SMSI - Earnings call transcript Q3 2018 | Smith Micro Software, Inc.

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Operator

Good day. And welcome to the Smith Micro Third Quarter Earnings Conference Call. 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, today’s event is being recorded. to of conference Development. Investor like Messman, to now President Vice Relations would turn over the Charles I and Corporate go ahead. Please

Charles Messman

us results. XX, third copy release quarter Thank Thanks our received fiscal Micro good a and year of now, financial today ended with you fiscal joining have September Software’s the you, press Smith By to the of for afternoon, results the XXXX financial discuss XXXX. operator, for everyone. should

and of copy at would one, you call, do Chief a If of Micro; section of website have the Executive visit our discussion we reserves. Chairman Smith company Relations and during you’ll and and statements, www.smithmicro.com. product like some Investor Board, the Smith, not please new Company’s today’s President of Tim regarding the Officer forward-looking have new opportunities, Huffmyer, Financial information of today Bill and without On consist revenue operating Chief Officer. our cash limitation, those future development market including, the note hear will profitability, Please and that expenses

cause risks or by could materially uncertainties, forward-looking which from or implied results statements involve statements. to Forward-looking those trends and expressed actual our differ

over financial Bill? the all to refer of recently Bill. the information, refer forward-looking a date disseminated they said, in assumes as for measures. to forthcoming factors we’ll more earlier made. to Smith Please release non-GAAP speak the now risk back point to want Micro’s which of turn statements, that please that For out press measures. obligation to in and belief remarks, With the filed call only assumption discussed Micro Smith I’ll reconciliation non-GAAP our any XX-K. to the no update our refer I management’s certain are prepared to financial today

Bill Smith

driven expectations. everyone. in third as conference good Revenues us and you our to in during to third we last Life be voice pleased Overall, came Charlie, Gross continues third quarter earnings quarter the profitability I quarter. or from call. afternoon at from Platform the up $X.X We for quarter $X.X today of $X.X quarter share CommSuite the non-GAAP with reported of million, our $XXX,XXX the million the per last up core met profit million, growth for year. messaging wireless $X.XX for The XX% SafePath at our XXXX platform. came joining by and Connected million in am products, our earnings achieved Thank approximately Thanks, $X.X two year.

year, quarter. some progress will we Looking organization, third throughout call call, the Later at enhancements quarter. the I over in particularly detailed the continued will plan But that entire financial Tim? to the overall, I the have of a launch go made first the months with nine new product we review in fourth of now to more detail. the for Tim turn into

Tim Huffmyer

Bill. Thanks,

increase third the $X.X revenue $X.X quarterly posted of the million an of compared of last The reported $X.X we million million $X.X quarter, revenue increase an XX%. million last same For quarter XX%. segment of to year, compared year, Wireless to for

year. Our $XXX,XXX quarterly to reported million Graphics $X.X segment last compared revenue of

for of as the an and revenue of messaging increased SafePath customer increase voice third $XX.X the For revenue compared million CommSuite The increase Life was in product a quarter both the to million last adoption XX%. was year-to-date, families. $XX.X rates result Connected both year, Platform growth Wireless in revenue

the revenue growth rolled fourth consecutive and quarters CommSuite quarter of highest enhancements, in During has premium product the XXXX, subscribers. resulted of of number out now which four we

We expect for for revenue modest of growth rest CommSuite XXXX. the

XX%. Sprint Family SafePath quarter by the of third from During XXXX, revenue grew

execution. Sprint on recent dependent promotions. store These retail completely growth continue actions, expect to which Sprint actions are continued based revenue and on We expected include

support to continue required. We efforts as

that quarter existing was in XXXX, the unique legacy As first base a Sprint due operational in previously but was legacy subscribers originally using of has sunset product an launch similar of This decision. discussed, to The on a Sprint is was Sprint product. the delayed. based change subsequently

