Earnings call transcript Q4 2022

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Operator

Good day, and welcome to the Smith Micro Fourth Quarter 2022 Earnings Conference Call. [Operator Instructions].

I would now like to turn the conference over to Mr. Charles Messman. Please go ahead, sir.

Charles Messman

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

a have of please section and would website at www.smithmicro.com. not visit do like Investor the you copy If Relations our one,

On Board, our Executive Chief Jim Kempton, President Chief today's Officer. Officer; call, we have Bill Smith, and our Chairman of Financial the and

during of company's the and the expectations, consists information existing and Please today's note deployments, operating hear without regarding call development, expanded and forward-looking will those profitability, reserves. that product and future company's customers, expense migrations including, statements, new cash some opportunities, new product and of growth you and/or new revenue the market our limitation, plans future by

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

most included please information, Form refer more our filings subsequent in XX-Q. For Form risk on to factors XX-K our and in recent the filed

forthcoming point will speak refer that no that financial to are Smith which disseminated forward-looking today made. of statements, release date and earlier our like Please as management's update for refer reconciliation beliefs I'd to to any specific assumes non-GAAP obligation assumptions the they we to in only measures. Micro prepared measures. of remarks, the out financial non-GAAP our press these

Bill. ball the to turn Bill? I'll over said, that With

William Smith

progress setback. on of we Thanks, fronts year-end for call. share year. recently conference you you fiscal some with to Charlie. our XXXX many we've experienced joining also as several afternoon, Good I'm and quarter made and a know, the thank important fourth for throughout But today excited us you

of carrier to up press release, for portion As support a noted from will the on relationship. There X period the specified one has received we of That by our note. that as takes our contract. during which Family it decided Safety transition Tier terminate our to termination our February after June important to customers XXX notice in we XX, are points provide days, effect few XX

expect growth expect to earn through transition XXXX. this the we no contract end continue the from any this the of until we from revenue remainder period While longer monthly of to partnership,

While of commercial events, were certainly surprise terms were important we taken and not inherited by were disappointed we the turn by candidly, partnership and those this that contract, note they our this very that acquisition the of in of to it's favorable.

our revenue, negative although will impact So yield it a line an top on increase per news will subscriber. this our have in average revenue

we costs to as early as Additionally, others to more our we QX the improvements eliminate profitable to gross relationships, margins expect reallocate XXXX. associated as and of see

happened, of just and all the With focus we going we understand with on clearly this impact what how said, our challenge. are deal is to of the

The immediately, our align to is reality. the by implement expenses our expenses with business $X per first to reduce we quarter. step million will actions new Effective

need personnel, terms in reduce which all the been to of back-office number efforts allow delivery in of migration both have for to for resources activities resources. this customer of significantly product We us to development carrier, able cease and terms immediately support will and we the

savings as can achieve to a these this level term. confidence the nonpersonnel-related addition, In this certain costs rationalized in factors Collectively, us be cost give result action. near of of

financial provided is in balance discuss in our will of after Jim that overview. of more business has second I his part the solid. my presentation detail believe the We viewpoint

and our not of this than the expense year. With as later the the be will reductions, profits QX, soon grow to goal remainder immediate perhaps of year to post breakeven or our as results, profitable and QX during

provide will Jim note, Kempton, the results, Jim? business Officer, turn you with forward. our after going On which, on will to our will over call I case Chief specifics discuss I more that who our financial Financial

James Kempton

afternoon, good everyone. and Bill, Thanks,

we be the fourth discussing details Safety year-over-year year I'll in Family the acquired quarter today. now As which I'll a the the financial Mobile reminder, Avast and of business April cover that XXXX, full XXXX. comparisons of impacts

or For revenue in $XX.X the revenue revenues. million result revenues, million with same decline the XX%, Revenue million versus $XX.X decline XXXX, decrease million XXXX $XXX,XXX When due Safety $XX.X coupled in of to for for compared coupled fourth revenues. to in to the Family decrease quarter, the approximately the by decrease in as posted is we CommSuite decreased the a third $XX.X year. $X.X CommSuite was quarter million approximately X%. revenues, a compared quarter with Safety XXXX, of of a of last of decline approximately The Family

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

of of During the primarily prior the approximately Revenue which to the platform network, to on decline CommSuite which T-Mobile This revenue the the quarter. transitioned approximately was have as $X.X was $XXX,XXX, million completed sequentially in onto compared in decrease $X.X fundamentally produced CommSuite compared is subscribers the fourth the $XXX,XXX decreased in from fourth approximately XXXX, off was revenue XXXX. million attributable quarter to network down the in legacy Sprint Sprint CommSuite those subscribers quarter XXXX.

