Good day, welcome to the Smith Micro Q4 2022 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mr. Charles Messman. Please go ahead, sir. Thank you, operator. Good afternoon, everyone. We appreciate you joining us today to discuss Smith Micro Software's financial results for the Q4 and year-ended December 31, 2022. 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, and Chief Executive Officer, and Jim Kempton, our Chief Financial Officer. Please note that some of the information you will hear during today's call consists of forward-looking statements, including, without limitation, those regarding the company's future revenue and profitability, our plans and expectations, new product development, new and expanded market opportunities, future product deployments, migrations, and/or growth by new and existing customers, operating expense, and the company's 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 a forward-looking statement. For more information, please refer to the risk factors included in our most recent filed Form 10-K and our subsequent filings on Form 10-Q. Smith Micro assumes no obligation to update any forward-looking statements which speak of our management's beliefs and assumptions only as the date they are made. I'd like to point out that in the forthcoming prepared remarks, we will refer to specific non-GAAP financial measures. Please refer to our press release disseminated earlier today for that reconciliation of these non-GAAP financial measures. With that said, I'll turn the ball over to Bill. Bill? Thanks, Charlie. Good afternoon, and thank you for joining us today for our 2022 Q4 and year-end conference call. I'm excited to share with you some important progress we've made on several fronts throughout the fiscal year. As many of you know, we also recently experienced a setback. As noted in our February 27th press release, we received notice from one of our tier one carrier customers that it has decided to terminate the Family Safety portion of our relationship. That termination takes effect on June 30, after which we will provide support during the transition period for up to 180 days, as specified by our contract. There are a few important points to note. While we no longer expect any growth from this partnership, we expect to continue to earn monthly revenue from this contract until the end of the transition period through the remainder of 2023. While we were taken by surprise and certainly disappointed by this turn of events, it's important to note that the commercial terms of this partnership were those that we inherited in our acquisition of the contract, and candidly, they were not very favorable. Although this news will have a negative impact on our top-line revenue, it will yield an increase in our average revenue per subscriber. Additionally, as we eliminate the associated costs and reallocate others to more profitable relationships, we expect to see improvements to our gross margins as early as Q2 of 2023. With all of this said, we clearly understand the impact of what just happened. Our focus is on how we are going to deal with the challenge. The first step is to align our expenses with the new business reality. Effective immediately, we will implement actions to reduce our expenses by $4 million per quarter. We have been able to immediately cease all migration activities for this carrier, which will allow us to significantly reduce personnel, both in terms of the number of resources we need to support product development and delivery efforts for the customer and in terms of back-office resources. In addition, certain non-personnel-related costs can be rationalized as a result of this action. Collectively, these factors give us confidence to achieve this level of cost savings in the near term. We believe the balance of our business is solid. I will discuss that viewpoint in more detail in the second part of my presentation after Jim has provided his financial overview. With the immediate expense reductions, our goal will be to post break-even or profitable results perhaps as soon as Q2 of this year and not later than Q3, and to grow our profits during the remainder of the year. On that note, I will turn the call over to Jim Kempton, our Chief Financial Officer, who will provide you with more specifics on our financial results. After which, I will discuss our business case going forward. Jim? Thanks, Bill. Good afternoon, everyone. As a reminder, we acquired the Avast Family Safety Mobile business in April of 2021, which impacts the year-over-year comparisons that I'll be discussing today. I'll now cover the financial details of the Q4 and full year 2022. For the Q4, we posted revenue of $11.4 million compared to $14.7 million for the same quarter of 2021. A decrease of approximately 22% as a result of the decline in CommSuite revenues, coupled with the decrease in Family Safety revenues. When compared to the Q3 of 2022, revenue decreased by approximately $300,000 or 3%. Revenue for 2022 was approximately $48.5 million versus $58.4 million last year. The $9.9 million decrease is due to a decline in CommSuite revenues, coupled with a decline in Family Safety revenues. During the Q4 of 2022, Family Safety revenue decreased by $2 million, or 17% compared to the Q4 of last year, primarily as a result of the reduction of the Safe & Found platform revenue related to the continued attrition of legacy Sprint subscribers driven by T-Mobile's acquisition of Sprint. Family Safety revenues were essentially flat compared to the Q3 of 2022. During the Q4 of 2022, CommSuite revenue was approximately $900,000, which decreased