قالب وردپرس درنا توس
Home https://server7.kproxy.com/servlet/redirect.srv/sruj/smyrwpoii/p2/ Business https://server7.kproxy.com/servlet/redirect.srv/sruj/smyrwpoii/p2/ Editing transcript of conference call or presentation for SMSI revenue 25-Jul-19 20:30 GMT

Editing transcript of conference call or presentation for SMSI revenue 25-Jul-19 20:30 GMT



ALISO VIEJO July 27, 2019 (Thomson StreetEvents) – Edited transcript of Smith Micro Software Inc.'s profit conference or presentation conference Thursday, 25 July 2019, 20:30 GMT

* Charles B Messman [19659003] Smith Micro Software, Inc. – Vice President of IR and Corporate Development

* Timothy K. Haffmayer

Smith Micro Software, Inc. ̵

1; Vice President, Chief Financial Officer, Treasurer and Secretary

* William W. Smith

Smith Micro Software, Inc. Co – Founder, Chairman of the Board, Chief Executive Officer and President

Chardan Capital Markets, LLC, Research Unit – Senior Research Analyst of Industrial and Consumer Technologies

B. Reilly FBR, Inc., Research Unit – Discovery Group Senior Analyst

Good day and welcome to the Smith Micro Second Quarter 2019 earnings conference for profit. (Instructions for use)

Please note that this event is being recorded. Now I would like to head the conference to Charles Messman, Vice President of Investor Relations and Corporate Development. Please move on.

Charles B. Messman, Smith Micro Software, Inc. – Vice President of IR and Corporate Development [2]

Thank you, operator and good day, everyone. Thank you for joining us today to discuss Smith Micro Software's financial results for the second quarter of the fiscal year 2019 ending June 30. So far, you should have received a copy of the press release with the financial results. If you do not have a copy and would like it, please visit the Investor Relations section of our website at www.smithmicro.com.

Today we have Bill Smith, Chairman of the Board, President and CEO of Smith Micro; and Tim Hufmayer, Chief Financial Officer

Please note that some of the information you will hear during our discussion today will consist of forward-looking statements, including without limitation on the future earnings and profitability of the company, development new products, new market opportunities, operating costs and cash reserves of the company. Estimates include risks and uncertainties that could cause actual results or trends to differ materially from those expressed or implied by our projected statements. For more information, please see the risk factors discussed in the most recent Smith Micro 10-K form

Smith Micro does not undertake to update any forward-looking statements that indicate the beliefs and assumptions of our management only the date they were made.

I would like to point out that in the following remarks prepared we will refer to some financial measures that are not generally accepted by the GMP. Please refer to our press release, circulated earlier today, to reconcile financial measures that are not GAAP.

In so doing, I will now transfer the call to Bill. Bill?

William W. Smith, Smith Micro Software, Inc. – Co-founder, Board Chairman, CEO and President [3]

Thank you, Charlie. Good day, everyone, and thank you for joining us today for our profit conference in the second quarter of 2019.

I am very excited about the incredible acceleration of our earnings and profits in the second quarter for the fast start we did in the first quarter of 2019. We have achieved growth in all three of our major wireless solutions, leading to excellent results for our second quarter, which I am happy to share with you today.

Looking at the results, total revenue from operations went up by $ 10.9 million, up 29% in the first quarter of 2019 and 56% in the second quarter of 2018. Additionally, if we add the profit from a Poser transaction , total revenue amounted to $ 11.3 million.

Net GAAP earnings from operations for the quarter were approximately $ 2.7 million or $ 0.8 per share. Gross margins reached a very high 91%, which really highlights the strong leverage we have in our current business case. While revenue from CommSuite, SafePath and ViewSpot grew, the growth of the company was strongly driven by our SafePath platform, which grew by 77% in the first quarter of 2019

Noteworthy, we launched SafePath Family with Boost Mobile, prepaid carrier. This is a significant profit for the company as we deepen our relationship with Boost. Boost Mobile also uses our CommSuite messaging platform, which accounts for approximately 30% of our CommSuite revenue.

While merger talks continue between T-Mobile and Sprint, Boost Mobile appears to be shifted to Dish Network. With the overall intention of regulators to create a fourth-tier wireless carrier in the US, we see this as an excellent opportunity for Smith Micro, which can lead to a lot of strategic advancement for us.

The merger of T-Mobile and Sprint represents a risk but also provides a huge opportunity for growth and expansion of Smith Micro. The whole team is focused on ensuring a successful outcome if the merger is approved. This prospect, coupled with the opportunity to serve a new fourth-tier carrier, is an exciting time for the company.

Before we dive deeper, let's turn the call on Tim to see the finances in more detail. Tim?

——————————————— – ———————————

Timothy C. Huffmyer, Smith Micro Software, Inc. – Vice President, Chief Financial Officer, Treasurer and Secretary [4]

————————————– – —————————————-

Thank you, Bill.

