Q4 2020 Smith Micro Software Inc Earnings Call
[music].
Good day and welcome to the Smith Micro fourth quarter 2020 earnings conference call all participants.
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After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two.
Please note this event is being recorded.
I would now like to turn the conference over to Charles Messman, Vice President of Investor Relations and corporate development. Please go ahead.
Thank you operator, and good afternoon, everyone. We appreciate you joining us today to discuss Smith micro software's financial results for the fourth quarter and year and for our fiscal 2020 year ended December 31, 2020.
By now you should have received a copy of the press release with the financial results.
If you do not have the copy and would like one please visit the Investor Relations section of our website at Www Dot Smith micro Dot com.
On today's call the of Bill Smith, Chairman of the Board and President and Chief Executive Officer, and Tim Hoffman, Our Chief Financial Officer.
Please note that some of the information you'll hear during our discussion today will consist of forward looking statements, including without limitations those regarding the company's future revenue and profitability new product development the market opportunities operating expenses the company cash reserves, the announced planned acquisition of the family safety mobile business from them.
Net.
And how the acquisition and the impact of Smith, Micro's business strategy operations, and the financial position going forward.
And the launch of our underwritten public offering of common stock.
The proceeds of which will primarily be used to fund the acquisition for the back.
Forward looking statements involve risks and uncertainties, which could cause actual results.
For trends to differ materially from those expressed or implied by our forward looking statements.
For more information please refer to the risk factors included in our recently filed 10-K and the plenty of prospective supplement filed with respect to the public offering.
Smith micro assumes no obligation to update any forward looking statements, which speak to our management's belief and assumption on the ends of the date they are made.
One of the pointed out that and our forthcoming prepared remarks, we will refer to certain non-GAAP financial measures.
Please refer back to our press release disseminated earlier today for the reconciliation of the non-GAAP financial measures.
But that's out and now I'll turn the call over to Bill Doyle.
Thanks, Charlie Good afternoon, everyone and thank you for joining us today for our 2024th quarter and year end earnings Conference call overall, I am very pleased with what the team at Smith micro accomplished in 2020, let's take a look at the results which came in line with our expectations.
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For fiscal 2020 total revenue from operations increased 18% the $51 3 million.
Compared to $43 3 million reported in fiscal year 2019.
For the fourth quarter of 2020 revenue increased slightly to $12 4 million when compared to $12 3 million earned and the fourth quarter of 2019.
Non-GAAP net income for 'twenty, and 'twenty fiscal year was $10 $4 million or 24 cents per share.
And for the fourth quarter non-GAAP net income was 1.4 million or three cents per share.
Importantly, we achieved continued positive cash flow from operations of $7 9 million for the year.
As with everyone 2020 was a challenging year the global economic shutdowns caused by the COVID-19 pandemic definitely had an adverse effect on our business as the months long closure of carrier retail stores temporarily paused a strong red.
The new pipeline for our business.
Our largest customer sprint also completed its merger with T. Mobile U S also and important for Smith micro of customer and action, which initiated the integration of the two very large complex businesses the.
This had an impact on our revenue growth as well.
We made a strategic decision in 2020 to significantly increase R&D spend in order to accelerate the integration of the code base gain three of the circle acquisition into our sales path platform.
This strategic investment and enables us to bring sales path.
The market in November of 2020.
Through the integration efforts. We also launched several new significant features to the platform, including sales path drive and safe at home.
Not only did we complete this enormous undertaking and less than nine months amidst the uncertainty and unique challenges posed by a global pandemic, we remain profitable and cash flow positive.
This achievement sauce exit fiscal 'twenty, and 'twenty with a strong balance sheet and more than $25 million in cash and positioning the company for a fantastic 2021.
But theres still more.
I assume that you have seen the exciting news that we announced earlier today regarding what we believe is truly a transformational acquisition of the family safety and mobile business from Avast plc, which includes location labs, our largest competitor in the mobile operator space.
The cost of the transaction is $66 million, which includes a combination of both stock and cash.
And we expect will be immediately accretive.
This acquisition and five mobile operator contracts to our customer portfolio, including Verizon and two European carriers, along with the set of legacy products supporting T mobile sprint and AT&T.
