Smith Micro Software (SMSI) 4 May 222022 Q1 Earnings call transcript

00:05 Good afternoon, and welcome to the First Quarter 2022 Earnings Conference Call of Smith Micro. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. 00:45 I would now like to turn the conference over to Mr. Messman. Charles over and you, to you sir. Thank

XXXX. you, joining us Thank results copy XXXX March of operator. received release should Micro results. Good you appreciate for XX, ended quarter our We the everyone. first now, today a financial you have afternoon, Software’s XX:XX By with to financial press Smith discuss

expense, growth the acquisition migrations, Family plans, and existing new today's Bill Please strategy, and will those of would that Jim profitability, product visit future the and Kempton, Mobile of by please product forward-looking Chairman deployments, discussion including, Chief operating Financial Business you during not the results business cash could development, our statements. today trends opportunities, actual new at those by last year's new of market Board, Safety impact of expanded Chief If Officer. website one, company President, consist you and reserves, and/or do have XX:XX have company's Executive like Avast's information a and customers, call, XX:XX limitations, materially and uncertainties, expected www.smithmicro.com. future operations, forward-looking involve implied our financial which cause the forward. of Officer; positions revenue statements, or note without On differ our the our to Relations of Smith, copy section some hear Forward-looking regarding we and and expressed Investor and or future statements from going risks our and

speak that financial our made. date of no forward-looking Form release only assumptions said, please recently remarks, factors a With non-GAAP prepared to of reconciliation management's XX-K. to call Micro like the over to press For beliefs these obligation XX:XX non-GAAP I'll included the Bill? assumes our to Please refer will to forthcoming which and more in filed risk refer out that any in measures. are earlier certain disseminated the update statements, to today they I'd most financial information, Smith to Bill. the measures. as we XX:XX refer point turn for our

thank XX:XX us our you for Thanks, call. XXXX afternoon Good quarter first for conference Charlie. today and joining

been fronts. on quarter many extremely busy has first Our

As we during about our we the QX path that down continue spoke recent update.

continuing on are the in build recent enhance subscriber of the early from to launch We X. launch should to This the momentum the or late drive beginning QX. growth QX SafePath commence

progress and single platform. delighted SafePath increased lifestyle announcement the XX:XX of believe we only power bring to opens not an great that note customers our Directors. the month, I critical within carrier with have expansion where Board am today, very that customers Another continues Another conduct and with that are I I as lives making exciting the is truly through but offices, is larger begun the can with also Family Safety generation. access This of other growth, return necessary the our With historical as a we has working back is are model Tier-X strong the step to the of groups to and building XX:XX towards different delivering discuss a relationships of We Last carriers. work pandemic Family throughout the that hope recent deeper to We get the carriers how in set, business. while diligently to our resumption carriers cash to and a reopen milestone their consolidate impact we power we This of how our Keddy applications changed cost U.S. highly the growth, And will Their company earnings the are qualified carrier across are tremendous the Asha knowledge, our strategic mobile marketplace. our with our the synergies interesting of technology added contacts XX:XX recognized digital over allowing who Family seeing customers to arena. have realize the I'm XX:XX results. acumen Now going as leaders European enhance combined activity on we an partners. the the expanded the platform looking Safety am discuss platform. two Micro. critical in to space, Chetan to quarter mobile our call onto company. turn two encouraging pleased several they're feature SafePath us positive Smith we both as will opportunity is let's Sharma, Jim business first and are Overall, board we family even to our forward individuals to our Safety market XXXX a initiative to to that addition

and Thanks, afternoon, everyone. Bill XX:XX good

second As Safety the the quarter Family impacts I'll of period be comparisons today. Mobile a period Avast's reminder, XXXX, which we over covering in business that acquired

of additional the I As also be first XXXX. changes sequential as some of on context With such, details quarterly financial that, quarter to the will highlighting our the let well me cover XX:XX provide results.