Sprint in a We new into We to of expect of in distribution additional launched decrease the in and with date. channels new products. unit our lower launches sunset termination work with product attributed revenue Graphics product the line CLIP the coming and quarters. our The agreement on continue legacy to recently STUDIO expectations, was a sales

last gross the compared compared higher during quarter, of in quarter and The gross to XX% is revenue. Wireless Graphics revenue Gross third million was to a million the year. the period $X.X profit directly year. For $X.X last third the mix same increase margin for was margin to XX% related

decrease quarter $XX.X gross quarter to annual million. third decrease $XX.X year-to-date last million cost the cost X% year-to-date of third XX% year. compared was cost activities This compared program a quarter and million, included reduction third announced year. last For margin quarter, resulting for year. last same of or we quarter of restructuring a the for management reduction $X.X savings staff year-to-date, expense. was expense the million, reduction compared Last $XX.X year. a or an with to of was last Operating program other period to a $X X% expected million during in modest third million XX% compared $X.X Operating $XX,XXX profit Gross was the expense for to the

We this are the pleased operating quarter. expense with achieved savings

to operating We $X.X was $XXX,XXX $X.XX compared a The for expect plans. any million, the share last The was $X.XX the non-GAAP net non-GAAP quarter compared for The loss a to approximately per compared $X last to operating $X.X income $XXX,XXX year. loss or a or non-GAAP quarter which last quarter share million a net per unannounced year. quarter last loss million was share The year-to-date net per loss to was share loss third of non-GAAP $X.X for $X our third of quarter loss of loss fourth third loss the for restructuring to $X.XX $XXX,XXX or loss income compared million earnings $X.XX the be excludes operating of year-to-date year. non-GAAP net non-GAAP third or expense $XXX,XXX per year. million

release, the issued GAAP Within our we metrics non-GAAP comparable of to have metric. provided recently reconciliation the a most press

third $XX,XXX; of a the intangible reconciliation the following of value charges: adjustment debt discount expense $XXX,XXX; fair amortization $XX,XXX; preferred of includes amortization the issuance $XXX,XXX; of $XX,XXX. compensation noncash quarter, and of stock For and of stock dividends cost

of the issuance amortization adjustments reconciliation the third discount noncash intangible cost charges: compensation fair $XXX,XXX; For $XXX,XXX; includes stock amortization value of expense of the and debt quarter $XXX,XXX; year-to-date, of losses past few preferred expense $XXX,XXX. the primarily years, of and taxes. a dividend cumulative GAAP due task Due our $X.X million; of stock net foreign is income to to our over following

tax we expense Bill. $XX,XXX non-GAAP rate year-to-date tax purposes, a and quarter to tax third review. For utilize non-GAAP resulting Back third benefit The quarter financial $XXX,XXX. you, XXXX. was XX% was This my for the concludes non-GAAP

Bill Smith

Tim. Thanks,

on in Life Congress Life solid I'm on new Let's excited contributing we World truly which you quarter. delivered growth announce have am the SafePath start Connected many sure a calls. saw fourth $X These SafePath, the growth during revenue. quarter-over-quarter, a approximately alluded significant Platform, with million a in prior Americas Connected I we Mobile Platform prior something to delivering issued off in recent I produced plan introducing release that to September, of event. quarter, XX% our SafePath results the press to

hub, smart such a that Safety security, direct to is one say as to central and define digital SafePath home of the market host we when serious operator's Life SafePath cars, and Platform we our technologies, just unique market pet going reaches devices, filtering plan that services, mobile access today. parental Connected are on lifestyle to brand. under include forward. controls beyond Family the connected white-labeled leading will market the trackers We and all under This locations, web wearable

are which entire delivers single-payment available applications, While that have different ecosystem. several our your separate you there through can devices glass a solution view

expanding have with leading begun ecosystem We building and providers. consumer IoT partnerships already this

a As we the of banner the of first first IoT will matter quarter under XXXX. in launch SafePath device consumer our fact,

efforts market within enable in devices of we speed the that solutions quickly the by platform accelerate industry demands carrier-grade and delivering we will new agile crucial delivery not of changes weeks, continue of diligent market the the an is customers It the will with bring to meet the wireless leader, As our changing R&D on to months. leading quickly. remain in happening to

increase With sign-ups Sprint, will There depending Sprint are associates. Sprint's will In a installed as the initiatives the Connected also the to grow new we both new sell customer's launching quarter, have by branded version stores and subscribers of will fourth largest our customer, Life either products product. Spanish SafePath SafePath offers IoT of we timing continue the promotional Platform, run SafePath to enhanced to as retail at several architecture underway the ability are needs. on Safe & Found, that a the individual SafePath Family bundle SafePath sales of and or base.

