U.S. Markets close in 55 mins

Edited Transcript of SMSI earnings conference call or presentation 13-Mar-19 8:30pm GMT

Q4 2018 Smith Micro Software Inc Earnings Call

ALISO VIEJO Mar 16, 2019 (Thomson StreetEvents) -- Edited Transcript of Smith Micro Software Inc earnings conference call or presentation Wednesday, March 13, 2019 at 8:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Charles B. Messman

Smith Micro Software, Inc. - VP of IR & Corporate Development

* Timothy C. Huffmyer

Smith Micro Software, Inc. - VP, CFO, Treasurer & Secretary

* William W. Smith

Smith Micro Software, Inc. - Co-Founder, Chairman of the Board, CEO & President

================================================================================

Conference Call Participants

================================================================================

* Brian Swift

* James Patrick McIlree

Chardan Capital Markets, LLC, Research Division - Senior Research Analyst of Industrial and Consumer Technology

* Jon Deroy Gruber

Gruber & McBaine Capital Management, LLC - Co-Founder, Principal, and Manager

* Scott Wallace Searle

Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day, and welcome to the Smith Micro Fourth Quarter 2018 Earnings Conference Call and Webcast. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Charles Messman, Vice President of Investor Relations and Corporate Development. Please go ahead.

--------------------------------------------------------------------------------

Charles B. Messman, Smith Micro Software, Inc. - VP of IR & Corporate Development [2]

--------------------------------------------------------------------------------

Thank you, operator, and good afternoon, everyone. Thanks for joining us today to discuss Smith Micro Software's financial results for the fourth quarter and fiscal year-end of 2018 ended December 31, 2018. By now, you should have 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, Chairman of the Board, President and Chief Executive Officer of Smith Micro; and Tim Huffmyer, Chief Financial Officer.

Please note that some of the information you'll hear during our discussion today will consist of forward-looking statements, including without limitations, those regarding the company's future revenue and profitability, new product development and new market opportunities, operating expenses and company cash reserves. Forward-looking statements involve risks 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 risk factors discussed in Smith Micro's most recently filed 10-K. Smith Micro assumes no obligation to update any forward-looking statements, which speaks to our management's beliefs and assumptions only as of the date they are made. I want to point out, in forthcoming prepared remarks, we will refer to certain non-GAAP financial measures. Please refer back to our press release disseminated earlier today for a reconciliation of the non-GAAP financial measures.

With that said, I'll now turn the call over to Bill. Bill?

--------------------------------------------------------------------------------

William W. Smith, Smith Micro Software, Inc. - Co-Founder, Chairman of the Board, CEO & President [3]

--------------------------------------------------------------------------------

Thank you, Charlie. Good afternoon, everyone, and thank you for joining us today for our 2018 fourth quarter and year-end conference call.

Looking at our fiscal 2018. We achieved several significant milestones across all facets of the organization. We began the year with a concentrated focus of returning the company to growth, profitability and positive cash flow. I am pleased to report that we achieved success on all 3 fronts. For the fourth quarter, total revenue came in at $7.4 million, up approximately 28% over the same quarter in 2018, with a non-GAAP profit of $939,000 or $0.03 per share. For the year, total revenues were up 14% to $26.3 million with a non-GAAP breakeven.

During 2018, we continued to streamline our operations and rationalize our product lineup. We made difficult decisions to discontinue efforts on marginal product families and to do so in a manner that would not damage important customer relationships, which are keys to our continued growth in 2019 and beyond. We also successfully strengthened our balance sheet, paid out substantially all our debt obligations and strategically acquired a third leg to our wireless products stool with the acquisition of the Smart Retail product suite that we have branded ViewSpot.

We are pleased to have entered 2019 with a strong wind to our back. Sales activities are focused and backed with a level of energy we have not seen in almost 10 years. Our products, SafePath, CommSuite and ViewSpot are garnering increasingly strong interest and support from wireless carriers and cable MSOs around the world. We had over 50 meetings at the recently concluded Mobile World Congress in Barcelona.

Revenue growth from new customers and orders are definitely part of our plan for 2019. And we are looking to achieve continued revenue growth with the expanded profitability and strong creation of free cash flow. All the work during the past few years to rationalize our expense profile and build out an exciting product lineup are on the precipice of strong returns. This is an exciting time for our company.

Now let's turn the call over to Tim to give more in-depth financial details on the quarter and the year. Tim?

