Smith Micro Software, Inc. (SMSI) Q1 2020 Earnings Report, Transcript and Summary

Good day, and welcome to the Smith Micro First Quarter 2020 Earnings Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] 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 Charles Messman. Please go ahead.

Thank you, operator, and good afternoon, everyone. We appreciate you joining us today to discuss Smith Micro Software's financial results for the first quarter of our 2020 fiscal year ended March 31, 2020. 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, 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 expense 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 the risk factors included in our most recently filed Form 10-K. Smith Micro assumes no obligation to update any forward-looking statements, which speak to our management's beliefs and assumptions only as of the date they are made. I want to point out that in the forthcoming prepared remarks, we'll 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, and thank you for joining us today for our 2020 First Quarter Earnings Conference Call. I hope that all of you and your families are safe, and well during the current COVID-19 pandemic. Overall, I am very pleased with our team as we continue to be very productive while working from home. Due to the number of remote offices we have around the world, working from home is really a normal course of business for most of us. During the fourth quarter of last year, we significantly invested to upgrade our remote capabilities across the company, and we have a great IT team that has equipped our employees with collaboration technology to maximize our productivity. First quarter 2020 was another great quarter for Smith Micro. I am very pleased with the strong results we delivered. Revenues for the quarter came in at $13.3 million, a 58% increase over the $8.4 million reported in the first quarter of 2019. Gross profit for the quarter was $12.1 million compared to $7.5 million for the same quarter last year. Non-GAAP net income for the first quarter increased to $4.1 million or $0.10 per share. And it's important to note, we delivered solid free cash flow from operations of $1.5 million. Tim will break down the financials further in his remarks. These are very solid numbers for the quarter as we continued with strong growth and profitability. SafePath, our family digital lifestyle solution, continues to be the driving growth engine for the company. Since we spoke last in early March, we have made good progress towards the goal of integrating the expansive parental controls feature set gained via the Circle acquisition into the SafePath code base. Once we have completed this integration effort, now planned for mid-summer of this year SafePath 7.0 will be the only digital lifestyle solution of its kind on the market to offer best-in-class family location services and parental controls functionality, both inside and outside the home. We see this as a significant competitive edge for Smith Micro that will enable us to realize our long-time vision of bringing to market the most comprehensive, white label family safety offering for wireless service providers. From a strategic standpoint, the Circle acquisition puts us in the enviable position of having family safety solutions on both sides of the Sprint T-Mobile merger, which was completed on April 1. We are working closely with the new T-Mobile to map out the future of its family safety product. The progress we have made to this point is encouraging, and we remain laser-focused on executing our strategic vision in partnership with the new T-Mobile. While we have seen very strong growth from Safe & Found under Sprint, we are even more bullish looking forward regarding the potential growth of our Family Safety platform at the new T-Mobile. In addition to having what we believe is the most complete product on the market; we will now also be supported by the marketing might of the new T-Mobile. This is exciting as we now have the opportunity to sell the next-generation of SafePath to a much larger subscriber base. I am also very pleased with the continued progress of our sales discussions and with the strength of our sales pipeline. It is encouraging that our sales activity has not slowed at all even with the near-total lockdown of the global economy. Looking at ViewSpot. We are excited with the win for our smart retail platform with AT&T Mexico, one of Mexico's largest mobile operators with more than 18 million subscribers. AT&T Mexico began deploying the technology across a 1,500 store footprint in early January. However, the global spread of COVID-19 forced a temporary halt to the deployment. We expect this will open up once the restriction is lifted regionally. During the quarter, with our CommSuite platform, we continue to work closely with both the new T-Mobile and Dish Mobile on integration efforts across the board, and I am pleased with the progress. With that, let's turn the call over to Tim for a more detailed review of the first quarter financials. Tim?

