Smith Micro's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Smith Micro Software Inc. (SMSI)

Q2 2012 Results Earnings Call

August 1, 2012 4:30 PM ET

Executives

Charles Messman – MKR Group, IR

Bill Smith – Chairman, President and CEO

Andy Schmidt – Vice President and CFO

Carla Fitzgerald – Vice President, Marketing

Analysts

Mike Walkley – Canaccord Genuity

Charlie Anderson – Dougherty & Company

Brian Swift – Security Research Associates

Stephen Zaccone – Needham & Company

Presentation

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Smith Micro Software Second Quarter 2012 Financial Results Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions)

This conference is also being recorded today, Wednesday, August 1, 2012. I would now like to turn the conference over to our host for today, Mr. Charles Messman of the MKR Group. Please go ahead, sir.

Charles Messman

Good afternoon. And thank you for joining us today to discuss Smith Micro Software’s second 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 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 Chief Executive Officer; Andy Schmidt, Vice President and Chief Financial Officer; and Carla Fitzgerald, Vice President of Marketing.

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 those 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 based on -- the basis of views and assumptions of management regarding future events and business performances as of the date of this call and release. 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 remarks, we will refer to certain non-GAAP financial measures. Please refer back to our press release disseminated early today for reconciliation of the non-GAAP financial measures.

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

Bill Smith

Thanks, Charlie. Good afternoon, everyone. And welcome to our conference call to discuss earnings for the second quarter of 2012. Total revenues for the quarter were $10.2 million with approximately $8.7 million coming from our Wireless products and $1.4 million resulting from our Productivity & Graphics product line.

Non-GAAP gross profit was $8.4 million for the quarter with gross margins as a percentage of revenues of approximately 82.4%, up from 78% in the first quarter of this year.

These financial results are similar to those we saw in the first quarter of 2012. Increases in our backup and messaging products primarily Visual Voicemail and the mid-quarter commercial launch of our NetWise Director solution more than offset a decline in our base connection manager business.

The feedback from the commercial rollout of NetWise Director spend has been very positive and we anticipate continued pickup in revenues from this deployment in the third quarter of this year.

In addition, we are excited about our new contract with T-Mobile USA for the next-generation connectivity software on mobile hotspots, smartphones and Windows 8 PCs and tablets, which will positively impact revenues towards the end of this year and into 2013. I will provide more information about this deal later in the call.

We continue to carefully manage our costs, while maintaining sufficient investment in engineering and operations to support our sales opportunities.

Our operating expenses for the quarter are down 13% from Q1 of this year and down 41% compared to first quarter of last year. Despite this lower cost structure our ongoing efforts to bring new and innovative solutions to market are paying off. I will provide more detail about our new solutions and related sales opportunities later in the call.

Now I will turn the call over to Andy, to take you through the details of the Q2 financial results. Andy?

Andy Schmidt

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

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