--------------------------------------------------------------------------------

Timothy C. Huffmyer, Smith Micro Software, Inc. - VP, CFO, Treasurer & Secretary [4]

--------------------------------------------------------------------------------

Thanks, Bill. Let me start with a summary of certain activity completed since our last earnings conference call. First, we completed a private placement of common stock and warrants with funding finalized on November 7, which provided $6.8 million of net cash to support the business as we evaluate our product roadmaps, M&A opportunities, debt repayment and subscriber growth continues on the Sprint SafePath platform. The newly issued common stock was priced above market at $2.32 and included the issuance of a warrant for each share purchase for total proceeds of $7.5 million. In addition to these securities purchase agreement, the company also entered into a registration rights agreement. These actions were fully completed during Q4 2018.

In conjunction with this transaction and these agreements, the company amended the previously issued March and May private placement warrant agreements. These amendments allow the company to modify the warrant accounting from liability to equity treatment, resulting in the elimination of the warrant liability and an increase to stockholders equity of $7.6 million during Q4 2018.

On December 11, we announced the use of net proceeds from the November private placement to repay certain short- and long-term debt obligations of $3.2 million. The combination of both the private placement and debt repayment significantly strengthens the company's balance sheet as we enter 2019.

As previously announced, on January 9, we completed the acquisition of the ISM Connect Smart Retail product suite. Pursuant to the terms of the transaction, the company paid an aggregate purchase price of approximately $9.1 million, consisting of $4 million in cash and $5.1 million through the issuance of company common stock. The company has committed to certain registration rights, of which these actions are in process and expect to be completed in the coming weeks.

We are extremely pleased with the execution of these strategic transactions, as each contributes to the strengthening of the company's business and provides shareholder value, all as the company continues its journey to consistent revenue and profit growth.

Now let's review the numbers for the fourth quarter and fiscal 2018. For the fourth quarter, we posted revenue of $7.4 million compared to $5.7 million for the same quarter last year, an increase of 28%. The Wireless segment reported quarterly revenue of $6.9 million compared to $4.7 million last year, an increase of 47%. Our Graphics segment reported quarterly revenue of $482,000 compared to $1.1 million last year.

For the year, revenue was $26.3 million compared to $23 million last year, an increase of 14%. This growth was mostly related to the Wireless segment reporting annual revenue of $24.5 million compared to $18.3 million last year, an increase of 33%, offset by the Graphics segment reporting annual revenue of $1.8 million compared to $4.6 million last year.

The increase in the Wireless revenue was the result of revenue growth in, both the CommSuite voice messaging and SafePath Connected Life Platforms, as customer adoption rates increased for both product families. During the fourth quarter of 2017, we had rolled out CommSuite product enhancements, which has now resulted in 5 consecutive quarters of revenue growth and the highest number of premium subscribers.

Although we expect modest growth in CommSuite premium subscribers during 2019, we do expect these revenues to level out. This is specifically due to the uncertainty around advertising revenue generated on the CommSuite platform, and Sprint's recent divestiture of Pinsight Media.

During the fourth quarter of 2018, revenue from Sprint SafePath Family grew by 20%. We expect revenue growth to continue based on recent and expected Sprint actions, which includes continued retail store promotions. These actions are completely dependent on Sprint execution. We continue to support efforts as required.

As a reminder, the Sprint launch is unique in that Sprint adds an existing base of subscribers using a legacy product. The legacy product was originally due to sunset in the first quarter of 2018 but was delayed. This change was based on a Sprint operational decision. We continue to support Sprint on a new sunset date.

The decrease in the Graphics revenue was in line with our expectation, attributable mostly to the CLIP STUDIO distribution agreement termination and lower unit sales of legacy products. For the fourth quarter, gross profit was $6.4 million compared to $4.4 million during the same period last year.

Gross margin was 87% for the fourth quarter compared to 76% last year. The increase in gross margin is directly related to the higher Wireless revenue and mix of both Wireless and Graphics revenues. For the year, gross profit was $22 million compared to $17.9 million last year. Gross margin was 84% for the year compared to 78% last year.

Operating expenses for the fourth quarter was $5.7 million, an increase of $833,000 or 17% compared to last year. This increase is mostly related to the previously announced Q4 2017 reversal of real estate restructuring reserves combined with $200,000 of acquisition-related expenses incurred in Q4 2018.

