Earnings call transcript Q1 2023

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Operator

Good day, and welcome to the Smith Micro First Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Mr. Charles Messman, Vice President of Investor Relations and Corporate Development. ahead. go Please

Charles Messman

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

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

Officer; you President and have we Smith, market Chairman limitations, and Bill and company's Financial deployments, migrations Chief opportunities, Board, Please profitability, including, regarding and consists of future Executive company's and/or our growth during those Kempton, On that by today's call, expectations, revenue discussion customers, the development, Officer. Jim of our forward-looking Chief plans will our some product and new operating expenses, the statements, and expanded today's of future without new existing note the cash hear product the and reserves. new information

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

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

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

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

Bill Smith

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

during the we fourth at quarter quite call. discussed pleased look of of that conference and we overall I am some I the quarter, initiatives the As our progress outlined made first with

compared to we quarter organization off, help decisive We expenses fourth those took our on the achieve basis. set as we intended us measures We million during by goal per $X in earnings XXXX. this our last had across that to First to reach to XXXX, on goal. savings reported expedited March call, a reduce an quarter entire

will as workforce, in other second we our Taking to cost in the certain in aggregate achieving of bring measures our well the anticipate first million, to quarter. as compared million that result reduction approximately reported the goal global expenses taking will of will that that XX% quarter. actions result elimination we non-GAAP approximately $XX our XX.X This in

our will that task Implementing the was this company pleased cost swift return for to of plan and challenging with such profitability. I a alignment am structure action position the a

initiative of secure key was the the family SafePath application platform. AT&T the Another migration to

deliver public I process, is a a believe significant their to am milestone a we that for new AT&T launch. build to the happy quarter. which report the to testing month company during looking to launch for forward successful expect and this we're for well aligns third later we the This

our sales the see that later will overhauled are over benefits last of the And Officer. the am of organization encouraged I leadership by we of sales these increase starting Lastly, I call. our the under talk Chief Von new the changes. to year about in Cameron, activities Revenue We very

for a results covers the Before highlights. want Jim the financial cover I to few quarter,

quarter upward quarter. see we first to reported did We our And the fourth million from in-line XX% with results first in quarter expectations second non-GAAP of gross XX.X revenue down XX.X continuing came we in the trend, million, anticipate this with margin quarter. The for our the tick-up quarter.

loss X.X resulted expense per we million, our XXXX second for $X.XX with million initial This started share. or non-GAAP reduction of of down about continue the our we loss down addition, quarterly quarter when cost by our net quarter to a campaign. drive operating In to expenses compared X.X operating non-GAAP in of a

now the financial Jim results. of for to Jim? detailed our a analysis more call over turn Let's

Jim Kempton

Thanks a change non-GAAP as this adjusting making and Starting our wanted presentation. of Bill, good part we're afternoon on are by presentation non-GAAP calling everyone. quarter, we to my to presentation. for I start depreciation our today

the amortization this similar being to item. With thought is our that non-cash a for adjustment and

the consistent In I'll on have recast numbers basis. non-GAAP the period today, are been that results the being a discussing discussed results prior be also so

quarter first a depreciation approximately As in reference, frame XXX,XXX of was of the XXXX.

now details financial of cover quarter first the the With I'll XXXX. that,

quarter, a of revenue quarter decrease of XX.X of of compared same coupled CommSuite XX% revenues. million the decline first family posted safety the we in the with For revenues, as result approximately for A a XXXX. million, to in XX.X decrease

quarter XXXX, the X%. of XXX,XXX decreased compared to revenue or approximately by fourth When

During attrition a quarter of Sprint. by by legacy XXXX. of revenue first subscribers fourth of acquisition safe X.X the compared or by driven XXXX. reduction Safety quarter of XXX,XXX, related prior to of and continued of Primarily the as revenues result million Family revenue decreased Family to year. first of the XX%, the Sprint T-Mobile's compared platform legacy Safety quarter the found declined the approximately to the

of first of revenues past implementation During the attrition an decrease is approximately legacy X.X XXXX, quarter of was quarter XXXX, coupled with first the $XXX,XXX, fee to of which million platform in XXX,XXX CommSuite produced the compared the year. revenue XXX,XXX, in primarily XXXX. of CommSuite off decreased first subscribers Sprint approximately in the over to quarter This the recognized approximately attributable of the

approximately first ViewSpot XXXX. quarter negligible quarter first the compared prior of approximately prior quarter Revenue the to in XXX,XXX, revenue related to XXXX, to to XXX,XXX from compared XXXX. and was was Sprint CommSuite year of of which $XXX,XXX for increased fourth approximately quarter the was million down the Revenue compared X the first quarter. sequentially, of

