Smith Micro Software(US:SMSI)2023-11-09 01:26Financial Data and Key Metrics Changes - The company reported revenue of $11 million for Q3 2023, a decrease of approximately 6% compared to $11.7 million in Q3 2022, but an increase of 6% from the previous quarter [56][31] - Non-GAAP pretax profit for Q3 2023 was approximately $700,000, compared to a non-GAAP net loss of approximately $4.9 million in Q3 2022 [59][60] - Gross margin improved to 77% in Q3 2023 from 69% in Q3 2022, with gross profit increasing to $8.5 million from $8.1 million year-over-year [58][34] Business Line Data and Key Metrics Changes - Family Safety revenue decreased by approximately $500,000 or 5% year-over-year, primarily due to a reduction in Sprint Safe & Found revenue, but increased by $400,000 sequentially from Q2 2023 [26][31] - CommSuite revenue was $700,000 in Q3 2023, down by approximately $300,000 compared to Q3 2022, attributed to a decline in DISH revenue and legacy Sprint deployment [35] - ViewSpot revenue grew to approximately $1.1 million in Q3 2023, an increase of $100,000 year-over-year and $200,000 sequentially, driven by a new contract with a U.S. mobile virtual network operator [36] Market Data and Key Metrics Changes - Year-to-date revenues through September 30, 2023, were $32.3 million, down from $37.1 million in the same period last year, primarily due to declines in legacy Safe & Found Family Safety revenue [34] - The company expects consolidated revenues to decrease by 18% to 23% in Q4 2023, largely due to the decline in Verizon Family Safety revenues as the contract concludes [57] Company Strategy and Development Direction - The company is focusing on leveraging AI and machine learning to enhance family safety solutions and simplify SafePath deployments to capture broader market segments [32][46] - A new global deployment model, SafePath Global, is being introduced to accelerate penetration among Tier 2 and Tier 3 providers, particularly in high ARPU markets in Europe [67] - The strategic focus remains on family safety, with plans to introduce SafePath Premium in 2024, which will include features to monitor and alert parents about harmful content on social media [81][82] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth, particularly with the AT&T relationship, and indicated that significant marketing initiatives are planned for 2024 [79][78] - The company is observing increased demand for consolidated super apps and anticipates that more than half of the global population will be daily users of such applications in the coming years [80] - Management noted that the macro family safety market is evolving due to rising concerns about safety and security, both online and offline [45][46] Other Important Information - The company reported cash and cash equivalents of $8 million as of September 30, 2023, with cash flows from operations of approximately $1.5 million during the quarter [43] - GAAP operating expenses for Q3 2023 were $10.7 million, a decrease of 35% compared to Q3 2022, reflecting the company's aggressive cost-cutting measures [39] Q&A Session Summary Question: What is the expected revenue trajectory in Q4? - Management expects a decline in revenue due to the end of the Verizon contract, with no revenue anticipated from that contract in December [10][57] Question: Can you provide insights on the ViewSpot contracts? - One ViewSpot contract was terminated immediately, resulting in a loss of several hundred thousand dollars in revenue for Q4, while another contract will continue until the end of the year with a transition period [73] Question: What are the expectations for the AT&T relationship moving into 2024? - Management is very bullish about the AT&T relationship, with several initiatives planned for 2024 that are either approved or in the final approval process [79] Question: How is the company addressing competition in the family safety space? - Management noted an increased awareness in the family safety space rather than direct competition, as carriers are required to enhance their offerings due to regulatory pressures [106]