Earnings call transcript Q2 2023

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Operator

Good day, and welcome to the Smith Micro Second 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 Charles Messman, Vice President of Marketing. ahead. go Please

Charles Messman

you and us operator, for everybody. appreciate with By We second 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 June 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; President and have we Smith, Chairman and Bill Financial Chief Board, Executive Kempton, On today's call, Officer. Jim of our Chief our the

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

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

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

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

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

Bill Smith

update very earnings since conference today have us second thank all on afternoon for Good joining call. to on call. our positively am trended several progress quarter and which fronts, John. I last Thanks our of excited our today provide an for XXXX you

I effort has for now covering our a complete. lengthy to and years this platforms I recognize effort prepare development First required to that am and features report of acquired the happy Safety I behind significant pleased add and been to activities that Family so SafePath migration from am number that this approximately finally us. a three resources, tremendously foremost, are is

we and on with of new term launch. partnering Associated completion AT&T with have near secure the development more to activities the in been in I family anticipate aligned with the call. on them these subject launch cover marketing will this the later the activities,

plans. our toward Micro progress Another to methodical return rigorous is Smith the positive operating profitability of the execution of through our

through through to responses QX, the In business, our addition back both and decisive strengthen described headwinds to our expense unexpected customer on moved have as to reduction, well quick aggressively in sales we as and deliveries. execution accelerated

great thank are making progress, I for and Smith their Micro focus, and want to commitment, We employees tenacity.

path many interim a are along which way. our in and clear the We and of our remains have high, we exceeding meeting confidence targets

be discussing results updates Jim to shortly, highlight financial efforts to While the profitability. quarterly return some key in on Micro to will detail Smith want I do our

forecasting non-GAAP revenue announced QX outperformed the QX. that year. At are same time, earlier million targeted quarter the this QX, growth expenses our we in reduction During we we per $X for over

several presentation the to later detail today. We on in on see continuing are fronts touch more sales also I’ll our which in progress team, for

an quarter in the second margins, the gross this XX.X% of improving additional XX% same quarter. are We for them our driving third to for and margins versus improvement XXXX, gross during the year quarter expect of we

on operations importantly, and will confidence cash profitability each contributes of most a flow positive the in we to return XXXX. and this current Overall, basis QX non-GAAP company factors quarter, to our of these that

then in our I the some some detail, opportunities most relationships. for and numbers let more quarter I here and of important information and Jim? will through pause share Jim will run the about

Jim Kempton

everyone. afternoon, Good Bill. Thanks,

$XX.X to second across all the XXXX, posted revenues of For quarter, in $XX.X decrease the decline approximately three compared we same lines. result as of a a XX% quarter of a million product million of for revenue

June to versus million X%. decrease year. million Family quarter with Sprint, of CommSuite revenue were continued compared is through T-Mobile's Safe Safety subscribers or of the related to $X.X revenues. $XX.X XXXX When The primarily first decline due quarter second XX, in $XX.X to XXXX, acquisition approximately & through by the decreased million declines in of attrition by Sprint legacy coupled of revenues Found Year-to-date revenue last driven a $XXX,XXX,

of of Safe revenues or result During the compared by $XXX,XXX declined Safety revenue approximately revenue. quarter primarily first approximately $X.X reduction prior as Family of to XX%, year, XXXX. XXXX, quarter Found second of of by & compared decreased the the million the Safety the a to second quarter Family

the past the in This decrease is legacy negligible second XXXX. primarily quarter $XXX,XXX CommSuite in year. revenue from approximately $X.X produced Sprint by related compared CommSuite to quarter. $XXX,XXX, approximately the decreased of attrition of XXXX. second compared was the by was which Sprint to prior was revenue the During Revenue the XXXX, subscribers Revenue to $XXX,XXX the off quarter platform to down second quarter sequentially in CommSuite of million over of of the attributable

is second revenue approximately for year and ViewSpot The XXXX. the $XXX,XXX quarter to first of to the and approximately of with ViewSpot revenue associated in the decline those predictable. XXXX, of a compared portion was that to declined related the variable both and promotional $XXX,XXX such, which of to as quarter compared which the second volume is the less in by revenues, portion decrease quarter the of prior and due device timing was campaigns, revenues

compared grow the compared expecting the Gross profit of consolidated the revenue. quarter the decline XXXX. of quarter XXXX XXXX, in second to during was in X% by period year, million second to due period-over-period quarter $X.X approximately of prior In X% to the of are $X.X million to to the revenues third the we same

gross approximately in produced $X.X in second second of as a was margin the in quarter quarter the The XX.X% result of margins. quarter first gross increased compared the the million Gross the by second for XX% gross to to the increase compared XXXX. of profit quarter profit in $XXX,XXX

points increase XX second of to expect of by XXX In for of gross quarter XXXX. the margins reported third gross the basis from XX% quarter XXXX, the to margin we

