- Earnings call transcript Q3 2022

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Operator

Thank you for holding. Good day, and welcome to the Smith Micro Third Quarter 2022 Earnings Conference Call. All participants will be in 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. to conference like to now would turn over the Mr. I Relations Vice Development. President Messman, and of Charles Investor Corporate Please go ahead.

Charles Messman

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

today's www.smithmicro.com. development those profitability, one, President of of Mobile future new consist regarding don’t forward-looking new you last have going at today's If of reserves impact of and your Officer. our that Safety and of visit section company's discussion Jim Avast Investor Relations the future growth strategy, our Executive financial Please and have like a plans, year's the we some acquisition operating Financial of and the the please would product operations Chairman company expected migration website our forward. including during and Bill new and On customers, position the statements, business call, expanded limitations, our deployment, you'll Chief information Kempton, note Officer; copy Smith, Chief Board, hear revenue business and by our expenses, family without and existing market and on future opportunities, cash product

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

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

Bill Smith

Thanks, we After outlined nearing partners. in last in our this around experience with me is platform platform, through digitally vision to of conference carrier our for families lifestyle long-held evolving we keeping also on of ensure carrier really with strategic SafePath customers deliver safe extremely call. Since finally providing world, families on Home, SafePath feature-enhanced just our best making family new for migrate we’ve long will SafePath for market the and comprehensive IoT for customers, a many Tier today changes Smith Transitioning carriers our completion. only that not process beginning afternoon, for the Drive is but you of quarter to call, migration the single development Micro Once SafePath life to on experience our connected partners the both this and digital our age third been also to as platform. digital Charlie. last and thank the our the to the a point ever-changing opportunities journey subscribers. platform SafePath SafePath having fronts, significant call. creates our our best-in-class Good busy and leads for we us joining all began on are a a complete, XXXX X This

quarter, in anticipated that quarter-over-quarter we in nearing of resulting the QX million of from had began development our As key during operating conference capitalizing acquisition cost on the $X the the another cost was the [Evos]. call, in efforts the reductions synergies sequential discussed migration from Those benefit efforts we completion third costs. in rationalization

by our I turn Jim of remain actions building the the achievement quarter XXXX. reported about remarks, Micro financials, of opportunity of our phase history. taken our on company but In Smith plan migration that operating $X in over to We compared more on quarter XX-year to on in some a and more expense level critical have million new expense our extremely task quarter in close $XX.X in the operating additional have the operating hand the execute This we in will expenses million targeted to and fourth some activities we further continue seen our details the to customers his the remarks on quarterly this far thus believe future. we've to next addition, by clear to initiatives. the detail year. reviewed a larger exciting these of to very for in path second second is focused than that After at any we Jim's very bring focus the I and at to reduce provide

call the turn over to let's So Jim. Jim?

Jim Kempton

Thanks, good Bill, everyone. and afternoon,

of April XXXX. year-to-date As impacts on third covering I'll a acquired the begin Avast the reminder, be Safety I'll that financial XXXX, mobile now our Family discussion we of comparisons quarter the business today. of which in details the

from The $X the XXXX, through through decrease is the million April the revenues $XX.X to quarter resulting increase in decline revenue by year. compared Avast a when September the in the year, of CommSuite quarter of approximately decrease last last $XX.X due to result third offset XX, safety $XX.X safety the For in the in were a million decline as approximately the versus of XX% posted compared revenues $X.X coupled partially decreased X%. to decrease by family quarter revenue Year-to-date we million of million same of revenues second XXXX. quarter, from third revenues, in CommSuite a with acquisition XXXX, for $XX.X million or family million revenues

revenues related subscribers compared decreased & safety reduction Safety to as second XXXX. acquisition During revenue attrition Family the to Safe T-Mobile's sequentially quarter Sprint the X% of Sprint. revenue XXXX, to a Found decreased platform the XX% by legacy primarily of continued of of family $X.X of quarter million quarter driven the of third compared result third legacy the by of last year, or the

