Q1 2025 Smith Micro Software Inc Earnings Call
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Speaker Change: Good day and welcome to the Smith Micro First Quarter 2025 Earnings Conference Call.
All participants will be in listen only mode
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Speaker Change: After today's presentation, there will be an opportunity to ask questions.
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Speaker Change: Please note this event is being recorded. I would now like to turn the conference over to Charles Messman, Vice President, Marketing. Please go ahead. Thank you, Operator, and good afternoon, everyone. We appreciate you joining us today to discuss Smith Microsoft's financial results. The first quarter ended March 31, 2025.
Bill Smith: On today's call, we have Bill Smith, our chairman of the board president and chief executive officer [inaudible]
Jim Kempton, Archie Financial Officer
Bill Smith: Please note that some of the information you will hear today during today's call discussion consists of forward-looking statements.
Bill Smith: including without limitations, those regarding the company's future revenue and profitability.
Bill Smith: Our plans and expectations, new product development and availability, new and expanded market opportunities, future product deployments, growth by new and existing customers, operating expenses and company cash reserves.
Bill Smith: Board-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.
Bill Smith: For more information, please refer to the risk factors included in our most recent file
Smith-Miker: Smith Micro seems in no obligation to update any forward-looking statements, which speak to the management's police and assumption only as of the date they are made.
Smith-Miker: I want to point out, in our forthcoming preparatory marks, we will refer to specific non-GAAP financial measures.
Smith-Miker: Please refer to the press release disseminated earlier today for a reconciliation of these non-GAAP financial measures.
With that said, I'll turn the call over to Bill. Bill.
Bill Smith: Thanks, Charlie. Good afternoon, and thank you for joining us today for our first quarter 2025 conference call. We appreciate your interest.
Speaker Change: Throughout the first quarter and today, we have been extremely busy on several fronts.
Speaker Change: Most notably, we have been executing on the new initiatives we discussed on our last call. With a keen focus on Safe Path OS for kids phones and senior phones and on our Safe Path Kids great plan solution.
Speaker Change: We have engaged in extensive discussions with current and prospective mobile operator partners regarding these solutions.
which align with the operator's core business strengths and objectives.
Selling devices, and rate plans, and adding subscribers.
Speaker Change: Our focus on Safe Path LS for Kids and Senior Phones and on our Safe Path Kids rate plan solution has also broadened our reach into the carriers organizations which we believe will position us to be more strategically aligned with their long-term vision.
Speaker Change: I remain very confident about where we stand today and I am pleased with the reception we are getting in the market.
Speaker Change: I am optimistic about closing new customer deals and expanding agreements with our current customer base in the coming weeks and months.
for our new and expanded offerings.
Speaker Change: It is an exciting time for us here at Smith Micro
Speaker Change: As we've seen over the years, the process of selling, contracting and launching new offerings with mobile operators can take longer than we would like given the size and complexity of our customer organizations.
But we are making good steady progress.
Speaker Change: I am as confident as ever that we will get them to the finish line, building on the strong global demand for digital family safety solutions that we believe present immense opportunities for Smith Micro and our shareholders.
Speaker Change: As excited as we are about delivering our latest solutions, we also continue to keep an eye on the future with the continual focus on innovation.
Speaker Change: Our State Path Platform, Product Roadmap is aimed at ensuring that we and our operator customers will be able to offer cutting-edge solutions that families want.
Speaker Change: Our latest round of development efforts will culminate in the release of Safe Path 8, the next generation of our Safe Path platform.
Speaker Change: This upgrade will introduce an AI-centric set of features and capabilities that will enhance our platform to better serve our markets and elevate our core solution to a new level of performance.
Speaker Change: Later in the call, I will provide more detail on safe path 8, as well as updates on some of our key customers and opportunities.
Speaker Change: But first, let's go ahead and turn the call over to Jim to discuss our financial results, Jim.
Jim: Thanks Bill and good afternoon everyone. I'll now be covering the financial results for the first quarter of 2025.