approximately $1.3 million compared to the $2.2 million in revenue produced in the Q4 of 2021. This decrease is primarily attributable to the decline in legacy Sprint subscribers on the CommSuite platform, as those subscribers have transitioned off the Sprint network onto the T-Mobile network, which was fundamentally completed in 2022. Revenue from CommSuite was down approximately $200,000 sequentially compared to the prior quarter. ViewSpot revenue was approximately $800,000 for the Q4 of 2022, which was essentially flat compared to the Q4 of 2021 and decreased approximately $200,000 compared to the Q3 of 2022. As a reminder, ViewSpot revenue is comprised of both fixed and variable components. The fixed portion of the revenue is related to license fees and is generally the recurring component of the revenue. The variable portion of the revenue is related to device and promotional campaigns, and the timing and volume associated with this portion of the revenue stream is less predictable. While we are seeing increased levels of marketing for our Family Safety products for certain carriers, we are not expecting a significant increase in subscribers in the Q1 of 2023, given the activity to date. While we do expect revenue to increase for certain of our carrier customers quarter-over-quarter, we don't anticipate enough of an increase to offset the projected decline in revenues for certain of our legacy product lines in the current quarter, including Safe & Found. As such, we expect consolidated revenue for the Q1 of 2023 to be lower by 2%-5% compared to the Q4 of 2022. For the Q4 of 2022, gross profit was $8.1 billion compared to $10.6 million during the same period in 2021. Gross margin was 70.8% for the Q4 of 2022, compared to 72% for the Q4 of 2021. The gross profit of $8.1 million for the Q4 of 2022 was flat compared to the gross profit produced in the Q3. In the Q1 of 2023, we would expect gross margins to be relatively in line with the current run rate. For the year ended December 31st, 2022, gross profit was $34.3 million, compared to $45.7 million during the prior year. Gross margin was 70.7% for the December 31, 2022 year to date period. GAAP operating expenses for the Q4 of 2022 were $15.2 million, an increase of approximately $700,000 or 5% compared to the Q4 of 2021. This increase was caused by an increase in amortization expenses of approximately $1.4 million due to the one-time adjustments related to the finalization of the Avast acquisition purchase accounting recorded in the Q4 of 2021. Note that the amortization expense of $1.5 million in the Q4 of 2022 was in line with the amortization expense reported in the Q3. GAAP operating expenses for the year ended December 31, 2022 was $65.2 million, a decrease of $11.4 million or 15% compared to the prior year. Non-GAAP operating expenses for the Q4 of 2022 were $12 million versus $13 million in the Q4 of 2021, a decrease of approximately $1 million or 8%. Sequentially, non-GAAP operating expenses decreased by approximately $1.1 million or 9% from the Q3 of 2022, primarily due to decreases in personnel-related costs and in contractor costs related to the SafePath migrations. We expect Q1 2023 non-GAAP operating expenses to decrease from the Q4 of 2022 by 4%-8% due to the continued actions to reduce our cost structure, including the closure of our Prague, Czech Republic operations as of December 31st, 2022. As Bill mentioned in his remarks, we are taking additional actions to significantly reduce our costs even further and anticipate that these actions will result in over $4 million of quarterly savings from our aggregate total non-GAAP operating expenses and cost of sales for the Q4 of $15.3 million. In other words, out of the $3.3 million in cost of sales and the $12 million in non-GAAP operating expenses reported for the Q4 of 2022, we will be eliminating $4 million in quarterly costs by no later than the Q3 of 2023. We are also very confident that we will achieve at least $3 million of these savings in the Q2 of 2023. As some of these savings will be derived from our cost of sales, we are expecting to see an expansion in our gross margins beginning in the Q2 as well. Circling back to the results for 2022, non-GAAP operating expenses for the year ended December 31st, 2022 was $52.5 million, an increase of $4.7 million or 10% compared to 2021, primarily driven by the full year impact of the addition of the Avast business in April 2021. The GAAP net loss for the Q4 of 2022 was $8 million or $0.14 loss per share, compared to a GAAP net loss of $4 million or $0.07 loss per share in the Q4 of 2021. The GAAP net loss for 2022 was $29.3 million, a $0.53 loss per share, compared to a GAAP net loss of $31 million or a $0.61 loss per share in 2021. The non-GAAP net loss for the Q4 of 2022 was $4.3 million or $0.08 loss per share, compared to a non-GAAP net loss of approximately $2.4 million or a $0.04 loss per share in the Q4 of 2021. The non-GAAP net loss for the year ended December 31st, 2022 was $18.8 million or $0.34 loss per share, compared to a non-GAAP net loss of approximately $2.2 million or a $0.04 loss per share in 2021. Within today's press release, we have provided a reconciliation of our non-GAAP metrics to the most comparable GAAP metric. For the Q4 of 2022, that reconciliation includes adjustments for intangible asset amortization of $1.5 million, stock compensation expense of $1.1 million, convertible note in stock offering fees and amortization of $1.7 million, and severance-related costs of approximately $600,000, partially offset by fair value adjustments of $1.2 million. For the