Good day and welcome to the Smith Micro Second Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Charles Messman, Vice President of Marketing. Please go ahead.

Thank you, Operator. Good afternoon, everyone. We appreciate you joining us today to discuss Smith Micro Software's Financial Results for the Second Quarter Ended June 30th, 2024. By now, you should have received a copy of the press release with the financial results. If you do not have a copy and would like one, please visit the Investor Relations section of our website at www.smithmicro.com. On today's call, we have Bill Smith, our Chairman of the Board, President, Chief Executive Officer, and Jim Kempton, our Chief Financial Officer. 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 by new and existing customers, operating expenses, and the company's cash reserves. 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 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. I want to point out that in our forthcoming prepared remarks we refer to non-GAAP financial measures. These refer to our press release disseminated earlier today for reconciliation of these non-GAAP financial measures. With that said, I'll turn the call over to Bill. Bill?

Thanks, Charlie. Good afternoon and thank you for joining us today for our 2024 Second Quarter Conference Call. 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. On our last call, we announced that DISH would be our first customer to launch SafePath Global. We are very pleased to confirm that DISH launched Boost Family Guard, which is powered by SafePath Global during the second quarter. This was a significant milestone for us, not only for the growth potential of Boost Family Guard, but also because it is our first SafePath Global deployment and demonstrates the potential of this accelerated deployment model, going from contract execution to launch in about six weeks. This is a duplicable model for us, and we expect to see more SafePath Global wins in the near-term. 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. Marketing activities have begun for Boost Family Guard and we anticipate subscriber growth on that platform over the remainder of this year. 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. 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, 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…

Thanks, Bill, and good afternoon everyone. I'll now be covering the financial details of the second quarter of 2024. 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. 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%. When compared to the first quarter of 2024, revenue decreased by approximately $700,000 or 11%. Year-to-date revenues through June 30th, 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 of Sprint. 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, 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. 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. During the second quarter of 2024, CommSuite revenue was approximately $500,000, which decreased by approximately $200,000 compared to the second quarter of 2023. Revenue from CommSuite decreased by approximately $100,000 compared to the first quarter of 2024. However, we have been experiencing subscriber…

Thanks, Jim. Let me begin with DISH and provide further color on the activities that I touched on to begin today's call. 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. We believe the timing is very good for Boost Family Guard right now with the recently launched new branding for DISH Mobile Services under the Boost brand. This branding campaign is creating a fresh new look and feel for the DISH Mobile Services business. And we are working with DISH on plans to capitalize on the new branding with several new awareness marketing campaigns for Boost Family Guard. 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. 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. DISH has also recently launched our Ambassador Program, which drives the product promotion directly to consumers and stores and enables different types of [SPF] (ph) and bonus programs to incentivize in-store promotion of the product. As part of this program there are also different training modules for Boost employees, as well as for authorized retail store representatives to teach them about Boost Family Guard while also informing them of the bonus opportunities associated with selling this product. We have enhanced the Ambassador Program by adding the ability for store managers and sales representatives to download different promotional materials directly from the platform, such as signage replacement…

We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Scott Searle of Roth Capital. Please go ahead.

Hey, good afternoon. Thanks for taking the questions. 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. I'm wondering if you could talk directionally about what you're expecting for safe path 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, should we expect SafePath to be rebounding then into the fourth quarter?

Yes, look I would say this -- I would say that we will you know get the launch behind us in Europe. It'll happen hopefully before the end of the third quarter. And that will put us on a strong direction for growth for fourth quarter. I expect fourth quarter to show some meaningful leverage of the SafePath revenues. And I think that will be the sign that everybody's been waiting for.

Great. And maybe just to follow up on SafePath 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 SafePath Global or if that's a more traditional type deployment. So specifically on the SafePath Global front, I'm wondering how big is that pipeline in terms of carriers and your expectations in terms of what you can close this year?

Yes, I would say that all of the opportunities I talked about as being in process, you know, the added tier 1 carrier in Europe as well as others here in North America will be based around SafePath Global. So the time to market should be very rapid and so that's another positive sign. As we move into fourth quarter and then in the first quarter of 2025, that should provide the leverage that we're looking for to turn us into a profitable company and start to really grow our revenues. 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 and we can't talk about it yet. As soon as it launches we will announce what that product is and what its purpose is. It is an exciting market opportunity in and of itself and it is repeatable. So I think that's the really strong message that we have here. I think that we have reached the point now where we've consolidated everything, we've streamlined our operations, and we're you know on a course for meaningful growth.

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 SafePath Global and CCA, thanks.