Jim: During the first quarter, we recognized revenue of $4.6 million compared to $5.8 million for the same quarter of 2024, a decrease of approximately 20%.
Jim: When compared to the fourth quarter of 2024, revenue decreased by approximately 300,000 or 7%.
Jim: During the first quarter of 2025, family safety revenues were 3.8 million, which decreased by approximately 700,000 or 15% compared in the first quarter of the prior year.
Jim: Driven in part by the continued decline in Legacy Sprint Safe and Found Revenue as was expected.
Jim: Family Safety revenues were essentially flat compared to the 4th quarter of 2024.
Jim: During the first quarter of 2025, compsweet revenue was approximately 700,000, which increased by approximately 100,000 compared to the first quarter of 2024.
Jim: Revenue from Consweet decreased by approximately 400,000 compared to the 4th quarter of 2024 due to the favorable adjustment to revenue recognized during the 4th quarter of 2024.
Jim: View Spot Revenue was approximately 100,000 for the first quarter of 2025 and is declined by approximately 600,000 compared to the first quarter of the prior year.
Jim: The decline in V-Spot revenues compared to the first quarter of 2024 was primarily due to the end of one of our V-Spot contracts last year.
Jim: Viewspot revenues increased nominally compared to the 4th quarter of 2024.
Jim: In the second quarter of 2025, we are expecting consolidated revenues to be in a range of approximately 4.4 million to 4.8 million
for the first quarter of 2025.
Jim: Gross Profit was approximately 3.4 million compared to approximately 3.8 million during the same period of the prior year. A decrease of approximately 400,000 due to the period over period decline in revenues.
Jim: Gross Margin was at 73% for the quarter, compared to the 66% realized in the first quarter of 2024.
Jim: The gross profit of 3.4 million in the first quarter of 2025 decreased by approximately 400,000 compared to the gross profit produced in the fourth quarter of 2024, driven primarily by the sequential decrease in revenues.
Jim: In the second quarter of 2025, we expect gross margin to be in the range of 72% to 75%.
Jim: Gap operating expenses for the first quarter of 2025 were $8.6 million, a decrease of $26.7 million, or $76% compared to the first quarter of 2024, primarily attributable to the Goodwill Empowerment Charge of $24 million, recorded in the first quarter of 2024.
Jim: Coupled with the cost reduction activities that we executed last year, and the decline in the numberization costs associated with our entangeable assets.
Jim: non-GAAP operating expenses for the first quarter of 2025 were 6.1 million compared to 8.1 million in the first quarter of 2024. A decrease of approximately 2 million or 24 percent.
Jim: Sequentially, non-GAAP operating expenses increased by approximately 300,000 or 5% from the fourth
Jim: We expect second quarter 2025, non-GAAP operating expenses, to decrease by 1 to 4% compared to the first quarter of 2025.
Jim: The Gap Net Loss for the first quarter of 2025 was $5.2 million or $0.28 loss per share compared to a Gap Net Loss of $31 million or $3.28 loss per share in the first quarter of 2024.
Jim: The non-GAAP net loss for the first quarter of 2025 was 2.9 million or a 16 cent loss per share.
Jim: Compared to a non-GAAP net loss of approximately 4.2 million, or a 45 cent loss per share in the first quarter of 2024.
Jim: Within today's press release we have provided a reconciliation of our non-GAAP metrics to the most comparable gap metric
Jim: For the first quarter of 2025, the reconciliation includes adjustments for intangible acid amortization of 1.3 million, stock compensation expense of 1.1 million, and depreciation expense of a approximately 100,000.
Jim: Partially offset by changes in the fair value of warrants of approximately 100,000.
Jim: 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.
Jim: For non-GAAP purposes, we utilized a 0% tax rate for the first quarter of 2025 and 2024.
Jim: The resulting non-GAAP tax expense reflects the actual income taxes expense during each period.
Jim: From a balance sheet perspective, we reported 2.3 million of cash and cash equivalents as a March 31st, 2025.
Jim: I also wanted to note that as our existing shelf registration is expiring next week, earlier this afternoon, we filed a new shelf registration to replace it.