Thanks, Bill. For the first quarter, we posted revenue of $13.3 million compared to $8.4 million for the same quarter last year, an increase of 58%. The increase in revenues was primarily a result of continued revenue growth on the SafePath platform, both organic activity and due to the Circle operator business acquisition completed in February. During the first quarter of 2020, revenue from SafePath grew by 18% sequentially compared to the fourth quarter of last year, all within the guidance range provided and resulting in SafePath revenue of $7.8 million. During the first quarter, SafePath increased 240% compared to the first quarter of last year. For the second quarter of 2020, we do expect the SafePath platform revenue to decrease between 5% to 10% compared to the first quarter of this year. The primary reason for the decreased revenue is directly related to COVID-19 causing the majority of Sprint stores to be closed and the related marketing initiatives planned for those stores not to be executed. The COVID-19 situation is also causing a reduction in the number of subscribers as unemployment rates have increased. In the coming quarters, as stores reopen, we expect a return to SafePath revenue growth. We are also excited about the future opportunity with the new T-Mobile and selling the SafePath solution to their user base. Bill will discuss this further in a few minutes. During the first quarter of 2020, CommSuite revenue was $4.2 million, down 4% compared to the fourth quarter of last year and down 3% compared to the first quarter of last year. The current quarter decrease was due to the loss of Sprint and Boost subscribers using our premium CommSuite services. We expect CommSuite to be flat to down for the second quarter of 2020, as we continue to navigate the mergers, Boost with Dish and Sprint with T-Mobile. Revenue for CommSuite advertising during the first quarter was approximately $350,000, which was comparable to the fourth quarter of last year and an increase of $300,000 compared to the first quarter of last year. The current quarter results were in line with our expectations. As a reminder, this is variable revenue and dependent on third-party activities. We expect the second quarter of 2020 CommSuite advertising revenue to be between $100,000 and $300,000. ViewSpot revenue was approximately $750,000 for the first quarter of 2020, up 34% compared to the fourth quarter of last year and down 30% compared to the first quarter of last year. The current quarter results exceeded our expectations due to greater variable revenue with our Tier 1 U.S. customer. As a reminder, we separate ViewSpot revenue into two categories; fixed and variable. 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, which are short bursts of activity resulting in revenue, and the volume is less predictable. Based on our current run rates, we continue to expect 2020 ViewSpot revenues to be flat to down for 2020. Overall, for all the reasons discussed, including the impact COVID-19 is having on store activity, we are expecting second quarter revenues to be down between 4% and 9% compared to the first quarter of this year. For the first quarter, gross profit was $12.1 million compared to $7.5 million during the same period last year. Gross margin was 91% for the first quarter, compared to 89% last year. GAAP operating expenses for the first quarter was $10.2 million, an increase of $2.7 million or 37% compared to last year. Non-GAAP operating expense for the first quarter was $8.1 million, an increase of $1.4 million compared to last year. The increase in non-GAAP operating expense is primarily related to an increase in compensation and related expenses as our headcount has grown 31% year-over-year and an increase in trade show expenses due to an extra event this year. We continue to aggressively recruit and hire resources in all of our markets. We will continue to invest in current resources and additional resources with a focus on the SafePath platform, specifically around the Circle code integration and additional SafePath IoT device integrations. As discussed on previous conference calls, this headcount activity will result in growth of the quarterly operating expense run rate. Additionally, we are looking at options to increase capacity through use of third-party contract developers, which will allow a scalable arrangement and would not be a permanent cost. This is all to meet current development needs. The non-GAAP net income for the first quarter was $4.1 million or $0.10 diluted earnings per share, compared to a non-GAAP net income of $776,000 or $0.02 earnings 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 first quarter, the reconciliation includes the following adjustments; stock compensation expense of $632,000; intangible amortization of $515,000; and acquisition costs of $918,000, some of which are noncash. Due to our cumulative net loss over the past few years, our GAAP tax expense is primarily due to certain state and foreign income taxes. For non-GAAP purposes, we utilized a 0% tax rate for 2020 and 2019. The resulting non-GAAP tax expense reflects the actual income taxes expense during each period. To wrap up my financial review, I will add some comments around capital. We closed the first quarter of 2020 with $19.5 million of cash. During the quarter, we used $12.1 million on the acquisition of the Circle operator business. We generated $2.3 million of cash flow from operations and we received $2 million of cash from warrant exercises. Separately, during April, we received $2.3 million of cash from warrant exercises and we now currently have 3.7 million warrants outstanding. In the short term, we will continue to invest the excess cash balance to preserve capital. In the mid to long-term, the company will continue to evaluate strategic alternatives for utilization of capital to maximize shareholder return. As we think about the company's long-term capital needs and overall best corporate practices, we will be initiating a shelf registration shortly. We believe that having a shelf in place offers us the greatest flexibility over the next three years. Lastly, due to the COVID-19 impact on businesses, the Small Business Administration was approved to administer the Paycheck Protection Program, designed to provide a direct incentive for small businesses to keep their workers on the payroll. Although the company does meet the qualifications of a small business, based on the April 23 guidelines issued by the Small Business Administration, the company has not accepted the loan opportunity. This concludes my financial review. Now back to Bill.

