incremental costs that we need to kind of incur. But that being said, obviously, as we grow as a company as our market cap expands and as we grow both organically and inorganically, we'll continue to build out that team so we can deliver even more features, more capabilities. And so there will just be a natural progression, but we don't have a separate engineering team for our blockchain initiative that incur some additional liability. Our engineers have been working on that because we're building it for the same enterprises that we built mobile applications for where you have the exact same design-led thinking, and that's why it's actually going to be successful.

And the one thing I'd want to highlight here that I think is super important about this is much like people got familiar with Red Hat as the safe on-road for open source and Linux, if you were a corporation or government, the trust that we've earned in working on mobile applications at scale and controlling up to 1 billion devices every month with our software and using literally hundreds of thousands of transactions per second what we're going to be able to do is a couple of interesting things. One, we'll be able to provide a safe onboard for these enterprise customers, government customers, that want it tie into data and mobile loyalty in a safe way, bridging through Phunware to get into this new ecosystem in a way that they actually can trust, as Randall said, very directly and very accurately. The other thing is that we're not aware, and maybe you all know, but we believe that our launch of our full ecosystem tied to PhunToken and PhunCoin next month, will represent the first-ever crypto ecosystem ever launched by a public company that trades. We know there's people that buy bitcoin with corporate treasury as an example. We know there's people that are doing bitcoin mining. We know that there are financial groups offering ETFs or funds or other things like that to try to get exposure. We even see some that are dealing with the trading aspects of security tokens or utility tokens. What we've yet to see and what we think we're going to be the first is a credible NASDAQ trading, listed company, fully audited with the pristine components of governance and everything that goes around this ecosystem, launching an entire ecosystem to take advantage of what we're doing and to allow others to use it in a safe, responsible, compliant way according to all the laws, regulations and everything in between. So we're really excited by that. We've been doing this for years, and now we finally get to hit the proverbial-go button. And that will be something that, as I said in my portion, we'll start having successes in the second quarter, those PhunToken that will actually flow through our P&L, that will be net new. And then you'll start seeing those when we report in, I believe, mid-August for the second quarter.

[Operator Instructions]. And the next question is coming from Ed Woo.

Sure. Ascendiant Capital. Congratulations on managing through what was a very challenging year. My question is, as things get back to normal, do you think your sales lead time as well as your implementation software time is going to get back to normal and get -- be faster?

Yes. So I'll take that one. I think what we've seen and what Randall highlighted, we actually have in our vertical solutions, the ability to provision solutions extremely quickly. The 2 to 4 months, we typically talk about that you see in an average sales cycle that may be in the engagement, that may be an RFI, RFQ, RFP responses and then back and forth of the papering of deals that you win. So we think that, that cycle is going to stay very consistent what we expect, though, to overlay that is actually two things. One is all this pent-up demand where companies really were deferring budget and deferring initiatives, deferring rollouts of their solutions, even for their employee bases in addition to consumers until their facilities were reopening. And we see that, that acceleration that we were highlighting the delays that we've seen in some of our customers and partners, we expect there's going to be a lot of pent-up demand that's going to go with that. The other thing is that we see all the work that we put into creating a full software repository on GitHub, a full documentation, training and certification set of repositories. All that work we set up for our indirect channels we're really looking forward to making those announcements in Q2 to show where that's going to be a one-to-many deployment where it's not even an upsell or a cross-sell, but we'll have our software bundled with product and every time those products ship, we're going to actually receive a license of 1, 3, 5 years across those venues and that square footage to Randall's point across those venues and those facilities that they're trying to activate for digital transformation on mobile.

Alan, that sounds great. And then my last question is in terms of average deal size as well as average duration, I know you guys have done a very good job to get bigger deals than for a longer time period. Is there a specific target that you guys want to get your average duration of new contracts going forward?

So I'll take the contract duration. Go ahead, Matt. Actually, you can take this -- sorry, talk to retail, you can take that.