As Bill mentioned, in the second quarter, we ended up selling the Poser software product to a long-term resale partner. The sale led to a profit of $ 483,000 and was reported as another income. We are very pleased with the release as we continue to focus on our 4 strategic products.

Let's talk about the results now. For the second quarter we reported revenue of $ 10.9 million versus $ 6.9 million for the same quarter last year, an increase of 56%. The wireless segment reported quarterly revenue of $ 10.6 million versus $ 6.5 million last year, an increase of 64%.

Our graphics segment reported quarterly earnings of $ 217,000 compared to $ 439,000 last year. For the second quarter of the year, the income was $ 19.3 million compared to $ 12.4 million last year, an increase of 55%. The increase in revenue from wireless networks is mainly due to revenue growth in the SafePath Family platform.

In the second quarter of 2019, revenue from SafePath Family increased steadily by 77%, resulting in revenue of $ 3.8 million. We expect revenue growth to continue on the basis of recent and expected marketing activities that include ongoing retail promotions and call centers. These actions depend on Sprint's performance. We continue to support the efforts as required.

Based on recent SafePath launch rates, we expect the third quarter of SafePath revenue to grow approximately 30% in succession.

In the second quarter of 2019, revenue from CommSuite VTT increased again sequentially, resulting in the seventh consecutive quarter of consistent revenue growth. As discussed at the beginning of 2019, we expect a continuous growth of subscribers on this platform with low one-digit figures.

CommSuite's advertising revenue is also rising sequentially in the second quarter of 2019. This is a variable revenue stream and depends on third-party activities. We expect quarterly revenue to be between $ 200,000 and $ 400,000 for the remainder of 2019

ViewSpot's revenue was $ 1.4 million for the quarter. Sustained growth was directly linked to increased device and promotional campaigns from our existing US Treasury contracts. We continue to expect 10% to 20% growth for ViewSpot in this fiscal year.

For the second quarter gross profit was $ 9.9 million vs. $ 5.8 million in the same period last year. The gross margin was 91% for the second quarter compared to 84% last year. The increase in the gross margin is a direct result of higher revenues from wireless services.

For the second quarter of the year gross profit was $ 17.4 million compared to $ 10 million in the same period last year. The gross margin was 90% for the second quarter of the year, compared to 81% last year.

Operating expenses for the second quarter were $ 6.9 million, an increase of $ 1.2 million or 21% compared to last year. Operating expenses for the second quarter of the year were $ 14.4 million, an increase of $ 2.5 million or 21% compared to last year. The increase in operating expenses is mainly related to an increase in ViewSpot's operating costs, an increase in ViewSpot's non-cash depreciation costs, and an increase in non-cash inventory redemption costs.

Also in the second quarter, we invested in additional resources to focus on delivering ViewSpot customers and product development and added resources to improve SafePath Family product development, resulting in a net increase in staff numbers 18. This additional figure will result in a higher percentage of operating costs for the remainder of 2019.

Non-GAAP earnings for the second quarter were $ 3.6 million compared to non-GAAP earnings of $ 298,000 last year. Non-GAAP earnings for the second quarter of the year to date are $ 4.3 million compared to a non-GAAP prepaid loss of $ 1.6 million last year. Net GAAP net income for the second quarter was $ 2.7 million or $ 0.08 earnings per share compared to non-GAAP net income of $ 226,000 or $ 0.01 earnings per share last year.

GAAP net income for the second quarter was $ 3.3 million or $ 0.10 earnings per share compared to a non-GAAP net loss of $ 1.2 million or $ 0.07 loss per share last year . Within the recently released press release, we provided our non-GAAP benchmark with the most comparable GAAP indicator. For the second quarter, the reconciliation includes the following adjustments: $ 333,000 in stock compensation, $ 268,000 in intangible amortization, $ 483,000 in Poser Transaction, and $ 34,000 preferred share dividends, some of which are non-cash.

For the second quarter – Currently, the reconciliation includes the following adjustments: inventory compensation cost of $ 788,000, intangible amortization of $ 465,000, Poser $ 483,000 transaction profit, $ 76,000 acquisition cost and preferred dividend shares of $ 67,000, some of which are non-cash.

Due to our accumulated net losses over the past few years, our tax expense on GAAP is mainly due to foreign taxes. For non-GAAP purposes, we use a tax rate of 24% for 2019. The result of non-GAAP tax expense in the second quarter is $ 850,000 and the second quarter of the year to tax expense that is not GAAP, is $ 1 million.

This ends my financial review. Now let's get back to you, Bill.

—————————————- ——- ———————————

William W. Smith, Smith Micro Software, Inc. – Co-founder, Chairman of the Board, Executive Director and President [5]

—————————— —— ——————————————–

Thank you, Tim .

Now, let's talk about our 3 major product packages and provide an extra color.

