Good day everyone and welcome to the Smith Micro Software Second Quarter 2016 Financial Results Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Charles Messman, Vice President of Investor Relations and Corporate Development. Please go ahead, sir.

Thank you, operator and good afternoon. Thank you for joining us today to discuss Smith Micro Software's financial results for the second quarter ended June 30, 2016. 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 section at www.smithmicro.com or call us at 949-362-5800 and we will email one to you. On today’s call with me, we have Bill Smith, Chairman, President and Chief Executive Officer of Smith Micro; Steve Ziggy Yasbek, Chief Financial Officer. Please note that some of the information you will hear during our discussion today will consist of forward-looking statements, including without limitation those regarding the company’s future revenue and profitability, new product development and new market opportunities, operating expenses and company’s cash reserves. Actual results or trends could differ materially from our forecast due to a variety of factors. For more information, please refer to the risk factors discussed in Smith Micro’s Form 10-K for 2015 and Form 10-Q filings for the three quarters of fiscal 2015 and the first quarter of 2016. Smith Micro assumes no obligation to update any forward-looking statements or information which speaks only as of the respective dates. Before I turn the call over to Bill Smith, I want to point out that in the forth coming 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?

Thanks, Charlie. Good afternoon everyone. As expected, revenue for the second quarter of 2016 was $7.5 million in line with our guidance. Earnings per share were a negative $0.04 non-GAAP in line with Street expectations. Ziggy will provide more details of the Q2 financial results, so before he does I wanted to spend a little time talking about the announcement of the acquisition of iMobileMagic, a software company based in Braga, Portugal. Over the past five years, iMobileMagic has developed a very strong mobile platform in the family location and protection services marketplace. The product is sold by carriers worldwide to their customers as a value added service. In addition, the company has a highly skilled development team that builds mobile applications for enterprise customers in Europe and the Americas. iMobileMagic technology in addressable markets fit very well with several areas of our business. We are excited about the growth opportunities that come from this acquisition and the addition of several talented software engineers. I'll talk more about iMobileMagic as well as our progress on the integration of Birdstep and other highlights from the quarter after Ziggy presents the full financial results for Q2. Ziggy?

Thank you, Bill. I first want to 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 based compensation related expenses, the amortization of intangible assets and non-cash tax expense or benefit to provide comparable operating results. Accordingly, all results that we refer to in my prepared remarks for both 2016 and 2015 are non-GAAP amounts. Our earnings release which will be furnished to the SEC on Form 8-K contains the presentation of selected GAAP financial measures and related non-GAAP financial measures and a reconciliation of the differences between the two. The earnings release can also be found in the Investor Relations section of our website at www.smithmicro.com. June year-to-date revenues for 2016 were $14.7 million down $5.2 million from June year-to-date 2015 a decrease of 26%. Wireless revenues were $12.3 million a decrease of $4.8 million or 28% primarily due to this plan. Graphics sales were $2.4 million, a decrease of $400,000 or 15%. From a non-GAAP perspective, the June year-to-date 2016 loss per share was $0.08 as compared to at June year-to-date 2015 earnings per share essentially breakeven. In terms of our currently completed second quarter let me provide some detail. For the financial modeling let me provide the differences between GAAP and non-GAAP being P&L metrics. In terms of stock based compensation, stock comp totaled $406,000 for the current period, broken out as follows; $84,000 in selling and marketing, $127,000 R&D, and $195,000 G&A. In terms of amortization of intangibles, this totaled $27,000, $19,000 was reported in sales and marketing and $8,000 was reported in R&D. While we showed no GAAP tax benefits for the period due to full reserve in the…

Thanks Ziggy. I want to share a bit more about iMobileMagic and why we feel it is a great fit for the Smith Micro family. First with an outstanding mobile platform addressing the important theme of enhancing family safety, the iMobileMagic solution focuses on families who want to know their children or elderly relative or save adult times. There are several parental controls included in the platform. For example, allowing parents to put restrictions in place on how their children use their smartphones to also knowing where family members are located and establishing an alert for location-based events, such as when your child arrives at school or arrives home after school. The solution is very easy to set up and use and works seamlessly across the major mobile operating systems including iOS, Android, and Windows Mobile. It also supports wearable platforms, and can be deployed in the cloud or on premise. We believe the family location, protection, mobile market is becoming more important given the growing concern around national security throughout the world. It not only increases peace of mind, but also promotes customer engagement and loyalty. As the product has just recently launched, they have signed up a handful of leading operators in Europe such as T-Mobile in Albania, O2 in the UK and Portugal Telecom. Two additional carriers in Asia are presently beginning deployment and we look forward to telling you about them soon. We also have a solid pipeline of new carriers that we believe will offer us great growth potential worldwide. In time, we see the platform expanding to other related markets and enhancing our existing solutions. The acquisition also brings us a solid team of software engineers in Braga, Portugal. Several of them were educated in the University of Minho in Braga, ranked as one…

Thank you. [Operator Instructions] And we’ll take our first question today from Rich Valera with Needham and Company.