$X.X revenues network. was the on Sprint stream During revenue the network Sprint in Colin nominal million these onto essentially Sprint is the approximately $X.X fourth prior by now was sequentially the revenue XXXX, legacy the third has produced quarter revenue to CommSuite continued from the any subscribers with was in will T-Mobile of in subscribers in exhausted be ViewSpot approximately been associated last legacy quarter. compared decrease revenue This the quarter the approximately the subscribers $XXX,XXX to which quarter decreased Revenue quarter decreased for of of second year quarter. the XXXX. $X.X CommSuite by year. compared decline million, third XXXX, This in attributable of primarily Suite platform down compared last $XXX,XXX off to as transition those million and $X compared essentially quarter was the to which the flat third third approximately of to million

the comprised fees the fixed portion phone of generally now device and note predictable. being and a with campaigns I and variable deployed the select The timing revenue portion track ViewSpot this revenue. is of component is is related Verizon's to promotional ViewSpot both with the license is components. As reminder, to the is and revenue is would retail of portion The of variable fixed revenue related acquisition revenue the TracFone, recurring of stream and that associated of at less locations. volume

relationship longer ViewSpot existing optimistic that the deployments contract these provide we with the over will ViewSpot are under this opportunities Verizon, While growth for term. fall

for are activity significant our we carrier are of at to certain of to given continuing for Found increase a the levels We the to legacy the While see we efforts certain our offset product in subscribers to enough customers date. in in revenue revenues not marketing expect the in decline increasing carriers, line do expecting quarter increase quarter. but & not fourth Safe quarter-over-quarter, projected

for to consolidated lower revenue expect to X% the we XXXX. by quarter to flat of the such, third fourth As compared quarter be

the with to fourth quarter. profit $X.X by $X current $XX.X gross Gross second quarter, last last to third rate. For million compared million The be quarter was line margin the for the the compared of profit in margin was In quarter, quarter XX.X% we the to the third declined in during in million gross the same gross million produced of $X.X third quarter gross period the in run third year. profit year. relatively the the approximately expect XX% to compared

$XX.X related This XXXX, of quarter costs the of related or in the quarter in and increase change for to were in quarter amortization third compared of was of margin contingent was to decreased year. X% a Gross in $XX.X in $XX.X period by third million last expenses year-to-date acquisition XX, expenses by XXXX For gross September the year-to-date $XX.X $XX.X was last migration. year. for to period to third of $XX.X primarily the million quarter XX% or were XXXX, decline of million, decrease an XX, Non-GAAP of third Sequentially, for Avast from million $X.X a operating costs $XXX,XXX XX% for year-to-date approximately $XX.X charge September primarily ended a to decrease expenses September of compared of the million X%. million value million and due or expense consideration million. to XXXX, last was the XXXX the of quarter in million second non-GAAP to driven quarter operating compared decrease the $X.X personnel-related ended expenses SafePath year. $XX the profit fair XX, the the $XX.X approximately the XX.X% GAAP a operating corresponding period the operating GAAP due to million, a contractor million decreases third period. during or compared XXXX,

non-GAAP quarter including the the SafePath expenses in that place the X% of the continued in X% contractors expect development to quarter. the operating XXXX migrations, fourth quarter related to from our to took in to costs reductions We due third by quarter full reduction impact decrease third

taken In of including headcount reduce operating have to addition, reductions. further expenses, quarter, we select since steps the the end our third

of requirements XXXX. which XX, reductions announced result operations. internally cost date Czech Republic of closure We December statutory in be will quarter our of closure in Prague country, also that first effective the this further XXXX, will the in Because the of

