Smith Micro Software(SMSI) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q2 2022 was $12.7 million, a decrease of approximately 20% compared to $15.9 million in Q2 2021, and flat compared to Q1 2022 [16][14] - Non-GAAP net loss for Q2 2022 was $5.1 million or $0.09 loss per share, compared to a non-GAAP loss of approximately $300,000 or $0.01 loss per share in Q2 2021 [26][27] - GAAP operating expenses for Q2 2022 were $17.5 million, a decrease of approximately $200,000 or 1% compared to the same period last year [23] Business Line Data and Key Metrics Changes - Family Safety revenue decreased by about $1 million or 9% compared to Q2 2021, primarily due to the attrition of legacy Sprint subscribers [17] - CommSuite revenue was $1.4 million, down approximately $2.5 million compared to $3.9 million in Q2 2021, with expectations of very modest revenue from legacy Sprint subscribers in Q3 2022 [18] - ViewSpot revenue was approximately $1.1 million for Q2 2022, an increase of approximately $300,000 compared to Q2 2021, and up approximately 16% compared to Q1 2022 [19] Market Data and Key Metrics Changes - The company expects consolidated revenue for Q3 2022 to be lower by 5% to 10% compared to Q2 2022 due to ongoing market conditions [20] - Gross margin for Q2 2022 was 71.5%, down from 78.9% in Q2 2021, with expectations of a decline in gross margin by 1% to 2% in Q3 2022 [21] Company Strategy and Development Direction - The company is focused on consolidating acquired technologies into the SafePath platform, aiming to reduce operating expenses significantly by Q1 2023 [12][33] - A strong marketing team has been built to promote SafePath, with a target of 3 million to 5 million subscribers per Tier 1 carrier by 2025 [34][35] - The company is working on enhancing the SafePath platform with new features to drive subscriber growth [36][37] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about a recovery in revenue growth in Q4 2022, driven by marketing efforts at T-Mobile and AT&T [50] - The company anticipates a significant reduction in operating expenses, with a target of over $3 million in savings by the end of Q1 2023 [12][52] - Management highlighted the importance of marketing initiatives to drive subscriber growth and stabilize revenue streams [41][42] Other Important Information - The company reported $5.4 million in cash and cash equivalents as of June 30, 2022, and announced a $15 million convertible note transaction to supplement liquidity [29][30] - The company terminated its Wells Fargo revolving credit facility in conjunction with the capital raise [30][46] Q&A Session Summary Question: Visibility on marketing campaigns at T-Mobile - Management indicated strong plans in place with both T-Mobile and AT&T, expecting successful outcomes from ongoing marketing efforts [50] Question: Timing of cost reductions - Management confirmed that the expected reduction of over $3 million in operating expenses would be fully realized by the end of Q1 2023 [52] Question: Updates on Tier 1 operators in Europe - Management stated that there is ongoing activity but no specific updates could be provided at this time [53] Question: Health of the consumer and appetite for family plans - Management noted that the marketing approach for SafePath is multifaceted, focusing on various channels to drive growth [58] Question: Focus on subscriber additions versus new services - Management acknowledged that while carriers focus on customer acquisition, there is still significant potential for selling value-added services like SafePath [62] Question: Clarification on CommSuite revenues - Management clarified that the legacy Sprint revenue stream is expected to decline significantly, while DISH revenues are anticipated to continue [66] Question: Clarification on subscriber numbers - Management confirmed that the 3 million to 5 million figure refers to family coverage, with expectations of achieving this by 2025 [75]