Operating expenses for the year was $23.2 million, a decrease of $400,000 or 2% compared to last year. During Q2 2018, we announced a cost reduction program resulting in modest restructuring expense at that time. This cost reduction program included a reduction of staff and other cost management activities with an expected annual savings of $1 million. We are pleased with the operating expense savings achieved from this program.

The non-GAAP pretax income for the fourth quarter was $1.2 million compared to a loss of $1.1 million last year. The non-GAAP pretax loss for the year was $88,000 compared to a loss of $5.6 million last year. The non-GAAP net income for the fourth quarter was $939,000 or $0.03 earnings per share compared to a non-GAAP net loss of $693,000 or $0.05 loss per share last year. The non-GAAP net loss for the year was $67,000 or breakeven loss per share compared to a non-GAAP net loss of $3.5 million or $0.26 loss per share last year.

Within the recently issued press release, we have provided a reconciliation of our non-GAAP metrics to the most comparable GAAP metric. For the fourth quarter, the reconciliation includes the following adjustments: stock compensation expense of $261,000; intangible amortization of $60,000; amortization of debt discount and issuance cost of $42,000; fair value adjustments of $2.3 million; loss on debt extinguishment of $203,000; acquisition cost of $201,000; and preferred stock dividends of $34,000, some of which are noncash adjustments.

For the year, the reconciliation includes the following adjustments: stock compensation expense of $935,000; intangible amortization of $249,000; amortization of debt discount and issuance cost of $239,000; fair value adjustments of $812,000; loss on debt extinguishment of $203,000; acquisition cost of $201,000; and preferred stock dividends of $404,000, some of which are noncash adjustments.

Due to our cumulative net losses over the past few years, our GAAP tax expense is primarily due to foreign income taxes. For non-GAAP purposes, we utilize a 24% tax rate for 2018. The resulting fourth quarter non-GAAP tax expense was $297,000, and a non-GAAP tax benefit for the year was $21,000. This concludes my financial review.

Now back to you, Bill.

--------------------------------------------------------------------------------

William W. Smith, Smith Micro Software, Inc. - Co-Founder, Chairman of the Board, CEO & President [5]

--------------------------------------------------------------------------------

Thanks, Tim. Now let's take a deeper dive into our 3 core products suites and provide some additional color.

I'll begin with ViewSpot, as it is the newest and very exciting addition to our lineup. We closed on the Smart Retail product acquisition in early January. We acquired a very strong technology, an established team and a profitable business that is growing with significant upside. We see this as a very strategic and synergistic addition to our product line, adding a new profitable revenue stream that targets our sweet spot of selling to mobile networks and cable operators as well as building on and deepening relationships already in place. The product suite generated approximately $4 million in revenues in 2018, building off 2 significant long-term contracts with the 2 largest Tier-1 carriers in the U.S. Both carriers have deployed the software solution throughout their company on the retail store footprint.

A third Tier 1 carrier in Europe rounds out the current customer base. The ViewSpot platform enables wireless carriers, and frankly, any large retailer selling mobile devices to control on-screen demos displayed on android handsets or tablets throughout the store, allowing them to deliver consistent, targeted and secured content that could include specific promotional campaigns, device pricing that is dynamic and can be location-dependent, and on-device demos to educate consumers on the products and the service features.

The ViewSpot platform truly becomes an extension of the carriers' sale team helping to convert consumers browsing devices to buying customers. A good example of this dynamic interactive virtual method of sales occurred at the CES trade show back in January, when an OEM partner we were meeting with stated, "We love Smart Retail, it's our silent salesperson."

Coupled with the demo capabilities, the platform also collects several points of valuable real-time data, including customer engagements, device performance and diagnostic analytics to better understand store operations and overall device health. This collected data gives us very unique insights into consumer buying behavior, sales trends, campaign success and even the importance of device location in the store. These analytics are all delivered via a dashboard, broken down regionally per location. This functionality truly allows our customer's retail team to monitor and react quickly to assess and enhance overall sales performance.

Our ViewSpot pipeline is strong. And the sales cycle is significantly shorter than our other products. I am very pleased with the integration process and how the team has hit the road running. We are very excited about having ViewSpot as part of our portfolio. And I look forward to talking about new customers we expect to bring on board in 2019 in future earnings calls.