As I said earlier, SafePath had an excellent neighborhood driven by Sprint's Safe & Found implementation, which has grown beyond our expectations. The success of the subscriber expansion is due to Sprint's efforts and the significant investments we have made to improve the overall application of SafePath. We are also pleased with the continuation of our strategic marketing initiatives and the success we are generating.

I'm very happy with putting our first SafePath IoT device, a tracker powered by our SafePath platform, as both expand our market reach and further develop our vision of providing the best life-related life experience for the family.

SafePath 6.0 creates single-payment payment glass to manage family's digital lifestyle by providing both family-safe parental control, while integrating management of connected devices, whether mobile or home.

This is an important first place on the market, allowing carriers to offer not just the power of SafePath Family but now they include connected devices with the same common experience in the app. This allows carriers to offer their subscribers a choice of each option.

With these new features, we have more than a new sales opportunity. We also have a strong competitive advantage for our decision, which clearly separates us from our competition.

Sprint's launch, called Tracker + Safe & Sound, offers several features, such as real-time location, geofacting, notifications, and most importantly, allowing our customer to sell something or a device, all powered by our SafePath platform.

Overall, we are very pleased with the original search for the tracker, both from new subscribers and from those already included in the SafePath platform, which are upgraded to the new device and service. Overall, sales exceed expectations.

As mentioned earlier, Boost Mobile's strategic profit with the launch of SafePath Family expands our customer relationship with Boost. We work closely with Boost to ensure a positive start of the product.

Let's now look at ViewSpot. The result of the acquisition of Smart Retail in the first quarter, which led to steady growth for the quarter. We have made significant strides in the quarter by completing initial integration and strengthening our team in all business aspects to support the growing demand we see today in the market.

Now we strive to accelerate the product roadmap with new features and functionality. such as better workflows for faster turnaround and content delivery, while improving scalability and increasing sales. Our road map on the ViewSpot analytics platform is also gaining momentum. We plan to introduce significant improvements over the coming quarters, such as real-time data streaming, advanced device monitoring, AI-driven anomaly detection, and new improved boards just to name a few.

The ViewSpot Sales Program continues to be built with several new proofs of concept that are currently being conducted around the world. The team has done a great job with these efforts and I believe that we have been rightly positioned for growth in the second half of the year.

Let's take a look at CommSuite, our voice messaging platform. CommSuite has achieved robust quarter-on-quarter results and has achieved quarterly subscriber growth for the quarter and the highest quarterly earnings we have achieved since 2014. We look to build on this growth over the rest of the year with the introduction of several new product features and marketing initiatives.

We are also excited to attack the demand we see on the market with other carriers.

In conclusion, I'm really excited about where we are as a company, and with the prospects for this year. and beyond. I believe we are still very early in the growth curve and we have many exciting new opportunities ahead of us. We start with a great start with the results of the first half of the fiscal year 2019, and we plan to build on that moment as we look at the rest of the year.

This is how I will open the invitation for questions. Operator?

================================================= ==================================

Questions and Answers

—— – ————————————————- – ———————–

Operator [1]

——————- – ————————————————- – ———-

(Instructions for the Operator) Our first question today comes from Scott Saler with Roth Capital.

—————– —————————— ——————– ————-

Scott Wallace Searl, Roth Capital Partners, LLC, Research Unit – MD & Senior Research Analyst [2]

————- —————————— ——————– —————–

Guys, I guess, of course, a nice quarter. But just to calibrate quickly as to that number in June, Tim, are there any one-time revenue anomalies just to calibrate us? Then I have some follow-up on SafePath and several products.

——————————– ————— ——————————— [19659080] Timothy K. Haffmayer, Smith Micro Software, Inc. – Vice President, Chief Financial Officer, Treasurer and Secretary [3]

————————— ———– ————————————— —

Всъщност не е Скот, говорихме за продажбата на софтуера Poser, който намалява с други приходи. Така че всичко останало беше основен бизнес резултат.

————————————— —————————————–

Скот Уолъс Сиърл, Рот Капитал Партньори, LLC, Изследователски отдел – MD & Senior Research Analyst [4]

———————————– ———————————————

Добре, страхотен. Очевидно, SafePath, много вълнуващо от гледна точка на това, което виждате тук. Вашите насоки за 30% последователен растеж. Можете ли да ни преведете през това, което става в това? Какво е вашето предположение по отношение на кога стартира Boost? Или това е включено изобщо през второто тримесечие? И чековете бяха наистина положителни отпред на тракера, за което смятам, че намеквате. Искам да кажа, колко голям е компонент? Знам, че е рано в процеса на внедряване, но имате ли смисъл от гледна точка на това как може да изглежда скоростта на прикачване? Или за какво мислиш по отношение на проникването?

