Q2 2024 Smith Micro Software Inc Earnings Call
Operator: Good day, and welcome to the Smith Micro second quarter 2024 earnings conference call. All participants will be in listen-only mode. To ask a question, you may press star, then 1 on your touchtone phone. To withdraw your question, please press star, then 2. I would now like to turn the conference over to Charles Messman, Vice President of Marketing. Please go ahead.
Speaker Change: Good day and welcome to the Smith Micro second quarter 2024 earnings conference call. All participants will be in listen-only mode.
Speaker Change: Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question, you may press star, then 1 on your touchtone phone.
Speaker Change: To withdraw your question, please press star then 2.
Speaker Change: Please note this event is being recorded.
Speaker Change: I would now like to turn the conference over to Charles Messman, Vice President of Marketing. Please go ahead.
Charles Messman: Thank you, operator. Good afternoon, everyone.
Charles Messman: Thank you, Operator, and good afternoon, everyone. We appreciate you joining us today to discuss Smith Micro Software's financial results for the second quarter and the June 30, 2024.
Charles Messman: We appreciate you joining us today to discuss Smith Micro Software's financial results for the second quarter and June 30th, 2024. By now, you should have received a copy of the press release with the financial results. On today's call, we have Bill Smith, our Chairman of the Board, President, Chief Executive Officer, and Jim Kempton, our Chief Financial Officer.
Charles Messman: By now you should have received a copy of the press release with the financial results.
Charles Messman: If you do not have a copy and would like one, please visit the Investor Relations section of our website at www.smithmicro.com.
Speaker Change: On today's call, we have Bill Smith, our Chairman of the Board, President, Chief Executive Officer, and Jim Kempton, our Chief Financial Officer.
Charles Messman: Please note that some of the information you will hear during today's discussion consists of forward-looking statements, including, without limitations, those regarding the company's future revenue and profitability, our plans and expectations, new product development and availability, new and expanded market opportunities, future product deployments, migration, and our growth through new and existing customers, operating expenses, and the company's cash reserve. Forward-looking statements involve risk and uncertainties, which could cause actual results or trends to differ materially from those expressed or implied by our forward-looking statements.
Speaker Change: Please note that some of the information you will hear during today's discussion consists of forward-looking statements including, without limitations, those regarding the company's future revenue and profitability, our plans and expectations,
Speaker Change: new product development and availability, new and expanded market opportunities, future product deployments, migration, and our growth by new and existing customers.
Speaker Change: operating expenses, and the company's cash reserves.
Charles Messman: For more information, please refer to the risk factors included in our most recent filing, Form 10-K. Smith Micro assumes no obligation to update any forward-looking statements, which speak to our management's beliefs and assumptions only as of the date they are made. I want to point out that in our forthcoming prepared remarks, we will refer to non-GAAP financial measures. Please refer to our press release disseminated earlier today for a reconciliation of these non-GAAP financial measures.
Speaker Change: Forward-looking statements involve risk and uncertainties, which could cause actual results or 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 most recent filing, Form 10-K .
Smith Micro: Smith Micro assumes no obligation to update any forward-looking statements which speak to our management's belief and assumptions only as the date they are made.
Smith Micro: I want to point out that in our forthcoming prepared remarks, we will refer to non-GAAP financial measures. Please refer to our press release disseminated earlier today for a reconciliation of these non-GAAP financial measures.
Smith Micro: With that said, I'll turn the ball over to Bill.
William Smith: Good afternoon, and thank you for joining us today for our 2024 second quarter conference call. We are very pleased to confirm that DISH launched Boost FamilyGuard, which is powered by SafeMath Global, during the second quarter. This was a significant milestone for us, not only because of the growth potential of Boost Family Guard but also because it was our first SafePath-level deployment and demonstrates the potential of this accelerated deployment model, going from contract execution to launch in about six weeks.
Bill Smith: Thanks, Charlie. Good afternoon, and thank you for joining us today for our 2024 second quarter conference call.
Bill Smith: Let me start the presentation today with some quick updates on the business as we continue to work our way back to growth and profitability.
Speaker Change: On our last call, we announced that DISH would be our first customer to launch SafePath Global.
Speaker Change: We are very pleased to confirm that DISH launched Boost FamilyGuard, which is powered by SafeMath Global, during the second quarter.
Speaker Change: This was a significant milestone for us.
Speaker Change: not only for the growth potential of this FamilyGuard, but also because it is our first SafePath-level deployment and demonstrates the potential of this accelerated deployment model.
Speaker Change: going from contract execution to launch in about six weeks.
Speaker Change: This is a duplicable model for us, and we expect to see more SafePath Global wins in the near term.
William Smith: In addition to the faster launch cycle, the SafePath Global model also allows us to move quickly to deploy updates to the app with new features and functionality and offers a significant upgrade path with other tools that can be added to the platform.
Speaker Change: In addition to the faster launch cycle,
Speaker Change: The SafePak Global model also allows us to move quickly to deploy updates to the app.
Speaker Change: with new features and functionality and offers a significant upgrade path with other tools that can be added to the platform.
William Smith: Marketing activities have begun for Boost Family Guard, and we anticipate subscriber growth on that platform over the remainder of this year. By bringing a new solution to the European market in the early fall, we expect it to be quite visible and open the door to new opportunities for expansion throughout Europe and the rest of the world. Turning to our cost structure, we have completed our cost reduction of approximately $1 to $1.3 million per quarter, which I discussed on our last call.