year-to-date period, the reconciliation includes adjustments for intangible asset amortization of $6.3 million, stock compensation expense of $4.4 million, convertible note in stock offering fees and amortization of $3.1 million, and severance-related costs of approximately $1.4 million, partially offset by fair value adjustments of $4.7 million. Due to our cumulative net losses over the past few years, our GAAP tax expense is primarily due to certain state and foreign income taxes. For non-GAAP purposes, we utilize a 0% tax rate for 2022 and 2021. The resulting non-GAAP tax expense reflects the actual income taxes expense during each period. From a balance sheet perspective, we reported $14 million of cash and cash equivalents as of December 31st, 2022. This concludes my financial review. Now back to Bill. Thanks, Jim. Let's now touch on some specific areas of our business as we look ahead. Let's start by looking at our two tier one Family Safety customers here in the U.S. We plan on delivering the SafePath-based solution to AT&T during Q2, and we expect it to launch into the market in Q3. Our Q2 delivery will also complete the process of extracting select functionality from the former Avast platform and incorporate it into the SafePath version that AT&T will launch, thereby ensuring we roll out a best of both solution going forward. This will also conclude all of our customer migration efforts. In addition to the operational and expense-related benefits of moving AT&T to SafePath, we also believe that the newest versions of SafePath represent a far superior product with greater value to AT&T, its multi-line consumer subscribers, and to Smith Micro compared to the incumbent version. This also now creates opportunities for us to upsell additional services on our platform, such as SafePath Home, Drive, and IoT. It will also allow for substantial growth of the Family Safety user base at AT&T. We believe that our relationship at AT&T is strong. AT&T shares our enthusiasm and confidence that their deployment of our solution, AT&T Secure Family, will grow meaningfully once the SafePath-based version rolls out. In conjunction with AT&T, we have put in place a broad go-to-market marketing plan and have begun training activities across different groups within the AT&T organization. We also believe that our T-Mobile relationship is also solid. T-Mobile is already deployed on the SafePath seven platform, and with the completion of the integration of the best features of the BOSS code base into SafePath, we can also offer these extensions to T-Mobile. We believe this enhanced offering will provide new excitement around the FamilyMode product and offer a new opportunity to grow the Family Safety subscriber base. We are working with T-Mobile to develop an exciting marketing campaign for Family Safety, much like we have done with AT&T. Growth of the subscriber base is our primary focus with this customer. We remain focused on helping DISH launch the CommSuite-driven visual voicemail as one of the first value-added services on the DISH Wireless network. We're also working closely with DISH on the migration of the Boost Mobile premium visual voicemail subscribers over from the legacy T-Mobile billing system to the new DISH Wireless billing system. We believe that these efforts have strengthened our relationship with DISH, and may lead to other opportunities down the road. Our existing ViewSpot business continues to remain stable. I hope you saw our press release last week around ViewSpot's expanded data capabilities. We believe that ViewSpot data can help our customers correlate their consumers' in-store use of retail display devices to the retailers' sales, thereby increasing the value and relevance ViewSpot provides. This is an exciting part of our efforts to make ViewSpot a more important part of the customer's data-driven intelligence and retail success. On another front, we just completed a very successful Mobile World Congress in Barcelona. With our completely rebuilt European sales team, we believe that there are strong opportunities for growth in this market. We believe that both SafePath and ViewSpot have robust applicability and opportunity in Europe. We particularly see untapped potential in the European market, both among tier one carriers as well as their regional operating companies in higher ARPU markets, each of which often selects vendor partners independently. We met with dozens of European carriers in Barcelona, focusing on both the SafePath and ViewSpot product offerings, received very positive reactions to our presentations. In conclusion, we made significant progress during fiscal 2022 on one of our primary objectives, the unification of our Digital Family Lifestyle business to a best-of single platform. We are confident that the outcomes of increased operational efficiencies, cost savings, and a vastly improved product affirm the value of this hard work and provide a strong base from which we can grow. With the significant cost reductions discussed earlier, we see a clear path to profitability, potentially as early as Q2 of this year. We remain bullish on our future and focused on returning to growth, profitability, and free cash flow. With that, I will open the call for questions. Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. The first question will come from Scott Searle with ROTH MKM. Please go ahead. Hey, good afternoon. Thanks for taking my questions. Hey, Bill, maybe just to jump in quickly on T-Mobile. You know, it seems like that account is stabilized there. You've got the SafePath integration done. You're waiting for the marketing campaign to begin. When do you expect that to return to sequential growth? Is that something that we should expect in the Q2, or is that the H2 of this year? I would think to be conservative, I would look at the H2. We may be able to get some growth in the Q2. We'll have to wait and see. Gotcha. Maybe shifting over to AT&T. I think you announced earlier in the year that pricing renegotiations had been completed. When does that kick in? Does that kick in with new subscribers? Is there a timeline where all the existing subscribers are repriced? I mean, how should we think about that in terms of when it's gonna start to impact the P&L? Same sort of thing, you know, with AT&T. It sounds like you're very confident that this starts to ramp up into the Q3, right? Integration done in the Q2, it sounds like campaign in the Q3. What gives you the level of confidence that that is going to start to inflect and move in that direction? Okay. Well, first off, the AT&T contract, the terms took effect when we signed the contract, they're already in effect. As far as from the standpoint of growth of the installed base, there is extreme excitement within the customer. They are involving, really for the first time, so many different areas and strengths that AT&T has. In the past, it was always fairly well handled by a working team, but it's much broader now. I think that is the positive side of things. I, you know, I feel very confident in looking for some real strong and extreme growth going forward out of this customer. Gotcha. Lastly, if I could, and then I'll get back in the queue. Just to follow up on Mobile World Congress. It sounds like there was a lot of dialogue, a lot of positive activity. What are your assumptions for this year? You know, or goals? Did you expect to close a couple of deals? Do you think it's more likely to see tier ones, tier twos? How should we be thinking about that opportunity both in 2023 and 2024? Thanks. Okay. I would say first off, in Europe, our primary focus will be around the tier one large groups. Now each group has operating companies in each country, and so it usually gets rolled out one country at a time. As far as do we think we can close business in Europe? The answer is absolutely yes. We are bullish on what we've seen. We have rebuilt our team. We think our team is very strong now. They are experienced people in selling to wireless carriers. They've done this before, and they're just very anxious to get busy. That showed at Mobile World Congress and we feel very bullish about that. Great. Thank you. The next question will come from Josh Nichols with B. Riley Securities. Please go ahead. Yeah, thanks for taking my question. Just as a follow-up on AT&T and T-Mobile. Maybe you get the growth in T-Mobile in 2Q, maybe it's the H2. Is there any timeline for when the new marketing campaigns are gonna be released? Could you provide any detail? Are they gonna be paying out incentives to the sales force in terms of SPIFFs or whatnot? Because historically, at least through Sprint, that's whenever you saw the most transaction and saw pretty quick growth in subscribers. Is that the plan for T-Mobile and AT&T? Josh, hi, it's Charlie. Absolutely. It's, it's across the board. We like to call it our multi-channel. I can't really get into specifics on timing because it's really more around T-Mobile and AT&T. I can tell you that, specifically with AT&T, it will be at launch. That is part of our game plan as we stand today. It is also, you know, we, it's all the above. It's digital, it's retail, it's customer support, et cetera, et cetera. Thanks. If you could just provide a little bit more color on the expectation for gross margin. I know you're taking out $4 million of quarterly costs. Part of that's in the COGS line. Once you move AT&T over to the new platform in the H2, like, what's the expectation for the margin profile for gross margins in the back half of this year? Yeah, we would expect as part of the cost reductions that Bill spoke on the call about, we would expect those gross margins to tick up as the year goes on, you know, gradually. Once we're on, once we have AT&T on SafePath, we will be able to eliminate some of the legacy Ring costs. You know, candidly, until all the carriers are off, we're not gonna be able to eliminate all of those costs related to the legacy product. Again, some of the cost reduction activities that we're taking will impact the cost of goods sold. As a result, we would expect some uptick from where we currently are in the gross margins. Thanks. The last question for me, I know with the, with the surprise contract termination here, that the company is a little bit on a tighter timeframe. Fortunately, you have two carriers that are looking to ramp up this year. Just curious though, I guess, like how is the company redeploying some of these resources to potentially accelerate the ramp, particularly at like T-Mobile and AT&T? Is it more about like training and going to different branches? I'm just curious what you could do to help accelerate that and get the company back to sequential growth in a more meaningful fashion later this year. Yeah, Josh, I think the number one is, as soon as the notice was given to us, we ceased all activity for the canceling customer and all of our workforce that was working on their product have been reallocated to our other customers. It's also important to note that, you know, the revenue that we generated from the canceling customer generated the really, you know, the lowest possible profit of any of them. If you had to pick one to lose, this was the one to lose. We've moved forward