———————————– ———————————————

Тимотей С Huffmyer, Smith Micro Software, Inc. – вицепрезидент, финансов директор, касиер и секретар [5]

—————————— ————————————————–

Така че 30%, които пуснахме там, се основават на текущата скорост на изпълнение, Скот. Така че това може да се промени към положително или отрицателно във всеки един момент. Но искахме да дадем най-малкото представа за това, което виждаме днес тук, колкото е възможно по-добре, което предоставихме там.

От гледна точка на Boost, няма нищо – основното число включва някое от наскоро пуснатите продукти основно. Така че този номер на SafePath е всеобхватно число и ние – така очаквахме да играем през тримесечието.

———————- ————————————————– ——–

Скот Уолъс Сиърл, Roth Capital Partners, LLC, отдел за научни изследвания – MD & Senior Research Analyst [6]

—————— ————————————————– ————

Разбрах. Но просто пояснете, защото Boost не е на живо. Така че това не е на брой, но тракерите са вид на броя, текущата скорост на изпълнение, която изпитвате днес?

——————— ————————————————– ———

Уилям У. Смит, Smith Micro Software, Inc. – Съосновател, председател на Съвета, изпълнителен директор и президент [7]

———– ————————————————– ——————-

Е, не. Чакай малко. Boost е на живо и те активно продават продукта. Понастоящем нямат тракер.

————————————- ——————————————-

Скот Уолъс Сиърл, Roth Capital Partners, LLC, Изследователски отдел – MD & Senior Research Analyst [8]

——————————— ———————————————–

Точно така. Хванах те. Добре добре. И …

——————————————- ————————————-

William W. Smith, Smith Micro Software, Inc . – Съосновател, председател на УС, главен изпълнителен директор и президент [9]

——————————— ———————————————–

И мисля, че отпред на тракера, само за да е ясно, Скот, много, много рано е, и затова всъщност нямаме дълбок цвят в това състояние. Но докато се развива, току-що бяхме доволни от видяното досега.

————————— ————————————————– —

Скот Уолъс Сиърл, Roth Capital Partners, LLC, отдел за научни изследвания – MD & Senior Research Analyst [10]

———————– ————————————————– ——-

Добре. И последно на фронта на SafePath. Говорихте малко за Sprint, като T-Mobile приемете като предстояща трансформация, сливането ще бъде добро, имайки предвид къде – изглежда, че Boost ще намери нов дом. Можете ли да ни дадете вашите актуализирани мисли както от гледна точка на спринт, най-новите и най-добрите мисли по отношение на залеза на лабораторията за местоположение? Говорите ли с Boost понастоящем по отношение на това кой може да бъде следващият им собственик? И как това ще се разгърне? И мисли по отношение на всички превозвачи, когато започнете да гледате в края на 2019, 2020?

—————————- ————————————————– –

Уилям У. Смит, Smith Micro Software, Inc. – Съосновател, председател на Съвета, изпълнителен директор и президент [11]

—————— ————————————————– ————

Добре. Е, очевидно, на фронта на сливането, ние не можем да проведем смислени дискусии или да разкрием дискусиите, които водим около това, що се отнася до Boost. Искам да кажа, че можем само да разгледаме какви са съобщенията в медиите, че те биха били придобити от Dish. Имаме добри отношения с екипа на Boost, който скоро ще премине към Dish. И така продължаваме да работим усилено в Канзас Сити и Сиатъл и имаме много срещи и много дискусии и планиране. И това е наистина всичко, което мога да кажа по този въпрос.

———————————— ——————————————–

Скот Уолъс Сиърл , Roth Capital Partners, LLC, Изследователски отдел – MD & Senior Research Analyst [12]

——————————– ———————————————— [19659119]Хванах те. И …

——————————————- ————————————-

William W. Smith, Smith Micro Software, Inc . – Съосновател, председател на съвета, изпълнителен директор и президент [13]

——————————— ———————————————–

Що се отнася до – мисля, че вълнуващо е, че с освобождаването на Boost, искам да кажа, че целта е ясна, че регулаторите искат да създадат нов превозвач, който е превозвач от първи ред. Boost е значима част от нашия бизнес. Както вече споменах на CommSuite и нарастваща част в SafePath, макар и в много ранен етап. И така виждаме това като друг вълнуващ потенциал за нас. Що се отнася до други превозвачи, имаме много дейности. Не съм в момент, в който се чувствам комфортно да обсъждам тези все още, но виждам много позитиви.

———————- ————————————————– ——–

Скот Уолъс Сиърл, Roth Capital Partners, LLC, отдел за изследвания – MD & Senior Research Analyst [14]

—————— ————————————————– ————

Разбрах. И на последно място, ако можех, точно на фронта на ViewSpot, хубав растеж през това тримесечие. Мисля, че това е първото тримесечно участие на 90 дни. Къде сте по отношение на навлизането в някои от съществуващите акаунти? Те разполагат с места за търговия на дребно, но вие – напълно сте разгърнати това и получавате ли някакво сцепление след това в някои от другите, или франчайзинг, или дистрибуция на големи кутии за някои от тези превозвачи? Благодаря и хубав квартал.