While the legacy business brings important new relationships. The Smith micro and is experiencing surprisingly low churn rates from a valuation standpoint, we significantly discounted the legacy revenues, while applying a multiple to the core business only.
For 2021 of the core business is expected to generate between 18 million and $19 million of recurring revenue and we expect that to grow from there going forward.
We received very positive feedback from the new customers gained through the acquisition.
This is a critical upfront accomplishment and that will pave the way for productive work relationships as we work with these carriers to deliver world class family safety solutions to their users.
The acquisition will add more than 140 employees located in both the U S and Europe to the Smith micro employee base, combining what we believed to be the two most talented and experienced teams and the world when it comes to White label digital safety.
Solutions and firmly positioned Smith micro and the worlds number one family safety SaaS provider to wireless carriers globally.
We are also very excited about the go forward collaboration agreement with Vos and it is a partnership that will enable both businesses to penetrate the operator focused Iot security and family safety markets on a global scale.
Needless to say, reaching an agreement with the boss on the strategic collaboration was it was a critical component for both parties to get this deal done.
I can truly say both companies went above and beyond to bring this complex multifaceted deal to fruition and the very short period of time.
I am sincerely grateful for these contributions and see the steel is transformational for Smith micro as future business case and revenue potential.
Lastly, before I turn the call over to Tim I must mention we also put out a third press release today at the close of market announcing the launch of the follow on public offering for $62 million.
We believe this is of great opportunity for existing and new shareholders to be of part of the next chapter and Smith Micro's success story.
And frankly, we may have set a record for the number of filings made in one day. It certainly is for us.
With that said I'm going to turn the call over to Tim now to review, the 2020 financial results and provide more details on the acquisition.
Afterwards, I will talk more about our go forward plans for the Newco that unites Smith micro with the Abbas family safety.
Tim.
Thank you Bill before we review the results for the fourth quarter and fiscal year, 2020, Let's review some further details on the recently announced the acquisition.
We entered into a definitive agreement with the boss and certain of its subsidiaries to acquire substantially all the assets of their family safety mobile software business, including certain liabilities.
Along with all of the membership interest of location Labs L. L. C. A U S based subsidiary.
Further to Bill's comments the family safety Mobile software business will include the purchase of application source code license rights to shared source code and the.
The ownership and licenses to a patent portfolio.
The acquisition includes five mobile operator contracts, which are mostly U S tier one contracts and and the vast partnership to joined forces and further service current and potential customers together.
The U S tier one contracts are comprised of one large recently renewed contract and several legacy product contracts with declining revenue as those customers are phasing out location labs.
With some carriers moving on to the safe that platform.
In order to service these new customers and the separate product offerings, we will acquire approximately 140 employees from of Vos. Those employees are located in the United States, and Serbia, which our existing locations for Smith micro and the Czech Republic and Slovakia.
Which will now become two new strategic European locations.
All of these markets provide and impressive talent pool necessary to continue Smith micro's product development and growth.
Total consideration for the acquisition will be $66 million, which can be satisfied and cash and company issued stock.
We currently expect the stock consideration too of boss to be approximately $10 million.
There will also be and escrow funded from purchase price to secure indemnification and other post closing obligations.
Additionally, there is an earn out which will be paid based on revenue performance of one particular U S. Tier one contract that is near end of life and if renewed within the next year.
Also announced this afternoon was the launch of a $62 million.
Public offering to fund the cash portion of the consideration and for general corporate purposes.
Profile for a month for the offering Smith.
Micro will continue to operate with a strong balance sheet with an estimated $25 million or more of cash and no debt.
The acquisition is expected to close early next quarter.
Today within the public offering launch the abbreviated financial statements for the family Safety Mobile software business was filed which includes a historical view of the revenues and asset <unk>.
Quired for.
The liabilities assumed and direct expenses as you will see this business has experienced an 18% revenue decline from 2019 to 2020 and partially.
Partially due to the previously mentioned the legacy relationships for Smith micro is currently replacing the location labs installations.
As Bill mentioned, our valuation of the business significantly discounts the legacy revenue streams.
While the non legacy portion of the business is expected to grow nicely post closing.
Legacy revenue should continue to trend down into 2021.
The direct expenses do not include any facility or administrative support costs.