Okay, let's move on to SafePath, which delivered approximately $1.2 million in revenue for the fourth quarter. Although it is early, we believe the slower growth in the fourth quarter is directly seasonal in nature. Our carrier customers truly focus marketing efforts on device sales during the holiday timeframe. I am, however, quite pleased that in the first quarter of 2019, we have seen a significant surge in subscriber growth, exceeding growth rates of the last few quarters.

Now let's talk a bit about Safe & Found with Sprint. During the final quarter of 2018, we launched several new initiatives that we believe will continue to drive new adoption as well as conversion of the legacy installed base. As I spoke on the last call, we launched an advanced version during the quarter to offer a Spanish version to broaden the audience of new subscribers. We also added LVS location capabilities. This is a change from earlier strategy that we did not allow the administrator of the account to directly add functionality to a device without having the device owner download the app themselves. We made this change in a direct response to consumer demand from the legacy installed base to accelerate their conversion to Safe & Found. All indications are that the conversions are accelerating. And that Sprint is happy when the subscriber response.

On the marketing front, several new programs are underway. First, a trial card initiative has been distributed to the retail stores for retail reps to hand out to consumers. This program has been very successful. Second, a point-of-sales activation at checkout is an all-new sales approach, similar to how Sprint's retail stores sell insurance for devices when the purchase is made. This provides a quick and simple way for sales reps to promote Safe & Found and get new subscribers into a Safe & Found trial. Third, call center training. We began training sessions, where we visited a number of call centers throughout the U.S. to better educate reps on Safe & Found. And finally, we continued the digital online marketing campaigns expanding to regions in which we are seeing the most success. The Sprint deployment is growing at an accelerated pace. And it appears that product this offering has become and will continue to be a very successful value-added services offering.

Now let's look at the SafePath platform. We announced during the third quarter of 2018 that our next-generation SafePath Connected Life platform was expanding beyond just location services, parental controls and web filtering to include an entire ecosystem of digital lifestyle technologies, under a central hub, white-labeled for the mobile operators brand. To date, I am very pleased with the progress on this front. In fact, at Mobile World Congress a few weeks back, we demonstrated the next-generation enhancement to the platform, SafePath 6.0. These enhancements include a completely new user interface that makes it easy to add new devices, such as the pet tracker, a wearable device, a Smart Home security camera as well as a connected car, all under single pane of glass, bringing to life the connected digital life experience.

I would suggest that you visit smithmicro.com, and click on the SafePath demo video on the homepage. It gives a good feel for the application and its capabilities.

Let's move on to our CommSuite voice messaging platform, which is our largest revenue producer and had an outstanding year. During late 2017, we implemented several changes to the platform to increase the ability to reach a much larger footprint of mobile subscribers at Sprint. As Tim mentioned in his remarks, we achieved our fifth quarter of consecutive revenue growth, and now have the highest number of paid CommSuite subscribers in the company's history. To ensure continued success, we continue to innovate, and as such, we recently announced some significant upgrades to the platform. Unique in the space, that positions CommSuite as the next-generation voice messaging solution and includes CommSuite Voice, our traditional and core visual voicemail and voice-detect services with an enhanced user interface and improved functionality on text-generated response. CommSuite Anywhere, our client-less solution that works on any smartphone and enables users to receive and respond to voicemail messages from any device at any time, and recognize the preference to receive messages as SMS or MMS text messages. CommSuite Cloud, a scalable solution that provides a voice assistant that enables users to listen to messages without having their phone in hand. Users can listen and respond to messages through all the leading voice devices, such as Google Home and Alexa. Additionally, our contact service categorizes voicemails, allowing users to better distinguish between spam and other unwanted calls.

There is more to come throughout 2019 as we continue to explore innovative ways to expand the platform to better offer mobile operators new and preferred ways for their customers to receive their messages. The voicemail world has changed. And we have updated and expanded CommSuite to take advantage of these new opportunities in this expanding market.

So in closing, 2018 was a very good year for Smith Micro, as we made the turn back to growth and profitability while enhancing the product suite, diversifying our customer base and significantly strengthening our balance sheet. We entered 2019 with strong momentum, focused on maintaining our technology leadership position, adding new customers and accelerating growth. I am as encouraged as I have ever been for the outlook of Smith Micro and our 2019 year ahead.

With that said, I will open the call for questions. Operator?

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Our first question comes from Scott Searle with Roth Capital.