—————————————— ————————————–

William W. Smith, Smith Micro Software, Inc. – Съосновател, председател на борда, главен изпълнителен директор и президент [15]

——————————– ———————————————— [19659131] Намираме се във всички магазини на собствеността на компанията и за двата ни носителя от първи ред. Ние не сме там – другите места отвъд това, това е нещо, с което обсъждаме. Много сме развълнувани от броя на изпитванията с доказателство за концепция. Те продължават. Изглежда, че ще имаме приблизително 11 изпитания между сега и до края на 2019 г. и се надяваме да увеличим това. Така че – но това ви дава известна представа за нивото на търговска активност, което продължава с ViewSpot. Смятаме, че има някои истински харесвания.

————————————— —————————————–

Оператор [16]

– ————————————————– —————————-

Следващият ни въпрос идва от Джош Николс с B. Riley FBR.

— ————————————————– —————————

Майкъл Джошуа Никълс, Б. Райли FBR, Inc., отдел за изследвания – старши анализатор на Discovery Group [17]

———————————————– ———————————

Очевидно това е доста феноменален растеж на SafePath. Изглежда, че вероятно сте близо до 450 000 средни абонати за тримесечието. Само как е израснал този номер? Но като се има предвид, че Sprint има около 55 милиона абонамента, предполагам, включително Boost. Как трябва да мислим за възможността за навлизане на пазара, докато мислим през това следващо тримесечие, но през следващите 12 или 24 месеца и какво мислите, че бихте могли да постигнете?

———— ————————————————– ——————

Уилям У. Смит, Smith Micro Software, Inc. – Съосновател, председател на борда, главен изпълнителен директор и президент [18]

– ————————————————– —————————-

Както винаги съм казвал, целта на изпълнителния мениджмънт и на нашия клиент е – има винаги е бил да получите милиони абонати на Safe & Found. Така че има още много работа, която трябва да се свърши, има много работа, свършена е. Ясно е, че резултатът от сливането може потенциално да разшири общия регулируем пазар. Имаме с този клиент и това също е вълнуващо. Но мисля, че трябва да позволим на сливането да се разиграе. Никой от нас всъщност не знае как точно ще потекат нещата. И това е част от вълнението от просто опитите да се справят с това.

——————————– ———————————————— [19659145] Майкъл Джошуа Николс, Б. Райли FBR, Inc., отдел за изследвания – старши анализатор на Discovery Group [19]

————————– ————————————————– —-

И тогава споменахте и изглежда, че с ViewSpot нещата вървят доста добре. Исках да попитам, мислите ли, че има по-голяма вероятност следващата значителна печалба за ViewSpot да е като нов превозвач, добавящ към тези партньорски магазини на съществуващи договори или може би като голям търговец на дребно, който продава тези продукти, ако трябва да преценете какво мислите за най-близката възможност?

——————————— ———————————————–

Уилям У. Смит, Smith Micro Software, Inc. – Съосновател, председател на Съвета, главен изпълнителен директор и президент [20]

———————– ————————————————– ——-

Мисля, че най-близкият план вероятно са новите превозвачи. Партньорските магазини обаче са активна дискусионна тема. Нашите клиенти наистина харесват продукта ViewSpot. Наистина им помага на мястото на продажба на дребно и им дава силно последователно съобщение за продажбите на продуктите, независимо дали това са телефони или други видове устройства или услуги. И също така бих ви препоръчал да посетите местата на нашите клиенти и да видите продукта в действие. Това върши наистина чудесна работа.

—————————————- —————————————-

Майкъл Джошуа Никълс, Б. Райли FBR, Inc., отдел за изследвания – старши анализатор на Discovery Group [21]

———————————- ———————————————-

И после последен въпрос за мен и ще предам факлата. Има ли 1 или 2 конкретни маркетингови усилия в Sprint, които смятате, че наистина водят тази много бърза рампа в SafePath през последните няколко тримесечия? И като се има предвид колко бързо това нараства, какъв тип EBITDA маржове смятате, че компанията би могла да постигне през следващата година или така, тъй като този бизнес мащабира толкова бързо?

————– ————————————————– —————-

Уилям У. Смит, Smith Micro Software, Inc. – Съосновател, председател на борда, главен изпълнителен директор и президент [22]

—- ————————————————– ————————–

Е, нека да взема първата част и ще оставя Тим да се справи с последната. Особено се вълнувам и знам, че ръководството в Sprint също се вълнува от успеха, който са постигнали в продажбата на това като услуга с добавена стойност в техните търговски обекти. Те току-що свършиха феноменална работа в подготовката на търговската сила и в санирането на продажбите, за да застанат зад продукта. Те продължават да правят това и имат нови инициативи, които очакваме да дойдат през следващите седмици и месеци. И така смятаме, че това ще продължи да стимулира разширяването на потребителската база. Така че да, доста е вълнуващо и ние не знаехме това, когато започнахме това усилие. Не знаехме, че те могат да се продават толкова ефективно, колкото имат в магазините. И ако има едно нещо, за което научихме, че е много смислено – също така за нас е важно да помагаме на новите клиенти да продължат напред, е как да използват тяхната търговска мрежа. Тим?