Yes. So typically, I think as we said before, we typically look at 1 to 5 years. For us, we want to have people sign up for as long as possible. Our typical deals in the verticals that we've been focused on over the last kind of 6 to 12 months have been 3 years long. And deal sizes are anywhere from $700,000, up well over $1 million. And so for us, the 3 years is a good time frame for us. A lot of the customers we're dealing with. Are -- if we're talking about big health care customers, they don't want to sign up for a year and then have to go through the whole process again. And so typically, we're able to sign it for 3 to 5 years without a problem. And then from there, really, our next focus is how do we expand that? And like we've talked about with Baptist Health and some of our other customers, we start with initial engagement and then we really focus on pushing with the customer and getting more and more and extending that overall timeline in terms of how long they're gauged for.

And the next question is coming from Mike Latimore.

This is Antal Sau [ph] on for Mike. Could you give me an update on how much of pipeline includes location-based services? And how are the revenue retention rate?

Matt, you can probably talk to that. We haven't been breaking that out in the past. I think we had that question before.

Yes, I missed the first part of the question. Could you repeat that, apologies?

Yes. So how much of your pipeline includes location-based services?

Let me start, Matt, and then see if you can kind of clean it up. One important point to kind of note when we deploy our platform, it's kind of like Microsoft Office, just because I think nobody on this call has ever used Access doesn't mean you still don't get it. And so there's a lot of -- our platform. I think people have misconceptions about. We're deploying MaaS and MaaS is fully feature-rich. Now certain customers we'll choose to turn on certain features, but they're licensing that safe platform. And so we've never actually had the need to kind of break out okay, well, you're only using that same analogy, you're only using Access versus this customer using PowerPoint versus this customer is using only Outlook. And so I don't think we have those numbers. Matt, I know we were going to look at it and maybe we can do it in a follow-up with Mike. I know we have a couple of calls with Northland that we need to hold. But is there anything that we have shared before that gets to that point a little bit? For example, Baptist Health South Florida, they already had a mobile application and so they only licensed our location-based services software. So that one's easy. That 6 million square feet, it's $1 million total contract value. And we love that business because that's a lot higher margins because now they're just licensing our location-based services software. And it's not that kind of integration and design component that we normally have with mobile applications that we help out with. But do we have any numbers tied to ones that are similar to Baptist Health, Matt?

Yes. It's not something that we're sharing right now. We do have some numbers. We can go back and take a look with the team and see if there's something we can pull out to help better represent the portion that's utilizing the LBS portion. So let me take that down and see if there's something I can pull up on that, and we can certainly get back to you. I did want to address the second part of the question. I believe that it was related to churn. And so for us, as we've said before, we're selling to customers now in kind of a 3 to 5-year contract, this is really a culmination of a lot of development. We've been around 12 years. But our platform is fully ready now, and it's really over the last year plus we've been selling these types of deals. And so for us, it's a little bit early to say, hey, the churn rate is this when we're signing customers up at 3 to 5-year terms. For us, if we look at 1 layer deeper and how we approach churn, our typical LTV on initial engagement is going to be greater than our cost to acquire that customer. And so for us, we're -- the math works for us going out and getting customers. We feel that our deal sizes more than cover how much it cost to get these customers. But for us, really, as I mentioned earlier, the focus then becomes on customer success and customers like BHSF were expanded, as Randall said, expanded 3 million to over 6 million square feet in total. This is just another example where the customer becomes stickier and the churn window is pushed out and the LTV is extended. And so those are the types of things we look at now. And as we over time, we're going to get a better idea on how things turn. But just to be clear, this isn't -- our business isn't a business where we're going to see customers having an opportunity to churn on and off every month. We're signing up for longer-term deals, and we're cognizant of how much it costs to get that customer and what's the lifetime value of that customer.

And Mike, I think what you're getting at, which is important, and I'd like to reframe the question just a little bit, so we can get you the right answer. It's not who's getting location-based services, it's kind of who's getting that plus something else. And so the reason you come to Phunware is because of our ability to contextually engage, and that's location. And so we're not out there selling a bunch of nonlocation-enabled mobile software to hospitals. Every single hospital we're working with is working with us because we can make things contextual with that location-based services software. And so there's almost -- I guarantee you the number right now will be pretty much 90% or more of our revenue is licensing our location-based services software. The question is how many of them are also doing a full feature-rich mobile application portfolio using our modular application framework. So Baptist Health South Florida is only licensing, location-based services software. Virginia Hospital Center and Greater Baltimore Medical Center, they're also licensing location-based services software. But in addition to that, they also needed us to build their digital front door. So everyone gets location services software, only some people need us to actually also build them the mobile application. Does that make sense?