We will and rewards use to and drive retail contest focus. excitement

also such digital marketing moms, promoting and in awareness building of campaigns Safe Gen focusing millennial & on have power personas, Family We the Hispanic as targeted Found online some X moms moms, Safety. of

our bigger. growth even drive Sprint we As deployment, from is our vision

North carrier We careful to focus our customer next are with America. major close on aggressively working

getting While I believe cannot details, share closer new our to we are any I goals.

a seen provides growth connections, access the now text highest of our solid and growth The for anticipate voice-initiated which easy in cellphone, well. messaging such number of the as company, continued assistants a voice to ecosystem our revenue we've fourth paid your milestone, of shift remainder perform now year. and consecutive platform, to your achieved through we as We your Let's CommSuite to continues the CommSuite Alexa. from are inbox, subscribers quarter voice and at

to apps as working also well car base through messaging include as your third-party WhatsApp. from are to messaging We expand within like this

actively to Gen messaging a Z Voice users compatible important lives. messaging We in future. to and paradigm and how millennials they to it needs live meet make needs are voice user function relevant, reengaging is but the morph their with with and

services, way the and leading revenues putting voice in our both life are growing customers Micro these carrier into is carrier ends. while for messaging We achieving back ourselves. Smith

note product Just our about IoT a quick QuickLink line.

our are announced September product strategic intention in we this explore early aware, As alternatives for line. to you

Our been technology. to this working aggressively divest has banker

have We options, have time. at developed to but nothing a this report more few

NetWise. to on Moving

operators to rates. reduce simultaneously Our cost, platform and intelligent data enables as to enhancing of service relevant MSOS their X carriers, while Tier mobile very end quality unprecedented users. for the NetWise consume at users mobile remains MVNOs connectivity overall cable

customers and group that marketplace. market a share. has We reach who have progress grow with continue a the am overall XXXX. have in we NetWise pleased made throughout real value to the their solid of great I

Platform exciting with upside SafePath us platform found business towards growth. and have provide for our back CommSuite future. Connected Life our and profitability cases our We Both voice messaging the way

defined. clearly profitability Our now sustained and path flow to meaningful free of cash generation is

fourth year the the for quarter fantastic XXXX for with momentum will of enough more questions. is goal the maximize to and Our than that, up ahead us. Operator? finish With to open enter the strong opportunities call I

Operator

from [Operator Instructions] Searle first Roth go comes The Scott Capital. question with ahead. Please

Scott Searle

Thanks quarter. Nice afternoon. my for Good taking question.

there that be $X.X XXXX a in but on financials. of First, question onetime basis? million to stated a terms level the into think well figure? quick million, some events going should you in is Tim, there any this, quarterly as housekeeping forward, we a base as the thinking going related I about sales OpEx $X.X were how And

Tim Huffmyer

Hi, Scott.

as the there, onetime to base ability sales at in event future. to we OpEx have here sales about as current revenues the expect as rate -- we're that activity revenue. grow as OpEx far and talked decent leverage go, the And we events, pretty no our in a As far

Scott Searle

to a - look potential labs versus existing that Got that discuss should SafePath like the And about IoT, like And there time that about that labs? looked you I base location we IoP, last would looking rough from sunsetting terms the XX-XX. idea quarter, Could converted talked something what SafePath. think, of in it held? sounds sunset frame or moving continue you also, location the what about some us what to space? you. for over subscribers you be thinking Is Is subscriber at sunset, And like? for new that. that pricing give

Bill Smith

Okay.

this. me take Let

questions about X there. got You've

way. about it's last want dialogue say it's to is How's exactly us. the keep then more we'll talk think changed so that let just Let's think the sunset. better underway. I I happen I'd of and what There say the We just really plan happened. that? all time, don't It it for I rather saying is.