Thanks, Tim. Now let's talk more about our three core product platforms, beginning with ViewSpot. We made significant progress on ViewSpot product development during the first quarter, adding some significant new functionality such as content and URL filtering for in-store devices, improvements to the dynamic pricing portal, as well as a new self-service feature for content creation. We are branding this enhanced self-service capability as ViewSpot Studio. ViewSpot Studio significantly broadens our addressable market to better fit the different needs of carriers around the world. Before ViewSpot Studio, carriers were not able to create and deploy their own in-store campaigns and needed to rely on professional services to update device content. With ViewSpot Studio as the base, we are now able to bring to market a tiered solution that has a much larger pool of potential customers, such as smaller European carriers and MVNOs. We are currently in ViewSpot-related discussions with several carriers and expect to announce new customer wins in the coming quarters. Now let's move on to our voice messaging solution, CommSuite, deployed at both Sprint and Boost Mobile. As I mentioned earlier, good progress was made on integration efforts, we continue to work closely with the new T-Mobile executives to ensure legacy Sprint subscribers continue to have access to the premium Visual Voicemail services that CommSuite provides, while also working with the new T-Mobile on their Visual Voicemail plans going forward. And we are in similar discussions with Boost and Dish. We have a very strong relationship with both customers who are enthusiastic about CommSuite. At this point, it's too early to tell what the ultimate outcome of all of our discussions will be, but I believe we are well positioned. Our CommSuite solution is unique in the market and is a proven revenue generator, especially when compared to traditional Voicemail systems, which are cost centers for carriers. I look forward to providing you with further CommSuite updates as we work through the mergers. Now let's talk about SafePath, the lead product for the company. From a revenue perspective, SafePath's performance matched our expectations for the quarter. Revenues came in at $7.8 million for the quarter, up 18% sequentially and up 240% over last year. As Tim mentioned during his financial review, we expect SafePath-related revenue to be down in the second quarter for two main reasons. First, COVID-19-related store closures and the resulting stay-at-home mandates will have a negative impact on SafePath-related revenue growth. Heavy in-store promotion of the service across Sprint's nationwide footprint has been the major driver of Safe & Found subscriber growth over the last 18 months. And second, with the merger, we expect some disruption as we work with the new T-Mobile on how to integrate Sprint, Safe & Found, and the T-Mobile FamilyMode service offerings. On the bright side, these challenges should be temporary, and we expect SafePath to return back to a growth trajectory in the second half of 2020. Additionally, the worldwide lockdown has underscored the universal relevance and societal value of products like SafePath. Connectivity and digital services have never been as important as they are right now. Screen time, online gaming, and social media use is at an all-time high. The need for tools that help parents effectively manage online content, digital media consumption and device usage has never been more pressing. In SafePath, Smith Micro has a proven solution that addresses all of these challenges in a user-friendly manner. The extensive circle parental controls functionality, we are in the process of integrating into SafePath 7.0 will only increase its value in the eyes of wireless service providers and cable operators, motivated to provide value-added services that resonate with always-on digitally savvy consumers. Our connected home solution, SafePath Home, which is also part of the new SafePath 7.0, will be ready mid-summer as well. The expanded parental controls functionality that we are adding to the platform, such as age-based filters, device time limits, bed time settings, scheduled off time and online rewards will enable our customers to offer a comprehensive digital safety solution for the connected home that empowers subscribers to manage both cellular and non-cellular devices, such as gaming consoles and PCs. Delivered via a lightweight SDK that resides in the home router, our SafePath home router agent will be compatible with most broadband modems and 5G routers. SafePath Home will enable wireless service providers to extend their brand relevance in the place that is most important to the family digital lifestyle, the connected home. Exciting things are also happening with SafePath IoT, the third pillar of our digital lifestyle solution. During the first quarter, our product team made good progress on designing our lifestyle ecosystem for children's wearables. Much like our in-home solution, SafePath IoT extends the functionality and value of the SafePath platform beyond smartphones to other connected device form factors. When combined, SafePath Family, SafePath Home, and SafePath IoT creates the SafePath platform, delivering a comprehensive value proposition for the connected family. SafePath single pane of glass management interface ties it all together. The centralized management functionality provided by SafePath allows end users to see and control all connected devices on one screen with one app. In closing, like most other companies, we are facing headwinds in the short-term as we work through this COVID-19 pandemic. That said, I believe we are in a very enviable position of being able to maintain our profitability even if Q2 revenues are somewhat negatively impacted. Our outlook for the long-term has never been brighter. Our sales pipeline is stronger than it's ever been and we have a strong strategic product portfolio that enables our customers to deliver profitable services to millions of mobile subscribers worldwide. Our balance sheet is strong. We are committed to continue to deliver profitable results and free cash flow this year. With that said, operator, I'd like to open the call for questions.