Speaker Change: Marketing activities have begun for Boost Family Guard and we anticipate subscriber growth on that platform over the remainder of this year.
Speaker Change: Next, we are nearing the completion of our development efforts on the unique SafePath-enabled family safety offering with our European Tier 1 carrier partner that we previously referenced.
Speaker Change: We are excited to be in the last phase of this process and expect that our Tier 1 partner will launch an innovative, widespread go-to-market strategy across a multitude of different channels.
Speaker Change: bringing a new solution to the European market in the early fall.
Speaker Change: We expect it to be quite visible and open the door to new opportunities for expansion throughout Europe and the rest of the world.
Speaker Change: Turning to our cost structure, we have completed our cost reduction of approximately $1 to $1.3 million per quarter, which I discussed on our last call.
William Smith: Some of that impact is reflected in the Q2 quarter results, and the full impact will be reflected in the third quarter results, which we will implement in the very near term to better align our resources. Like the previous cost rationalizations, with the full benefit of these additional adjustments being recognized in the fourth quarter. We believe these changes will strengthen our company for both the long and short term, enabling us to be more agile and faster to market. This will include SafePath Premium, which will use enhanced AI machine learning to optimize and customize families' online experience. Overall, I believe we are very close to seeing a turn in our business case for the better.
Speaker Change: Some of that impact is reflected in the Q2 quarter results, and the full impact will be reflected in the third quarter results.
Speaker Change: As we remain focused on returning the company to profitability, we have determined to further streamline our resources.
Speaker Change: and will target an additional $1 to $1.2 billion in cost reductions per quarter.
Speaker Change: which we will implement in the very near term to better align our resources.
Speaker Change: This action will help position the company for a return to growth and profitability and generation of free cash flow.
Speaker Change: Like the previous cost rationalizations, there will be some benefit in the third quarter from the second cost reduction.
Speaker Change: with the full benefit of these additional adjustments being recognized in the fourth quarter.
Speaker Change: We believe these changes will strengthen our company for both the long and short term, enabling us to be more agile and faster to market.
Speaker Change: As we also discussed in our last call, we plan to add a new wave of enhancements to our SafePaths platform.
Speaker Change: This will include SafePath Premium, which will use enhanced AI machine learning to optimize and customize families' online experience.
Speaker Change: and provide cyberbullying protection, social media intelligence, and public safety notifications.
Speaker Change: Overall, I believe we are very close to seeing the turn in our business case for the better.
Speaker Change: and our teams are working hard to get us there.
Speaker Change: But let's turn the call over to Jim to review the financial results in more detail. Jim?
Jim Kempton: Thanks, Bill, and good afternoon, everyone. I'll now be covering the financial details of the second quarter of 2024.
Jim Kempton: Please note, all of my comments today regarding per share metrics reflect the impact of the 1-for-8 reverse stock split that was approved by our shareholders and effectuated in April 2024.
James Kempton: For the second quarter, we posted revenue of $5.1 million, compared to $10.3 million in the same quarter of 2023, a decrease of approximately 50%. Year-to-date revenues through June 30, 2024 were $10.9 million versus $21.3 million through the second quarter of last year. The 48% year-to-date decline is primarily due to the conclusion of the Verizon family safety contract in the fourth quarter of 2023, coupled with the decline in legacy safe and found family safety revenue related to the continued attrition of legacy sprint subscribers driven by T-Mobile's acquisition, primarily due to our having recognized no Verizon Family Safety revenues during the second quarter of 2024, as that contract concluded in the fourth quarter of 2023, coupled with a continued decline in legacy Sprint safe and found revenue.
Speaker Change: For the second quarter, we posted revenue of $5.1 million compared to $10.3 million in the same quarter of 2023, a decrease of approximately 50 percent.
Speaker Change: When compared to the first quarter of 2024, revenue decreased by approximately 700,000, or 11 percent.
Speaker Change: Year-to-date revenues through June 30, 2024 were $10.9 million versus $21.3 million through the second quarter of last year.
Speaker Change: The 48% year-to-date decline is primarily due to the conclusion of the Verizon Family Safety Contract in the fourth quarter of 2023.
Speaker Change: Coupled with the decline in legacy safe and found family safety revenue related to the continued attrition of legacy Sprint subscribers driven by T-Mobile's acquisition of Sprint.
Speaker Change: During the second quarter of 2024, family safety revenue was $4.2 million, which decreased by approximately $4.5 million, or 52%, compared to the second quarter of the prior year.
Speaker Change: primarily due to our having recognized no Verizon Family Safety revenues during the second quarter of 2024, as that contract concluded in the fourth quarter of 2023, coupled with a continued decline in legacy Sprint safe and found revenue.
Speaker Change: Family safety revenues decreased by approximately 200,000, or 5%, compared to the first quarter of 2024, primarily driven by the continued decline in legacy SPRINT safe and found revenue.
Speaker Change: During the second quarter of 2024, ColumnSuite revenue was approximately $500,000, which decreased by approximately $200,000 compared to the second quarter of 2023.
