Smith Micro Software(SMSI) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues from operations increased 81% year-over-year and 9% sequentially to $11.8 million for the quarter [4] - Non-GAAP net income from operations rose significantly to $3.2 million or $0.08 per share compared to $241,000 or $0.01 per share for Q3 2018 [4] - Gross profit for Q3 was $10.8 million with gross margins at 91%, up from $5.5 million and 85% respectively in the same period last year [16] - Free cash flow was strong at $5.9 million, with a cash balance of approximately $24 million, nearly double compared to last year [4][9] Business Line Data and Key Metrics Changes - Revenue from the wireless segment was $11.6 million, an increase of 85% year-over-year, driven primarily by the SafePath platform [11] - SafePath Family revenue grew by 38% sequentially, contributing $5.2 million for the quarter, exceeding expectations by 26% [4][12] - CommSuite experienced a slight decline in subscribers, with revenue decreasing sequentially by approximately 7% due to the launch of new iPhones [12][13] - ViewSpot revenue was $1.3 million for the quarter, in line with expectations, but faced a sequential decline due to decreased promotional campaigns [15] Market Data and Key Metrics Changes - The company anticipates continued growth in SafePath revenue based on ongoing marketing activities and expected seasonal trends [12] - The merger of T-Mobile and Sprint presents both risks and opportunities for the company, with potential access to a larger customer base [6][7] Company Strategy and Development Direction - The company is focusing on expanding its product offerings, particularly in the IoT space, with plans to enhance the SafePath platform and introduce new consumer IoT devices [29][30] - The strategy includes differentiating the ViewSpot product suite to reduce dependency on professional services and enhance recurring revenue streams [25][26] - The company is actively recruiting to support growth in all markets, particularly for ViewSpot and SafePath product development [18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth trajectory of SafePath and the potential for new subscriber acquisitions, particularly with the upcoming launch of new Android devices [13][29] - The company expects to finish the fiscal year strong, with operating revenues increasing 64% compared to the first three quarters of 2018 [33] - Management is cautious about Q4 due to seasonal factors affecting carrier focus on new subscribers rather than value-added services [54] Other Important Information - The company has seen a significant increase in cash reserves, with a $17.3 million increase in cash balance during the quarter [9][10] - Non-GAAP pre-tax income for Q3 was $4.2 million compared to $317,000 last year, indicating strong operational performance [19] Q&A Session Summary Question: Can you discuss traction with Sprint and Boost, and plans for IoT expansion? - Management noted that Boost is in a challenging position due to the merger, but SafePath growth is progressing, with expectations for consumer IoT devices to expand in 2020 [36] Question: What is the market opportunity with Sprint? - Management believes there is potential for millions of subscribers, with revenue growth driven by an expanding installed base [37] Question: What are the hiring expectations for the next quarters? - The company is looking to fill approximately 20 open positions and plans to pause hiring after reaching around 200 employees to evaluate future needs [38] Question: Can you provide more details on operating expenses? - Management indicated a couple of hundred thousand increase in operating expenses is expected for Q4, following the trend from Q2 to Q3 [42] Question: What is the impact of bundling on SafePath growth? - Management confirmed that growth has been driven by new accounts rather than conversions, and bundling has positively impacted growth [44] Question: What is the level of interest in the 5G router opportunity? - Management sees significant opportunities for mobile carriers to enter the home market, enhancing family safety through a unified application [46] Question: Will IoT have a meaningful impact on financials? - Management expects continued growth in IoT revenues into 2020, leveraging multiple approaches to engage carriers [55] Question: Will product changes in ViewSpot affect development costs? - Management confirmed that investments in engineering talent for ViewSpot are already accounted for in operating expense guidance [57]