loss period last in by per third have The third April last quarter GAAP XXXX. net the of of business remarks, a addition GAAP diluted in of share press XX% loss these the loss through of of ended non-GAAP mentioned the of in compared The million million, per the for $X.XX the year. of to million result $X.XX second metrics our perspective million per share share share the prior or year, $XXX,XXX are to or Bill year-to-date the million was most earnings net of the or million $XX.X quarter per from XXXX breakeven $XX anticipating $X.XX GAAP year-to-date approximately compared loss from a to loss a net in loss comparable for breakeven XX, for the compared $X.XX non-GAAP non-GAAP for this we period $X.XX loss XX, $X.X per net savings for share was $XX.X today's expenses third was -- million third operating share the the $X.X non-GAAP last year. September increase incurred will to GAAP a the quarter net $X.X net to $XX was by of his or $X XXXX, $XXX,XXX net a $XX or in the million, GAAP perspective compared Non-GAAP XXXX, net Within income operating loss a actions period. quarter year. compared loss of September the in of a that loss release, $XX.X million second loss to in loss share per quarter year. or quarterly last a was loss over reconciliation an As expense $X.XX per million we metric. a Avast or driven approximately year-to-date to compared non-GAAP the non-GAAP provided per primarily period share quarter of per loss The or of year-to-date

note expense adjustments offset of of quarter, For compensation and million, of third million; convertible by amortization the million. $XXX,XXX, $X and severance-related reconciliation of $X.X million stock intangible $X.X offering adjustments of fees includes approximately fair the for value costs stock $X.X partially

for adjustments compensation includes of reconciliation of note stock of past $XXX,XXX, few of adjustments million, $X.X net offering million $X.X convertible of and fees approximately and million, $X.X GAAP stock $X and the our tax due period, million. the to year-to-date amortization severance-related costs taxes. losses to Due the partially certain foreign asset intangible expense offset by For our value state income is primarily over fair cumulative years, expense

XXXX concludes sheet for million and X% September non-GAAP $XX For equivalents The utilize tax taxes XXXX. expense balance we each This resulting and XXXX. review. actual From cash expense financial of during a my perspective, we a tax cash the period. purposes, reflects of reported rate non-GAAP XX, as income

Now back to Bill.

Bill Smith

Thanks, Jim.

progress the being our carrier into dive with partners. Let's made

driving probably to team integration with you've by T-Mobile effort, solutions. very family assist the continued that we've heard, and As endeavor their completing updates hard is to their partner to various on in safety

product. lines, new churn since to Found quarter of adding As the second base T-Mobile directly which & new Safe acquisition churn is & releases continues, FamilyMode FamilyMode, legacy the T-Mobile reducing Efforts migrate Jim by subscriber by network. delivered mentioned, to Found as reduction T-Mobile the with subscribers, Family the customers the in several those stabilize wear goal of Along we are some underway to this overall the with Safe driven onto the Sprint. enhancements for and particularly

In them navigate I T-Mobile has integration report front. messaging better onto pleased am billing activity while see some a also beginning FamilyMode new integration to helped path we new platform, to on addition are to marketing efforts effort, the to a the subscribers campaigns the continue. that

high-profile details, into holiday for include I expect we head these will will that promote the a near the FamilyMode and the term into that in we momentum as campaign While get build can't product season. this efforts

have about with quite been where let's we initiatives. Now several Verizon, different talk busy

the additional fact the On be into the in SafePath I last to attention call, feature Verizon that to migration XXXX. base, to needed which drew resulted the to an pushing code added new

been development handoff with a market. first the which that process their the would the launch soon anticipating ultimately, QA to of in into platform, also were We complete would recently able same follow. quarter Verizon the the are new recently I additional efforts for legacy we ring to XXXX still that and has associated feature note to launched on

in ring platforms very The this two the we different. the While underlying SafePath. does as code deliver is us feature confidence between provide successful delivery with

have As Verizon I and call, Family, increasing efforts for been campaigns last continued. their Smart marketing discussed has on the these awareness and

efforts new deploy partners. our approach we've relationships campaign example, to [indiscernible] are the training For family for build expanded partnership retail quarter Smart expanded retail our able the outside a to of the to indirect as throughout as included This during we continue enhancing outlets has new an in trial campaign corporate-owned how the been period been executed illustrates organization. brand grow critical a reach we've build awareness marketing while to Verizon base. strong to the These subscriber multichannel

product. where AT&T, family see the tremendous to on move we Let's upside for secure