Thank you. Bill, would you willing to give any terms on the iMobileMagic deal?

Right sure, actually I think its covered in the press release, but it’s €500,000 cash, €500,000 worth of Smith Micro common stock that’s upfront and then additional €1 million worth of Smith Micro common stock with after 20, 24 months from the closure of the deal.

Got it, okay.

That went out on an 8-K also so...

Got it. Okay, so I can get that, that’s great. How about the revenue or expense impact of that after you close that?

So, going into Q3 the sales will be about somewhere in 100,000 to 150 range and the expenses will be in that same range, so it's basically breakeven for now.

Okay, that’s very good. Thank you. And then just another modelling one if I could, with respect to the expense levels for Q3, putting aside so I understand the contribution from the new acquisition, but ex that should we assume flattish versus Q2 as we move into Q3 Ziggy?

Operating expenses will be flat or may be up 50K, but it will be basically flat.

Got it, okay. So Bill, its sounds like you are expecting some significant deals to close in Q3 that will ramp in Q4. I think timing of those is always tricky, but before you talked about getting to a breakeven by Q4 and it seems like you would need at least $11 million of revenue to get to that level which seemed like a pretty big jump from where you're guiding for Q3. I'm just wondering if you wanted to comment on how you thought about exiting the year and any targets for breakeven when that might be?

Okay. Actually our internal numbers are higher than $11 million, so we are looking for profitability in Q4 and we believe we can get there.

Got it.

But your $11 million number was a good one.

Right, right. I mean it's 11 possibly plus depending on the expenses but that seems like a reasonable sort of baseline for that. And can you give us any other color on the deals that you think will really drive that, are those Birdstep deals, are those sort of organic Smith deals, any color on the expected drivers of that?

Yes it's a combination of deals and it would include Birdstep deals as well as ours, as well as i.e. as I mentioned in my comments, there are two new carriers in Asia that are deploying the family services software that should come online in Q4 as well. So it's a combination of things. As far as from the Smith Micro side, actually all sides are Smith Micro, but you know what I'm trying to say, we see growth from new customers and we see growth from existing customers, so it's a combination across the board.

Okay. That's it from me. Thank you, gentlemen.

Thanks Rich.

And we will take our next question from Jim [indiscernible] with Desjardins Capital.

Yes, thank you. I was hoping you could help me understand how you get to the $8 million, let's call it for Q3 and by that I mean, you're going to get a boost from the acquisition of iMagic, what is the expectation at Sprint, the Sprint decline is complete and everything else kind of starts kicking in or are you still seeing Sprint declines and everything kicks in to overcome that?

Okay. First off I do believe that the Sprint decline is - has happened and it's over with. If anything, I see opportunities for new additional business at Sprint. So I think the Sprint story should turn much more positive going forward from here. We also see growth in the number of our other installed customers and as we've talked about in the past, we have launched a significant cable and wireless carrier as a new customer. They started coming online in the current quarter and should continue to grow in Q3. So we have a very clear path identified as to how we get to the $8 million level and a reasonably high degree of confidence to go along with it.

Okay, great. And as far as iMagic goes, is the idea to take their product and run it through your distribution, so you can leverage your distribution and create a much greater revenue than what they're currently doing and I'm assuming that is the case, but can you help me understand how big that might be there in terms of they are serving X hundred thousand or X million handsets and you think you can ramp that to 5 million or 10 million or something higher than that?

Well yes, I mean I think that first off, we have in place a very strong sales team serving the cable and wireless carrier marketplace on a worldwide basis now. And our goal is to enable all of these sales folks to not only sell what we currently have but also to sell the Family Services product. What is very compelling about the Family Services product, not only is it right for the times considering all the chaos in the world, so people are very sensitive to what is happening with their loved ones and want to protect them, but also when you look at how it sold, this is a rev share model. And when we go to a wireless carrier or cable MSO, they don't have to write us a check up front. We get - the service offering launch is paid for by the consumer and we rev share the revenues that come in and it’s a healthy split, such that we believe this could be a very successful business case. So if you look at the sales team that iMobileMagic has is very limited. The fact that they've sold as many carriers as they have is a strong testament not only to how good they are, but also how strong the product offering is. So, I think there's a very healthy upside to this product family, and I think it's just the beginning. With this deal come 16 folks, the CEO who will stay and take on additional activities within Smith Micro and 15 highly qualified engineers. So it's a – it's a very strong opportunity for us to expand.

And how many devices are they currently serving?

It's relatively minimal, because they're just launching. So they have – I would say, I would look at it as being a relatively small number today, but a number that there's a clear path for growth.

Okay. And just last one on that. The quite consumer that you're targeting for the consumer for that family safety plan, I don't know exactly now what you are calling it, but what's a reasonable expectation going to family to pay for that service?

Okay. Again, it will vary depending upon the geo that you know that it would function in. In North America it could be anywhere from $3 to $9, in Asia Pac it’s more in the $1.50 to $2 and in Europe it's somewhere in the middle between those two extremes.