with increased quarter XXXX, an of revenue Family Family revenue of Safety million to million Family in million When compared During was compared XX:XX $XX.X of revenues. CommSuite partially for an lines. in we to to last the a approximately quarter revenues, year. primarily XX% same as XX% first decline by quarter, posted result by first XXXX, CommSuite Safety $XX.X Safety the a XX% fourth the decreases For and down of increase the of our of compared year, quarter $XX.X last to quarter increase the in driven offset first product associated revenue revenues legacy

related due compared the sequential decreased Family certain reduction the a fourth The As platform of declining from & accelerated obtained due of legacy Safe Found Family primary XX% of in recognition $X.X Tier the decrease reasons through sequentially $X.X Family the Safety declined to to the clients. quarter subscribers produced of million our Safety revenue first carrier fourth Sprint quarter the revenue the CommSuite revenue of Safety X Revenue of last one from deferred customers XX:XX million, quarter continued During legacy revenues the Sprint fourth subscribers. for to result the of to revenue XXXX. decreased in additional and in in which last was quarter year continued first compared to related million of Avast. executed quarter with decline CommSuite in the the a contract sequentially revenues the the year. revenue amendment to $X.X to was compared XX% acquisition XXXX, XXXX, our of

is last on services. driven Sprint discussed call, in to Sprint the As those for the I to by legacy move voice subscribers option network decline having subscribers T-Mobile the the from

decline. transition network, Sprint more subscribers this continue concrete more and As off to revenues will

in Boost is not for difficult predict to when part to revenues very visibility the customers to SIM is However, by over as do us new owned we Sprint T-Mobile the decline a formerly XX:XX now timing of of Dish. network. on have that switch

CommSuite The are the is was device With quarter, with portion and compared of subscribers timing approximately which the the essentially XX% executed contract fixed of The related approximately associated the our license Dish of the of less generally quarter components. the recurring is of during comprised was revenue that campaigns, the of both the to variable quarter component the and of on this fixed revenue revenue the is fees we expanding to XXXX. quarter first with to goal flat variable we and up stream relationship XX:XX ViewSpot CommSuite to promotional last first with related year $XXX,XXX revenue portion increase and a for to XXXX, platform, Dish is revenue fourth first the portion and time. over ViewSpot of volume the and revenue. is with compared predictable.

of XX:XX all the carrier three launch timing We marketing the customers our we Tier believe of this will be Tier that to expected Tier in be the initiatives, carriers will opportunity at we the the our significant growth that SafePath recent this carrier quarters. X wireless carriers U.S. this aligned in platform to basis X of our by and we other have year. X subscriber second customers with grow U.S. several expect anticipate the With at However, half migration of of one initiated year. the later of a U.S. which X coming

period XX% such, down gross expect quarter to $X.X to same by compared X% In As year. quarter, last the in quarter million the to For year. the $X.X first the run expect first be we approximately we to flat the Gross rate. first XX% quarter XX:XX was current was million quarter for compared during compared the be first last to second flat slightly revenue from quarter, of XXXX. for profit second margin margin the consolidated of to the gross to lower

the combined the all able to will realize the Once our Safety our Our platform. towards range used achieve of upon gross to margin. gross margin we of applications migration Ring platform, platform synergies this a the and carriers the by single contracts carrier be to transition back be targeted longer-term XX:XX to margins Family customers off goal to Family our are To XX%. of will legacy XX% gross expect service Safety we that able our us to drive we is SafePath optimize third-party onto help for Avast fully goal, of business, in

the we XXXX. compensation last or million the migrations, quarter increase of be first year. $XX.X increase of Given primarily in until Family expenses was first to $X.X the GAAP increase first XX% to for the contractor of of fourth million our XX% operating for of due by $X the these increased the SafePath fully first to will Safety with in operating realized last employee-related year. and first million acquisition or timeline migrations. part expenses, Non-GAAP of expect the million expenses compared the likely the synergies an were were Sequentially, the in XXXX, million, for to quarter compared not million Avast XX:XX mobile quarter from to driven to operating related The quarter X% business. the quarter $XX.X XXXX, expenses by $XX of due non-GAAP increase compared $X.X of XX:XX quarter an

of loss share of XX:XX non-GAAP press a first $X.X $XXX,XXX a the quarter of per year. provided non-GAAP most last loss XX:XX per was GAAP year. GAAP our first loss to in the our first to by Family X% loss Safety to continue The We net per quarter our non-GAAP first $X X% development first $X.XX to net in the million, or resources expect to reconciliation from customers last have metric. share The SafePath loss earnings quarter compared as of net was metrics we million, or net non-GAAP compared or $X.XX $X.XX operating for release, million, loss diluted comparable migrate the $X.X the we of second or in $X.XX for share the quarter quarter expenses Carrier Within quarter income a share the to to today's GAAP XXXX increase to platform. invest per

first quarter, expense over few the foreign for intangible years, includes For adjustments net our GAAP past of tax $X.X state amortization compensation $X.X is Due to expense in our million. million asset and income taxes. stock losses the reconciliation certain to of due primarily cumulative the