flat which of and to the fourth $XXX,XXX quarter compared approximately the approximately decreased ViewSpot XXXX, third XXXX. quarter revenue of quarter fourth XXXX, was essentially $XXX,XXX the of compared to was for

and is variable timing is volume the of portion the to device fees portion the campaigns, revenue predictable. The reminder, is revenue. of fixed The recurring portion the components. stream generally comprised of associated license the ViewSpot revenue variable a both and promotional component less As to revenue is and is of fixed this with revenue of and related the and related

first levels Safety the increased significant not seeing our for are Family XXXX given are the in in quarter a of we for marketing of to carriers, products subscribers certain we While date. increase activity expecting

do our we of quarter-over-quarter, Safe of in for to enough offset certain legacy Found. increase an lines expect in & projected While revenues certain to carrier for product customers we current including our decline don't anticipate the of revenue quarter, the increase

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

of fourth for gross XXXX $X.X XXXX, quarter of compared flat quarter period of profit fourth for quarter $XX.X The during fourth the to XXXX. XX.X% the for the XXXX XX% quarter. compared third $X.X the in was million to the to million the was compared was XXXX. million profit Gross quarter the profit of gross fourth margin of same in gross produced For

In XXXX, run of current first the rate. expect the would gross we margins quarter with line be to in relatively

December For million XXXX, million December Gross gross was profit XX.X% to the $XX.X for the XX, ended during year-to-date the year. prior year compared XXXX, XX, period. $XX.X margin was

of the onetime was approximately in acquisition quarter XXXX. for of purchase or $X.X Avast X% increase of quarter million, million to in fourth increase expenses the quarter adjustments an XXXX amortization the XXXX. by an $XX.X were compared This finalization expenses increase the of of accounting fourth caused of operating to GAAP the to due recorded the related approximately $XXX,XXX fourth

the of expense to amortization Note $XX.X of with the fourth $X.X XX, expenses amortization or line in XX% a prior operating in the XXXX GAAP year the million quarter of million in compared reported was $XX.X third for ended was expense million, that the December the quarter. XXXX, decrease year.

to in the operating from Non-GAAP approximately operating or for third a were contractor the expenses primarily versus X% decrease quarter the $XX fourth costs to X%. of of XXXX, quarter the XXXX, of quarter $X of or approximately Sequentially, XXXX non-GAAP migrations. $X.X in SafePath and due personnel-related fourth decreases $XX costs million in decreased by million million expenses million related

non-GAAP XXXX our XXXX. to operations of to decrease from Czech expenses structure, to the XXXX by including as cost reduce Prague, quarter first of the expect quarter of X% due Republic X% fourth XX, our December continued actions We to closure the operating

are million his operating quarterly reduce from for sales million. of costs the will of our actions quarter remarks, and fourth actions expenses mentioned non-GAAP to total additional aggregate As Bill further even taking $XX.X of that in these cost savings result $X we over and anticipate our significantly in

the In be quarter than will costs other words, million out in the cost and operating XXXX. of in million $XX we non-GAAP fourth third expenses in no of by reported for sales the later of $X.X the XXXX, million of eliminating quarter quarterly $X

savings very also $X quarter of million are we of these in the at least confident We achieve XXXX. will second that

well. in beginning some to derived of our cost see in margins second these quarter the as sales, expansion gross be savings our As will from we expecting are of an

million, XXXX, fourth XXXX, GAAP loss quarter the primarily per $X.X $XX.X million, year to XXXX. Avast the quarter or $X.XX share in XXXX. net loss a the to operating per in April a December was $X.XX addition $XX year the driven $X.XX ended back impact XXXX, Circling loss full GAAP results for for net to to an share share compared increase loss a XXXX for million for expenses the $X GAAP $X or the fourth in per per XXXX. The of of net million non-GAAP XX, The of loss share of or by of $X.XX of million net compared the $XX.X a a GAAP business was or of loss XX% compared loss XXXX million was loss

of or approximately loss per of compared for of the $X.X to million The of loss or in year the the or loss per $XX.X quarter XXXX. for a XXXX. net non-GAAP fourth share The to million loss fourth compared $X.XX million million or loss $X.XX share was $X.X XX, a $X.XX non-GAAP approximately net loss was December a loss non-GAAP a $X.XX share per ended XXXX, in loss non-GAAP share per net net $X.X XXXX quarter

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

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

$X.X million for $X.X stock million, and million, amortization fair by compensation period, For amortization and of offset of severance-related value adjustments fees million. reconciliation partially of approximately offering of asset stock adjustments of expense $X.X includes and convertible costs note the million, $X.X intangible the $X.X year-to-date

over primarily and net is cumulative losses the our taxes. our past tax GAAP years, state to few due certain income to expense Due foreign

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

This concludes my financial review.