James Kempton: Revenue from CalmSuite decreased by approximately $100,000 compared to the first quarter of 2024. These bought revenue was approximately $400,000 for the second quarter of 2024, which declined by approximately $500,000 compared to the second quarter of the previous year. In the third quarter of 2024, we are expecting consolidated revenues to be in the range of approximately four and a half to five million dollars. This anticipated decline in revenue, as compared to the second quarter, is driven in part by a projected decrease in viewspot revenue.
Speaker Change: Revenue from CalmSuite decreased by approximately $100,000 compared to the first quarter of 2024.
Speaker Change: However, we have been experiencing subscriber growth on the Boost CommSuite premium visual voicemail platform more recently and expect CommSuite revenue to increase modestly in the third quarter as a result.
Speaker Change: These bought revenue was approximately $400,000 for the second quarter of 2024, which declined by approximately $500,000 compared to the second quarter of prior year.
Speaker Change: The decline in ViewSpot revenues compared to the second quarter of 2023 was primarily due to the previously announced termination of one of our ViewSpot contracts in the second half of 2023.
Speaker Change: Viewspot revenues decreased by approximately $300,000 compared to the first quarter of 2024.
Speaker Change: In the third quarter of 2024, we are expecting consolidated revenues to be in the range of approximately $4.5 to $5 million.
Speaker Change: This anticipated decline in revenue, as compared to the second quarter, is driven in part by a projected decrease in view spot revenues.
Speaker Change: For the second quarter of 2024, gross profit was $3.5 million, compared to $7.7 million during the same period of the prior year.
Speaker Change: A decrease of approximately $4.2 million, primarily due to the period-over-period decline in revenues.
James Kempton: Gross margin was at 69% for the quarter, compared to 75% realized in the second quarter of 2023. In the third quarter of 2024, we expect gross margins to be in the range of 70 to 73%. For the year-to-date period ended June 30, 2024, gross profit was $7.3 million compared to $15.4 million during the corresponding period last year. Gross margin was 67% for the June 30, 2024 year-to-date period. Non-GAAP operating expenses for the second quarter of 2024 were $7.5 million, compared to $8.3 million in the second quarter of 2023.
Speaker Change: Gross margin was at 69% for the quarter, compared to 75% realized in the second quarter of 2023.
Speaker Change: The gross profit of $3.5 million in the second quarter of 2024 decreased sequentially by approximately $300,000 compared to the gross profit produced in the first quarter of 2024, driven primarily by the sequential decline in revenues quarter over quarter.
Speaker Change: In the third quarter of 2024, we expect gross margins to be in the range of 70 to 73 percent.
Speaker Change: For the year-to-date period ended June 30, 2024, gross profit was $7.3 million compared to the $15.4 million during the corresponding period last year.
Speaker Change: Gross margin was 67% for the June 30th, 2024 year-to-date period.
Speaker Change: GAAP operating expenses for the second quarter of 2024 were $10.5 million, a decrease of approximately $500,000, or 4%, compared to the second quarter of 2023.
Speaker Change: primarily as a result of the effect of cost reduction activities undertaken during the second quarter of 2024, partially offset by severance-related costs.
Speaker Change: The app operating expenses for the year-to-date period ended June 30, 2024 were $45.8 million compared to $25.6 million in the prior year-to-date period, an increase of $20.2 million compared to the last year.
Speaker Change: This period-over-period increase was driven by the non-cash goodwill impairment charge of $24 million incurred in the first quarter of this year.
Speaker Change: non-GAAP operating expenses for the second quarter of 2024 were $7.5 million, compared to $8.3 million in the second quarter of 2023, a decrease of approximately $700,000, or 9%.
James Kempton: Sequentially, non-GAAP operating expenses decreased by approximately 600,000, or 7%, from the first quarter of 2024. As we noted on our last earnings call, we did undertake cost reduction actions in the second quarter as we work to return the company to profitability. We continue to expect to achieve the targeted savings that we established on our last earnings call. In addition, As a result of both of these cost reduction initiatives, we would anticipate a further decline in non-GAAP operating expenses in the fourth quarter of 2024 as compared to the third quarter of 2020.
Speaker Change: Sequentially, non-GAAP operating expenses decreased by approximately 600,000, or 7%, from the first quarter of 2024.
Speaker Change: As we noted on our last earnings call, we did undertake cost reduction actions.
Speaker Change: in the second quarter as we work to return the company to profitability.
Speaker Change: We continue to expect to achieve the targeted savings that we established on our last earnings call.
Speaker Change: In other words, based on the actions taken to date, we anticipate that our total non-GAAP operating expenses and cost of sales for the third quarter will decrease by $1 million to $1.3 million compared to the first quarter of 2024.
Speaker Change: In addition, as Bill had discussed in his opening remarks,
Bill Smith: We plan to undertake additional expense reductions in the very near term to further realign our cost structure.
Bill Smith: As a result of both of these cost reduction initiatives, we expect third quarter 2024 non-GAAP operating expenses to decrease by 6 to 10 percent compared to the second quarter of 2024.
Speaker Change: Given the timing of the actions that we plan to take in the third quarter, a partial quarter effect of these reductions will be realized in Q3 2024, and the full quarterly effect of the additional reductions will be realized in the fourth quarter of 2024.