These costs will be evaluated and added as needed to support the new operations.
And its micro is thrilled to have this opportunity to work with the family safety mobile software team from of Vos and increase our customer portfolio.
Now, let's cover the financial details of the fourth quarter and fiscal year 2020.
For the fourth quarter, we posted revenue of $12 4 million compared to $12 3 million for the same quarter last year and increase of 1% when compared to the third quarter of this year revenue was down 2%, which was within the guidance provided.
For the fiscal year revenue was $51 3 million compared to $43 3 million last year and increase of 18% the.
The increase in revenue compared to last year was a result of the safe path platform growth some of which was related to the circle acquisition earlier in 2020.
Comm suite and new spot were relatively consistent year to year.
During the fourth quarter of 'twenty, and 'twenty safe path decreased 9% to $6 1 million compared to the fourth quarter of last year and decreased 10% sequentially compared to the third quarter of this year the.
This decrease was within the guidance range provided.
For the fiscal year, 2020 safe path increased 58% from $17 8 million in 2019 to $28 1 million in 2020.
The primary reason for the sequential decrease and safe path revenue was related to a reduction of in store marketing initiatives for safe path, reducing the number of new subscribers.
And the reduction of in store marketing.
Is mostly due to merger activities between T mobile and sprint.
Earlier, this year and COVID-19, Cosmos sprint stores to shut down and when those stores reopened post merger the marking initiatives did not focus on the sprint products.
And the coming quarter based on the current status of the marketing initiatives and the current subscriber activity through February we expect safe path to be down 7% to 12 per cent compared to the fourth quarter.
This guidance assumes the current subscriber trending continues through the first quarter of 2021.
We remain excited about the new safe path opportunities and are encouraged by continued progress on the launch of a new T mobile offering expected in the coming quarters.
During the fourth quarter of 2020 comp suite platform revenue was $4 8 million, which was consistent with the fourth quarter of last year revenue.
The revenue from the comp suite platform increased 5% sequentially compared to the third quarter of this year. This increase was higher than expected and outperformed the guidance provided.
For the fiscal year, 2020 Comm suite platform revenue decreased 3% from $18 7 million in 2019 to $18 2 million in 2020.
The current quarter increase was due to better than expected performance and seasonal advertising revenue, resulting in AD revenue of approximately 500000 offset by an expected sprint subscriber decline.
We continue to navigate the T mobile sprint merger as subscribers now have an option to move from sprint the T Mobile network for voice services as the subscribers transition from the Sprint network, we expect a natural decrease and sprint comm suite subscribers to continue.
Yeah.
As a reminder, boost formerly owned by Sprint is now part of the dish and comprised approximately 25% of the comp suite platform revenue.
We look forward to expanding our relationship with dish and the future, including the goal to increase boost comp suite subscribers.
During the first quarter of 2021, we expect comps we platform revenue to be down 5% to 10% compared to the fourth quarter.
This range includes an increase and the boost subscribers a day.
Decrease and the sprint subscribers and assumes advertising revenue returns to a normal run rate of approximately 200000.
These spot revenue was approximately $1 4 million for the fourth quarter of 2020 up 146% compared to the fourth quarter of last year and up 18% compared to the third quarter of this year.
This increase was higher than expected and outperformed the guidance provided primarily due to higher volume of variable revenue with our tier one U S customers.
For fiscal year 2020 of these spot revenue was $4 2 million.
And was consistent with 2019.
As we released last week during the first quarter of 2021, we launched a new view spot of customer in Europe.
Offsetting this new customer. Unfortunately, we were notified that AT&T, Mexico has chosen to not renew the view spot platform. As a result of continued store closures due to COVID-19.
We look forward to supporting this customer and the future has in store activity returns.
As a reminder, we separate the spot revenue into two categories of fixed and variable the fixed portion of the revenue is related to license fees and is generally the recurring component of the revenue.
And the variable portion of the revenue.
And is related to device and promotional campaigns, which are short burst of activity, resulting in revenue.
And the volume is less predictable.
Based on our current outlook, we expect the use spot revenues in the first quarter to be lower by 25% compared to the fourth quarter. This decrease is primarily related to our near term visibility of variable revenue.