Bill. to back Now

William Smith

Jim. Thanks,

as business our look of areas ahead. specific some we on touch now Let's

at Let's QX. expect looking launch start plan into Safety by Tier and to market the in SafePath-based in delivering customers our to the AT&T U.S. We during solution here on Family we X X the QX, it

Our we launch, thereby best-of-both Avast will out This complete delivery into extracting process QX platform solution of AT&T the conclude functionality that SafePath will going will also former our from version it and incorporate the the customer all forward. migration select of a also ensuring roll efforts.

will expense-related superior Home, incumbent operational Drive upsell to the base of In represent at Safety subscribers additional product that SafePath, we on multiline and newest our far SafePath with the and creates now allow a Smith consumer and user AT&T its for opportunities benefits us value addition greater to growth the It SafePath to such also platform, version. services believe for to also AT&T. AT&T, compared IoT. versions to substantial of of Family moving This as Micro also to the

is grow in we put AT&T groups AT&T of confidence organization. out. In plan and our and enthusiasm place go-to-market have within broad Family, across We activities believe at the meaningfully with solution, once SafePath-based that strong. that version AT&T, our deployment training a marketing conjunction will relationship the shares begun Secure their our rolls different AT&T AT&T have

the new of the deployed also also And T-Mobile. this relationship subscriber already new on to opportunity can extensions completion SafePath features excitement We Family around we these the the Avast the believe offer family offering grow a also our T-Mobile the is mode to Safety T-Mobile will X is solid. SafePath, believe base. platform. best of enhanced the offer into with product code provide We base and of integration that

with T-Mobile AT&T. with working campaign like the customer. are We subscriber primary exciting focus done we much marketing develop with Safety, Family of this an our is have for to Growth base

from billing DISH with wireless Mobile DISH working the We down DISH system have efforts visual T-Mobile DISH premium visual focused We the billing voicemail new voicemail network. remain the they first our closely DISH, strengthened services that lead on of value-added wireless to with helping the the on the these as launch Boost on CommSuite-driven and system. relationship also to We're believe of one road. opportunities the subscribers over the other legacy migration

saw customers existing of ViewSpot's can Our use business hope correlate I their stable. release that We expanded ViewSpot data our ViewSpot capabilities. on continues press help our you last retail to data to retailers' devices week believe the thereby in-store This intelligence the success. consumers' exciting ViewSpot value retail data-driven of ViewSpot display and the and sales, part part to a of an customers' increasing provides. efforts is more our relevance important make remain

We strong are With market. Europe. for completed completely ViewSpot applicability in successful front, that rebuilt another our team, and SafePath European in a we just growth have On robust believe in Congress this believe World and there Barcelona. sales we both very opportunities that opportunity Mobile

untapped in received the European regional both among companies very each of presentations. to their ARPU see X with and the We Barcelona, which met carriers partners offerings, European SafePath market, product focusing as on both ViewSpot carriers of positive selects well and potential dozens particularly vendor independently. in in reactions We markets, as higher operating Tier often our

business significant made of we the unification family of on digital fiscal conclusion, our to In objectives, progress lifestyle XXXX during our platform. best-of-single a one primary

base a cost this that which the outcomes a confident are affirm grow. increased We improved savings the can work we of operational product and of provide efficiencies, strong and hard value vastly from

earlier, With clear will future focused path QX to profitability and a early we the as this and bullish for profitability, remain open call discussed significant We that, see returning flow. to year. cost as reductions the potentially on With I questions. of our free growth, cash on

Operator

[Operator ROTH from will Instructions]. question MKM. with Scott And the Searle come first

Scott Searle

on that to Bill, maybe has T-Mobile. stabilized like account in quickly jump seems It there. just

SafePath integration the done. got You've

that year? sequential for in campaign Is quarter? expect half When Or the this second you second the that that marketing begin. we to waiting growth? expect the that something You're to do to return of should is

William Smith

to see. second and think, would have be half, wait to would but the in be I may growth quarter. I able we get We'll second conservative, to some look at the

Scott Searle

And you. Got shifting over maybe to AT&T.