primarily, As far as the mix, at coming is if growth, the quarter-over-quarter, look from growth you new subscribers. the

can over you legacy, in now of the say the If look best without it's subscribers numbers mix all little subscribers, but of at probably the overall having the I right new that's bit towards a front me. slanted all

a good that's indication. think I

would that's is That something as a to a device far -- a pricing It IoT are -- Family be way working device through. in some considered IoT, give SafePath an considered view it it. that we would you for As plan. might be

were there customers. will families believe, lot that we to not, be, Family However, prior SafePath IoT that, a SafePath of

they model the to being it. real worked So don't I'm to get have will in process. it's a being front I granular all because want know I different of out, and not

Scott Searle

is expectations enhanced pretty features And that Okay. How talked think, CommSuite, growth? seen you conservative, -- on you progressing the Thanks. and we've could, terms about just voice guys have Alexa It's XXXX? had that Is to does pricing this time in been quarters. I we to growth there for of changing there into out terms the started as recovery XXXX? earlier, handicap what and thrown you Bill, on how couple start front. would model I accelerate that get of follow-up. Since add that new of frame? a you in are But well the and a other or as And Or over sequential your if carriers in some been otherwise. you modest and last it

Bill Smith

Okay.

SafePath take first. the one me Let

little deal, being I next approach in deal about bit the year, in ready you our is the conservative talk -- half usually, until that that. think offset to products. be most would next probably we new the to to at able talk that a a look can't shipping carrier about because so mind the new it's might deal Keep first of always when a time, startup that that start there's it,

I dynamics driven to launch close we're be will customer. announce will of something the but able half. to -- actually think we So the in be looking first it by that When

messaging to want doing. talk that customers what a right are in features moved that users that answer CommSuite have for now way is capabilities looking don't in demand says, space on doing I is as it, believe and about platform, of but the drop real view what to can think carrier a enhance is adding new far and we the side, these CommSuite it the nice As attract to we're we so, I are to the of from now I at messaging actually, platform voice really And who today. carriers it But what can the we're view I if is our well, platform a and I our go the fine, forward, have, about what's of is to exciting talk to of we maybe the and some your perspective about a that voice can different add than that I now think, I get of not already has feature users most little that platform, guess from paradigm the capable sales the point parts lot now, everything to just talking a yes.

force that's that and pretty our I and something conversation that's sales know about. excited is different new So a

Scott Searle

you. Great. Nice Thank quarter.

Bill Smith

Thanks.

Operator

question [Operator Instructions] Mark ahead. comes Data. Please Gomes with The next Pipeline from go

Mark Gomes

guys. quarter, Good

this Are So done looking has Connected terms they you're that frame carrier expected? be that that move bit of they on at at you? that schedule QX. for discussions you're have to around? to little in forward released looking waiting Is to to, what time in what earlier a been And done, with in you Life, -- order

Bill Smith

about your Okay. I'm question. just parts different thinking the of

demo a targets. been sales capability from think this we able have standpoint, first prototype our to discussion I off, a of to various

can to deployed. this be a is gives is usually real, it's that I thing and a we confidence. a something biggest ready more longer is no new That it's lot prototype, think say carrier the that

just timing, the about as coming far the that we're had planned product I As feel of on, the I to I'm really we timing out. think pretty the positive close quality and seeing

So now. I right positioned we're think well

Mark Gomes

to as today? you're this far opposed as product offering to carrier's this response what wanting to the And Okay. as relative

Bill Smith

Safety an they with but Well, conversations a product, having may consumer we're have lot have lot of the don't alternative of IoT. an carriers Family a already -- for answer who conversations

be to this is sides, option a there's devices is can seems to their so provide all to point sell, to interesting on attack a hodgepodge And to a the IoT we think saying, forefront So go bring guess, back well. carrier carrier. also Safety. Family then, through in I it kind it's own of all with this we thing, sort really can all message working to is that problem a number about it. and of the The that -- client, of the it's way it -- branded are It's not by the and oh, consumer that from really the way, a your way backdoor, and

Mark Gomes

from ahead development? hard And is in IoT expertise your your IoT you get come lead do have? you on discussion it a the having much that you're that into play sense on the and And does how how