registration This to utilized facility it leverage the briefly facility quarter, The tax and on XXXX. through non-GAAP instead like to we today. work the within to this the expense as a migrations. only with XXXX. each lower we the majority within For of for we highlight typical XX, on funding we one from in came from wanted year expense would months with received necessary million that attractive resulting customer two last utilized can line I in Tier and We XX:XX credit SEC I place revolving March zero quarter. in the the the XX:XX We income This than payments $X.X capacity This vast in of and Wells a to balance than the non-GAAP under of cash credit from this of Avast. capacity We're entered on X, as three shelf had rate payment with rather terms. that taxes pleased into the up perspective. XX:XX as during tax provides purposes, sheet on April period. XX, of million. Fargo the From cash company X XXXX. touch acquisition approximated of XXXX anticipated equivalents $X percent a $X.X was existing for earlier filed we our of the also March actual as payments carriers reported balance a cash million the resulting reflects SafePath registration shelf have

to in such, financial equity establish it leverage if offerings We concludes This with good would new determine opportunity but be a my place itself. future an as a present XX:XX As the to would any anticipate three-year shelf a attractive registration term, we prudent would not wanted the have near matter term corporate to review. in of governance. shelf needs, for

Now to Bill. back

XX:XX Thanks, Jim.

Now let's closer our platforms. look at product take a

continuing carrier SafePath the the X of We North are to platform. on new Europe both our migration and very focused customers America in

features the in offering We SafePath driven SafePath inclusion the platform carriers, are IOT. of found carrier XG, new and expanded believe will X. robust as be the I allow market of broadband G expanded SafePath market market. SafePath home SafePath This flow as roadmap as relevance utilize by to and right better Being Home routers acquired going is providing new SafePath rollout the offering customers result SafePath functionality gained well the forward. of for in provided as such means The capabilities of carrier XX:XX Drive Home, an the X Avast features. our adding constant features platform even to the a and more leader

progress With the all deliver of is digital the mobile March, at XX:XX weeks both in good to our growing up that on lifestyle There switch the continue is Home, when made prepare in From we Verizon anticipated the the retail next This at earnings the A is avenue T-Mobile SafePath a great market. ViewSpot very as our line fronts received been are following to in customers' apps presentation. we [indiscernible] Smart subscribers well build can efforts particularly the several has with XX:XX SafePath platform. home. the announced front as being and late been the was products, as and pilot for of hands. application. continued performance a to phase well the the family ensure who awareness perspective, we initiative expected launch application of the the last occurred safeguarding stores. of on new emergence at us the within into to reps launch gauge for new for As Verizon family of SafePath corporate-owned sets working launch example app sales X getting throughout Family underway our well to has new extremely the to and

campaigns when some We program launch are entering the on months, we X Phase capitalize a sales Family incentive will as enhance in well the several new have organization, retail XX:XX the to in content the of Verizon coming as promotional stores. awareness critical to that the marketing approach. new targeted initiatives were We step a entire for our delivered also marketing and training multi-channel Smart new

track. On on the we side, integration remain

AT&T expectations progress to before continues work very with to launch key been to over delivering The significantly the will successful of this to continue on SafePath for the we to are the and we by date Moving as are us towards and We applications tracking launch. confident the an to focused we the customers. increased our a year. Smart with has able be with carrier about migration drive us, this Family opportunity XX:XX together enhanced plans customer ROI this bullish platform on improved experience, AT&T, that on end with work

a the features the is our areas app can the These awareness As a the their they potential campaign to organization subscribers emphasis significant with this contact of have with are sell customer for and awareness clearly other our should employees, ongoing. so Retail and of customers. XX:XX drive efforts partners, AT&T care which With several among the of service amount product. of and across Divisions benefits better approach strong an carrier continued key on

cycles our targeted value digital lifetime AB We and several more advertising with of testing per employing approach our importantly acquisition, a maximize to also more cost subscribers. ongoing our pilot have expanded far

on with quarters. will we briefly AT&T built be continue fronts. up space of I immense discuss are let's for that call, from last is a excited Safety we Next, as to Family see the As ViewSpot. stated smaller coming today and AT&T, The on mission potential relatively I'm part very And in base. many we that XX:XX important critically

to ViewSpot delivering more addition capabilities, real-time experience and upgrade The and is great been studio significant Our faster for out received of rolling customers, a by campaigns, a our innovative capabilities. Cricket, platform team. move is both product Studio Verizon much agile the much accomplishment deployment analytics for a cycle better very our at in with which new well has with the

for customers applications promote further We capabilities have to also allowing gives market opportunities us and and total unique upgraded with as continue addressable environment, explore and integration improved to need which us making new step for relevant on for strategic XX:XX is and to Family the the to sign I our our sales addition, In Family and a explore Studio, the retail that Safety consumers more attack. sales it us earlier, partnerships the broadens and the our Verizon allows to Safety in rep conversation up engaging allows sale. touched products rep the the content for in or program, without ViewSpot close