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

the ViewSpot this quarter, XXXX Primarily anticipating in of first of a during As revenues consolidated a flat we second quarter revenue the as compared result for quarter. variable are decline, decline of first there to expect was be to second the the to to quarter by higher we in revenue component ViewSpot XXXX. of lower X%,

to year, Gross was quarter the XX% decline XXXX. the of the in profit XXX,XXX compared of first in to for the million, quarter incurred. related period-over-period compared in revenue the first the first due to of million and For margin XXXX, period was X.X gross same prior costs in approximately X.X XX.X% severance quarter,

by the basis The Non-GAAP XXX,XXX, increase the of fourth which for margin gross quarter basis XX.X% XXXX. XXX XXXX, quarter. of quarter in In approximately first points severance, expect produced first we X.X the the to gross to of by profit gross from adjusted excludes second XXX in quarter to margin first of declined was the profit the compared approximately XX.X%. gross gross of margin the points XXXX, quarter the for million

expenses in of and for a was million, XX%, million the SafePath X.X were of first or operating X.X driven related result of of the completion decrease million, research migration This decrease quarter to to activities. due a consulting a primarily of decrease as XX.X GAAP XXXX decline compared by a nearing of development personal XXXX. first and costs the expenses quarter and

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

to the the recent in quarter by We actions conducted XX% global Portugal, to XXXX due of second in and to we our structure. the of expect undertaken In decrease XXXX XX%, operating a quarter non-GAAP United Serbia. personnel reduction the reduce force in elimination to States, resulting March, first cost from expenses

[ph] In XX, we June the XXXX. of closure our as development addition, office [Selena] Slovakia announced of

required because the notice requirements, Similarly, operations the a personnel our our quarter for period in location. of Republic closure fourth statutory the Czech of closure in that

fees our XX% In addition, salaries the executive the of of reduced to Directors we suspended program. cash paid in bonus officers Board by and quarterly base our our

of and million cost expenses result our cost savings cost other goal actions, for of reduction quarterly anticipate sales X will non-GAAP second and that of we fourth a in operating million of total of achieved reduction quarter XX these from XXXX As the the quarter. our aggregate of be

per $X.XX or sales of million quarter of non-GAAP anticipate the net XXXX. aggregate in share $X.XX per per or million, share first our the other of be GAAP loss cost will the loss compared first non-GAAP the in XXXX non-GAAP first for X.X million approximately in was words, quarter The the of a net the XX loss reduced In first loss net operating of loss X.X XXXX. reported per to share, and XX.X million quarter. million a to non-GAAP share, XXXX of X first loss compared loss or was or expenses to quarter, million $X.XX of to second X.X GAAP for we compared net $X.XX quarter The the in loss quarter

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

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

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

tax tax taxes the we purposes, period. utilized resulting non-GAAP For actual The and non-GAAP each for during rate expense reflects income XXXX. a XXXX expense X%

million the of concludes sheet impacted receipt receivables, XXXX. our the of my of note by last of This I the similar financial to balance and quarter reported the balance would first XX, cash equivalents timing From perspective, a March X.X of that certain cash year. of we was review. as cash favorably

Now, back it Bill. I'll to turn

Bill Smith

Thanks, Jim.

on and the at Family. first Let's look efforts Secure progress migration for the made AT&T

the public quarter. and completing journey for this efforts will on Micro, a for for been second quarter, testing SafePath long the their for achievement when big during earlier, sometime launch third begin a stage final As Smith during a AT&T remain I mentioned version will we which of set These our track we have efforts, the be delivery the can believe company. base effort migration