——————————————— ———————————–

Timothy C. Huffmyer, Smith Micro Software, Inc. – Вицепрезидент, финансов директор, касиер и секретар [23]

—————————————- —————————————-

Хей, Джош. Маржът или процентът на EBITDA през това тримесечие очевидно е доста силен. Имате своя транзакция Poser там. Така че бихте искали да го извадите. Но това вероятно е честно представяне, както мислим за следващите квартали. Очевидно растежът на продукта може да доведе до това по същество по-добър начин, но аз – искахме да дадем причина за тази целева печалба навън за тази ставка, която да работи, така че да изградим някакво очакване за най-добрите данни, които ние 're seeing here today. And I'd encourage you to model it off of what you see here today, based on the information we gave you.

——————————————————————————–

Operator [24]

——————————————————————————–

Our next question comes from Jim McIlree with Chardan.

——————————————————————————–

James Patrick McIlree, Chardan Capital Markets, LLC, Research Division – Senior Research Analyst of Industrial and Consumer Technology [25]

——————————————————————————–

Great quarter, guys. Tim, you just said something about the gross margin impact from the Poser sale. Can you walk through what you're — what the impact was?

——————————————————————————–

Timothy C. Huffmyer, Smith Micro Software, Inc. – VP, CFO, Treasurer & Secretary [26]

——————————————————————————–

Yes. So no impact to gross margin. We had the Poser sale recorded in other income. It's online item there that you'll see. It's about $483,000 gain for the quarter. So if you run an EBITDA, my point was you'd want to pull that out. That's an anomaly in EBITDA, not in revenue or anything, but in EBITDA, it is.

——————————————————————————–

James Patrick McIlree, Chardan Capital Markets, LLC, Research Division – Senior Research Analyst of Industrial and Consumer Technology [27]

——————————————————————————–

Okay. I misunderstood. Can you address the subscriber growth in SafePath? Generally speaking, where the subscribers are coming from that is new customers or transitioning from the legacy service for the quarter?

——————————————————————————–

William W. Smith, Smith Micro Software, Inc. – Co-Founder, Chairman of the Board, CEO & President [28]

——————————————————————————–

Okay. I would say that the largest percentage is coming from new customers. The legacy service, there is still people coming across on their own. How our customer decides to deal with the legacy, I think, is going to have to wait until post-merger.

——————————————————————————–

James Patrick McIlree, Chardan Capital Markets, LLC, Research Division – Senior Research Analyst of Industrial and Consumer Technology [29]

——————————————————————————–

Got it. Добре. And in answer to Scott's question, you talked about Boost and IoT, both contributing to Q3. Can you frame that? Is it a meaningful contribution? Is it — you think it's greater than 5% or greater than 10% of SafePath revenue in the quarter, in Q3?

——————————————————————————–

Timothy C. Huffmyer, Smith Micro Software, Inc. – VP, CFO, Treasurer & Secretary [30]

——————————————————————————–

Yes. No, it's a small percentage, Jim. It's starting from 0. So in the sense that we have new clients out there that start from 0, it does take some time to ramp. So the meaningful part of all the growth is coming from Sprint right now. Now the good thing is that we've done this before. We have a lot of learning that we've completed, and we think we can hit the ground running. But in the current run rate that I gave, that did not assume a significant increase there on the Boost side.

——————————————————————————–

James Patrick McIlree, Chardan Capital Markets, LLC, Research Division – Senior Research Analyst of Industrial and Consumer Technology [31]

——————————————————————————–

Right. Добре. And can you talk about seasonality if there's anything to be aware of in Q4 that would impact the SafePath or ViewSpot results? But I'm thinking mostly for SafePath. Is there a likelihood that the customer focuses on new adds and isn't as concerned about signing up SafePath customers? Or is there any insight you can share with us about Q4 seasonality?

——————————————————————————–

William W. Smith, Smith Micro Software, Inc. – Co-Founder, Chairman of the Board, CEO & President [32]

——————————————————————————–

Yes. I think that it's pretty well proven that large carriers tend to focus on new sub adds in the fourth quarter, which can slow down the growth a little bit that we see in some of our value-added services. So I would probably model it that way, and then we'll work really hard to make it better than that.

——————————————————————————–

James Patrick McIlree, Chardan Capital Markets, LLC, Research Division – Senior Research Analyst of Industrial and Consumer Technology [33]

——————————————————————————–

Okay. And I think this is my last one. But Tim, in your initial prepared remarks, you talked about — in reference to CommSuite, $200,000 to $400,000 for the remainder of 2019. I just — I'd like to clarify, you were talking about $200,000 to $400,000 for add revenues per quarter for CommSuite for the rest of the year. Is that right? Or is it something different?