XX:XX will the We CommSuite. significant Let's analytical briefly data also help us improve marketing that discuss campaigns. gained

for last during prepaid signed its As I those, XG launch Dish and deliver in our CommSuite touched to for call, carriers the on, both quarter, Wireless our much-anticipated of text to services the powered offering. premium postpaid and voice with first Dish’s service, visual including brand our we contract the voicemail

to Dish’s time take our strong will long-term will CommSuite base extend platform. CommSuite life very to it Although, a strategy build is complementary of the and

significant a the quarters. Micro voicemail in term. longer CommSuite during offers and expected for milestone what revenue quarter. the Jim growth I am Sprint stability I'm for first the that continues our we was achieved X in largest As Dish Wireless catalysts In deployment pleased the and SafePath to coming XX:XX about with spoke which The conclusion, Smith stream down. wind our (ph), firm a visual legacy Boost believer at to and upside

will while year the in free this to other of confident I gross our on of American X European applications. carrier initiatives Tier range, revenue and back training Safety forward, strong XX% the the to awareness for our the as coupled remainder -- margins subscriber well clients partners believe path result Family and carriers, historic focus growth marketing, our up to Our high in like in migrating with is XX:XX drive flow. of which platform I we year cash two for to as remain our XX% our SafePath growth North the our with half executing

are Family space. to being the motivated carrier both the Safety by and clear wireless We leader proud

product roadmap best market Difficulty] has opportunity the Home, and years. SafePath Drive, is said, With for the ever opportunity Smith larger on SafePath Operator? Micro market I [Technical [indiscernible] a IOT. SafePath the With for will questions. to well-planned fit better open been XX:XX in us it even and with than call The that

you. Thank XX:XX

We Instructions] The will the Please question from comes with session. Nichols question-and-answer FBR. ahead. B. [Operator now first go begin Riley, Josh

kind what of the been terms marketing put spiffs your that to it's begin ramp my be digital whether place has question there know bit this to taking do, rolled you T-Mobile into XX:XX and a I the and and Yeah. may with have lot little of is of about good that. trading making, training long where with into see expectation the begun that's to dive been or initiatives? help effort to and for T-Mobile put team Thanks for get of Could a you initiatives, here. a launched marketing that in in everything time out

kind answer that's look the off, to them. to really directly ask first to can’t Yeah, T-Mobile, of I of at, really confidential the question It's guess that's really to Josh. something that. going you're we XX:XX have way

working So hard them. with we're

them. focused focused. They are We with are

to is them. -- ask going everything have you're So to but positive, that

looking just you've of kind in Fair to before mentioned you're you XX:XX for mentioned with that expecting see in which half, trajectory here, then at the kind of a the second ramp enough. XQ. and revenue And flattish revenue

trying in run potential curious to like if next legacy of Just figure much couple due out how CommSuite revenue of how that Sprint quarters? like of related the to we're the much to lift the off may be the stuff, over is

be second quarter, portion. related like XX:XX in the to Sprint, third anticipate maybe We of roughly the the a revenue would T-Mobile would

Thanks. XX:XX

So Verizon. AT&T just if I'm then and (ph) looking for

end You reaffirming mentioned are signing, migrate year. before the given platform both might Fair customers bring? when economics And of if not of contract assume a new and some the do would agreement, to that the to old that the this SafePath you value reflective type expect contract we you you is that, that that probably require by case? those of the agreement the think see of update over that

When XX:XX talk customer about contract and this street it, we a and our the from done come to have we approval but will time, at have can’t. we

guys. XX:XX back Thanks, Fair hop enough. I'll the queue. in

go comes from XX:XX Thank Dawson James. ahead. Please McIlree Jim The you. with question next