For all of the reasons discussed with our three products. We expect total revenue for the first quarter of 2021 to be lower by approximately 9% to 14% compared to the fourth quarter of 2020.
For the fourth quarter gross profit was $11 million compared to $11 3 million. During the same period last year gross margin was 89% for the fourth quarter compared to 92% last year.
For the fiscal year gross profit was $46 1 million compared to $39 4 million during the same period last year gross.
Gross margin was 90% for the fourth quarter year to date compared to 91% last year.
GAAP operating expense for the fourth quarter was $11 million and increase of $3 4 million or 44% compared to last year.
GAAP operating expense for the fiscal year was $42 6 million and increase of $13 3 million or <unk> 45 per cent compared to last year.
Non-GAAP operating expense for the fourth quarter was $9 5 million and increase of $2 5 million or 36% compared to last year.
And non-GAAP operating expenses for the fiscal year was $35 7 million and increase of $9 million compared to last year.
The increase and the fourth quarter non-GAAP operating expense compared to last year is primarily related to an increase of $1 9 million for compensation and employee related expenses as headcount increased 29% year over year, resulting in 255 employees at the end of the fourth quarter and.
And increase of 600000 for third party contract development costs. These costs are variable and allow us flexibility to increase or decrease the number of engaged resources.
The fourth quarter non-GAAP operating expense of $9 5 million was comparable to the third quarter and consistent with the guidance we provided.
The mix of the operating expense was slightly different debt during the fourth quarter, we reduced the amount of third party contract development costs and increase the employee run rate costs as we continue to face and employee costs throughout the quarter.
We expect the first quarter of 2021, non-GAAP operating expenses to be less and the fourth quarter by approximately 200000.
This expectation includes a reduction of third party contract development costs.
And consistent employee run rate costs.
The increase and the fiscal year non-GAAP operating expenses compared to last year is primarily related to an increase of $6 3 million for compensation and employee related expenses as headcount again increased 29%.
And an increase of $2 3 million for third party contract development costs.
The non-GAAP net income for the fourth quarter was one 4 million or <unk> <unk> diluted earnings per share compared to a non-GAAP net income of $4 3 million or 10 cents diluted earnings per share of last year.
The non-GAAP net income for the fiscal year was $10 $4 million of 24 cents diluted earnings per share compared to a non-GAAP net income of $12 8 million or <unk> 35 diluted earnings per share last year.
Within the recently issued press release, we have provided a reconciliation of our non-GAAP metrics to the most comparable GAAP metric for the fourth quarter. The reconciliation includes the following adjustments stock compensation expense of 812000 intangible amortization of 715000 and.
And a gain on sale of the Mojo animation software of 711000, and some of which are non cash adjustments.
For the fourth quarter year to date the.
The reconciliation includes the following adjustments stock compensation expense of $3 1 million intangible amortization of $2 9 million acquisition cost of 918000, and a gain on the sale of the boho animation software of 711000, and some of which are non cash adjustments.
Due to the cumulative net loss over the past few years, our GAAP tax expenses, primarily due to certain state and foreign income taxes for.
For non-GAAP purposes, we utilize the zero percent tax rate for 2020, and 2019 and the resulting non-GAAP tax expense reflects the actual income taxes paid each period.
This does conclude my financial review and now back to you Bill.
Thanks, Tim since Tim has provided color on our three core products and I won't spend time on them on this call instead I will concentrate on the acquisition as I am sure you had many questions.
Let's look at the acquisition from the 30000 foot perspective, why we did the deal and how we see it as transformational for Smith micro.
The acquisition of the Airbus family Safety, and mobile business, clearly physicians Smith micro and globally as the number one family safety software provider to wireless carriers.
To give you some perspective on market size, and where we see opportunity we estimate that the total annual carrier revenue from digital safety solutions was approximately $1 $1 billion and 2020.
This value is projected to nearly double to more than $2 billion.
In 2023.
The transaction is immediately accretive and further diversifies our customer base.
We believe the the collaboration agreement and we now have in place for the boss will create significant new growth opportunities for Smith micro as it enables us to further penetrate our carrier accounts with new Iot security offerings that complement our family safety portfolio.
The vast family safety and mobile business has its roots in the location labs technology platform.
Each of US acquired through its merger with AVG technology and 2016.
