Smith Micro Software's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Smith Micro Software, Inc. (SMSI)

Q1 2012 Earnings Conference Call

May 2, 2012 16:30 ET

Executives

Charles Messman – MKR Group

Bill Smith – Chairman, President, and Chief Executive Officer

Andy Schmidt – Vice President and Chief Financial Officer

Analysts

Mike Walkley – Canaccord Genuity

Scott Sutherland – Wedbush Securities

Charlie Anderson – Dougherty & Company

Presentation

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Smith Micro Software First Quarter 2012 Financial Results Conference Call. During today’s presentation, all participants will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions) This conference is being recorded today, Wednesday, May 2, 2012.

I would now like to turn the conference over to Charles Messman with MKR Group. Please go ahead.

Charles Messman – MKR Group

Good afternoon and thank you for joining us today to discuss Smith Micro Software’s first quarter 2012 financial results.

By now, you should have received a copy of the press release discussing our financial results. If you do not have a copy and would like one, please visit us at www.smithmicro.com or call us at 949-362-5800 and we will immediately e-mail one to you.

With me on today’s call are Bill Smith, Chairman, President, and CEO and Andy Schmidt, Vice President and Chief Financial Officer.

Before we begin the call, I want to caution that on this call, the company will make forward-looking statements that involve risks and uncertainties, including without limitations, forward-looking statements relating to the company’s financial prospects and other projections of its performance, the existence of new market opportunities, and interest in the company's products and solutions, and the company’s ability to increase its revenue and regain profitability by capitalizing on these new market opportunities and interest in introducing new products and new solutions.

Among the important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements are changes in demand for the company’s products from its customers and their end users, new and changing technologies, customer acceptance and timing of deployment of these technologies, new and continuing adverse economic conditions, and the company’s ability to compete effectively with other software companies. These and other factors discussed in the company’s filings with the Securities and Exchange Commission, including its filings on Forms 10-K, 10-Q, and 8-K could cause actual results to differ materially from those expressed or implied in any forward-looking statements.

The forward-looking statements contained in this release and call are made on the basis of the views and assumptions of management regarding future events and business performances as of the date of this call. And the company does not undertake any obligation to update these statements to reflect events or circumstances occurring after the date of this release and call.

Before I turn the call over to Bill Smith, Chairman, President, and CEO of Smith Micro, I want to point out that in our forthcoming prepared statements, we will refer to certain non-GAAP financial measures. Please refer back to our press release disseminated early today for reconciliation of non-GAAP financial measures.

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

Bill Smith – Chairman, President, and Chief Executive Officer

Thanks, Charlie. Good afternoon everyone and welcome to our conference call to discuss earnings for the first quarter of 2012.

Total revenues for the quarter were $10.1 million with approximately $8.6 million coming from our Wireless products and $1.5 million resulting from our Productivity & Graphics product line. Non-GAAP gross profit was $7.9 million for the quarter with gross margins as a percentage of revenues of approximately 78%.

Revenues for the first quarter of 2012 were in line with our internal expectations. Decreases in our connection manager revenue were offset by gains in our wireless backup and messaging product lines. We expect the first commercial launch of our data offload solution to slowly ramp in second quarter and anticipate significant volumes in early third quarter. This along with several other trials and new product agreements we are working to complete should lead to improved financial results in the coming quarters.

Our operating expenses for the quarter are down 35% compared to the first quarter of last year. We continue to carefully balance a reduced cost structure aligned to current revenue levels with product innovation and development investments which should increase future revenues. New solutions for mobile application management and the emerging Windows 8 platform are gaining strong interest in the market and I will provide more detail about those solutions and several other growing opportunities later in the call.

Now, I would turn the call over to Andy to take you through the details of the Q1 financial results. Andy?

Andy Schmidt – Vice President and Chief Financial Officer

Thank you, Bill. First, let me go over our customary introductory items. As we have in past quarters, we have provided non-GAAP results and a reconciliation of non-GAAP and GAAP results. The non-GAAP results discussed on this call net out stock compensation-related expenses, non-cash tax expense or benefit to provide comparable operating results.

Accordingly, all results that I refer to in my prepared remarks from both 2012 and 2011 are non-GAAP amounts. Our earnings release, which will be furnished to the SEC on Form 8-K contains a presentation of the most directly comparable GAAP financial measures and a reconciliation of the differences between each non-GAAP financial measure provided in the press release, and most directly comparable GAAP financial measure. The earnings release can also be found in the Investor Relations section of our website at smithmicro.com.

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