--------------------------------------------------------------------------------

Scott Wallace Searle, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [2]

--------------------------------------------------------------------------------

Bill, just to follow-up on the SafePath front. It sounds like things were a little slow in the fourth quarter but have started to accelerate. Could you give us a little bit of color on what that mix is looking like between new location-based hubs as opposed to converted location web subs? And it sounds like you've got a new sunset date out there? I wonder if you're willing to share that with us. Or is that something that's expected to happen this year? And I had a couple of follow-ups.

--------------------------------------------------------------------------------

William W. Smith, Smith Micro Software, Inc. - Co-Founder, Chairman of the Board, CEO & President [3]

--------------------------------------------------------------------------------

Okay. Well, let's see. What we've seen so far in the first quarter is a very substantial growth in the number of subs. Primarily, I would say they are new subs, not legacy. However, we are starting to see a conversion of legacy users, primarily because I think I mentioned, where we now allow a family head to force the capability onto every phone in the family. That was a feature that seemed a little heavy-handed to us and the spread at times. And we didn't do that. But it was done in the legacy app and that became an issue. So we fixed that. We're seeing a very positive response. Sprint is becoming extremely confident in the ability to convert that legacy base. As far as a sunset date, I'll leave that to Sprint, that's not something that I should be talking about. And we'll just have to move forward.

--------------------------------------------------------------------------------

Scott Wallace Searle, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [4]

--------------------------------------------------------------------------------

Okay. And just couple of follow-ups on SafePath then. You're starting to demonstrate multiple devices that could be incorporated into the platform at Mobile World Congress. Do you have partnership sufficiently signed now? You mentioned pet trackers, other tracking devices, wearables, et cetera. Is that currently part of the suite now that you can actually go out and offer to the carriers? And do you expect to have additional carriers beyond Sprint by the end of this year? And then I had a follow-up on ViewSpot.

--------------------------------------------------------------------------------

William W. Smith, Smith Micro Software, Inc. - Co-Founder, Chairman of the Board, CEO & President [5]

--------------------------------------------------------------------------------

Okay. Let me handle that part first. Yes, we do have a number of partners now signed up to support us. And we, in turn, tend to support their devices. This is very important to carriers. They are asking for help and guidance as to where they can source devices that will come up and work immediately. So that is going extremely well. I would say as a result of the work done at Mobile World Congress, we're in the process of adding a number of others. So this is a family that's going to get much, much larger. As far as activities at other carriers, it is quite robust. And it is -- there's a lot going on. And it's fairly global. So I feel comfortable that we're going to do what I said. That we'll have another carrier by the middle of the year in this first half. And I guess -- I start to see where we could have multiple carriers before the end of the year. So a lot of really exciting progress on the SafePath front, a lot of interest, a lot of excitement. I think you're going to see some really good things. I know I've talked about that in the past, I really mean it.

--------------------------------------------------------------------------------

Scott Wallace Searle, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [6]

--------------------------------------------------------------------------------

And on the ViewSpot front, Bill, you guys talked about $4 million in sales in 2018. What is the outlook into 2019? It sounds like you're very excited about that platform, other carriers are looking at. Can you kind of take us through the thought process of what you're expecting as a baseline level of growth? Where you are within the carriers today? You are in the carrier -- I believe, you're in the carrier-owned stores at this point in time. But are you getting pushed down into other franchises? And to other retail outlets like the Best Buys, et cetera? What kind of opportunity does that represent? And what is the timing of when you would expect to add some additional carriers?

--------------------------------------------------------------------------------

William W. Smith, Smith Micro Software, Inc. - Co-Founder, Chairman of the Board, CEO & President [7]

--------------------------------------------------------------------------------

There's a lot in the works right now. Again, I would say that it's possible by midyear, third quarter to see other carriers using ViewSpot. Your comment about large retailers is spot-on. Anybody who sells mobile devices can benefit from this technology. So I think that we are very excited about what we've acquired. It's a great group of people. We are expanding the size of the team because we see that there's going to be a lot of growth. Tim, do you want to add anything to that?

--------------------------------------------------------------------------------

Timothy C. Huffmyer, Smith Micro Software, Inc. - VP, CFO, Treasurer & Secretary [8]

--------------------------------------------------------------------------------

Yes, Scott, from a revenue perspective, as you said, $4 million in 2018. I think a fair outlook would be lower double-digit growth in the 2019 would be our expectations. Down to the bottom line, as we've indicated, this is an accretive deal. So we expect double-digit operating margins as well. So that sort of gives you the top and the bottom of what we're thinking and what we're expecting for 2019.