Location labs pioneered mobile safety solutions for the carrier market and holds the number of patents covering various mobile technology innovations, including Geo location.
The business unit, we are acquiring employs more than the 140 individuals which are based in Slovakia, and Serbia, and the Czech Republic, and Europe, and in Emeryville, California, and the U S.
When compared to our space path connected lifestyle platform of Vos family safety Mobile product line has the very complementary feature set and customer base.
Once the acquisition closes it is our plan to operate safe path and the acquired family safety as two separate product lines and the interest of making this consolidation and easy for our customer base to digest and and the interest of putting the needs of our customers first.
And.
This approach, which is different from the full integration we completed after the circle of transaction in 2020 will enable a seamless transition and the near term as we learn more about the acquired family safety platform is features the needs of our acquired customers.
And the platforms future potential.
We are confident that this is the best path forward as it will allow us to maximize revenues from existing carrier contracts, while we blend both talent teams over time to optimize the future of our family's safety portfolio.
While this approach will take time, we feel it is necessary to successfully combine the experience and market presence of the vos was the knowledge expertise and market leadership of our safe path team.
Just as important this acquisition will also benefit of Smith micro from a customer marketing and user acquisition perspective.
And as underscored by the retail closures of 2020 due to the pandemic did.
Digital customer acquisition has never been more important.
And I blending the talents and experiences and strategic relationships of our combined teams, we will optimize the efficiency and bottom line impact of our digital product marketing efforts.
Plus Mr. Micro and has successfully completed many transactions over the years. This is our largest one to date.
I couldnt be happier that both sides of benefiting so much from this acquisition.
Overall 2020 was the very successful year for Smith micro and as we remained profitable generated cash from operations and grew year over year revenue.
And on top of these achievements, we diversified our carrier customer base by signing multiple new Greenfield contracts for both Sage and view spot opportunities that are loaded with the expansion potential.
We acquired circle's, operator business of deals that strengthened our competitive position and the family safety market accelerated our sales path roadmaps and generated more than $4 million of revenue during this during the fiscal year.
By successfully integrating circles Gresham controls and the safe path. We made good on our vision to bring a full featured family safety solution to the market.
We also greatly expanded the utility and total addressable market for our view spot platform.
And investments and enables us to sell diverse flavors of the platform based on the specific needs of.
Of the carrier.
As you can imagine I am very confident regarding our business case and competitive position as we move into 2021.
Which has been significantly expanded with the acquisition of the of Vos family safety mobile business.
Once the deal is complete we will of added horizon to our family's safety customer list positioning us as the dominant player in the United States.
The acquisition and will also accelerate our vision of European expansion of region. The signifies great upside for Smith micro as we broadened our operator focused family safety business on a global scale.
Armed with an impressive customer portfolio extensive financial resources.
And at a diverse sales pipeline and a talented global staff of professionals Smith micro is poised to sort of even greater heights and 2021.
With that said I will open the call for questions operator.
We will now begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing of the keys to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from Josh Nichols with B Riley. Please go ahead.
Hi, Bill well first off congratulations on the accretive the location lab announcement coming out of this afternoon.
And I did want to ask because I think you hit on it briefly could you provide us the also with a little bit of and update on T mobile and the opportunity that represents for the company as we think about the back half of this year really longer term in 2020 two as well.
Okay.
Sure Josh that things are going really well with T mobile a lot of planning going on.
Lots of joint meetings between our team and the T mobile team Wade.
We continue to look for a launch of the new safe past, seven operating which will be called family mode.
And that the that product will launch mid mid year as planned.
We are quite excited about it we think that this will allow cheap T mobile to really start to focus on the a single family safety offering going forward I think the fact that we have now just announced the acquisition of the avast product as well and we'll make it even simpler.
<unk> and El <unk>.
On the T mobile standpoint to get all of their various offerings unified with the new safehouse seven.
I think this is going to be just a great opportunity, we look for super growth out of out of T. Mobile as we head into the back half of 'twenty one and.
And we expect some really big outcomes going forward.
Clearly T mobile's carrier with a lot of energy a lot of excitement a lot of growth and we're really pleased to be part of it and we think that.
And the family most Rio is just kind of the a fabulous offering.