Speaker Change: As such, we would anticipate a further decline in non-GAAP operating expenses in the fourth quarter of 2024 as compared to the third quarter of 2024.
Speaker Change: non-GAAP operating expenses for the year-to-date period through June 30, 2024 were $15.6 million compared to $19.5 million for the year-to-date period ended June 30, 2023, a decrease of $3.9 million or 20% compared to last year.
Speaker Change: The gap net loss for the second quarter of 2024 was $6.9 million, or a $0.66 loss per share.
Speaker Change: compared to the gap net loss of $5.7 million, or a $0.73 loss per share in the second quarter of 2023.
Speaker Change: The non-GAAP net loss for the second quarter of 2024 was $4 million, or a $0.38 loss per share, compared to a non-GAAP net loss of approximately $600,000, or an $0.08 loss per share in the second quarter of 2023.
James Kempton: Within today's press release, we have provided a reconciliation of our non-GAAP metrics to the most comparable GAAP metrics. For the year-to-date period, the non-GAAP reconciliation includes adjustments for goodwill impairment of $24 million, partially offset by approximately $200,000 in changes to the fair value warrant.
Speaker Change: Within today's press release, we have provided a reconciliation of our non-GAP metrics to the most comparable GAP metric.
Speaker Change: For the second quarter of 2024, the reconciliation includes adjustments for intangible asset amortization of $1.5 million.
Speaker Change: stock compensation expense of $1.1 million, depreciation expense of $100,000, and other non-recurring charges, including severance-related costs, of $300,000.
Speaker Change: partially offset by nominal changes to the fair value warrants.
Speaker Change: For the year-to-date period, the non-GAAP reconciliation includes adjustments for goodwill impairment of $24 million.
Speaker Change: Intangible Asset Amortization of 3.3 million
Speaker Change: Stock compensation expense of $2.3 million.
Speaker Change: depreciation of approximately $200,000 and non-recurring expenses including severance related costs of approximately $400,000, partially offset by approximately $200,000 in changes to the fair value of warrants.
Speaker Change: Due to our cumulative net losses over the past few years, our gap tax expense is primarily due to certain state and foreign income taxes.
Speaker Change: For non-GAAP purposes, we utilized a 0% tax rate for the second quarter of 2024 and 2023.
Speaker Change: The resulting non-GAAP tax expense reflects the actual income taxes expensed during each period.
Speaker Change: We did conduct a capital raise during the second quarter, grossing approximately $4.1 million in cash before transaction-related fees.
Speaker Change: As a result of this equity offering, we reported $5.6 million of cash and cash equivalents as of June 30, 2024.
Speaker Change: This concludes my financial review. Now, back to Bill.
Bill Smith: Thanks, Jim.
Bill Smith: Let me begin with DISH and provide further color on the activities that I touched on to begin today's call.
William Smith: Boost Family Guard had a successful launch in May, and DISH has begun marketing activities on several fronts. DISH has been very collaborative in driving awareness for this new offering and has been receptive to exploring different ways to market this product. DISH has also recently launched our Ambassador Program, which drives product promotion directly to consumers in stores and enables different types of SPF and bonus programs to incentivize in-store promotion of the product. To download different promotional materials directly from the platform, such as signage for placement throughout the store, which accelerates the rollout of the latest marketing collateral as compared with the traditional store packout process that is regularly mailed out to the store. Although we are still in the early And we are just getting started.
Speaker Change: Boost Family Guard had a successful launch in May and DISH has begun marketing activities on several fronts.
Speaker Change: DISH has been very collaborative in driving awareness for this new offering and has been receptive to exploring different ways to market this product.
Speaker Change: We believe the timing is very good for Boost Family Guard right now with a recently launched new branding for DISH mobile services under the Boost brand.
Speaker Change: This branding campaign is creating a fresh, new look and feel for the DISH mobile services business.
Speaker Change: And we are working with DISH on plans to capitalize on the new granting with several new awareness marketing campaigns for BOOST FamilyGuard.
Speaker Change: Some examples include the use of their internal channels such as SMS, email, and website promotions, as well as capitalizing on in-house ad inventory that can be distributed among the several different dish properties.
Speaker Change: These campaigns will not only promote the new brand, but also promote Boost Family Guard, which could help bring more Family Plan subscribers to the DISH mobile network.
Speaker Change: DISH has also recently launched our Ambassador Program, which drives the product promotion directly to consumers and stores, and enables different types of SPF and bonus programs to incentivize in-store promotion of the product.
Speaker Change: As part of this program, there are also different training modules.
Speaker Change: for BOOST employees, as well as for authorized retail store representatives to teach them about BOOST FamilyGuard, while also informing them of the bonus opportunities associated with selling this product.
Speaker Change: We have enhanced the ambassador program by adding the ability for store managers and sales representatives
Speaker Change: to download different promotional materials directly from the platform.
Speaker Change: such as signage for placement throughout the store, which accelerates the rollout of the latest marketing collateral as compared with the traditional store packout process that is regularly mailed out to the stores.
Speaker Change: This is an exciting opportunity for growth of Boost FamilyGuard, as Boost Mobile has a large base of stores with approximately 5,000 throughout the United States.
Speaker Change: Although we are still in the early days of these marketing efforts, we are excited about the progress made in such a short amount of time for Boost Family Guard. And we are just getting started.