First migration Secure will XXXX. off, report the I'm SafePath disappointed to onto of the be pushed family to that platform

the on are report very X has challenging the but a can team issues migration family. But carrier AT&T that year. am a a present a unfortunate, to significant migration. technical development effort to has I we pleased It's stages of Tier for incredibly progress to been AT&T for on negotiating is SafePath due made and new into the Secure delayed Our in development, to technical the with front, the in platform the positive certain contract more On next an complex issues. handoff final

only excitement Overall, into to I While a the subscriber I can't for activities will very in I good within senior stand Secure I expect growth together say the the strong AT&T, our working specifics, with growth. that be expand The feel significant as upside about real have this forward we would the that platform. to relationship and not negotiations but management as leader I today that AT&T family look go is where being We at new the want help with in to space. marketing in truly fully new collaborative, working result family there and they also the teams. digital reach contract the safety we platform the drive to increase characterize very can partners. drive around subscriber

Okay.

about me a Let little ViewSpot. bit talk

and the serving as for out opportunity TracPhone enhancements was carrier made avenues the as the in within and T-Mobile we to launched win in significant only pursue end result reach, retail of CommSuite, On now covered the at their other that pleased retail plans presentation, I not ahead direct a earlier I believe a we ViewSpot essentially branching was locations. are deployment, a with there expected. space was we is the which we overall quite continue us, expand pleased the This as of but our well. the at for mentioned, to revenues Jim ViewSpot As solid retail product. Jim speed are had as

initiatives DISH of I our work the XXXX AT&T some they second represent earlier AT&T. positive million the several on and the some will efforts summary, results free forward, of to past be the to as for SafePath and we quarter the third confident growth, is we seeing is term. on second our We the a profitability on on to carriers which quarterly $XX tangible exciting for in in very to that XXXX made million a XXXX. can clear but Going our in presentation. questions. lot structure really negotiation also albeit in progress lot creating and relationships us. execute this And Operator, remain call quarter and $X future make on The new cash potential Micro, well be with we're progress have working the the on very open and we've promising on I'm and The of subscriber due a with near optimism impacts beyond. the we are on actions at achieving customers cost on our offerings, have roll to upside a below during the marketing reducing that headway network to am us in outlined a expense near target make I'll in continued out In very that generation the reductions new strides future. These completed carrier some to with quarter. growth their on for times great pleased compared by we'll still very with constructive focused migrations, Smith of fronts. allow Jim to with operating and We've the also progress return that at path the do, product with delay focused delivery the flow of contract our should quarter

Operator

Thank you.

the the open turn questions, we I'm for remarks. Mr. Before going call Jim Kempton to few to just over call a to

Jim Kempton

Thank you.

First, share we release expenses, wanted months getting in net in operating misspoke delay with Also, issues million loss Operator? $XX.X on technical to for Please today. to XXXX, over of which non-GAAP to the or for a apologize in turn the out. nine our the XX, basis. September ended I'll We question-and-answer numbers. to press some non-GAAP press for non-GAAP the year-to-date the of details GAAP release were the to $XX.X the for non-GAAP a per had now a release it loss reported I reconciliation session. million our operator refer $X.XX including back the regards the resulting results,

Operator

Capital. from Your at first question Searle [Operator Instructions] Scott Roth comes

Scott Searle

of said a if to $XX you'd standpoint, I think the to like think the as you entire confirm of to you sounds into Just a couple second a $X quarter? Is show The or that's in of expected sure number hit as flattish of I year. I for follow-ups. second, well? million had real third reduction for It then here a we the got million middle into initially want going call. into quickly, it's the rate, looking from recovery recovery get be 'XX run so middle in the fourth that in And you're of that the I quarter. below numbers Bill, a I've quarter I that clarification gross OpEx, quarter during couple margin the wanted make next on And XXXX.