Thanks for providing some additional color on the good to hear things on providing on track there.
And also you did mentioned a really interesting collaboration agreement here with the strategic partnership could you talk a little bit about really the opportunities that that could create for Smith micro, particularly since the boss has a lot of carrier relationships and a really strong presence, particularly in Europe.
Yeah, we're really excited about this as well.
And you know early on and the conversations with the vast the some of the early talks where between myself and my counterpart, there and one of the entre.
The final question and then we got into with.
You guys are and the Iot space.
Do we compete and explain to them what we did that we viewed the digital family lifestyle and being not only family safety, but bringing it all of the new <unk>.
Wearables.
Consumer Iot devices, and then from a single App you could run the whole thing and he goes wow, okay that you're taking a totally different approach. Then we are what we're looking at from a consumer Iot standpoint is the safety of and the C security and.
And keeping the home networks, the secure and I think two of them. I said you know I think we have just identified area, where we can partner not compete and we both really thought this was a great idea. We had expanded that three of the process and I think that we look forward to.
Joining hands, yes.
As we really look at the how to.
Service, the wireless carriers and the cable msos going forward, they need both family safety and the device and.
Securities, where the device and network and we.
We leap family safety Daily security.
He joins hands and working together, we can create amazing products and we think this really will work out very well for us.
Thanks, Bill and congrats again on a pass the baton and let someone else ask some questions.
Thanks, Josh.
The next question is from Scott Searle with Roth Capital. Please go ahead.
Hey, good afternoon, and thanks for taking my questions and congratulations on the deal.
Hum.
Thanks Pete.
Real quickly and in terms of the advanced model I just wanted to clarify. Unlike circle of asked is the subscription of per user driven model is that correct and then I think you referenced as well that of Boston.
As there are some European relationships that come along with it I don't think you've named the carriers, but could you give us an idea in terms of the size of some of these carriers are these pan European carriers, and how should we be thinking about that.
Yeah, Okay, let's let's take the first part of your question there Scott Yes.
The.
Marketed in a mode of very compatible with US It was all of a.
And so subscriber of monthly fee so as the SaaS model it's recurring.
It is just very consistent with how we do business.
So that works very very well.
There are a couple of carriers that will be joining our lineup as a result of this transaction of.
First off of the.
And the Vodafone check.
Yes.
The group will the offering family safety and and B using our software going forward as well as wintry part of the Hutchins and growth.
In Spain, and Italy, and they also will be working with us so.
Thats the nice add to our lineup of carriers and we look for many many more and the European market and even beyond that I mean, we're also very heavily focused on the middle East and.
A few weeks ago, we announced the launch at origin of.
Of our of our safe path product and.
And it's often running and I think theres a lot of energy there and we think theres a lot more opportunities and the middle east as well. So when you combine the middle East where the European markets. We just see some really significant growth going forward and we think this transaction helped us quite quite quite a bit.
Hey, Bill just to quickly follow up on that and then I'll get back in the queue, but just in terms of the pipeline you referenced a little bit off of that with the overdue.
And you announced I think of couple of weeks ago, you've had tell us you've got dish now starting to ramp up as well I'm wondering if you could talk a little bit about the pipeline how broad it is and I know, it's early but looking at the competitive landscape now you've consolidated the North American landscape.
What is the rest of the European continent look like in terms of the competition out there or is it going to be mostly greenfield opportunities that you are chasing as it relates to the save per family of products.
Sure.
Look I think.
We will find many greenfield opportunities, but we also think we can find somewhere.
They've had some efforts under underway. So we're looking at both the top.
And in the last call that we had signed the.
For the carrier contracts won and the and the.
The spot area.
Put of release out of talking about it we weren't able to name names.
And still can't really because that's the <unk>.
Wishes of our customer is often running and we think it's just the first country.
Three large European carrier. So we look for growth off of that we also talked about the fact that we and sign deals with three new safe have customers or dealers now named and out there and the others are in process on that.
The convinced yet and we're going to be able to give you the names.
Hope, we can and you'll just have to stay stay tuned, but things are going quite quite well, we're pretty excited about where we are in general and clearly, adding the of us business.
The locations Labs is the company that started all of this years ago and they owned the all of the U S carriers of one one point.
We now as a result.