Speaker Change: In addition to the process being made with Boost Family Guard, DISH has now fully deployed Compsuite across the Boost network on all Android devices.
William Smith: DISH will also include, among its value-added services, premium visual voicemail, which is powered by our ComSleep platform. As Jim touched on in his remarks, we have seen an uptick in subscribers on the premium visual voicemail platform more recently. Now, let's talk about AT&T.
Speaker Change: DISH will also include, among its value-added services, premium visual voicemail, which is powered by our ComSleep platform.
Speaker Change: As Jim touched on in his remarks, we have seen an uptick in subscribers on the Premium Visual Voicemail platform more recently.
Jim Kempton: which should translate into revenue growth in the third quarter for COMSLI.
Speaker Change: Fish recently conducted some new promotional activities for this product which we believe is helping to drive the subscriber growth.
Speaker Change: Overall, we continue to maintain a strong and collaborative relationship with DISH and are aligned with them on our goals for success of both products.
Speaker Change: [inaudible]
Speaker Change: Let's talk about AT&T.
Speaker Change: We remain very optimistic about the opportunity.
Speaker Change: for Subscriber Grove at both AT&T and Cricut.
William Smith: We continue to drive awareness of AT&T Secure Family through different marketing channels, a recent example of which is a new promotion with the National Parent-Teacher Association that just launched. I am encouraged by the progress we are making, and I'm looking forward to seeing growth in the coming months because of these efforts. We are continuing to work on expanding the portfolio of products that we are supporting at T-Mobile. Our sales and marketing teams are working together to further our progress.
Speaker Change: We continue to drive awareness of AT&T Secure Family through different marketing channels.
Speaker Change: A recent example of which is a new promotion with the National Parent Teacher Association that just launched.
Speaker Change: AT&T Secure Family is now being promoted on the National PTA's website, helping to raise awareness within our targeted demographic for digital family safety.
Speaker Change: Additionally, we have also been methodically expanding the Affiliate Influencer Program that was launched during the second quarter.
Speaker Change: We anticipate further expansion of the influencer campaigns in the third quarter to drive more visibility to AT&T's secure family, which we expect will significantly broaden our reach.
Speaker Change: The campaign will include some great new activities for back-to-school, which we are very excited about, as this timing aligns very nicely with the utility of AT&T Secure Family.
Speaker Change: I am encouraged with the progress we are making, and I'm looking forward to seeing growth in the coming months because of these efforts.
T-Mobile: At T-Mobile, we continue to see strong interest in our expanded roadmap enhancements that we believe could help springboard new activities to drive subscriber growth.
Speaker Change: Our sales and marketing teams are working together to further our progress with widening our reach throughout the organization.
Speaker Change: In the meantime, T-Mobile continues to be a key customer for us.
William Smith: In Europe, we expect to launch our Tier 1 carrier partner in the next few months. There's much more to come regarding this carrier and the approach that they're taking to digital family safety, enabled by SafePath, and the opportunities we believe the launch of this product will create for us in Europe. Our sales pipeline is also quite strong. We are also in the final stages of concluding a marketing engagement agreement with the Competitive Carrier Association, or CCA.
Speaker Change: In Europe , we expect to launch our Tier 1 carrier partner in the next few months.
Speaker Change: This family safety solution will be a unique go-to-market approach for SafePath, and we believe it will drive new demand, opening the door for new contracts with carriers throughout the world.
Speaker Change: I look forward to providing you with additional insight on this contract soon.
Speaker Change: There's much more to come regarding this carrier and the approach that they're taking to digital family safety, enabled by SafePath, and the opportunities we believe the launch of this product will create for us in Europe .
Speaker Change: Our sales pipeline is also quite strong.
Speaker Change: We are also in the final stages of concluding a marketing engagement agreement with the Competitive Carrier Association, CCA.
William Smith: Upon completion of this agreement, SafePath Global and CCA will partner to market our SafePath global family safety solution to CCA's carrier members under a single branded application. This partnership will enable CCA carrier members of any size to offer this valuable solution to their subscribers under the rapid go-to-market model that SafePath Global supports. There are several other exciting opportunities in the sales pipeline.
Speaker Change: Upon completion of this agreement,
Speaker Change: Smith Micro and CCA will partner to market our SafePath Global Family Safety Solution to CCA's carrier members under a single branded application.
Speaker Change: This partnership will enable CCA carrier members of any size to offer this valuable solution to their subscribers under the rapid go-to-market model that SafePath Global supports.
Speaker Change: We believe this agreement will provide access to a collectively large number of subscribers from the many smaller carriers operating in the United States.
Speaker Change: Without this agreement, reaching these carriers would be a difficult task.
Speaker Change: In addition to the expected completion of the CCA agreement, there are several other exciting opportunities in the sales pipeline.
William Smith: In Europe, we have opened discussions with another Tier 1 carrier interested in launching SafePath on an accelerated schedule. We also are in advanced discussions here in the U.S. with carriers to launch SafePath as a strategy to attract new family subscribers. Overall, these opportunities, combined with our recent successes at DISH and our upcoming launch with our major tier one European carrier, give us strong confidence that our strategy will be effective. We also see SafePath Live as a strong marketing opportunity to drive users to our full-featured SafePath family safety office.