--------------------------------------------------------------------------------

Scott Wallace Searle, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [9]

--------------------------------------------------------------------------------

Tim, just to follow up on that. Is that baseline assumption to the existing customer base that you got today? And incremental carriers would be on top of that? And then just directionally looking into the March quarter, what are you thinking about the different main business lines?

--------------------------------------------------------------------------------

Timothy C. Huffmyer, Smith Micro Software, Inc. - VP, CFO, Treasurer & Secretary [10]

--------------------------------------------------------------------------------

So the first part of that Scott, that's pretty much existing. Customers to anything significant would be on top of that. And then the second part of your question, Scott, if you're still in the queue, can you repeat that, I did not get that.

--------------------------------------------------------------------------------

Scott Wallace Searle, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [11]

--------------------------------------------------------------------------------

Sorry, the outlook by business unit going into the March quarter. What do you expect sequentially? Sounds like SafePath will be up sequentially, there tends to be a little seasonality with CommSuite. How should we think about things just directionally, moving into March?

--------------------------------------------------------------------------------

Timothy C. Huffmyer, Smith Micro Software, Inc. - VP, CFO, Treasurer & Secretary [12]

--------------------------------------------------------------------------------

Yes, got you. SafePath, you're spot-on there. We expect to continue growth there quarter-over-quarter. CommSuite, we do expect to see that level out during 2019. Although we may add paid subscribers, we are working with Sprint on the advertising revenue platform. So there is some uncertainty around that. Net-net, we definitely will be at least flat in CommSuite here as we move through 2019. And then ViewSpot, I mentioned already where we're expected to be.

--------------------------------------------------------------------------------

William W. Smith, Smith Micro Software, Inc. - Co-Founder, Chairman of the Board, CEO & President [13]

--------------------------------------------------------------------------------

Yes, I can add on that. We are also getting some traction with some other carriers with CommSuite. Whether we could actually get that launch to have it just generating revenue, before the end of this year, I am not sure. But there is excitement. So I think there is other things we can look forward too.

--------------------------------------------------------------------------------

Operator [14]

--------------------------------------------------------------------------------

Our next question comes from Jon Gruber with Gruber & McBaine.

--------------------------------------------------------------------------------

Jon Deroy Gruber, Gruber & McBaine Capital Management, LLC - Co-Founder, Principal, and Manager [15]

--------------------------------------------------------------------------------

The $1.2 million revenue is phenomenally disappointing. Why was it so low? I mean, you got all the -- how many subscribers do we have now?

--------------------------------------------------------------------------------

William W. Smith, Smith Micro Software, Inc. - Co-Founder, Chairman of the Board, CEO & President [16]

--------------------------------------------------------------------------------

Well, I can't give you the exact number. I will tell you that the number we gave you last quarter, I think we said we were over 100,000. We've done another double and then some.

--------------------------------------------------------------------------------

Jon Deroy Gruber, Gruber & McBaine Capital Management, LLC - Co-Founder, Principal, and Manager [17]

--------------------------------------------------------------------------------

I'm sorry, you said you were over what last quarter?

--------------------------------------------------------------------------------

William W. Smith, Smith Micro Software, Inc. - Co-Founder, Chairman of the Board, CEO & President [18]

--------------------------------------------------------------------------------

We told you we were over 100,000. And I think you can now get it and say, we -- based on the growth we're seeing in Q1, there's another double. And that does not really bring in the legacy business.

--------------------------------------------------------------------------------

Jon Deroy Gruber, Gruber & McBaine Capital Management, LLC - Co-Founder, Principal, and Manager [19]

--------------------------------------------------------------------------------

Okay. And my other question is, we were supposed to have a new win back in December or at least by September, here we are 6 months later. When can we expect the new customer?

--------------------------------------------------------------------------------

William W. Smith, Smith Micro Software, Inc. - Co-Founder, Chairman of the Board, CEO & President [20]

--------------------------------------------------------------------------------

Well, as I said, I think that -- we think we can get one done before the middle of the year. And Jon, I'll make you a promise. I'll pick up the phone and call you as soon as it is public.

