SMITH MICRO SOFTWARE, INC. Q3 FY2024 earnings call

• European carrier: Hoped to announce the carrier's name but must wait for official launch, expected soon. - SafePath OS: Expect to sign first contract for deployment with a U.S.-based MVNO in coming weeks, first deployments expected in first quarter of 2025, recurring fees from deployment model will meaningfully contribute to 2025 revenues. - CCA partnership: Completed marketing and engagement agreement with CCA, partnering to market SafePath Global Family Safety Solution to CCA's carrier members under SafeTools brand, currently has contracts in process with multiple CCA members and expects to sign additional ones. - Cost structure: Achieved $1.9 million in cost reductions in Q3, targets $2.4 million to $2.8 million in quarterly cost savings for Q4. - Boost: Ramping up marketing of Boost Family Guard in retail footprint, using various avenues to promote it; continued growth in subscribers on CommSuite platform's premium visual voicemail. - AT&T: Began new social media influencer campaign for AT&T Secure Family in November, featured in connected television advertising, optimistic about opportunity. - T-Mobile: Continuing to explore expanded SafePath platform opportunities, SafePath OS is an innovative delivery platform, SafePath Kids Plan aligns with rate plan sales.

During the third quarter of 2024, Family Safety revenue was $3.9 million, a decrease of approximately $5.2 million or 57% compared to the third quarter of the prior year, and a decrease of approximately $300,000 or 7% compared to the second quarter of 2024. CommSuite revenue was approximately $600,000, a decrease of approximately $100,000 compared to the third quarter of 2023 but an increase of approximately $100,000 compared to the second quarter of 2024. ViewSpot revenue was approximately $100,000 for the third quarter of 2024, a decline of approximately $1 million compared to the third quarter of the prior year and a decrease of approximately $300,000 compared to the second quarter of 2024.

• Expected consolidated revenues in the fourth quarter of 2024 to be in the range of approximately $5 million to $5.2 million. - Expect gross margins in the fourth quarter of 2024 to be in the range of 72% to 75%. - Expect fourth quarter 2024 non-GAAP operating expenses to decrease by 7% to 12% compared to the third quarter of 2024. - Aim to return to profitability and generate free cash flow in 2025.

• Forward-looking statements involve risk and uncertainties which could cause actual results or trends to differ materially from those expressed or implied by forward-looking statements, refer to risk factors in most recently filed Form 10-K. - Uncertainty regarding the official launch timeline of the European carrier may impact revenue progress. - Competitors may launch similar products or take actions that affect market share.

Q: Scott Searle asked about the European operator launch, SafePath OS model, break-even, etc.

A: Bill Smith said he fully expects the European carrier to launch before the end of the year, SafePath OS is a subscription model; Jim Kempton said break-even is in the mid-7 range when taking into effect cost of sales.

Q: Leo Carpio asked about operating cost savings, cash runway, and CCA deal size.

A: Bill Smith said achieved more savings than initially targeted in Q3 and full effect will be seen in Q4, no additional reductions contemplated in 2025; Bill Smith said finished Q3 with $1.5 million in cash and got approximately $6.4 million from capital raise; Bill Smith said CCA deal sizes vary from relatively small carriers to carriers with a few million subs.

Q: Matthew Harrigan asked about implementation costs, competitive side, and European vs U.S. opportunities.

A: Bill Smith said SafePath offerings have common code base making it manageable and cost-effective; Bill Smith said app ratings of SafePath offerings are high compared to in-house offerings of large Tier 1s; Jim Kempton said Europe is seen as a good stepping stone with big opportunity as well as the U.S.

Q: Brian Swift asked about the yet to be named European customer.

A: Bill Smith said aligning activities with what carriers do, leveraging selling rate plans and devices, and that it's all meaningful but couldn't provide specific details on size of first country or time to meaningful revenues