Speaker Change: In Europe , we have opened discussions with another Tier 1 carrier interested in launching SafePath on an accelerated schedule.
Speaker Change: We also are in advanced discussions here in the U.S. with carriers to launch SafePath as a strategy to attract new family subscribers.
Speaker Change: Overall, these opportunities, combined with our recent successes at DISH and our upcoming launch with our major Tier 1 European carrier, give us strong confidence that our strategy will be effective.
Speaker Change: Before I close, I would like to briefly introduce you to our plans for a new expansion of the SafeTAS platform that we are calling SafeTAS Live.
Speaker Change: While I don't want to go into detail about the product, I do want to mention that this product will utilize our technological strength for family location controls.
Speaker Change: The offering will provide a premium model for our carrier partners that we believe will greatly expand their reach and further enhance their competitive position.
Speaker Change: The addition of this product to our portfolio builds on a key focus to expand our reach and market opportunities while leveraging strong relationships with our existing carrier partners.
Speaker Change: We also see SafePath Live as a strong marketing opportunity to drive users to our full-featured SafePath family safety offerings.
Speaker Change: We are truly excited about this next wave of innovation. We are already in the market discussing SafePath Live with our growing list of carrier customers, and they like it.
Speaker Change: We remain confident that the business case for Safe Path is strong.
William Smith: It is our core belief that the overall family safety market is expanding, particularly in the current environment as we continue to see new initiatives and legislation across the United States and around the world with a clear focus on online safety. We have a solid base to build from and believe that we are driving toward meaningful subscriber growth across multiple carrier customers.
Speaker Change: It is our core belief that the overall family safety market is expanding.
Speaker Change: particularly in the current environment as we continue to see new initiatives and legislation across the United States and around the world with a clear focus on online safety.
Speaker Change: We plan to capitalize on this momentum and leverage it to expand the reach of our solutions.
Speaker Change: We have a solid base to build from and believe that we are driving toward meaningful subscriber growth across multiple carrier customers.
Speaker Change: which is key to putting us on a path to growth and profitability.
Speaker Change: With that said, operator, let's open the call for questions. Operator?
Operator: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2.
Operator: We will now begin the question and answer session.
Speaker Change: To ask a question, you may press star, then 1 on your touchtone phone.
Operator: If you are using a speakerphone, please pick up your handset before pressing the keys.
Speaker Change: At this time, we will pause momentarily to assemble the roster.
Speaker Change: And our first question comes from Scott Searle of Roth Capital. Please go ahead.
Scott Cyril: Hey, good afternoon. Thanks for taking the questions.
Speaker Change: Hey, Bill, maybe to jump right in, timing, you know, has really been the headwind in terms of carrier launches, but it seems like as we're looking into the third quarter, we're starting to see the bottom here in SafePath.
Speaker Change: I'm wondering if you could talk directionally about what you're expecting for SafePath into the third quarter and then given the anticipated launch schedules of the European carrier ramping up at DISH and some potential other carriers getting a little bit more aggressive.
Speaker Change: Should we expect Safe Path to be rebounding then into the fourth quarter?
Speaker Change: Yes, look, I would say this. I would say that, you know, we will, you know, get the launch behind us in Europe . It'll happen hopefully before the end of the third quarter.
Speaker Change: and, you know...
Speaker Change: That will put us on a strong...
Speaker Change: that direction.
Speaker Change: for growth for fourth quarter. I expect fourth quarter.
Speaker Change: to show some meaningful.
Speaker Change: All of these companies have a very high level of leverage of the Safe Path revenues and I think that that will be the sign that everybody's been waiting for.
Unidentified Analyst: Great. And maybe just to follow up on Safe Path Global, it's nice to see the rapid launch on DISH. I'm wondering if you could frame that a little bit in terms of how you're going to characterize success there in terms of penetration of that base. And then it sounds like the pipeline continues to grow there, and I think you referenced another opportunity in Europe, but it wasn't clear to me if that was Safe Path Global or if that's a more traditional type deployment. So specifically on the Safe Path Global front, I'm wondering, you know, how big is that pipeline in terms of carriers and your expectations in terms of what you can close this year.
Speaker Change: Great, and maybe just to follow up on Safe Path Global, it's nice to see the rapid launch on DISH. I'm wondering if you could frame that a little bit in terms of
Speaker Change: Specifically on the Safe Path Global front, I'm wondering, you know, how big is that pipeline in terms of carriers and your expectations in terms of what you can close this year?
Speaker Change: you know, the added Tier 1 carrier in Europe as well as others.
Speaker Change: here in North America will be based around SafePath Global. So the time to market.
Speaker Change: should be very rapid, and so that's another positive sign.
Speaker Change: That should provide the leverage that we're looking for, you know, to turn us into, you know, a profitable company and start to really grow our revenues.
Speaker Change: The only exception to that is the launch of the first Tier 1 carrier in Europe that I'm alluding to is going to be using a slightly different product.
Speaker Change: It is an exciting market opportunity in and of itself.
Speaker Change: Okay, great. And lastly, if I could, CCA is a very interesting, a little bit of a stealth growth agreement there. I'm wondering if you could frame that in terms of size, you know, how many subscribers are contained with CCA carriers. And it sounds like you could ramp this up pretty quickly, so I'm wondering when you would expect to see some of the results with SafePak Global and CCA. Thanks.