We will now begin the question-and-answer session. [Operator Instructions] And the first question today comes from Scott Searle of ROTH Capital. Please go ahead.

Hey, good afternoon. Thanks for taking my questions and glad to hear you guys are safe, sound and healthy along with your teams. Bill and Tim, maybe to kick it off, on the SafePath numbers that you provided, was Circle included in that $7.8 million? And if not, could you give us an idea of what Circle was in the quarter and that's still on track for the $4 million for the year. And possibly then looking out into the second quarter, to give us some idea of what the linearity or the turnover or churn might have been in March and April to give us some idea about how to model that going forward?

Hey, Scott. The first quarter SafePath number that I provided did include Circle. It was about $600,000 of revenue for Circle. We had estimated about $500,000, I think, in the beginning of the acquisition. In the second quarter, we had initially guided about $1 million per quarter -- for a full quarter, and that number is going to hold pretty solid. So we expect it to be around $1 million in the second quarter and throughout the rest of the year.

Got you. Perfect. And maybe just a follow-up. It sounds like the integration with Circle is on track to maybe a little bit ahead of schedule where the platform, from a code standpoint, will be ready to roll in the second half. Can you give us an idea of what your level of optimism and engagement is with T-Mobile? It is a larger base. It's currently untapped and the ability to get in there and convert and sell them subscription services. And maybe as part of that too in terms of the broader discussion, it sounds like you continue to be engaged with multiple carriers for the SafePath platform. Could you provide a little bit more color or granularity in terms of size, geography or timing of when you would expect some positive outcomes?