Bill Smith

of last ahead engineers and with working the whole SafePath we're Serbia for think the of had years. we IoT entire I Belgrade, team the That in that to IoT. on market. modules that moved been team and working a Clearly, for Yes, has devices been the fact product QuickLink XX-plus have --

think is lot are incredibly They will rev so X experienced on their product And of of good is an the the leveraging quality this be it a team. I reason So a high. probably knowledge. that

Mark Gomes

jump I'll One queue. back the more into question.

when demoing and you customers carriers targets, Or product plural? you that the You this include various to you, sales Thanks. have mentioned used does that existing a minutes for new couple for of ago, these SafePath? currently are

Bill Smith

always SafePath existing the that that mind as to relationships everything customers -- we've many new. had well And so years, are you new one of had lot confidence. customers the the Smith when been in, of quantity of Micro about. the walk and all that's in have as of be door It's they the would keep customers biggest an as we're It advantages we a not necessarily over with talked unknown in

it's it's positive, good. all So all

Mark Gomes

back and the go back line. in queue I’ll on Great. come

Operator

Stutman from with Marc comes question Trimark. next ahead. The go Please

Marc Stutman

Two quick ones.

that the yours, would third be SafePath would released. or You -- had that is first Is IoT be XXXX, party? mentioned in a QX of that device

Bill Smith

we no, hardware. make the So don't

the will say world So the that device the is first not ship that. in of powered to be trying by quarter the What no, and will to platform we're that 'XX. will happen we're first out saying user SafePath

Marc Stutman

tell is? application the Can us what you

Bill Smith

No, I be right first customer That our something talk now. that's can't would needs -- to about. that to

Marc Stutman

next is regarding Okay. And the question CommSuite.

You that, carriers have obviously, had voicemail mentioned existing systems.

my So is, can add question they that find they attractive on? CommSuite of do which features most

Bill Smith

the coming message -- away Visual or a just when from the Sprint Also, Yes, car broken out in that it's like so are left, knowing to or the you're That capability. actually capabilities I Google Alexa second. like one kinds it's first. has rather capability and systems or call with a That the car, would you, these Home caller think think, in that Verizon the calls from first of I parts good also that. Voicemail call vendor there number, your leveraging interfacing of carrier, comes the our core mean, looking capabilities obvious platform, at can by all good whether things a be things they I but into filtering robocall the voice wireless whoever. of be The it's a question. came coming the maybe off, from working particular is and from identifying and that, that the messaging a of than IDs

Marc Stutman

Okay.

to of interface say, this be -- let's calls. and to more filtering would devices say really the third-party it phone intelligent that So fair is providing,

Tim Huffmyer

that's think fair. I mean, I Yes.

actual itself look more just to the and to it can to voicemail actually You get that way, that quality adding being able someone channel wants on. deliver it it at to the

the very that's key I to do. think It's unique. hard part

Marc Stutman

right. All Thanks.

Operator

from is ahead. Please Mark Gomes with Pipeline The Data. go next [Operator Instructions] follow-up question a

Mark Gomes

Thanks.

heard correct? product, first customer have the be. think device I you you on correctly, might out, you that whatever So sounds like have it it for coming consumer a I -- that Is you already

Bill Smith

minute. a Say again. your Wait question

Mark Gomes

previous to the didn't there and you what you the When caller's that is answering mention you maybe detail some, have. that question, NDA going was were customer to with made discuss be that in device the you want consumer

like already. it this So have sounded you customer ready Is for correct? a that

Bill Smith

That's true. That is correct.

Mark Gomes

Okay.

Okay. Cool.

or Safepath? Sprint this what us expound of revisiting older its has incentive maybe to interested they labs, whether are is Obviously, an either but and kind And been want doing you them whether do in question, to can base an customer so remind why? location to incentive as an so to they of move I'm What delays so, having do there's or is investor not so. over in

Bill Smith

a That's question. good

is platform I that way look been at to think has the the legacy capped.

the to hasn't much launched pretty year join almost legacy ago. day the cannot since able You we platform. a It been

this that it a capped get the leave can that is is platform The with that's platform offerings. out. can happen service thing So people that only as smaller

reason they going One that, will want revenue that think, base product change functionality, no they move as make have year our There them so that, that a that feel product they other more than comfortable, that and capability some hit. sure that will Sprint so consistently is not away, that and paying the for and -- a to people tend make do to enhancing to is the people done get forward. revenue us of and And with lot at make through continue that last and change. that I point think of to are working doesn't to upgrading the users, over we the stay, fact have they to logical are their that to we're offer moved Sprint, we they over over the churn they we hold the the don't get -- and one, and to I number reasons, all to