--------------------------------------------------------------------------------

Jon Deroy Gruber, Gruber & McBaine Capital Management, LLC - Co-Founder, Principal, and Manager [21]

--------------------------------------------------------------------------------

Yes. You would have lost bets all the way. But how is that -- do you think by midyear you will -- you think you'll have something? Is that what you just said?

--------------------------------------------------------------------------------

William W. Smith, Smith Micro Software, Inc. - Co-Founder, Chairman of the Board, CEO & President [22]

--------------------------------------------------------------------------------

That's what I said.

--------------------------------------------------------------------------------

Operator [23]

--------------------------------------------------------------------------------

Our next question comes from Jim McIlree with Chardan Capital.

--------------------------------------------------------------------------------

James Patrick McIlree, Chardan Capital Markets, LLC, Research Division - Senior Research Analyst of Industrial and Consumer Technology [24]

--------------------------------------------------------------------------------

Can you just help me understand how you're pricing the ViewSpot product that's on a per device, per campaign kind of pricing structure, is that right?

--------------------------------------------------------------------------------

Timothy C. Huffmyer, Smith Micro Software, Inc. - VP, CFO, Treasurer & Secretary [25]

--------------------------------------------------------------------------------

Yes, I think you can look at it a couple of ways. There is a fixed amount per quarter that the carrier pays for the service. But then there is additional revenue that's generated through the launch of new campaign, that's the right word -- through the launch of new campaign. And so it's a combination.

--------------------------------------------------------------------------------

William W. Smith, Smith Micro Software, Inc. - Co-Founder, Chairman of the Board, CEO & President [26]

--------------------------------------------------------------------------------

I'll just add. This is Bill. There's quarterly -- think of it as a quarterly licensee, basically to use the platform. And then you have some variable opportunity based on the number of campaigns, the number of device launches basically that happen on the platform.

--------------------------------------------------------------------------------

James Patrick McIlree, Chardan Capital Markets, LLC, Research Division - Senior Research Analyst of Industrial and Consumer Technology [27]

--------------------------------------------------------------------------------

Okay. And so when you look at the growth at a carrier, the growth is going to come from what Scott was talking about going from the company-owned stores to the retailers and the noncompany-owned stores as well as an increase in the number of campaigns, can you talk a little bit about if there is a way to think about capacity utilization of the number of campaigns that you can deliver? And kind of what that utilization is right now? Either average or an example from the carrier?

--------------------------------------------------------------------------------

Timothy C. Huffmyer, Smith Micro Software, Inc. - VP, CFO, Treasurer & Secretary [28]

--------------------------------------------------------------------------------

Sure. So I think if you look at some of the larger carriers, I think it's typical around 20 to 30 different campaigns happen throughout the year. That can change. But that's probably a pretty good number to think of. So I think that answers your first question. The other one I would add is that there's also ability to expand into authorized retailers as well as the stores that are owned by the carriers is quite a few of those as well. So I would add that as well. It's sum of almost all retailers.

--------------------------------------------------------------------------------

William W. Smith, Smith Micro Software, Inc. - Co-Founder, Chairman of the Board, CEO & President [29]

--------------------------------------------------------------------------------

Yes, actually can I expand on that. But for most of the Tier-1 carriers, there are more indirect distribution points than there are direct sales source. So that is an upside as we get into 2019 if you can get some of our current customers to expand away from just their store -- the company-owned stores to go to the full and indirect channel. That's actually the carrier. It's almost like getting another carrier and then sum.

--------------------------------------------------------------------------------

James Patrick McIlree, Chardan Capital Markets, LLC, Research Division - Senior Research Analyst of Industrial and Consumer Technology [30]

--------------------------------------------------------------------------------

Got it. And so I am not trying to portray this as an estimate or guidance of any sort about this year with that product. But I'm just trying to frame it in my mind. So maybe we can easily think of this business with the current carriers doubling if they had more campaigns, and if -- and if they were deployed in the indirect channel and their retailers. Is that fair enough?

--------------------------------------------------------------------------------

William W. Smith, Smith Micro Software, Inc. - Co-Founder, Chairman of the Board, CEO & President [31]

--------------------------------------------------------------------------------

We're still learning, Jim. I mean, this is -- we've had -- we've owned it now for 1.5 months. So we're trying to understand some of the dynamics that you really don't get a good deal for until you own it. And so I'd rather not get into giving you some sort of idea of the magnitude of growth. The only thing we can say is we think there is growth. I know that's not answering your question, I'm sort of sidestepping, but I have to.