William Smith: Yeah, we're pretty excited about the CCA opportunity. It provides us access to a large number, about 40, 50 different carriers around the U.S. And I'm not including T-Mobile, who is also a member of CCA, so they're excluded from this opportunity because we already do business with them. So, you know, collectively, we're talking about tens of millions of subscribers. And you know, individually, there are a number of carriers that are smaller that would be very difficult to market to without this marketing arrangement.
Speaker Change: Okay. Yeah, we're pretty excited about the CCA opportunity. It provides us an
Speaker Change: And I'm not including T-Mobile, who is also a member of CCA, so that's...
Speaker Change: They're excluded from this opportunity because we already do business with them.
William Smith: And we're very, very excited, as is CCA, to be able to leverage their footprint to find some more meaningful growth. Again, we will focus on SafePath Global with all of these accounts. We're looking for very rapid deployment, and we'll be back talking about that, you know, in the weeks to come.
Speaker Change: Again, we will focus on Safe Path Global with all of these accounts. We are looking for very rapid deployment and we'll be back talking about that in the weeks to come.
Unidentified Analyst: Thank you. One really broad question and one fairly narrow.
Speaker Change: Matt, we can't hear you.
Speaker Change: And you've certainly honed down your cause repeatedly now.
Speaker Change: and you just did an equity raise last quarter, so how is it that you're really embarking on some more fairly aggressive cost reductions just as you did the equity raise and you seem to...
Speaker Change: First, the power of SafePath Global is that it does not require a lot of customization to reach the deployment. You know, the first deployment was done in six weeks.
Speaker Change: we actually believe we could deploy in less than that.
Speaker Change: and so that's part of our overall strategy.
Speaker Change: Because we're not doing a lot of heavy customizing, and we're, you know...
Speaker Change: can now be ended and are in the process of having that happen.
Speaker Change: So, we've done a lot to streamline our go-to-market, to streamline what it takes to bring new carrier customers into the fold, and we look forward to talking about a number of new names and showing you some meaningful growth.
Unidentified Analyst: And I guess this is also relevant to Safe Path Global, but when you look at the European Tier 1 carriers, as you know, they tend to have a lot of autonomy on a national basis, and I know that your product introductions have sometimes been in select markets. I don't know how much customization there is if you go from Chechya to Tigris to Spain or wherever, but is this something that's really going to allow you with a TEP or a Vodafone to really hit the map much faster when you have, you know, operating in 15 or 20 countries and you might have a trial in one country and another in the old world, maybe a three-year process to have, you know, broad adoption
Speaker Change: And I guess this is also relevant to Safe Path Global, but when you look at the European Tier 1 carriers, as you know, they tend to have a lot of autonomy on a national basis. And I know that your product introductions have sometimes been in.
Speaker Change: really hit the map much faster when you have, you know, operating in 15 or 20 countries and you might have a trial in one country and others in the old world, maybe a three year process to have a broader adoption.
Speaker Change: Yes, look, I, you know,
Speaker Change: What I can say is this, this launch will be launched in a first country. It is a country where they have meaningful size.
Speaker Change: And we are already, you know, in conversations about who the next countries will be. So this is just the beginning. So when we launch in a couple of months...
Speaker Change: Yes, that's just the first country, and there's more to follow, and that can be done in rapid fashion. Really, the only difference is just changing the language so that the users can read the props.
Speaker Change: Okay, great, thank you.
Operator: Once again, if you would like to ask a question, please press star, then 1.
Speaker Change: Once again, if you would like to ask a question, please press star, then 1.
Operator: And our next question comes from Leo Caprio on behalf of Joseph Gunner. Please go ahead.
Speaker Change: Leo Caprio of Joseph Gunner. Please go ahead.
Leo Caprio: Good afternoon, gentlemen. I actually have two quick questions.
Speaker Change: Good afternoon gentlemen. I actually have two quick questions. The first one regarding the operating expenses.
Leo Caprio: The first one regarding operating expenses. It seems like you're doing a great job in terms of reducing those costs. It sounds like the second round is coming in. How much more opportunity is there in terms of reducing costs going forward? Could it be a third or fourth round of invasions? And then, secondly, in terms of the pipelines of opportunity, CCA sounds like an exciting opportunity. Are there other similar associations that are out in the market, either in Europe or in the US, that you haven't reached out to and could be a possibility?
Speaker Change: And then secondly, in terms of the pipelines of opportunity, CCA sounds like an exciting opportunity. Are there other similar associations that are out in the market, available either in Europe or in the U.S., that you haven't reached out to and could be a possibility? Thanks.
Speaker Change: Yes, Leo, I mean...
Speaker Change: We're pretty excited about getting the first one done with CCA. We are always looking to work with other industry organizations to broaden our reach and do it in a much more effective manner.
Speaker Change: So you'll have to stay tuned for that. But the CCA opportunity, I think, will bode very well for us.
Speaker Change: It's a section of the market that...
Speaker Change: you know, we haven't really been able to focus on, and it's pretty exciting. So, let's just wait and see. Let's get them launched with, you know, some new names and see how it grows.
Speaker Change: Oh, and David, just quickly to follow up on the cost question. You've already had two rounds of 1 million plus on cost savings. Is there a vision of possibly even more cost savings going forward or it's as much as you can extract from ops at this point?