Mark Gomes

looking question final then And Great. here. more broadly,

and the carriers I'm they How or motivated out incentive to through internal there product, that Visual move there are strong model Voice have a of SafePath, their building? product multiple and can your that expenses. where guys are an there some everything internally if off have that of to a how provide to supporting lot. how similar Beyond also if consolidate from a like need, portfolio are carriers Thanks And out are one you they own wondering small maybe are motivated question, then it you? with that similar they there outsource products, you around a that seems products -- are some sitting

Bill Smith

Okay.

You the take It all mind. that Anyway, guys got wants user me a branded to interface. the our question me are it's on to carrier reason is easier one let doing consumer that one to with be because last at time. use IoT my still solution of fresh The then is carrier. in one the a empowered devices

You're not [ph] Fido Johnny [ph] well, it's all different defines and between the Susie or [ph] the defines driving in is One having one apps. place. to jump other car

that's so that... that. a their and that's simplifying a so think solution And I their big carrier. Say empowers deal understand to solution, that They

Mark Gomes

you around a question having Voicemail incentive And or might the move products the their not as internal-expensed outsource any that off and feel internal-developed opposed to Visual that to or was do strong team carriers that. to other organization a folks whether inside and of

Bill Smith

messaging way paradigm. group of gist you We're their like voice they that's answer Voicemail lives. modern a voice that if that going embracing all of they're we're a are of voice probably work live follow interfaces, age themes And today the that all fit what product, Alexa. change. We're of probably going We're messaging There these the we've do groups. in like really Well, the something is that if different kind a more messaging the done. through you working Visual to because just they're it investing using adding not changing not younger can users and an aren't developing the period devices doesn't Sure. on, had

and internally, they all it to get all have people they work have it if really would doing that something it have done, to to -- pay off moving product. probably, they those importantly, that we And forward, to we're already charging have. we So is and all the it's the our services, developed the make take them, of value-added base street. model most talk we for not rev-sharing money we them to When don't

So That cost to of if cost. a they're employing a center profit it product product, build instead makes a that's fixed a center whole a team product.

profit is center. product Our

Mark Gomes

you very guys. much, Thank Great.

Operator

next from & question The go Please McBaine. with Gruber comes ahead. Jon Gruber

Jon Gruber

if do get been afternoon. late, Where new by for new I question and We've -- long stand on going service? we new apologize. year-end customer, this been talking asked, Good I we is so is the to customer? time a customer on a a are got a for still

Bill Smith

confident when that. are offerings, might we carriers, is probably now good new they feel things a customer we bit been more tied large that we goal. answered Yes, we right talking able we that get the be Jon. will bit. to prospects, to discussions of -- will having it a have that is only of half Yes, first But really look a quite the launch the news number sometime to a the prior about a XXXX. the announce question Whether What we the that in little in in have with carrier are we publicly have large and number that could so meaningful of change very we service thing is that to

Jon Gruber

So from year-end that -- is before? a that delay

Bill Smith

fine. is positive that they guess that grow a and and if year-end, than think life will I we it and is that customers are - later event the Well, there in I but you're it's think right,

Jon Gruber

good. Okay, you. Thank

Operator

would over Messman the turn session. closing like question back our concludes conference for answer I and to Charles any remarks. to This

Charles Messman

I just want to thank everyone for joining us today.

be of November event on feel on out to will in in attending to couple us As note a directly. free further calendaring questions, you City reach event if want New know, any York XX, November I Roth Benchmark and a to Chicago. also we have attending please you the events. also be We'll XX

happen you our be a if you please events, those today, your and updating forward Thanks. sign year-end on great for attending call. to with up to look Have either meet So of day. we to Again, time thanks us.

Operator

attending for you today's presentation. Thank concluded. now is conference The

You may now disconnect.

Smith Micro Software (SMSI) 24 Oct 182018 Q3 Earnings call transcript