Yes. All right. And how many salespeople do you have now? And how many more will you add this year?

Sorry, 5 right now, we're actively hiring more. And so we're -- that is the primary use of funds. So obviously, we announced the $25 million round from Northland and ROTH. And so that's not to address a lot of tech debt. That's to address a very small sales and marketing team. Our ideal operating model is kind of a 4:1 LTV to CAC. We really -- and when I say sales, a lot of it is tied more around kind of this idea of engaging these channel partner relationships, not direct selling. So we're -- these folks are experienced sales executives. We're not buying kind of a young team of people just hammering the horn, these are 20-year veterans of selling enterprise software through channels so that we're getting orders of magnitude from their participation. So 5 now, and we are aggressively hiring right now more. I can't tell you what we're going to end at the end of the year. It will also depend on how fast we activate some of these channels because some of these sales folks will also be working those channels to kind of further activate new customers within those channels. So 5 now, I'd like to get another 5 by the end of the first half of this year, and then we'll kind of scale from there.

All right. And the last one, should deferred revenue grow faster than revenue this year?

Repeat that question again, Mike?

Yes. Should deferred revenue grew faster than the revenue this year.

I'm not hearing the first part, it's cutting off for me. Matt, can you hear the...

Yes. You're referring to deferred revenue growth and our expectation for this year in terms of how it's going to grow versus revenue?

Got you. Matt, go ahead and take that one. Yes, we certainly -- we've already seen like return in the corner, and we feel like we're at an inflection point to begin adding back to backlog and deferred revenue.

Yes. No, I think that deferred revenue growth, we've said it before, deferred revenue backlog are key indicator for us. And certainly, our focus is to build that as much as possible. That being said, I think that on a deferred revenue basis, we are able to deploy quicker, faster now. So you're not going to see projects that are held up for several months because of maybe in the past, might have been development issues upfront with our customer. Now we have a fully capable platform and products that we can deliver quicker. But that being said, we're continuing to invoice annual advance and to build that. And so we do expect to see growth there. And we'll see how things play out with our strategy in terms of, obviously, we're continuing our direct sales that we've been doing for years. But really this indirect sales that we're focusing on this year, could have a fairly big impact on that. And so we'll update everybody as we kind of get through that. As Alan mentioned, we've got some partners we're working with, and there could be some opportunities there. We're going to be able to scale up our revenue and backlog.

And remember, that's going to be the biggest differentiator between last year and even the previous year to this year. As we grow this, our ability to generate revenue, both what Alan already made a good point of it, I hope everybody understands what we're doing around blockchain actually showing up as revenue because we have a live product and a live ecosystem with our PhunWallet that now it's just like selling digital goods. So for us, it's no different selling a PhunToken, than it would be selling location-based services software that should be very compelling from a shareholder perspective of saying, okay, how do we really begin ramping revenue a lot faster? That's one. The other -- and I want to hammer this point home these indirect channel partner relationships. And so you'll see a big move over the next couple of years to this idea of usage-based pricing. And for us, that means square footage. And so our usage-based pricing with square footage, depending on the complexities of your venue that you want to become a smart venue. Once we're bundled and someone else is offering, and they already have access to that customer, and the door is already wide open, and they're just upselling them or turning on additional features and capabilities, we're just collecting revenue at that point. Great margins, and it's priced based on square footage. And so that is a totally different thing. I think still a lot of people feel like we have to engage in the year-long sales cycle to sell some large brand like Fox and then it's the slow role of trying to develop the actual engine that they want, and then we finally get to recognize revenue. We've done that very well on the path. We've done it very well in the passion verticals. And we still will do that a little bit faster clip, but we'll do it for hospitals and corporation. But when we start bundling things like our location software in other people's offerings, it will fundamentally change our revenue ramp.

Ladies and gentlemen, at this time, this concludes the company's question-and-answer session. If your question was not taken, you may contact Phunware's Investor Relations team at Phun@gatewayir.com. Thank you all for joining us today for Phunware's 2020 Earnings Conference Call. You may now disconnect.