He'll have control of all of them.
And our size so.
Pretty excited about the whole thing.
Great. Thank you.
The next question is from Eric Martin Newsy with Lake Street. Please go ahead.
Yes, I had a question about the revenue I think you said $18 million to $19 million is that a 2021 full 12 months year or is that the remainder of assuming and early Q2 close.
Yes, Eric 18th and 19th $19 million of reflects the.
The forecast that of us had.
Given us for the entire year, obviously, we will have a portion of that you are not all of it we do expect to close the index the.
30% to 45 day, so it's kind of looking like some time in April and so we'll have to prorate debt.
And that's the go forward revenue of that is recurring of.
There will be still some legacy revenue and.
We will hope to you know the.
Maximize that clearly from a valuation standpoint, the valuation of the business was solely based upon the recurring revenue going forward. The legacy revenue was completely discounted out.
Okay. So just kind of a blunt instrument on.
EV to Rev. As we're talking $6 6 million.
Over the $18 million to $19 million of debt, which are the point you're making.
Okay, Yes, that's correct Gary.
Okay.
Thanks Charles.
I wanted to dive into the the customers that you picked up here, obviously, we're getting five mobile operator contracts, you mentioned, Verizon and the two EU carriers, which of named.
You mentioned T mobile sprint and then you mentioned the AT&T.
You also mentioned that the revenues and decline in 'twenty.
Within decline in 2020 versus 2019.
Can you give us any detail on where the decline was coming from and it's and expect it to does the 2021 revenue outlook that you gave color on deferred.
And that included.
And the decline further decline.
And when does the business kind of base I guess theres a couple of questions.
Sure.
First of all there was a decline for of US from 19 to 20 of about 17%.
The decline was really led by.
Our efforts.
And at T Mobile sprint.
T mobile sprint was basically leaving there there are there.
The business that they were doing with avast.
And it was probably it was just on the wind down mode.
Ours was growing so that negatively impacted them.
The one nice thing to point out is there the current contract with Verizon was just recently re upped and.
So it's a multi year contract and we look forward to a long and prosperous.
Business relationship with Verizon.
AT&T. We do also include and the legacy cap category, and we will be working with.
And <unk> to try to understand better their their goals going going forward.
Is that $18 million to $19 million and 21 include some AT&T reported.
Net not include AT&T and no debt all of the eight of the.
$18 million to $19 million or the ongoing revenue. So that's the revenue is from Verizon as well as the European carriers Gotcha.
Gotcha Okay.
And then just curious to know from the customer's perspective, I'm, assuming you reached out and touched on five of these mobile carrier the contracts here.
You mentioned that they were excited to hear about your arrival.
And obviously that introduces some uncertainty what can you tell me about why they are excited about.
On the transaction.
I think going into this tranche transaction, we were all of them already recognized as the leader and the space.
With this transaction being closed.
It's the.
We are the dominant player in the space and from a wireless carrier.
And now have across the board the nub.
On player as their vendor and part partner I think is reassuring.
I think the fact that they see us investing so heavily and the family safety space less of them know that we're here for the for the long haul and that we can really work for them to grow their overall subscriber base and in doing so increase the revenues for both us and our customers I think that debt.
Really bodes well I think when you look at the.
The roadmaps going forward that the carriers really can see how there is some real vision for this market and I think that that's something they can get excited about now and we've added over 140, new folks from a boss, which gives us even more depth.
And more capabilities than we had for I think thats reassuring as well so.
I think they were very impressed I think that they are very pleased to see that there is now a dominant leader and the space of dominant leader with the girth the expertise the wellbeing to actually really grow the space and I think thats.
And it gets some fire it up.
Jim.
Okay. Thanks for taking my questions and congrats on the transaction announcement.
Thanks, Eric.
The next question is from Jim Mcgilvery with Bradley Woods. Please go ahead.
Alright, Thank you and good evening.
A little bit on a few questions on the hey, guys. A few questions on the on the other parts of the business Tim The Tom Sweet.
Revenue has continued to surprise on the upside is this a function of you just being conservative or is it a function of the stores not being opened and you know maybe less.
Churn or.
And what some.
Okay.
Can you talk about why we've been consistently surprised there.
Sure Yes.
Yes.