subscribers? line repricing? are earlier we announced of existing When had there Is Does in with that all that a when year to the it's start completed. the I pricing think about you the going that terms in? that does time renegotiations kick been think where kick should to in subscribers in impact new How P&L?

start this with confidence gives the And it confident same AT&T, that, to going starts into in sounds sounds sort in right? that like to level of and the it of quarter. thing quarter, you that campaign second quarter, like up very the third inflect What that done third ramp direction? is to move you're in Integration the

William Smith

the contract. AT&T contract, took Well, we signed Okay. the first off, when the effect terms

So in they're already effect.

the involving, and really, customer. that As areas the excitement within strengths far first the time, different there base, the has. they of And for of extreme from is many growth so as AT&T installed standpoint are

it by positive growth out the fairly but think a In past, this that confident looking very, side extreme I customer. feel some well-handled things. broader is always strong And team, working now. much And very it's of was of and forward going the for real and I

Scott Searle

queue. the could, Got back and get I I'll you. in if And then lastly,

more Do expect likely both Xs? that thinking we you should dialogue, be on to activity. Tier follow-up or a Xs, 'XX assumptions opportunity, What there of think a Or Tier about sounds deals? and lot Just your year It to lot Mobile close for did was are World positive this like 'XX? in couple you see it's a How Congress. goals? a of of

William Smith

focus Europe, would around be first off, the X groups. Tier primary I say, Okay. in our large will

out Now each each one time. companies a so rolled group at in it and has country, operating country usually gets

far can in As The business think we yes. as absolutely close we do is Europe? answer

And seen. we we've what bullish are on

team -- at team. showed Congress, carriers. that to that. is our busy. people just before, rebuilt very, are get to wireless World bullish anxious strong think they're this Mobile They very our and They've very about we done feel selling And and now. in We have We experienced very they're

Operator

Nichols The Josh come question will with next from FBR. Riley B.

Michael Nichols

T-Mobile. follow-up you new the it's the marketing XQ, second maybe and And a provide when T-Mobile to for to could you there Maybe Is as in growth on Just get line AT&T any going in detail? campaigns are half. released? be time any

historically, the T-Mobile sales in quick growth or spiffs through that's they saw whatnot? least for force Are Sprint, in plan Because a at be that going the to most whenever and saw out of paying subscribers. you pretty Is incentives the to transactions AT&T? terms

Charles Messman

our Absolutely, it's you it can't call because to our That into stand today. support, get But tell multichannel. also Josh, Charlie. it I and will more cetera, board. launch. it's at really et it's with AT&T. AT&T, it's around it's can customer above. be it's game we timing of the et it retail, like specifically We'd It's really is that, on the -- part digital, T-Mobile across of cetera. all is plan I specifics as

Michael Nichols

for like over you expectation of a in you're color margin? of know out year? line. if just in of platform the half, gross costs, little for that's to in margins half for the provide gross part Once move could the the you second bit I what's margin back then And more expectation million COGS quarterly new the AT&T $X this the taking profile on the

James Kempton

on reductions of expect margins to some ring eliminate call Once -- be we SafePath, as that up Bill on on year We goes spoke the would gross able the AT&T costs. about, once would legacy the gradually. we're tick cost on we as expect those the to part of have -- will we

going related costs we're a as the taking sold. those gross And to the of goods again, expect to the in will that margins. result, currently eliminate able the of we're candidly, cost But until all to some reduction some uptick all carriers would where are be But legacy we product. not are from activities cost off, of impact we

Michael Nichols

the then know with And time on the me. contract question bit little the surprise frame. a tighter a here, last I for termination is that company

this that to looking ramp Fortunately, X carriers you have up are year.

Is Just redeploying like I the how different to it could going looking potentially and to to later you're training is accelerate more -- year. particularly company if growth and that about meaningful company curious, resources ramp, at guess, what the some these AT&T? like of like so I'm accelerate fashion get a this the back and sequential to you T-Mobile help curious do branches? just in more

William Smith

Josh. Yes,

us, reallocated I was to for think customer. that activity And soon as their the notice all working possible have It's the to number as customer any the note the revenue canceling our of given we been also one our on the other was ceased workforce lowest product is, canceling profit all really to customers. generated we them. of generated important the of from that that

had So things over able a forward people those road By moved hopefully, efforts, to move for to one and on we've we've of one number and now moving to the to working efforts, if from map faster. pick T-Mobile the working and AT&T all accelerated to even lose, through lose, was be you projects and we'll this development that. for different

Operator

The Jim come next McIlree James. question will Dawson with from

James McIlree

in about cost of in it the sales operating $X that remainder expenses? be reasonable goes, think cost So as cutting to is of X/X as would far million is the and

James Kempton

want specific point, we guidance Jim. think provide don't on at that to I this

James McIlree

Okay.