That's great. Thanks a lot. I appreciate it. Good luck with everything.

Thanks Jim.

[Operator Instructions] We’ll go next to Kevin Dede with Rodman.

Good afternoon Bill and team.

Hi, Kevin.

Hi, Kevin.

Yes, so Bill, just on that last question from Jim, and back to that cost I guess is that on a monthly basis?

Yes it is.

Yes, and that would include what how many four connections?

Typically, its four family members, that is something that can be worked by each carriers how they want to make the offering.

So, have you had a chance yet to package it to present it to people like Sprint and Verizon?

I would say that you should believe we have already presented it to carriers and I'm not at a point where I can tell you who.

Right, okay, fair enough. How competitive was the deal and why do you think they sold?

Okay that's a good question. Well, we weren't competing against anybody else for this particular deal first off, but the reason that they sold I think it's fairly straightforward. They are relatively a small company with a business case where they need to sell to carriers around the world. They lack the sales and marketing presence. That's a problem number one. And then the problem number two, they weren’t known in the carrier environment where we are. And we've talked about this in the past, is that you know when somebody, a sales person calls from Smith Micro, getting a meeting with virtually any carrier is not necessarily a very difficult thing. They know us. We've been around a long time. We are trusted. And so, I think they just substituted wondering for a new dream. They had dreamed that they could do it on their own. So then they changed over and they become part of us and the likelihood of being successful and seeing strong growth from the products they built is significantly enhanced. And I think that's kind of a typical thing for small firms. But I do think they will see some strong success going forward. This product is a good product to sell. It speaks of the times and it’s a strong offering in its own right, backed by very strong people in Braga, Portugal.

Okay. So if we were to take a step forward, can you talk a little bit, I mean you mentioned it in your prepared remarks, but could you talk a little bit more about, I mean I guess maybe in the context of some real world examples as you see, it’s just I’m kind of scratching my head. It’s a little tough for me to see how well you build, integrate operations in Scandinavia with that's Western Europe, Pittsburgh and the Western U.S. So could you just kind of help me understand how you think, you can try to get these pieces to fit together? And then sort of deliver on some of that location based activities; I know you mentioned that one deal with Zonetail? If you could kind of expand on that and just give us a little more background on how you plan to integrate everything strategically?

Okay, first off we have one group of engineering folks, they all report up to Rick Carpenter as Vice President of Engineering. It makes no difference what locations they are at. There is one sales team, there is one marketing team, there’s one finance function and that’s true across the entire company. The cities that you as a Smith Micro employee shows up to work in the morning is really not that big a deal. To back this up and I think we’ve talked about this in the past Kevin, we have a strong tele-presence network between all of our offices, that allow us to have face to face meetings even if you’re sitting in Belgrade and the other side is sitting in Pittsburgh, it doesn’t make any difference. I mean, we can be very effective. We leverage by the various locations, some very strong cost driven factors. I mean, our most expensive part of our business is our people. We’re a software company. We’ve talked in the past about the fact that Belgrade is less costly for high quality people than other parts of the world. Braga is in the same realm and so we’re looking at locations that we can expand and expand as our business grows that will allow us to maintain a very strong cost profile. So we’ve done this for years. I mean, we are a 30 some odd year old business. We’ve had offices in many places for a long time. I have a strong management team. The management team knows how to deal with it and we do a pretty darn good job of it.

Okay, then just on the next step in terms of location capability, do you think you’ll be able to fold the kind of work that iMobileMagic has been working on into the current location work that you’ve done I guess hand in hand with Birdstep and your own NetWise development?

Yes. Let me just say absolutely. If you look at what we have done and what we are doing with the, enhance the integration of Birdstep, we have taken the best of the Birdstep product offering and the Smith Micro product offering and have created one NetWise product with exactly the same code that sold to Micro customers and Birdstep customers. So we only have a single product, that’s the only way this thing works. When we talk about iMobileMagic, yes you’re right. A lot of the family services software ties into location knowledge and processing as does Captivate. So one of the things we’ll be working on very diligently is to look to see that we take the best of both companies approach to dealing with location technologies and applying that across the board. In this particular case, Captivate speaks to one side of the mobile marketing issue in the case of iMobileMagic it is talking about location so that you know where family members are and you know if a family member is in trouble exactly where he or she is such that you can call for help. It is just a little different as to what the purpose is, but the technology is quite similar in that sense.

Okay, well thanks Bill, thanks for reviewing the strategic fit and I guess the corporate hire, I appreciate the refresher on that, so thanks.

Thanks.

And gentlemen, we have no further questions in queue. I'd like to turn the call back over to Mr. Messman for any additional or closing remarks.

So I want to thank you every one for joining us today. Should you have any further questions, please feel free to call us and we look forward to talking to you on our third quarter conference call. Thanks.

Thank you and that does conclude today's conference. Thank you for your participation. You may now disconnect.