--------------------------------------------------------------------------------

James Patrick McIlree, Chardan Capital Markets, LLC, Research Division - Senior Research Analyst of Industrial and Consumer Technology [32]

--------------------------------------------------------------------------------

No, that's all right, I think I get it. Tim, you talked about CommSuite leveling off. Is that leveling off at current levels? Or is that -- we're going to get a couple -- a little bit more growth in the first 2 quarters or first quarter and then level off? Or is the visibility too opaque to really tell?

--------------------------------------------------------------------------------

Timothy C. Huffmyer, Smith Micro Software, Inc. - VP, CFO, Treasurer & Secretary [33]

--------------------------------------------------------------------------------

We may see another quarter or so of modest growth there, Jim. And then we expect to see it leveling off.

--------------------------------------------------------------------------------

James Patrick McIlree, Chardan Capital Markets, LLC, Research Division - Senior Research Analyst of Industrial and Consumer Technology [34]

--------------------------------------------------------------------------------

Okay. And then lastly on SafePath. So you guys have been increasing revenue somewhere around $200,000, $300,000 per quarter -- quarter-over-quarter. I just want to make sure I understand, Bill, you're implying or suggesting or just flat out stating that that is going to accelerate, beginning let's call it, right now. Did I understand that correctly?

--------------------------------------------------------------------------------

William W. Smith, Smith Micro Software, Inc. - Co-Founder, Chairman of the Board, CEO & President [35]

--------------------------------------------------------------------------------

Yes, I think that's a fair way to say it. And we just -- we'll be looking forward to telling you how we're doing at the end of Q1. I guess -- I think that's a way to think about it.

--------------------------------------------------------------------------------

Operator [36]

--------------------------------------------------------------------------------

Our next question comes from Brian Swift with Sutter Securities.

--------------------------------------------------------------------------------

Brian Swift, [37]

--------------------------------------------------------------------------------

Most of my questions have already been answered, but I did want to get a bit more color on the CommSuite side where -- can you give us an idea of how much of the CommSuite revenues come from -- have historically come from advertising? And how the Sprint divestiture of that business that you, I guess Tim mentioned, can you just give a little bit more color on how that -- how you feel that's going to be impacting going forward to put Sprint on CommSuite?

--------------------------------------------------------------------------------

William W. Smith, Smith Micro Software, Inc. - Co-Founder, Chairman of the Board, CEO & President [38]

--------------------------------------------------------------------------------

Well, before Tim gets into the actual number, let me just kind of give you a little color of what actually happened. Sprint owned a sub called Pinsight. Pinsight was their advertising arm. That sub has been sold to another SoftBank-owned company. It is not guaranteed that there will be no advertising going forward. It just -- it's kind of suspect. So we'll -- there's a little bit -- we kind of have to sit back and let this thing play out. It is clearly something that has to be worked between Sprint and SoftBank and this other party. So I think that's just -- it's not like we're sure, but we're trying to give you an idea on a more conservative front. So Tim?.

--------------------------------------------------------------------------------

Timothy C. Huffmyer, Smith Micro Software, Inc. - VP, CFO, Treasurer & Secretary [39]

--------------------------------------------------------------------------------

Yes, good summary, Bill. So Brian, the way to think about the range of advertising revenue here on this platform is measured in several hundreds of thousands. So anywhere between $400,000 and $600,000, and this fluctuates based on campaigns that are run and seasonality really. So think about $400,000 to $600,000 a quarter. We could be adding subs, premium subs, as I'd indicated, but we could also be seeing that advertising revenue fluctuate and/or decrease is what we're guiding towards.

--------------------------------------------------------------------------------

Operator [40]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Charles B. Messman, Smith Micro Software, Inc. - VP of IR & Corporate Development [41]

--------------------------------------------------------------------------------

I thank everyone for joining us today. If you have any further questions, please feel free to reach out directly to us. Also, we'll be at the Roth Conference next week. If you happen to be there, please stop by and say hello. And we look forward to talking to you in a couple of months when we release Q1. Thanks and have a great day, everybody.

--------------------------------------------------------------------------------

Operator [42]

--------------------------------------------------------------------------------

The conference has now concluded. Thank you for attending today's presentation. And you may now disconnect.