Jim Kempton

is Jim. this Scott,

would that quarter. million, second $XX be the expectation the on the off, for First

by baked those So expect cost second we fully -- those quarter. to reductions the have fully

expenses we're to under. gross we the So we the $XX expect margins, in regards progresses. with at be in as And would XXXX million those to rebound do operating year

Scott Searle

to integration push as ice little Great. marketing to the And to waiting up continuing bit the just here, well, but on a is done follow button. Sprint the of cube comment be and for a really melting maybe them

quarter Sprint suite? its going meter Just hitting want is the clarify year, then revenue first overall collectively, first from we're in when is that growth start fourth in the standpoint then next as some to see of to that quarter. a we essentially And SafePath into the

Bill Smith

guess a approach reasonable take. that's Yes. I to

the efforts longer. to being branded to back as far I a underway and made. actually Sprint And think getting progress today the is & to network. migration are that to any well are that ongoing T-Mobile single Safe as T-Mobile, Found not is

So keep we those and have with trying transitions been same up also to efforts. making their

Scott Searle

you've should control, growth specifically are be we that And I around not once past lastly, about The should thinking think the about own are form but the the some middle that want confident we about your I you to to for Verizon there's start their timelines. that efforts confident Bill. feel know that sounds I and get should marched 'XX? to by that wondering all SafePath, we're in of be Bill, of I could, next been and But middle holiday marketing And how with decks three you it if in all carriers how more still like year of subscribers launch. them. feels a could season, major well, direction. talking early. within Is that thinking aggressively it for I comments if going like growth increasingly clarify comfortable know new AT&T. pushing guess expectation XXXX? was Okay. makes of And see the I are going in up finally all like AT&T T-Mobile, cleared frame us your are the to we they're and that It carriers as year, I of XXXX. sounds in next you're start it's that to have in pushing just we lot inflection? what

Bill Smith

Yes.

now best think over with above we've working the with to the really relationships the executives strong carriers. three X year had and all Tier way I groups a We've answer built is that with them.

very we have dialogue. think large I is schedules. we result a yes, And very now especially that And how for some lot meaningful own of call, product, can see are as they opportunity I have I view flow all where right. the quarterly more the think believe -- conference a we and -- So approaching see the how Xs, And just fast But about nothing's clear on I to huge pass. addressable thought view cost Carriers market a changed. I to we the they come Tier you're to what total it's going forward. that going It's their set path going a the talked growth. all is last we're starting to forward. they time opportunity this the was clarity

Operator

at B. Your Nichols next comes question from Riley. Josh

Josh Nichols

after on expect I I to on of understand when that going a this follow-up a push in a something bit And follow-up Is little that out you able provide could that exactly of But to deliverable. you're color do there. Just quarter have the be AT&T. you then to first any that. secure 'XX. there's a

Unidentified Company Representative

joint a Yes, there's responsibilities diligently is this the sides. something really this that is both effort, on working with we we're and on, are is and partner working something

fluid now. a -- issues and done. say, We had And little a to some of seen, that process technical the some So work right we it efforts underway, is that in other that's let's we've is hadn't expected. haven't through we this

really to there's done that question. So work be your of little I can additional bit needs a before answer

Josh Nichols

thinking then Fair just more broadly. enough. And

So whenever been launch doing with like see trajectory? before think to it with next ramp you've already a do subscribers. up? half least at the case new two fact start there and second subs already potential of you the so. you work four with with in carrier, year be maybe pick It that you ATT seems lot some see you've take could in Verizon. you the and to a expected upswing to a that quarters working Historically, is material What's even that like accelerated time here? of the could them Or that been for could more Is an

