Smith Micro Software(SMSI) - 2019 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues for fiscal year 2019 increased 65% to $43.4 million compared to $26.3 million in fiscal year 2018 [7] - Fourth quarter revenue increased 67% to $12.3 million compared to $7.4 million in the same quarter last year [14] - Non-GAAP net income for fiscal year 2019 was $9.8 million or $0.26 per share, compared to a non-GAAP net loss of $67,000 in the previous year [24] - Gross profit for the fourth quarter was $11.3 million with a gross margin of 92%, compared to $6.4 million and 87% gross margin last year [21] Business Line Data and Key Metrics Changes - Wireless segment revenue for the fourth quarter was $12.2 million, up 77% from $6.9 million last year, driven by SafePath platform growth [14][15] - SafePath revenue for fiscal year 2019 grew 435% to $18 million from approximately $3 million in 2018, with fourth quarter revenue of $6.7 million, up 28% sequentially [34][15] - CommSuite VTT revenue for the fourth quarter was $4.3 million, a 3% sequential increase, while annual revenue increased 15% to $17 million [16] - CommSuite Advertising revenue decreased 53% for the fiscal year 2019 to $1 million, with expectations for Q1 2020 between $100,000 and $300,000 [17] Market Data and Key Metrics Changes - ViewSpot revenue for the fourth quarter was approximately $600,000, impacted by competitive pressures and a delayed launch with AT&T in Mexico [18] - ViewSpot revenue for fiscal year 2019 increased 11% to $4.2 million [20] Company Strategy and Development Direction - The acquisition of Circle Media Labs is seen as transformational, enhancing customer relationships and expanding the technology portfolio [9][38] - The company aims to lead in the family digital lifestyle market, leveraging the SafePath platform and the new capabilities from the Circle acquisition [10][37] - The company plans to launch a new combined SafePath 7.0 platform in the second half of 2020 [39] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the opportunities arising from the Sprint and T-Mobile merger, as well as Dish Network's growth [11] - The company anticipates continued growth in SafePath revenue, with expectations of 10% to 20% sequential growth in Q1 2020 [16] - Management highlighted the importance of integrating the Circle codebase and expects to complete this by mid-2020 [49] Other Important Information - The company ended December 2019 with a cash balance of $28.3 million and plans to preserve capital while evaluating strategic alternatives for shareholder returns [13] - Operating expenses for the fourth quarter increased by 33% to $7.6 million, primarily due to increased expenses in the ViewSpot business and headcount growth [22] Q&A Session Summary Question: Clarification on SafePath-Circle growth guidance - Management indicated that approximately $500,000 of Circle revenue is included in the 10% to 20% sequential growth guidance for SafePath [44] Question: Expectations for Circle's revenue in 2020 - Management expects Circle's revenue to maintain an annual run rate of $4 million until renegotiated contracts are discussed [44] Question: Timeline for integrating Circle's source code - The integration project is expected to be completed in the next quarter, with testing and integration to follow, aiming for a product launch in Q3 2020 [49] Question: Operating expenses related to the Circle acquisition - Higher-than-normal operating expenses are anticipated in Q2 and Q3 due to code integration activities and aggressive hiring [53] Question: Guidance for CommSuite and potential revenue from Dish - Guidance is based on current run rates without assuming new significant wins from Dish [63] Question: Pricing dynamics between SafePath and Circle - The Circle deal is primarily fixed in nature, with some variable components, and pricing strategies will be evaluated as integration progresses [66]