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

Portugal we elimination global in discussed United As a last Serbia. in March, in and the on of we conducted in resulting our call, reduction States, the force personnel

we at the requirements. that Slovakia XX, June was Office XXXX, addition, location our notice a announced of closure In for personnel required Development the statutory Zilina, period to effective as due

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

GAAP the operating of for As and $XX a of compared second the million, cost XXXX. reduction other of XX% XXXX quarter result decrease of a quarter or expenses were to actions, second $X.X these million

period million for expenses decrease June to were operating $XX.X million XX% or last the $XX.X year-to-date the year-to-date the period, GAAP year. ended of XXXX a to compared in compared $X XX, prior million

undertaken the of by approximately to Non-GAAP quarter for the operating approximately of the expenses quarter Sequentially, were from non-GAAP expenses primarily or decreased $XX.X due of cost decrease compared operating March. in a XXXX XXXX, XX%. second XXXX, the to $X.X million first million $X or XX% $X.X of the reduction second in activities million quarter million

goal non-GAAP our exceed With of $X did sales XXXX these our total of aggregate savings of operating cost fourth expenses reduction million quarter’s results, for of quarter from $XX million. quarterly the of we and

of second to We quarter compared by decrease expect XXXX. non-GAAP X% operating XXXX to X% third quarter the expenses to

$X.X quarter operating or compared million Non-GAAP $X.XX through last year-to-date of XX, expenses $XX.X loss of net million for share year. XX% share decrease in of or per compared to million or second were quarter the loss net The per loss for a XXXX GAAP a $X.X the $X.XX $X.X period to was XXXX. of loss June XXXX million, second GAAP the

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

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

For amortization million, in reconciliation approximately million, $XXX,XXX, approximately compensation related million, for approximately costs the $X.X and XXXX, $X.X of $X and of stock changes second the of to of derivatives $XXX,XXX. offering note depreciation of adjustments personnel reorganization severance amortization includes of $XXX,XXX, warrants intangible activities stock of asset quarter expense and

of For the $X warrants compensation intangible stock year-to-date adjustments for to $XXX,XXX, includes million, derivatives of activities expense in depreciation by the to changes stock million. non-GAAP approximately period, note $X of of reconciliation of related personnel of and reorganization costs $X million, asset $X.X million, and million, offering offset partially amortization $X severance amortization

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

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

June sheet million balance with to of accounts million XX, to of we our perspective, of a of issues $X.X as as receivables part and cash from some resulted a related through $XX.X June that working receivable were XXXX. as XXXX. increasing certain couple due which we our customers, in million was in This From to driven XX, equivalents December $XX.X of reported XXXX, administrative cash XX,

during resolve these to quarter. expect positive third cash flow issues the be and We ARR

This review. concludes financial my

Now back to Bill.

Bill Smith

of our add to growth most would about Thanks, some Jim. important color now opportunities. like I and several context

remarks, our opening efforts of support are quarter. to SafePath complete, development the expect version during Family based AT&T's I SafePath new this AT&T in to As my Secure launch and to noted migration we AT&T

getting Our we relationship all with and are strong, levels. support AT&T AT&T is from enthusiastic at

multiple template and collaborating specifically, with channels Secure launches. Family marketing are across growth launch efforts. future a will More marketing we SafePath Our AT&T plans be for

launch With activity, groundwork a subscriber will believe for successful lay the current that growth. we promotional driving

I significantly very I'm base. from subscriber bullish Secure for As to Family grow on prior the opportunity a AT&T largely noted untapped in calls,

to front, continues T-Mobile perform our the relationship On well.

quarter, second system to T-Mobile's technically and three two apps. operating and the companies. between projects significant collaboration we time-consuming updates required Safety Family were complex the that delivered compliance-based several These During successfully

enhancements the the deliver feature Family experience Mode, will set continue to half the improve releases with a some expect on of the to the app. back current number We year, to which of customer of over include to

We to also continue growth. we them drive partner to able where may subscriber ways with to be explore

their network. are the perspective, successfully to during through we work partnership about of as voicemail on visual I'm with tell we pleased subscribers standing you billing complexities boost CommSuite excited from up our DISH to able they quarter. migrating were continue legacy to Sprint second work together DISH, to premium that system the a From the

in at Our working value we the and coming potential, working are We the are subscribers to relationships, and level believe mutually beneficial we DISH's executive to to has continue adding excited are level, upside DISH at delighted quarter. business. the value and partnership both collaborative, and our to its deliver

I Turning am we portfolio announce ViewSpot, to ViewSpot carrier a that customer to our new of added pleased to customers.