Unidentified Company Representative

Definitely, relationship with user have an working ramp we accelerated and I already their think because have base. such you'll see we a strong presence

it's I see maybe quarters think reason take that So to to a any like greenfield two take. it going to don't brand-new opportunity, four might

Josh Nichols

And do -- stance, to thought to pushed bit year? for Is like to little thoughts slower guess, commitment the people company right I things do have ramp year flow last debt maturities to could little have guess bit what's expenses think the you say willing be and I operating of given achieve next cash next hard OpEx what's about maybe the reducing T-Mobile is your the likely that integrate than because over or a some what's a quarter? there more now. about the out profitability been But to to cuts you free that

Bill Smith

integration standpoint. platforms. SafePath so quality cuts that lifting were for coding a and be tasks It's platform, it from from heavy workforce but OpEx now family take the it for the a is All being large-standing Look, of one to Yes. down performed really platforms have that to two done direct a -- safety. moving virtually doesn't still time, the other takes result both

against There to and down we're planned we and for. to finish that So less we place, in XXXX hope to of will well we a that plan number our $XX get -- executing QX, is we for and QX in started are underway plan. in finish or QX OpEx that million well continuing efforts are all in that

plan. as that -- but So a up, profitability outcome that were we if I generation XXXX. always as against and plan, we're issues a successful came free and of executing we have course, of And far -- for have in the any look other options, flow there and cash

Operator

Your next question James. from Jim Dawson from McIlree comes

Jim McIlree

whereas be possible, the three like with they market sounds were you to It be that's going hitting time. the previously, carriers It it spaced out. all same like more seemed like at might sounds

I one, the And all hoping do you simultaneously. if two, a was reasonable could scenario. have help launched that's technical you resources address resources, is, three carriers the human to whether And so it carriers

Bill Smith

I all it time. pass in exactly launching three Yes. indeed, were if come to didn't guess, Jim, same the that

that that We to be are handle an and wouldn't issue. staffed

them. off, time not family major an a probably I on we're only has programs first been impact of platform And a on And other safety, are been of for some I They the think the working their through that lot safest T-Mobile for merger on. has going conclusion task activities. think, it now. that's but really

well that in actually is an benefit AT&T be all I same business. the So argument three own to part, the to From the approaches stamp the one the make hand. a hard others. were they can the push I standpoint, that have Verizon at if their efforts to would and time, think, by

wave it And so they did time. come a if bigger that actually help past may all create same the at to doing they're

Jim McIlree

your helpful. think I'm business Fed to Okay. next on impact increases how if just wondering the rate might that you And address And Great. impact starting obviously, are an Yes, that's have you the then year? economy. could

Bill Smith

on And clearly, on in effects We the same the in could have some all being put pressure environment. negative growth and there consumers operate economic that is business 'XX.

your about thing, your of your we're many and other ones. I one And talking offerings. however, product loved from us separates that safety have friends, family is think the we that

of And and think separates going safe. fact note. something talking to price think fundamental, want that And basic, sometimes, so from think you And lot fact necessarily driver. that a be do the isn't other to the the I important us offerings. people an It's do you're care you consumer-driven really I really that's I to always about so keep when

Operator

our I question-and-answer concludes That today. now to closing back Charles session conference like Messman turn for would the Mr. for remarks. to

Charles Messman

a on New to Thank forward for have attending everybody. joining If please us you. I further great out reach are next day, to call. to conference Roth, with look feel Thanks Have those to be today. want we'll speaking week that thank you. And free York. Thank Roth attending us. next you questions, in we'll our Should you again. everyone

Operator

And Thank you. all attending. The for conference has thank now you concluded.

now disconnect lines. your may You

Smith Micro Software (SMSI) 11 Nov 222022 Q3 Earnings call transcript