I want another intensive a maintain among that process friendly old is seamlessly to user churn goal experience subscribers, the preventing existing the important the time former a extensive platform allow moves SafePath, creating of that Avast migration this SafePath. driven an critical in will of in existing breed product effort from best user to seek our subscribers that Avast as platform incorporates investment to select note without us interruption, aspect we features user the development to into of yet addition was

I it would secure add resources that reallocate the to This of goes will activities live, SafePath efforts. expansion going map enable customer will road like conclude us to our to and new migration AT&T when family SafePath on forward. allow our

a to on activities, across marketing focused which collaborate migration the some series our momentum already Beyond distribution into team we of AT&T channels, building of growth with begin have launch. started teams continue different going as the initiatives

on my I'll that platform. comments we powered by of by Secure launch close pending and very for are the AT&T optimistic excited SafePath Family, the saying

We on year various offerings in Our and to initiatives. well. so partnership safety several with far had this T-Mobile several T-Mobile operational family releases executing strategic new support progress to their across continues

vertical on and our opportunities believe focused T-Mobile remains to expansion which marketing we subscriber committed stakeholders, and team to growth. will relationships both key working additional to internal horizontal with lead Our of drive

the wireless as as launch visual network, voicemail the visual from over subscribers help continue T-Mobile We billing of the system. to on the DISH well one CommSuite-driven first DISH the migration system Mobile DISH to billing premium services of legacy wireless value-added as the Boost on voicemail its new

periods other footprint collaborate has complex This the a space. them believe its an their with offering that DISH services our grow project partnership opportunity and and strengthened very been could in subscriber added base value it expands on future This with efforts as the with DISH. to our in to provide have we with us wireless

Now, let's ViewSpot. talk about

filtering will We EMEA in are both the our Prospective yield add in its efforts analytics to the as near-term. development content the expand recognizing Perhaps business value well seeing our and can North opportunity additional America, anticipate with ViewSpot in a region. customers ViewSpot customers significant as are that that and business capabilities.

Our a of existing executed stable, of existing contracts being with one business remains our in ViewSpot extension recent March.

has pipeline an opportunities, our next sales a positioned the over team months, us spot portion several use optimistic our I Beyond these past our quarters. several very remain to as of and over has sales expansion of driven the opportunities close

has success prospects of markets both sales that are positive. from sell business, strategies across Revenue our made our U.S. typically ARPU Despite the seeing and organization, our cycle and long from high we very our feedback Europe the our in go indicators in Officer in leading including Chief has the way products. sales sales The the improvements within the we which market to our been

We bullish about be quarters. I opportunities, but the to and for discussing our with am and need these over new SafePath to ViewSpot close clients coming you prospects both hope

we As of reported total we achieving in established have non-GAAP announced of goal expenses fourth call, $X that savings we on from the last a quarterly quarter XXXX. in million the

during schedule organization as goal achieving pleased is an we to optimize report the expense are we am that made to migration. all to of expect effort I this quarter. This achieve our reduction end, in second and already have of as of ahead that near significant progress the the and favorable target AT&T and organization the effort crosses the ongoing our completion parts we To

Looking costs with to be associated third-party focus we and direct to our only Collectively, product. two expenses SafePath costs can position these maintaining platforms, to with application able our on forward. actions gross growth consolidating completely and decommission the that margins path company and further our the reduce associated we return align ahead, to Thereby legacy a profitability. reduce to once going enhance us team's ring will different

headwinds some you all encountered past have business our the over we months. in few know, As

industry, challenges our That within leaves those of these challenges enthusiastic chart are of fortunately, are across forward. empowered most of but as of head course common scope us many software Some control and the own the we are sectors and our on. meeting we

the can the migration with our acquired on latest put complete. our to acceleration opportunities. We now conclusion, the of increase market and roadmap we've In technologies effort efforts

on we We continue people, execute and strategy products, to operate strategy. that sound remain confident to and right based the processes our that business against have

expense it business early started very we to We to exciting progress revenue has Smith seeing and the curtailing on will where side have changes already of now be met, are at side. Micro. rapid and in but have make that been seeing believe able been time indications a Yes, the significant progress we of these were challenges the leading challenging,

call questions. can With for now operator, that, we open the

Operator

with [Operator Instructions] Our first ahead. go ROTH question comes from MKM. Please Scott Searle