ViewSpot we Smith disclose logo North details, new the solution represents The significant on quarter. accomplished be a out cable the Micro current during quickly, family. we this American so roll the to launch While can expect cannot operator a in

revenue new As quarter this anticipating customer such, from well. we this also are as

prospects. first as an value new indicator of believe three contracts we to American be not customers. also encompass our ability I consider several targets, our of well close as quarters, coming will but These of of the European and all that span and our our new the field ongoing this Eastern North health increasing existing is deal deals the over lines, identify and and completion teams' ViewSpot of sales product only and solution, and opportunities discussing Middle with this

calls, mentioned that pay Europe-based beginning dividends. our in we investment is late As last overhauled to we and year prior team, sales

strong many in pipeline as and we in have Europe is years. seen the as Middle Our East

the While revenue operators, we ensure value we're pipeline's focused that to to must that stay conversion team this customers confident infrastructure resonates the year those proposition and with prospects convert and next. building we and to realized, are to our is European

organization results, in our pleased expenses back of second savings efforts operating from development our of company reduction associated our expense million the non-GAAP am the fourth in Shifting that total target This of the the an organizational migration are all complete. that effort of the structure, quarter now crossed $X to SafePath drove and I especially quarter optimization with reported our parts XXXX. exceeded

associated focus and application Looking the consolidating enhance decommission these SafePath Collectively, our us several return profitability. align costs our margins further maintaining quarters, ring only expect completely to thereby to with reduce to we the going will on legacy next different ahead actions two position a company expenses team's to and our gross direct growth platforms, the path and over forward. to

company's the part are improvements of overall plan combined to These financial health. restore long-term operating our

We are to moving in the achieve our right goals. direction

months. remain, progress in our recent challenges resolve, I by and focus, the some While remain encouraged team's

I the ourselves has opportunities and ahead. very future. made I months on that have company in about As year am the significant this company's accomplishments our the that positioned the for reflect we bullish

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

Operator

[Operator Instructions].

question Searle ahead. The with comes from ROTH first Scott Please go MKM.

Scott Searle

for and for sequentially guess the perspective, do ViewSpot, market third to growth thanks of an of give on the see in the unit cost you end nice a we the Hi. there the customer would idea start side equation perspective growth to SafePath front I start, Good is the return given AT&T? a if quarter. looking there, my taking uptick to Nice from or an afternoon that timing new expect I but on could on questions. are side see into looking out what you Maybe to us some and job

Bill Smith

Yes going on result and about rollout definitely we AT&T. look we of Bill. there strong sub count is that, very a think Look very what’s We for growth very this as Scott, some strong and I well. are at for bullish feel launch the looking

So to it look. like the way we would everything is looking

Scott Searle

launch. around different good. going nice to put SafePath going that And up a to commercial parameters follow are it see to it AT&T going I it. be on some include the Very around moving offering? Okay. be could on congratulations Is or it you actually Is front, some wonder drive to basic there it? plans to if Bill, into

obviously define how etc.? can look provide a within we you adoption the you XX or you accounts XX success to base related AT&T. how is And to plus here? quickly when marketing success and dollars, into; over any there It are sell huge going to other believe I should million are What’s XX expect color or next months out

Bill Smith

half big was is growth I half ask what AT&T that's a to to I'm at Sprint look to or to so Sprint. Yes. remarkable of quarter-over-quarter. you at prior looking would activity. today. Well I here always look, too. growth point number maybe size is try for was back worked size how the of a saw rollout history, frankly, It and And the the what We

Scott Searle

T-Mobile, are of over see expect with Sprint point terms course Okay. Great. additions headwinds at want you this And Thanks. this the lastly It of Should that what Sprint I just year? sure I couple if the that then formally expectations I could, heard like to on in launch And correctly. happen? front, the Do on sounds make start time. deactivations done that basically are subscriber to your the we to front? some additions, in

Bill Smith

guess report. for we're the is have pleased that saying CommSuite All from activity activity see do Sprint/T-Mobile CommSuite, We the And The was decommissioning DISH. will for term there we come for of first other about forward to I over. off, at I Yes, near I'm very what well. sales CommSuite bullish as revenue going yes.

add to logo able to be we'll hopefully another list. So that

collaborative. continue subscriber as are us far hope we accelerate. see our growth and they some to base. with activities at and working are very cordial in T-Mobile, we And They that their as see But, to

Scott Searle

you. Great, thank

Operator

next FBR. question is Nichols go Riley B. The Please Josh with from ahead.