XX:XX afternoon. Yeah. Thank you. Good

was in for costs hoping [indiscernible] You contractors increased or talked do might do And get just secondly, away go something when just permanent, else? the the get could and to that's you about redeployed migration costs for then costs migration the done is, how dollars? are but going I cost those they is that else contractor get these spent into something on big

contractor way are thought contractors behind permanent, So, and the focused felt as with very fact two a be costs be real we year way bringing get eliminate able in to to to carriers that the lot -- bring these those the at that that we migrated most we're getting on on contractors costs is of end this to do the migrations, tail. on the XX:XX we'll no not effective would the

going be when would expect I to by to migrated. are second we first back operating costs. contractor XX:XX quarter X% X% driven your guidance increased those largely where the we point believe first eliminated off that in the be to we of For the to those quarter and question, to expenses to our that's So would

we flat That's goes, like -- and it ViewSpot far XX:XX like is are? helpful. then flat, to sounds is as And CommSuite flat up is QX as SafePath directionally sounds that where Okay. it down, to is

That's it. XX:XX much Thank you. pretty, pretty

from end much of prepaid by business it be year, their all with the coming good will the of of brands think ongoing Wireless is and I that almost the CommSuite boost. revenue Dish the part

would continue to so our forward. think will And drama to we regrow that I and going revenue that end look CommSuite

it. risks Got you on SafePath migration mostly And achieving SafePath track. the rank is rank to that, customers to goals your for in your how that the would the do is the it, got the control, Is risks growth, you that XX:XX that how year? staying issue

XX:XX That's a it different question. great I in would two ways. view

you once have if from the migration perform have at off, that's and over to but we a final deploy lot First look it get because goes and done, to software, a they clearly, our deliver standpoint, to running. of it hands, the it and risks then up customers'

our make So this I that get we everything sincerely mean, amount migration it's complete. I it's do meet risk, can everything old this really there believe is will or will that our selling have to the certain deploy SafePath to whether all we old of that their product. our product because customers schedules, currently do whether and we significant power want XX:XX our a in in over power improvements that I because the of to new spring will say upgrades also product sure ring,

plenty things where there both of part It's about the The of on there's some risk. marketing to really plans. for the is motivation So get execution of it, done next parties all time.

financial that execute our there standpoint, does to sharply. motivation But carrier plan. final, with are all all incredibly We carriers. in you parties the this follow-up from strong XX:XX this, is in on it deeply a to execute for Again, -- of involved the

are deal that the are that also reasons with, reasonable risks feel of plenty will still to do to way there's through. we but risks need there So and recognize that you we and work our can

helpful, floor. That's a XX:XX right. yield care, lot. the guys. Take I'll very Thanks All Bill.

Instructions] with Lake Goldfarb [Operator Capital The XX:XX Thank from comes question ahead. you. go Bruce Street Please Markets. next

on taking and expect When questions. revenue Jim congratulations from thank my you And Bill account? do XX:XX all the progress. you your T-Mobile material for

to XX:XX SafePath the Well, revenue now, step the X marketplace. material in the get so was first

sure As in continued the new is product make the they a can executing really strategy. going functioning prepared properly. the customer we're of results, assessment growth when comments, I with to said, happy focusing is through everything And period now those the that on start in then

as more now, and growth So becomes it's starts. even it meaningful meaningful the that we hope

XX:XX in It you've but Okay. And this like probably have seeing retail said sounded I T-Mobile you earlier, that? you stores. didn't of activity earlier answered signs are visibility think you to

we about that. can again, are a where Well, talk point not at XX:XX we

So question. can't I answer really that

XX:XX integration tracking the are -- how lastly, the then how AFSM since acquisition. Okay. is And the (ph) synergies

XX:XX in by It's able push really the towards will end synergies and the we're us once the synergies transition realize to this real really to migrations all all to platform be to that that able carriers. SafePath complete trying allow first are for we'll the to We occur the to the one of quarter obtain year those have the, will of XXXX.

congrats the you. all Thank Great. are questions XX:XX all again progress. That's on all my that’s your -- that’s and

you. Thank XX:XX

to This closing back Messman you. any over like session. our for concludes to I remarks. Mr. the question-and-answer turn would Thank Charles XX:XX conference

I XX:XX very Well, appreciate it's thanks everybody for know that. busy joining a time. us. We

call. questions, have have free please to you feel a any further great afternoon. a Thanks If again us and give

attending presentation. today's you. concluded. for you The has XX:XX now Thank Thank conference

now may You disconnect.