Jim: The expiring shelf registration originally had 75 million of capacity and still has approximately 65 million of unused capacity.
Jim: The new shelf registration will have substantially the same terms as the expiring shelf, including 75 million of capacity.
This concludes my financial review. Now back to Bill.
Thanks Jim.
Bill Smith: So, let's begin with Safe Path 8 and some of the new exciting features that will be included in this upgrade to the platform.
Bill Smith: Both at launch and in the future as we roll out our exciting next-generation road map
Bill Smith: With Safe Path 8, we will bring the power of AI to every member of the family, enhancing the platform to deliver personalized and proactive protection.
Bill Smith: Designed with privacy and pieces of mine at its core, Safe Path 8 will seamlessly connect and help families safeguard each generation.
at Every Stage of Life
Bill Smith: As we evaluate the ways in which AI can safely offer additional protections and benefits to the individuals and families to use our products.
Bill Smith: We consider its use according to our AI strategy, which is built on three key pillars.
The AI solutions that we use must be safe.
Let's be carrier grade.
and must be insightful.
With these three pillars in mind, let me discuss further.
Speaker Change: At Smith Micro, Artificial Intelligence, AI, or Machine Learning has long helped to enable our product innovation.
Speaker Change: We applied it to our comsleep visual voicemail solution using AI models to deliver intelligent features like voice-to-text transcription and scam-called detection.
Speaker Change: We also leveraged AI-powered capabilities and features of our existing safe-pass solution.
Speaker Change: such as Safe Path Drive, which uses advanced machine learning models to detect speeding, sharp turns, hard braking, and crash-a-depth.
Enhancing real-time family safety on the road.
Speaker Change: With SafeFath 8, we will introduce a new set of AI-powered features and functionalities to the platform that we believe will provide families with powerful, actionable insights they can use to keep each other safe.
Speaker Change: Along these lines, Safe Path 8 will include social media intelligence.
Speaker Change: This feature set will provide parents with valuable insights regarding their children's social media usage and notify parents of areas of potential concern.
including things like cyberbullying.
Hate speech, profanity, actually immutable languages, and self-harmed.
Speaker Change: When safe past detects an area of concern with the child's social media activity, it will automatically notify the parent of what has transpired and powering parents to have valuable conversations with their children.
Speaker Change: Keep in mind that these notifications will occur only in connection with the areas of concern and not every online activity.
Speaker Change: This is where we put AI to work to help parents.
Speaker Change: With Safe Path 8, we also plan to introduce a dynamic age-aware platform that can adapt to the child's age.
Speaker Change: Once the parent enters the child's initial age group during setup, safe path will enter a self-configuring mode and establish recommended age-based settings for the child.
Speaker Change: Content filters, time limits, usage of apps and app categories all are guided by the child's age group based on the recommendations of industry leading experts.
Speaker Change: These steps will make onboarding frictionless and personalized for the family.
Speaker Change: Of course, parents will have the ability to override these recommendations at any time and select settings they feel are most appropriate for their children.
Speaker Change: Another key enhancement that will be part of the Safe Path 8 platform will be the ability to block his from using AI chatbots and tools, empowering parents to establish the limits they feel are most appropriate for their children.
Speaker Change: One example where parents will benefit from the stunctionality is while their children are doing homework.
Speaker Change: Studies have shown that using AI for homework can hinder critical thinking.
Speaker Change: Where kids rely on external tools instead of engaging in deep internal thinking or putting in the steps to solve a math problem.
Speaker Change: Another feature that we plan to include in Safe Path 8, that we believe is truly unique, will be our family AI assistance.
Speaker Change: This tool set will use large language models to provide parents with valuable insights
Speaker Change: Most importantly, all of the AI elements we will include in Safe Path 8 will be consistent with the three pillars that I shared as the foundation of our AI strategy.
Speaker Change: They will be carrier grade, safe and secure with strong guardrails in place.
Speaker Change: They will provide parents with valuable insights to help them keep children safer as they navigate the online world.
Speaker Change: Additionally, Safe Path 8 will include our Digital Wellness Resource website.