William Smith

Yes.

So been yet. taken the action hasn't

about -- we talk it. have then take think to the and we can action more I us let you

James McIlree

And enough. Fair I want verify. to Okay. just

right when the that that to terminated the this to coming costs is that addition We $X the as But that are Tier new that is the be thinking with you're down the down going had cost that Is It's now now we customer to anyway. been action, right? come baseline, baseline. million well. -- cutting all in its before were contract. not cost is expecting So taking X new

James Kempton

Right, right.

we is the that this you're of so plus think you total the if you $X those going if fourth So and to costs. sales quarter total take cost expenses, number, off are from way fourth of our about going take take see non-GAAP the to OpEx, to our million quarter, eliminated

in the been line has that new the sand. So

William Smith

reducing that QX action, I quarter drop When can and QX in 'XX, add saw And be you of Yes. and second of in to QX, we going were that. in the also OpEx our that we our 'XX. announced we expenses to took

So this returning is continuation, to obviously, big step a towards a profitability.

James McIlree

the for as in that there's some you've QX reductions cessation I'm QX. noncash assuming whatever, Got right? Is customer that doing combination that to the, work it. And as you're as going Tier taking, of the and well been and this far charges cash as X be of

James Kempton

accurate. That would be Yes.

James McIlree

well. And Great. going those me I'll wait you're that just assume make to for as

James Kempton

sir. Yes,

Operator

will Matthew come Harrigan next question Benchmark. with Your from The

Matthew Harrigan

questions, one on and on one Two actually ViewSpot. SafePath

Firstly, mystery stack? their replace about you're to product, you is Safety on your to going I not on mobile you feel going is business. your priority comment how IP But Tier X a the can know Family carrier how clearly, for but comment

in-house, And it's of sort if like almost I be things a inefficient having a you, but especially they seems know me. a bump advantageous I -- even had fixation particularly that to pretty to had a of surprise has written. so, contract even to code know with there's that bit they it's terms. there's if lot It of

SafePath. overall be product? more marketing could feel transition profitability you're prioritized that to and addressing and clearly, getting lot closer ViewSpot, haven't is and But holy -- in like grail weren't then really that on the for decisions I growth now. worked process mean, purchase you advertising, getting so a everyone's that noise attribution And lot in is of around to you secondly, if of on fruition a and under decades, the the marketing do on And there

William Smith

Matt. Yes,

let handle the and part, Charlie the me one. Let -- second first I'll I'll take

competitive us. the the they've using internally. we were on developer this All the absorb believe, not product the part software that they and from have amount, first that a they are what to all the -- based is third-party We a So developing us points smallest like are told make, paying us, do they do now they that cost. of fact you believe that

of pause get And start profitable. our lots have But stock know we up. to run have to we a and Yes, get reasons and there's and we wonder. have what, business, price to to growing, to you I got

anymore. can't dominate they with labor it's and on Tier I that making product goal I to all totally U.S. make the and that my T-Mobile on am And with both So sure in focused T-Mobile space AT&T the what happy have. about. And that AT&T the is deliriously X carriers here that's

want As as marketing at far you take stuff, the shot do that? Charlie, to a

Charles Messman

Thanks, Sure. Matt.

is I going think same on quite it's campaign after that broader It bit market of play a actually with an have we're fair ViewSpot. marketing actually say bit we little is with -- aggressive a team. a ViewSpot. a more to different It it's going do because the

right And We're down we'll carriers we're has We've and not path. the that really good just about that going after now, setting, ViewSpot. after got up. ViewSpot continue opened a pipeline and the retail now, going we're really excited

I see pulling from So it as don't the other. one

going if makes I think sense. the same that both it's forward,

Operator

will any closing I to remarks. Charles the go conference This Mr. Messman Instructions]. over question-and-answer [Operator ahead, conclude session. like would sir. to back Please turn for our

Charles Messman

very the you We ROTH to the time. us everyone I actually today. remain for thank at just appreciate We're taking be going to want conference We here shortly. excited. joining

We questions. quarter far to us with up. day, talk a too not look call talking us further forward So away. call please conference And we'll to there, on to if please a everybody. you you and our you, give look first great happen Have be Thanks. to

Operator

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

You disconnect. may now

Smith Micro Software (SMSI) 9 Mar 232022 Q4 Earnings call transcript