Scott Searle

Jim, then reduction, tone in what questions. now Hey, over the sounds AT&T And that confidence I'm Hey, to $X on quarter? sorry terms guys. improved. I for you to just the that front. of OpEx the third just Bill, Thanks front confidence? million clarification? is point ramp that OpEx revenue your that driving for COGS but that belabor like taking the the really gives on is purely going has It OpEx, What's certainly increased in wanted and is or in to the clarify, it moving

Jim Kempton

and OpEx. question That first is, reduction turn encompasses and $X million Bill, both your Scott. I'll to answer COGS I'll So, it over

QX both aggregate from we XXXX, and sense? by we the year, Does is, expense as OpEx. well this that of So, COGS, reduced make as would that past million X are encompass are

Scott Searle

Yes, absolutely.

want to Just clarify.

Bill Smith

are activity then very seen before. me engaged. Yes. that AT&T, was get heavy a we Thanks. SafePath for reminds launch when Scott, similar very at saw of very excited. are product. a They impressive with as ready They some of based growth something customer. seeing are Sprints our And it time at product from I've we It the we And the

pretty I'm bullish. So,

Scott Searle

in are it and within lastly, AT&T, incremental see there had more in some And going success if internationally, focused ViewSpot. Okay. customer to are an that dialogue sounds have like wondering but inflection? back in the some there the Thanks. some the It base non-AT&T remaining for are there start like on and XXXX, here opportunities that last a for I'm numbers like What T-Mobile, that of wins SafePath you're is past. T-Mobile? the you've are both key it T-Mobile milestones but are quickly where hit looking sounds certainly Sprint was And to then real of opportunities to ViewSpot terms sounds you to with

Bill Smith

I'm SafePath at not a say numbers pipeline be you ViewSpot there give strongly going and we business. actual strong that I Look, this Yes. for or and will point, feel will very names simply is to very we but name both closing new would that

very both should So, North nicely. I And see think is organization that executing Cameron we sales the led wins by in and America in Europe. Von yes, new

then So, about. I strongly feel

will support we're are that already. a there to have side, good and if forward. believe continue as far your growth job that's and do And users. you perform customer this very As very we organic to that, I'm our growth that some work much seeing product see with in the customer know, on the we nice nicely regions sure support We something T-Mobile And of you'll going on. do focused their some there for

Scott Searle

you. Thank Great.

Operator

Boss next B. question Griffin comes Our Riley. from with

Griffin Boss

questions. my taking for thanks Hey,

So, the be Has expected nice you realized in, on more be the think previously your cost second see. would I for that in changed Is to savings mentioned the yes, any color this X quarter? expectation or a that return that's still saw to third million going forward cadence to now in order helpful? the profitability

Bill Smith

in this point, we're the third At still quarter. profitability on committed the

So, we are moving that up yet. not

Griffin Boss

All Okay. right. Great.

curious same XQ] I half along the So, too I any to if was tell? is early little talk could a [guided the you or of there you in it there know color could margins the additional I back anything you year? just is give lines, guess on [ph], to

Bill Smith

quarter. guidance We beyond next don't give the

the basis perhaps or maintain we're at basis and this on. that up is quarter expecting XXX to least be to gross with you that as XXX points leave just goes better off would the it of for the year to points I margin what adjusted So, margins

Griffin Boss

Okay. Can those on will helpful? color elaborate quantified growth be all? then now. additional on talked that Excellent. this at working Thanks And you point? about opportunities additional initiatives at those Any are lastly, AT&T be you right all you at Can

Charles Messman

mean Yes, Yes, I hi, them been of good going This activities Charles. lot I preliminary different call on. there's is morning. are things. type would a that of

run with some I seen training, start the we've of marketing, different And channels. some newsletter. digital think a you’ll some we've done they you've particularly see have to So, tests, some

the want into help? we a building launch more you'll lot build momentum Does So, start a because that activity. process it's to see where

Griffin Boss

does. me. Charles. it. the Appreciate That's for thank you It it. right. Yes, All Got time. it from Thanks

Charles Messman

Great, thanks Griffin.