——————————————————————————–

Timothy C. Huffmyer, Smith Micro Software, Inc. – VP, CFO, Treasurer & Secretary [34]

——————————————————————————–

No. You're correct. It was quarterly add revenues is the range I gave. Correct.

——————————————————————————–

James Patrick McIlree, Chardan Capital Markets, LLC, Research Division – Senior Research Analyst of Industrial and Consumer Technology [35]

——————————————————————————–

Okay. But in Q2, you exceeded that. Did I hear that correctly? Or am I just making that up?

——————————————————————————–

Timothy C. Huffmyer, Smith Micro Software, Inc. – VP, CFO, Treasurer & Secretary [36]

——————————————————————————–

I did not make a statement. I said it grew over the first quarter. So we grew sequentially, but it was in that range.

——————————————————————————–

Operator [37]

——————————————————————————–

Our next question comes from Mark Gomes with Pipeline Data.

——————————————————————————–

Mark Gomes;Pipeline Data;Founder & CEO, [38]

——————————————————————————–

Congratulations, of course, gentlemen. Sorry if I didn't catch it in the beginning of call. We have got the $3.8 million for SafePath. What do we have for CommSuite and ViewSpot?

——————————————————————————–

Timothy C. Huffmyer, Smith Micro Software, Inc. – VP, CFO, Treasurer & Secretary [39]

——————————————————————————–

We had — ViewSpot was $1.4 million. And we did not give a number for CommSuite. So you can — when you lay that out, you'll able to figure that out.

——————————————————————————–

Mark Gomes;Pipeline Data;Founder & CEO, [40]

——————————————————————————–

Okay, yes. And you're looking at the new hires. Also seeing a lot of open racks out there in the [ether.] Where are those kind of focused on in terms of product areas and initiatives?

——————————————————————————–

Timothy C. Huffmyer, Smith Micro Software, Inc. – VP, CFO, Treasurer & Secretary [41]

——————————————————————————–

Yes. So there are a lot of open racks, even though we've completed a lot of hiring. Those are primarily SafePath focused, Mark, and maybe a little bit of ViewSpot. So just a continued reinforcement of what we've done.

——————————————————————————–

Mark Gomes;Pipeline Data;Founder & CEO, [42]

——————————————————————————–

Okay, great. And then just kind of looking at the update that you guys did sort of product over the recent months that — when we're looking at our due diligence from kind of downloads perspective, it seems like you're getting more subscribers per download relative to what we're looking at. How much has the — how much have we — how much have you seen from your end in terms of the number of downloads, types and the number of new subscribers?

——————————————————————————–

Timothy C. Huffmyer, Smith Micro Software, Inc. – VP, CFO, Treasurer & Secretary [43]

——————————————————————————–

We don't track or talk about that level of detail, Mark.

——————————————————————————–

Operator [44]

——————————————————————————–

Our next question is a follow-up from Scott Searle with Roth Capital.

——————————————————————————–

Scott Wallace Searle, Roth Capital Partners, LLC, Research Division – MD & Senior Research Analyst [45]

———————- ———————————————————-

Just a quick follow-up. Bill, I'm not sure if I missed it, but did you give any indications of time lines or other potential number of IoT devices that we could see as part of the SafePath ecosystem by the end of this year? And also as part of that, if you could give us a quick update in terms of parental controls in the Home and in-home capabilities, specifically, around growth? And how is that progressing? And when will we expect to see some commercialization?

——————————————————————————–

William W. Smith, Smith Micro Software, Inc. – Co-Founder, Chairman of the Board, CEO & President [46]

——————————————————————————–

Okay. We are working on a number of additional devices that are consumer IoT-oriented devices. And so you will see us talking about or demonstrating those devices before the end of the year. So there's a lot of activity in that area. As far as the SafePath Home efforts, we are working together with our partner to expand that product offering and to meet a — I think what we now understand may be more fully as some of the requirements the carriers will have to allow them to effectively deploy. I think the other thing that you'll see is that with all the major carriers now really focus on what it is they're going to do as far as devices that they will put into the home. The types of servers that are — routers, excuse me, that was the word I was looking for, routers, that they will then sell for home use allows us to focus in on how to best get the SafePath Home firmware included in those devices before they go on to the marketplace.

——————————————————————————–

Operator [47]

——————————————————————————–

Our next question today comes from [Erin Warwick] with ES Capital.

——————————————————————————–

Unidentified Analyst, [48]

——————————————————————————–

I got a couple of questions. The first one would just be a follow-up from what Mark asked. It was interesting you had mentioned the increase in OpEx for the rest of the year and headcount. And like Mark mentioned, it looks like there's several more jobs you've got queued up. I'm just wondering are those — is the increase in the headcount, is that because of the way that Sprint's ramped up? Or is that really more of what you guys kind of have in the pipeline for the future that you feel you're going to need those positions?