Speaker Change: which users will be able to access directly from our safe path app.
Speaker Change: The Digital Wellness Resources site is a curated collection of online resources aimed at helping families and parents obtain helpful information.
Speaker Change: The site is easy to navigate and organized by topping. So parents and families can jump right to this topic. They are most interested in and obtain additional expert information and insight.
Speaker Change: We expect the available resources to expand as we launch the initiative in partnership with carrier partners and content providers with relevant expertise.
Speaker Change: As excited as we are about our product innovations, we were equally excited about some of the activities we're seeing in the market. Now let's talk about our carrier activity.
Speaker Change: In general, during the past several quarters, I believe we have seen a positive shift in our conversations with our current and prospective customers with respect to our latest solutions and our customers' long-term strategies.
Speaker Change: I then pleased with the expanded reach within our customers organizations.
Speaker Change: We believe all of this has been driven by the expansion of our portfolio and is very positive.
Speaker Change: With Orange Spain, we remain very excited about the path forward for our Safe Path Kids solution that is this technology supporting Orange Spain's unique to-you rate plan.
Speaker Change: We are working closely together with Orange on some new initiatives planned for back to school time frame and we'll look forward to sharing teacher announcements around those
Speaker Change: We also continue to engage productively with other orange properties throughout Europe , building on the momentum of the two-yo launch in Spain.
Speaker Change: We have also received interest from other mobile operators throughout Europe , resulting from the success of our appearance at Mobile World Congress earlier this year, and will soon launch new trials with a number of these mobile operators as a result.
Speaker Change: Back here in the US, we continue to work closely with AT&T on new marketing activities related to product updates that will be included in an upcoming release, which we believe will expand the available audience.
Speaker Change: for AT&T Secure Family, allowing for some different and broader marketing campaigns.
Speaker Change: without getting ahead of ourselves of what we can share. We are also engaged on ongoing discussions with regard to the expansion of the SAAS Classroom.
Speaker Change: We continue to have a very solid and collaborative working relationship with AT&T and hope to have more news to share in the coming quarters.
Speaker Change: With Boost, we remain on track on several ongoing initiatives, including marketing initiatives for visual voicemail and Boost Family Guard.
Speaker Change: We are engaged in meaningful discussions with regard to different bundling opportunities, as well as our expanded, safe-pass solutions that we see as a great opportunity for boosts
Speaker Change: I believe there is a strong upside with this important partner.
Speaker Change: As I mentioned on our last call, our partnership with T-Mobile continues to broaden and we continue to engage monthly with key stakeholders around our expanded safe path offerings.
Speaker Change: I remain bullish about our future prospects for this key customer.
Speaker Change: More broadly, I want to note that we are seeing significant interest in safe path OS for both kids and senior phones.
Speaker Change: as well as with our Safe Path Kids Great Plan solution. With operators, we currently are not doing business with it.
Speaker Change: These innovative products have opened doors for our COC, and the features and functionality associated with SafeFath 8 has further piqued their interests.
Speaker Change: We believe the opportunities with these carriers will enhance our growth prospects.
Speaker Change: I expect to be able to provide additional color for you regarding these opportunities over the coming quarters.
Speaker Change: As you can see we are excited about the activity we're seeing in the market particularly around our product innovations.
Speaker Change: from SafePath OS for Kids and Senior Phones to SafePath Kids Great Plan Solution and our upcoming launch of SafePath 8 and its future roadmap.
Speaker Change: We believe that this next generation of safe path will enable parents to ensure that every child gets an experience automatically tailored to their needs.
Speaker Change: from youngsters taking their first digital steps to teenagers navigating the complexities of social media.
Speaker Change: and for seniors seeking to age in place and enjoy their senior years in a safe and secure manner.
Speaker Change: Given the opportunities ahead and the innovation that drives us forward, I am optimistic about the company's prospect for a return to growth and profitability.
Speaker Change: With that, let's turn the call over to the operator for questions.
Operator.
Speaker Change: We will now begin the question and answer session. To ask the question, you may press star then one on your touch tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys.