Go ahead go ahead.
Yeah.
Yeah Jim.
So this quarter was related to seasonal ad revenue.
And it's one of the best quarters, we've ever had and and many years anyway. So that was the.
Unusual item that we couldn't have predicted we do expect that the sprint base will continue to be on that glide path down that I've talked about throughout the year and.
And we're hopeful that we will continue to build the boost side of the business, maybe not complete offset on the sprint decline, but we're going to try.
And those of the components really of that comp suite revenue.
And actually it's yes. It is both but it's also going to.
Get the help I think from the from the dish postpaid business as they start to launch that sometime this year or so.
And we're pretty excited about partnering with dish going forward.
And the let's see what we can really really do with comp come suite at dish.
And.
And the view spot.
The customer that you picked up can you characterize the size of that customer in terms of subscribers relative to the AT&T, Mexico subscriber for customer you lost.
Yes.
I think the AT&T, Mexico lost by the way is just the momentarily.
The problem that's caused by the fact that their stores just can't reopen.
I think once they can get to some.
Stability and Mexico with the Pan pandemic, and then get the stores back and open I think there's excellent chance that they'll come back and Reengage with us, but let me ask of your question the <unk>.
Carrier that we're doing business with in Europe and us.
One of the very largest multinational carriers in Europe, we are launching and one of their prime target countries. Once it is very.
And often use to test new products and new Tech technologies.
It is going very well and hopefully that trend continues because typically if it goes really well and the first country. They will look to of plants and deploy it.
And the broader plat platforms. So it should be a driver for growth going forward.
Also think that as a great reference accounts in Europe, where we see a lot of activity for view spot and we think the it could lead to additional carrier wins.
Throughout 'twenty, one and into 'twenty two so we think that few spot general has a.
Very nice growth profile, we think its a product as the pandemic starts to wind down as we all get our shops and we can start to work through this.
Think theres some nice growth there I would not say, it's as big as the growth potential for family safety I think safe to say that just has a huge total addressable market and.
Should really drive the growth of the new Smith Smith micro immensely going forward.
And my last one.
I think it's a similar to what Scott was trying to get at is are there are there large.
Our product lines are of companies out there and maybe sort of in Europe, or the or the Asian markets that are.
Net or potential acquisitions for you or is this going to be more of the.
Building up the business from the ground up.
Okay. So whats your it was other products that we might want to.
Getting into this the fit our SaaS value added service model established yeah, that's fair enough yes.
Yeah, Yeah, I think that's the percentage of rephrase it for.
Okay fine right now.
And now I guess, what's your question is of.
And.
Yes look we have demonstrated that we have been very acquisitive.
We've done two significant deals and.
And the last 14 months now between the circle acquisition and the first quarter of 2020 and out of the Avast acquisition.
Now.
We are really trying to solidify the family safety market.
But we are also always looking for other opportunities, but there is very careful criteria that we apply.
We are we are looking for opportunities, where we can enter and market segments, where we can be either of the number one or the number two player and the marketplace.
So we would not and for instance, just.
And Oh by the way there is a very strong non compete BT.
<unk> us and our boss of we would never ever attempt to get into the.
The security market, but it would never fit that model. If we were to enter the security market and we'd be you'll never six seven or eight that is not the place you ever want to be so we are always looking for new opportunities.
Have a number that we have started conversations on but there's nothing that we're at a point that we really want to talk about I think we have a handful now we need to digest.
Digest this acquisition it is probably the largest one and.
And our 38 years.
History, and I think it has the most incredible upside of any of the deals. We've done so I think I'll be happy getting this one done and get it done right and get a bunch of really happy customers and get a bunch of new customers, but yes, we'll be looking at other opportunities.
But we do one of the at the top of the heap. There we do what the wanted the number of water and number two.
Alright, very good thanks, a lot guys good luck with everything.
This concludes our question and answer session I would like to turn on the conference back over to Charles Messman for any closing remarks.
Okay I want to thank everyone for joining us I know this was a little bit of a longer of a call can be on a lot to talk about but should you have any questions.
Going forward, please feel free to reach out to us and.
And we'll look forward to talking to you and the near future I Hope everyone has a great day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yes.
[music].
And so forth.
[music] moving forward.