from that. By moving a number of people now over to AT&T and working on different projects for T-Mobile and for working through the roadmap development efforts. You know, we've accelerated all those efforts, and hopefully we'll be able to move things even faster. Thanks, Bill. Appreciate it. The next question will come from Jim McIlree with Dawson James Securities. Please go ahead. Thank you and good evening. As far as the $4 million cost-cutting goes, would it be reasonable to think about a quarter of that is in cost of sales and the remainder is in operating expenses? I don't think we wanna provide specific guidance on that at this point, Jim. Okay. See how the action hasn't been taken yet. I think you have to let us, you know, take the action and then we can talk more about it. Okay. Fair enough. I just wanna verify. The cost-cutting that you're taking right now is the new baseline. That is before the tier one customer terminated its contract, we had all been thinking that costs were going to be coming down anyway. With that action, this $4 million is now the new baseline. It's not in addition to the cost that we are expecting to come down as well. Is that right? Right. Right. The way to think about this is off of the Q4, if you take our total non-GAAP expenses, if you take the cost of sales plus our OpEx, we are going to take that Q4 number and you're going to see $4 million eliminated from those total costs. That is the new line in the sand. Yeah. I can add to that. You know, when we announced that we were going to be reducing our expenses in Q2 of 2022, we took that action and you saw our OpEx drop in Q2, Q3, and also in Q4 of 2022. This is a continuation, obviously a big step towards returning to profitability. Got it. As far as the cessation of the work that you've been doing for this tier 1 customer as well as whatever reductions you're taking, I'm assuming that there's going to be some combination of cash and non-cash charges in Q1 and Q2. Is that right? Yes. That would be accurate. Great. I'll just assume that you're gonna make me wait for those as well. Yes, sir. All right. Okay, that's it for me. Thanks, guys. Thanks, Jim. The next question will come from Matthew Harrigan with Benchmark. Please go again. Please go ahead. Excuse me. Okay. Thank you. Two questions, actually, one on SafePath and one on the ViewSpot. Firstly, I know you're not gonna comment on how the mystery tier one mobile carrier is going to replace your product, but clearly Family Safety is a priority for their business. Can you comment on how you feel about your IP stack? I know there's a lot of code that has to be written. It seems like it's almost pretty inefficient to bump you even if they had a particularly advantageous contract terms. I know that there's sort of a fixation with, you know, having things in-house, but even so, it's a bit of a surprise to me. secondly, on ViewSpot, I mean, clearly in marketing and advertising, you know, attribution and purchase decisions is really the whole holy grail that everyone's worked on, you know, for decades, and a lot of that is getting closer to fruition now. Do you feel like you're under-marketing that product and there could be a lot more growth if you weren't so prioritized on getting to profitability overall and addressing the noise in the transition process around SafePath? Thank you. Yes, Matt, I'll take the first part, and I'll let Charlie handle the second one. The first part is we do not believe, based on what they've told us, that they are using a competitive product from a third-party software developer like us. We do believe that they are developing this internally. All the points you make, the fact that they were, you know, paying us the smallest amount, and now they have to absorb all that cost. Yes, there's lots of reasons to pause and wonder, but you know what? I have to run a business, and we have to get profitable, and we have to start growing, and we gotta get our stock price up. I can't labor on that anymore. I am totally focused on making AT&T and T-Mobile deliriously happy with the products that they have. My goal is to make sure that both AT&T and T-Mobile dominate the space with tier one carriers here in the U.S. That's what it's all about. As far as the marketing stuff, Charlie, you wanna take a shot at that? Sure, and thanks, Matthew. I think it's fair to say that we actually do have quite an aggressive marketing campaign going on with ViewSpot. It actually is the same team. It is a bit more, it's a little bit of a different play, because we're going after a broader market with ViewSpot. We're not just going after the carriers now. We're going after the retail settings, and ViewSpot has opened that up. We'll continue down that path. We've got a really good pipeline right now, and, you know, we're really excited about ViewSpot, so I don't see it as pulling one from the other. I think it's both the same going forward, if that makes sense. Oh, two great answers. Thank you. Again, if you have a question, please press star then one. This will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Charles Messman for any closing remarks. Please go ahead, sir. I just wanna thank everyone for joining us today. We appreciate you taking the time. We remain very excited. We're actually gonna be at the ROTH Conference here, shortly. If you happen to be there, please look us up. We'll look forward to talking to you. Please give us a call with further questions, and we'll talk to you on our Q1 conference call not too far away. Have a great day, everybody. Thanks. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.