——————————————————————————–

William W. Smith, Smith Micro Software, Inc. – Co-Founder, Chairman of the Board, CEO & President [49]

——————————————————————————–

I would say that it's both. We are looking at headcount to help service our existing customers, but we're also looking at headcount to service new opportunities that we believe are on their way. So yes, it's — this is a pretty exciting time.

——————————————————————————–

Unidentified Analyst, [50]

——————————————————————————–

Yes, that's really exciting. Other question I asked on the last call about IoT device, and you guys delivered on that, I think, beyond anybody's expectation with the tracker, very impressive with that. I'm just wondering if you have an early read, how many of the people that are buying just the tracker only that are new to SafePath or to Safe & Found or are actually upgrading to the full version of it?

——————————————————————————–

William W. Smith, Smith Micro Software, Inc. – Co-Founder, Chairman of the Board, CEO & President [51]

——————————————————————————–

Yes. We really can't talk about that. That's something that there is a lot of studying going on between ourselves and our customer to better understand those dynamics. But that's really something that I think Sprint's going to have to talk about.

——————————————————————————–

Operator [52]

——————————————————————————–

(Operator Instructions) Our next question is a follow-up from Mark Gomes with Pipeline Data.

——————————————————————————–

Mark Gomes;Pipeline Data;Founder & CEO, [53]

——————————————————————————–

Guys, back on the IoT a little bit more. Can you just kind of talk to us a little bit more about the advantage that you have there? Clearly, you have a legacy in IoT technology expertise. Wondering how that's benefiting you now? And how reallocated those resources? And how that's benefiting your sales cycle now to be able to offer the carrier something where you have a long reputation for providing applications that scale to their need, that tie to their back-end systems, and now also leverage your IoT expertise?

——————————————————————————–

William W. Smith, Smith Micro Software, Inc. – Co-Founder, Chairman of the Board, CEO & President [54]

——————————————————————————–

Okay. As you are discussing, yes, we had a lot of efforts that have been done on the prior products, not SafePath, but that was more oriented towards Device Management and Industrial IoT implementations. That product was part of our — we kind of moved it aside as we narrowed our focus on where we thought the company would see the most growth. That was a decision made really last year. That entire team, however, was extremely experienced, and they knew the space, they know how to work with IoT devices. They are predominantly housed in our Belgrade, Serbia location, and yes, they're doing a great job. The experience that they had is part of the reason why we can bring so many devices to the marketplace in our plants and what we've already done.

——————————————————————————–

Mark Gomes;Pipeline Data;Founder & CEO, [55]

——————————————————————————–

Great. And what does that mean in terms of — like, do you have any kind of targets or restraints in terms of how many devices you can bring online, and tie to the platform over, say, a 12-month — any given 12-month period?

——————————————————————————–

William W. Smith, Smith Micro Software, Inc. – Co-Founder, Chairman of the Board, CEO & President [56]

——————————————————————————–

I don't think of it that way. Our job is to service our customers. And if our customers need more devices than we are thinking about at this minute then we'll have to react to that, and we'll have to figure out a way to service them. I mean, that's what we're in business to do.

——————————————————————————–

Mark Gomes;Pipeline Data;Founder & CEO, [57]

——————————————————————————–

Absolutely. And then just kind of back to the original question where I asked like, kind of what you're kind of seeing anecdotally from your sales pipeline in terms of their excitement around, the stuff that you're seeing so far with the platform, doing well at Sprint and/or just working in general?

——————————————————————————–

William W. Smith, Smith Micro Software, Inc. – Co-Founder, Chairman of the Board, CEO & President [58]

——————————————————————————–

I would say that the carriers out there are watching with a great deal of interest and have sort of figured out that it's going pretty well at Sprint. That is also a positive thing for our sales efforts and for how we move this forward.

——————————————————————————–

Mark Gomes;Pipeline Data;Founder & CEO, [59]

——————————————————————————–

Now it's more apparent than it was yesterday. Great job guys I really appreciate the time and congratulations.

——————————————————————————–

Timothy C. Huffmyer, Smith Micro Software, Inc. – VP, CFO, Treasurer & Secretary [60]

——————————————————————————–

Thanks, Mark.

——————————————————————————–

Operator [61]

——————————————————————————–

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

——————————————————————————–

Charles B. Messman, Smith Micro Software, Inc. – VP of IR & Corporate Development [62]

——————————————————————————–

Well, again, I want to thank everyone for joining us today. We're, obviously, very excited here at Smith Micro. Should you have any other questions, please feel free to reach out to us here, and we'll look forward to speaking to you on our next conference call. Благодаря. Have a great day.

——————————————————————————–

Operator [63]

——————————————————————————–

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


Source link