James Kempton: Well, we always look at our cost structure and look to optimize it. But at this point, between the two reduction initiatives, we're talking about $2 to $2.5 million in total. So that's what we're targeting currently.
William Smith: Well, we'll, we always look
David: Well, we always look at our cost structure and, you know, look to optimize it, but at this point, you know, that...
Speaker Change: Between the two reduction initiatives, we're talking about $2 to $2.5 million in total, so that's what we're targeting currently.
Speaker Change: All right, thank you.
Speaker Change: The next question comes from Brian Swift of Security Research. Please go ahead.
Unidentified Analyst: Yeah, I have a couple of questions. First, just to clarify, I think Jim, in your comments, you guided Q3 to four and a half to five million.
Brian Swift: Yeah, I have a couple questions. First, just to clarify, I think, Jim, in your comments you guided Q3 to four and a half to five million and...
Brian Swift: And I think you also said that much of that decline was unanticipated.
James Kempton: We certainly expect it to decline further from where it is now. I will say that we don't expect it to go all the way to zero, but we are expecting a decline.
Speaker Change: Maybe you can give me a little color on that.
Speaker Change: We certainly expect it to decline further from where it's at now. I will say that we don't expect it to go all the way to zero, but we are expecting a decline there.
James Kempton: Yeah, let me add that we also have new opportunities for ViewSpot that we are exploring, and they're with meaningful names, so let's just, you know, we'll monitor the process, we'll report it faithfully every quarter, but I think it's a nice product, it's had sort of a checkered role in the market in the last year or so, but
Speaker Change: Yeah, let me add that we also have new opportunities for
Speaker Change: view spot that we are exploring and they're with meaningful names.
Speaker Change: So, let's just, you know, we'll monitor the process, we'll report it safely every quarter.
Speaker Change: but I think it's a nice product. It's had sort of a checkered role in the market in the last year or so but that doesn't mean that we can't turn it around so we'll see.
Speaker Change: Okay.
Speaker Change: And secondly, we've had a continual slide in the
Unidentified Analyst: offsetting, anyway, whatever gains you were getting at T-Mobile. You know, some uptick here, but when you guide to four and a half, five, it means we haven't hit the trough, other than what you've already...
Speaker Change: you know, promotions and such. I remember when you really started accelerating with Sprint was when you.
Speaker Change: had a program where
Speaker Change: They were really doing a lot of training with the in-store people doing promotions and such you see
Speaker Change: any kind of activity like that at T-Mobile and as well as at AT&T, where we could see. I'm glad you pointed it out. It seems like we should be seeing some.
Speaker Change: you know, some uptick here, but when you guide to four and a half, five, it means we haven't hit the trough yet, so it's a little discouraging, to say the least. Anyway, I'd like to see what your thoughts are on how you plan to get this thing moving in the right direction here, other than what you've already talked about.
William Smith: Well, you know, I think you brought up Sprint and you brought up the success we had at Sprint for DISH and, you know, and the Booth Family Guard. And, you know, I believe that's going to be a rather exciting event. I haven't said much, I didn't say much about T-Mobile on this call.
Speaker Change: Well, you know, I think you've brought up Sprint and you've brought up...
Speaker Change: the success we had at Sprint.
Speaker Change: and we've always thought it would be very repeatable. Based on the commentary I've already made, I think you can see that DISH is doing everything that Sprint did plus more.
Speaker Change: So, I think where you really want to watch is to watch the growth
Speaker Change: for DISH and the Booth Family Guard, and I believe that's going to be a rather exciting event.
Speaker Change: I haven't said much, I didn't say much about T-Mobile on this call. You know, the decline of Sprint users is getting down to a fairly small number overall.
William Smith: You know, the decline of Sprint users is getting down to a fairly small number overall. So, you know, I think that issue is one that's probably going to just sort of, you know, take its course. But look, watch what happens at DISH, and I think you're going to see some meaningful growth there, and that's what you ought to be looking for. And then we'll launch the European carrier. These new carriers are excited; they're full of energy.
Speaker Change: So, you know, I think that issue is one that's probably going to just sort of, you know, take its course.
William Smith: and I think you're going to see some meaningful growth there and that's what you ought to be looking for.
William Smith: and then we'll launch the European carrier. These new carriers are excited, they're full of energy, they want to be very successful, they believe family safety is right for the time.
William Smith: They want to be very successful. They believe family safety is right for the time. I mean, look at all the laws that are being talked about and being passed. I mean, the Senate passed a bill today, it's got a, we're waiting for the House, but there are all kinds of things going on, not only in the US but also in Europe. This is an exciting market. And yes, we've tested your patience, Brian, but you know, I know you're a patient guy. So we'll work our way through it.
William Smith: I mean look at all the
Operator: This concludes our question and answer session. I would like to turn the conference back over to Charles Messman for any closing remarks.
Operator: This concludes our question and answer session. I would like to turn the conference back over to Charles Messman for any closing remarks.
Charles Messman: I want to thank everyone for joining us today. If you have any follow-up questions, please feel free to reach out to us. We appreciate you taking the time, and we'll look forward to talking to you on our next earnings call. Thanks, everybody.
Charles Messman: The conference is now concluded. Thank you for attending today's presentation and you may now disconnect.