Josh Nichols

you quarter-over-quarter Any between could versus other a for thanks customer the related level up. that on much sequentially company the that to that areas growth just I of bit. taking for segments? my at to business? have ramping expects a Yes, high of XQ. give out you up maybe how going to be that's line the be indication breaks And question. top ViewSpot customer the How know is to in Great the see to for us a touch little

Jim Kempton

would while the Jim. ad it's it's growth, from that coming we Safety expect of the say help to we're do most of with that, Josh, the it the of house. most side ViewSpot projecting, I growth Family that we're seeing Hey that

Josh Nichols

good. That's

to revenue effectively, the from say? So anticipated expect you AT&T, that fair with launch coming XQ in

Jim Kempton

yes. it, a That's of portion

Josh Nichols

And on as gross Great. margin significant the then very front well. progress

bps long expected that think plus the how to And to to about talked you expansion single migration hurdle to going you that rate margin XXX you a in platform? do complete company When XX of previously? would to to take back be it XQ. the get software XX% Another able are gross

Jim Kempton

the now, exceed go Well, to at expecting as here. into we're and XX% we we're that QX

Beyond to realize that, expecting fully third-party savings platform. really year of next cost decommissioning we're the the with of some Ring the associated

Josh Nichols

usually any Thanks. efforts to say And comments about then, but AT&T much last employees realize of I question have on launches what's these as about used amounts for or expected? successful the with hard the could to you marketing how it's what's it, carrier early SPFs are days, has are relatively determinant at going so material historically me. been stores, too to going big that it a be Specifically, the of there at are? incentivize

Charles Messman

Josh. and Hey, but specifics, you across past I is Charlie. that in tell going blueprint we've been a will I good on think with way channels, different them not I board the into several very done It's will I'm the following closely that probably working it. the we've you, to tell at to look that get

a actually and going a been. are much than happening. already and things the you back-to-school, it. which about And very can't a in lot and think of work is background. been I the of tell regarding AT&T collaborative, launch, excited out I from lot of been think cross-collaboration I along press promoting There's can so, that There's that's you I'm efforts that we've quite underway, there's release that we're ever kind see further It's went

Josh Nichols

year. in profitability the Well, track to growth back company great half see to and hear, the on this and of it's Thanks. for great is

Bill Smith

Thanks.

Operator

with ahead. question Jim go McIlree is Please Dawson next from The James.

Jim McIlree

up quantify in evening. lot. talked that issue Can going Good about the that much this you how quarter. to a the you you identified contributed thanks particular AR increase? Jim, Yes,

Jim Kempton

equate I prepared Well, in the were that issues, remarks. my of and increase roughly there a mentioned to couple in it I'd AR the

Jim McIlree

Okay.

So, to it reasonable back the more in it's AR to comes QX? or that than down expect is something low $XX that million

Jim Kempton

that perhaps I would -- even be yeah. below would expectation. I say would the

Jim McIlree

a certain Okay, great. some Are lines. to but that. operations a for pay, a quarter, think Not for? And going about those you you exec something of you events things you talk might when like level, necessarily things? be then that some temporary, level, you are are of looking taken bonuses, measures you've cash those like the along Can what flow unwind margin gross looking cost-cutting from certain probably

Bill Smith

Yes, that's to standpoint a for from team profitability exec more of and sustained we return conditions. and trigger are a fair that the will that be return question Jim. to I'd growth, and those say actions would looking the normal the the board,

Jim McIlree

meantime, in there be where you've… you increasing that there the other know – And Talk] is are programs? cost-reduction [Cross areas I could the

Bill Smith

looking at to constantly Yes. business our our No, cost customers and for We're be more structure. better. ways we are to the cost-effective streamline service looking to

opportunities to is that sure. expenses, So the than obvious of other costs model for to there the take our if one platform, Ring going some that with to decommissioning reduce the are extent, of out

Jim Kempton

And then to that would expected so call note we that mention OpEx another our to Jim. to in well, X% the decrease as X% QX, on we did decrease I

Jim McIlree

that. Right, that's me. right, Thanks All a from lot right, Thank Got guys. noted. it you.

Jim Kempton

you. Thank

Operator

over for Messman conference closing would question-and-answer this like back [Operator the to I to Instructions]. turn any concludes Well, Charles session. the remarks.

Charles Messman

out today. Should day. to Thanks, forward Micro, look joining here everybody. I to to next questions, further Smith call. you us free awesome feel earnings an want and please at thank conference talking have comments, reach you us for to have to We on you everyone. our Thanks,

Operator

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

may now disconnect. You

Smith Micro Software (SMSI) 9 Aug 232023 Q2 Earnings call transcript