Speaker Change: To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster.
Scott Cyril: In the first question comes from Scott Searle with Roth Capital. Please go ahead.
Scott Cyril: Hey, good afternoon. Thanks for taking my questions. Exciting to hear some of the new features come along with SafePad 8.
Bill Smith: Bill, maybe to dive in, starting with two, yo, I'm wondering if there are any metrics that you're willing to share in terms of how that's been going so far year to date, it's been up and running now for a couple of months.
Bill Smith: also wondering how you think about that in terms of ultimate success and penetration. What kind of penetration can we get into that youth installed base?
Bill Smith: Yes, Scott. I think the way to think about to you is it's off to a strong start.
They're getting some pretty good adoption.
Bill Smith: They think that they will get better adoption as we get into the summer and the back-to-school period.
So they actually said
Bill Smith: You know launching in the you know right after the first year was probably one of the the more difficult times to launch a product like like this yet they still are seeing some very meaningful success and growth.
Bill Smith: The product itself is being received well. We are working through different issues that you know, I come up with a new product launch and we're working in the spirit of team teamwork and it's been very, very positive.
Bill Smith: So all in all, I would say we're very happy with what's coming and we think it's going to get even more meaningful as we move forward.
Speaker Change: It's a bill maybe to follow up and unsafe path kids.
Speaker Change: It sounds like you're engaged with a number of different car operators I'm wondering if there are any sort of metrics that you're willing to share in terms of [inaudible]
the number of engagements, the timing of pilots.
Speaker Change: and I think previously you've talked about the third quarter potentially being an area or a timeline where we can see some inflection as a lot of these operators target back to school as an opportunity to sell something like safe path kids.
Speaker Change: Yeah, I think that's still holds true. I wouldn't change anything about what you just said because it is what I said last.
Speaker Change: on our last call, and I would fully want to reiterate that.
on this call. We do expect that we have some good opportunities for some.
meaningful
Speaker Change: You know, watches in the third quarter and the third quarter could start.
to really show some inflection.
Speaker Change: for all the efforts that we're putting in growing our products.
Speaker Change: Stain, you know, current and pushing the envelope as far as
You know, the capabilities. Look, God.
Speaker Change: I see this whole push for AI is being yet another meaningful driver for growth.
It is being very well received by the operators.
Speaker Change: They view it as a very positive move on our part and we want to leave this bucket and this is what leaders do. They continually move the product forward and that's what we're doing.
Speaker Change: And lastly, if I could, on Safe Path Seniors, I'm wondering when we'll start to see the first pilots on that front? Are you starting to get some visibility into that? And then just real quick, conceptually from a pricing standpoint of Safe Path 8, how should we be thinking about that? I'm assuming it's a premium, but just kind of wondering what the early thoughts are on that front. Thanks.
Speaker Change: Yeah, let me make sure I cover all the parts to that question so first off [inaudible]
Speaker Change: As far as the senior family, we've actually already had our first, you know, trial and we're well into the conversation around that product with that particular carrier. So, you know, there will be more to follow. We expect that
The senior version of Safe Path OOS will be available.
this fall.
Speaker Change: and so we're looking for launch show, hopefully in maybe in fourth quarter around the holiday selling season might be a good time to look for some movement forward on that front. As far as on the...
Safe bath, eight offerings, yes, this is it.
Speaker Change: There are a lot of premium offerings that are part of this as well as...
Other things we've had for some period of time.
and we are looking to launch.
this offering as a premium and a premium price.
Um...
Speaker Change: which will be also beneficial to our revenues, and that's something you'll just have to stay tuned for, it's a working process.
Great. Thanks so much. I'll get back in the queue.
Thanks.
Matthew Harrigan: In your next question comes from Matthew Harrigan with Benchmark. Please go ahead.
Matthew Harrigan: Thank you. I guess two questions. One was Safe Path Aid and an AI and you talked about the use of AI for homework and all that.
Matthew Harrigan: It feels like you're getting a lot more of its germane devices.
beyond smartphones and tablets.