Bill Smith

you. Thank

Operator

question comes Please next Our ahead. from McIlree go Dawson James. James with

James McIlree

Thank you. regarding Bill your commentary in DISH.

You talked were Were or about discuss? of you services entire and just additional growing them. you the ViewSpot Smith referring value-added referring offers to services to to with portfolio that

Bill Smith

we have from think I would multiple not DISH offering somebody at positive to DISH it top Look, from the relationship me us. And surprise products down. a see like very

them. of three have we so, And

is there's of One and more. well them underway two

So, we'll just and wait see.

James McIlree

expand interacts on usual might QX, marketing, Okay. in that as pullback QX that a the pulling the bit Thank subscriber in launch they was a back carriers in how discuss with value-added launch with QX. focus the on little regarding hoping AT&T additions. bit how you. And you on services I support? a that typical in you just could little Can interact

Bill Smith

good late that November start to clip. speaking point you're months between be that they at December. usually grow happens and pullback our where final The in hope late that be their a November many would base can will there to It in

have we going out. And I to this time. think I case time in So, think work is

wait and So, we'll just see.

James McIlree

think it place? employees cutting Europe you. is, announced talked it to take Jim, right. occur, that last And if when my be the could you cost that not, notification will All to one needed about place? Thank has taken in before some I And

Jim Kempton

take months of of requirements Slovakia. then Yes, that did takes We until be effectively a it in that because can the can but notification place announce it, down. statutory shut number

been going be but already around effectively of So, to back until communicated that's not that the requirements that, in XX. has shut communicated June was because down that timing March,

James McIlree

it. Got

of impact reductions million will the cost full QX? the we So, COGS, in X OpEx see

Jim Kempton

million reduction to expect full the in achieve would X QX. We

James McIlree

in But to if end QX, the – if until the not of the place That's take reduction Slovakia cost impact question. doesn’t the full Right. my going until see you're headcount QX?

Jim Kempton

until You other there's out. see but the other – QX, that there's impact that won't coming are of costs

has for of been that example, So, program things the suspended nature. quarterly for so like bonus QX

million So, savings of we achieve in are going QX. to the X

James McIlree

Thank Okay. me. it Very good. That's from you.

Jim Kempton

Certainly.

Operator

from comes with question Benchmark. next Harrigan Our Matthew

Matthew Harrigan

feels I Family product in It you. over you to [ph]. environment, Safety if for so like unfortunately a was this table stakes Thank the is curious speak were [transom] demand come seeing to lot operator. in more almost mobile almost a

one offering? World have and to have a lot try up? as that it or see in-house more the an like more other fast and to Congress development how seeing that. seeing you the need [ph] you and instances necessarily have think Thank just or seems all in-house And companies shaping [corollary] efforts capability. like Are competition particular, you of I of to kind to [ph] Mobile something a are in demand that And from that, to then do would from do do of [M&O] replicate defected, you. carriers natural either you competition would

Bill Smith

Yes.

Okay.

Family from new as way in well is as tackle hasn't I me that try ARPU be lot Europe that will There Let base North broader that of very it activity a for we offering and some activity the I areas seeing the, America, that a been Safety for this, nicely we're high would names and lot installed kind markets say of guess to Europe. a in of little and those are in have. of very fit

really focus So, and takes the pipeline, our geos for that as both about activity sales on. for I in It in ViewSpot. SafePath talk that place both matter we really increased

comment to I a for offering. carriers have America North especially necessary, family safety is think in So, that your

I think you're probably right there.

time. own there's we're we've the that as that about that As only only and doing one their are talked one thing, carriers the aware at present far really that's of

Matthew Harrigan

you. Thank

Operator

session. the Instructions] time. conference back to concludes turn questions are This to There for remarks. question-and-answer like over no Messman the Charles would closing this [Operator I at

Charles Messman

the Should talking give and everybody taking look free joining a We us we quarter. for to for time. feel Thanks earnings next further any you questions, on you us appreciate call forward you the to have second Thank you please today. and everybody. our thanks call

Operator

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

now disconnect. You may

Smith Micro Software (SMSI) 11 May 232023 Q1 Earnings call transcript