Okay, yeah, we're pretty excited about the CCA opportunity. It provides us access to a large number, about 40, 50 different carriers around the US. And I'm not including T-Mobile, who is also a member of CCA. So that's their excluded from this opportunity, because we already do business with them. So, collectively, we are talking about tens of millions of subs and individually, there are a number of carriers that are smaller that would be very difficult to market to without this marketing arrangement. 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 are looking for very rapid deployment and we'll be back talking about that, you know, in the weeks to come.

Great, thanks so much. I'll get back in the queue.

The next question comes from Matthew Harrigan of Benchmark. Please go ahead.

Thank you. One really broad question and one fairly narrow one.

Matt, we can't hear you. Can you get louder?

Sure. Hopefully you're at an inflection point now for SafePath, really both here and in Europe. And you've certainly [honed] (ph) down your costs repeatedly now. And you just did an equity raise, you know, last quarter. So how is it that you are really embarking on some more fairly aggressive, you know, cost reductions just as you did the equity raise and you seem to be hopefully be hitting an operational inflection point. And then I'll say the next question after your answer.

First, the power of Safe Path Global is that it does not require a lot of customization to reach the deployment. You know, the first deployment was done in 6 weeks. We actually believe we could deploy in less than that and so that's part of our overall strategy. Because we're not doing a lot of heavy customizing and we are looking to deploy a number of other carrier customers, we have looked at our resources and determined that we can do this with less headcount. We also have been able to streamline the cost structure in that all of the ring costs for the ring platform, which were substantial, can now be ended and are in the process of having that happen. So we're talking about multiple hundreds of thousands of dollars that was involved in running the Ring platform and that is being rung out of our business model. It has been rung out over the course of this year. 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. And I guess this is also relevant to SafePath Global, but when you look at the Europeans, here are 1 carriers, as you know, that tend to have a lot of autonomy on a national basis. And I know that your product introduction to [some of them] (ph) and select markets, I don't know how much customization there is. If you go from Czech to Greece 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 other in the old world, maybe a three year process to have, you know, broad adoption.

Yes, look, I, you know, What I can say is this, this launch will be launched in a first country. It is a country where they have meaningful size and we are already in conversations about who the next countries will be. So this is just the beginning. So when we launch in a couple of months, yes that's just the first country and there's more to follow and they can be -- and that can be done in rapid fashion. Really the only difference is just changing the language and so that the users can read the props.

That's great. Thank you.

[Operator Instructions] And our next question comes from Leo Carpio of Joseph Gunnar. Please go ahead.

Good afternoon, gentlemen. I actually have two quick questions. The first one regarding the operating expenses. It seems like you're doing a great job in terms of reducing the 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 invasion? 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 US, that you haven't reached out to and could be a possibility. Thanks.

Yes, Leo, I mean, 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. So, you know, you'll have to stay tuned for that. But the CCA opportunity, I think, will bode very, very well for us. And it's a section of the market that 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 some new names and see how it grows.

Leo? We can't hear you.

Oh, it did. 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?

Well we always look at our cost structure and, you know, look to optimize it, but at this point, you know, that between the two reduction initiatives, we're talking about $2 million to $2.5 million in total. So that's what we are targeting currently.

All right, thank you.

The next question comes from Brian Swift of Security Research. Please go ahead.

Yeah, I have a couple questions. First, just to clarify, I think, Jim, in your comments, you guided Q3 to $4.5 million to $5 million, And I think you also said that much of that decline was your anticipated results from ViewSpot. And since the ViewSpot went down $300,00 to $400,000, is it going to zero or what maybe you can give me a little color on that?

We certainly expected 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.

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 safely 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 that doesn't mean that we can't turn it around. So we'll see.

Okay. And secondly, we've had a continual slide in the Sprint revenues that seems to be consistently more than offsetting anyway, whatever gains you're getting at T-Mobile. Can you give us a little bit more color on each quarter? It seems like you're optimistic about what T-Mobile is doing in terms of promotions and such. I remember when you really started accelerating with Sprint was when you had a program where they were really doing a lot of training with the in-store people doing promotions and such. Do you see any kind of activity like that at T-Mobile and as well as at AT&T where we could see? Because it seems like we should be seeing some uptick here, but when you guide to [$4.5 million, $5 million] (ph) it means we haven't hit the trough yet. 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.

Well, you know, I think you've brought up Sprint and you've brought up the success we had at Sprint. 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. So I think where you really want to watch is to watch the growth for DISH and the Boost Family Guard. 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. 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 are full of energy, 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 to today. It's got to -- we're waiting for the House. But there's 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.

All right. Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Charles Messman for any closing remarks.

Well, I 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.

The conference is now concluded. Thank you for attending today's presentation and you may now disconnect.