Matthew Harrigan: and all that, a regular social media activity. How do you see that as an increasingly important
extension.
Matthew Harrigan: and then I guess in the nature of horse vacuum category.
Matthew Harrigan: and probably, you know, unmet demand for something like family, safety, of course, the vacuuming even more.
How we're uh...
Matthew Harrigan: Guys who are not using you who are kind of fumbling around, trying to do something in-house.
Matthew Harrigan: or looking at other alternatives, you know, fairing. I know you don't want to be too specific on Verizon, but, you know, what are you seeing in terms of capabilities that do not stem from
from Smith Micro. Thanks.
Matthew Harrigan: You know, historically, we've always had meaningful business with Verizon so I would welcome the opportunity to do business with them, you know, in the future.
when you see the kind of development there.
Matthew Harrigan: that we're working on with Safe Path of the Less for Kids, Safe Path of the Less for Seniors.
Matthew Harrigan: Bringing out all these AI features. We're moving the envelope. These are big time development efforts. This is Dott for the, you know,
The
Matthew Harrigan: A sideline business. This is something that is core to what we do.
Matthew Harrigan: and I think as Carrier's look at this, it makes it just that much more daunting in
Matthew Harrigan: for them to say gee, I guess we'll just go build our own version of this. That's a tough swallow and everything that we're doing is not going to make it any easier. Everything we're doing is making it tougher.
Matthew Harrigan: and the important part, though, is while it's making it tough for those who maybe want to save a little bit and try to do it on their own or whatever the driver is, the important part is [inaudible]
Matthew Harrigan: for their customers, for the families that they want to embrace, that they want to pull into the tent with them.
The families want these features
Speaker Change: You know, being a parent in the digital age, you know, I'm a little older and I didn't have to experience it but I would think it's pretty scary.
Matthew Harrigan: and, you know, to be able to use the power of AI as an assistant, as a help made, you know, in the whole parenting process.
Matthew Harrigan: I just think it's what it's all about and I go back to the premise that I've said a number of calls in the past.
Matthew Harrigan: There is no more valuable sub that a carrier can attract than a family sub.
Families are willing to-
There's much more loyal. They don't churn.
Matthew Harrigan: They're willing to spend a little extra money because they have...
Matthew Harrigan: You know, some things in mind that they really want to, you know, help with and keeping the family safe is gotta be one of the, you know, the basis of this.
Matthew Harrigan: So, if I was a carrier and I knew that the best customers I could get are family subs.
Matthew Harrigan: I'd be doing business with Smith Micro. I wouldn't be trying to save a few bucks. I wouldn't be trying to, you know, try some start-up a garage shop or something like that. I'd want to go with somebody who actually knows what they're doing. I want to make sure that the product is safe.
Matthew Harrigan: Is Carrier Great, and it is intuitive and is helpful to the parrots.
Matthew Harrigan: I know I'm preaching a little bit, but you know this is my shot, you ask the question.
Matthew Harrigan: You're niche and obviously you've got to install a base and it doesn't matter that much. People got a new phone, but any thoughts on how the global disruption could affect you and that's my last question. Thanks Bill.
Matthew Harrigan: Okay, I understand where you're going with that. Look, we are for our OS solution. We're using
The Largest
Matthew Harrigan: Device Manufacturer on the Android side. It is products that every carrier already sells.
Matthew Harrigan: So they don't have to go out and source new new phones or new tablets or and oh yes tablets are part of the game too. I think the phone probably is bigger but you know nonetheless.
Matthew Harrigan: We are looking at the tablet, and our solution will run on the tablet without doing anything else.
That's great. Thank you. That's your question.
Absolutely, thanks.
Thank you. Bye.
Speaker Change: Again, if you have a question, please press star then one.
Speaker Change: Thank you operator and thanks everybody for joining us. We appreciate your interest in the company. Should you have any questions? Please feel free to give us a call. Thanks and we'll talk to you a little bit.
Bye.
Speaker Change: This concludes today's conference call. Thank you for attending today's presentation. You may now disconnect.