Okay. Let me try to take that question. First off, we are working very closely with the new T-Mobile management teams as they are being defined right now. We feel very positive about the move forward, both with the legacy T-Mobile FamilyMode service offering, which was based on Circle as well as with the Sprint Safe & Found offering that was based on SafePath. We see a clear road ahead to move these to the SafePath 7.0 over some, I think, planned-out deployment. We may not deploy both at the same time. We'll probably deploy one and then bring the other one in. So that's in process, that's being discussed now. There's a lot of planning on both T-Mobile side and on the Smith Micro side to make that happen. We will have the software ready by mid-summer, such that we could be looking at maybe first deployments in the late summer time frame. So there's a lot of work to be done. It's not a simple process, but we have a good plan being mapped out. As far as other carriers, we are in very definite discussions and in some cases maybe further along than for SafePath deployments. These will be both in North America and in Europe and the Middle East. So you will see some announcements coming over the next months as we get to the point of deployment there. So yes, we feel very bullish. We have a lot of work that's being done. That's part of the reason why we've grown our headcount the way we have. There is just a lot of effort in many different ways in many different areas, and that also covers the other products. I mean, we have a lot of work we're doing on CommSuite, both for T-Mobile and for Dish as well as what we're doing on ViewSpot, in that we have a number of carriers that we thought we probably would have had done by now had not COVID-19 gotten in the way and having all the stores closed. So I think you'll see wins on the ViewSpot side as well. There's a lot of activity here and a lot of energy and a lot to look forward to. We just need to get through -- as with everybody in this world, we got to get through this COVID-19 problem.

Great. Thanks for the color. Bill, maybe just a quick follow-up on CommSuite, then I'll get back in the queue. But in terms of the existing base right now, do you expect that to be relatively protected that Sprint premium base? And what is the competitive offering that T-Mobile has on the Visual Voicemail front? And how do you think you stack up to that? Because it sounds like that's one of the immediate opportunities for you? Thanks.

Sure. On the Sprint side, we think that there will be a steady base that will continue to use CommSuite for the foreseeable future. There will be a transition that may take a year, may take two years, I'm not sure how to really picture that, could take longer where these users will be moved from the Sprint system and the Sprint billing system, et cetera, to a T-Mobile offering. And at that time, the base would start to decline. On the T-Mobile side, they have an offering that was built for them by a contract house, and we think there's an opportunity to improve upon that. So we'll wait and see. We are in conversations, and that would be a very, very nice win for us. On the Dish side, I think there is very strong activity at Boost, and we would consider that, that will be a growth area for Dish going forward, especially once the Dish merger has been concluded, and there's good focus put back on that business, as well as we have, I think, a very meaningful opportunity to work with them on the CommSuite side in their postpaid business that they will be building out and will necessarily really want to have build out when they are moved over to their own 5G network.

Great. Thank you.

The next question comes from Josh Nichols of B. Riley FBR. Please go ahead.

Thanks for taking the time to answer my question. You did mention, Bill, you said part of the reason for the expected decline for SafePath in the coming second quarter is really just due to some disruptions as you work with T-Mobile on how to integrate with the new T-Mobile platform. Is that just going to be like a Q2 headwind? And then kind of off to the races back to growth again? Or is it going to take maybe a couple of quarters to get that finished?

Okay. First off, my number one headwind for second quarter is COVID-19 and the fact that the stores are closed. As I said, if you look at history, and we sort of assume history tends to repeat itself, that one of the biggest areas of growth of Safe & Found at Sprint was driven by the stores and retail programs that brought new subs to the Safe & Found platform. Without the stores being open, obviously, that sort of curtails that activity. Now we do expect that the stores will start to reopen in the latter part of second quarter and should be opening still further in third quarter. So we think that problem should take care of itself. As far as for the merger, which was the secondary part of what I was alluding to, yes, there is some timing now that we have to work with new teams, some of the teams are made up of former Sprint people, some of the teams are made up of former T-Mobile people and some sort of a mixture. And we have to work our way through with that. And as such, that takes a little bit of time as far as getting focus back on the objective, which is to build out a family safety platform that has a growing population and in turn, gets a growing revenue stream. I think most of this will be taken care of by the end of the second quarter. I think at this point, we're already starting to see clarity, and we are working on building out the plans and the strategies as to how to move forward. Clearly, in all cases, SafePath 7.0, which is the conjoined product that incorporates the Circle parental controls technology, along with all the features and capabilities of SafePath from a location standpoint as well as IoT are well underway. And I think that -- I think we should start to see a nice recovery and return to growth in third quarter. And I would expect fourth quarter should be full guns blazing. So I feel very, very positive about that.

Thanks. Yes. No, no, it provides a ton of color. That's really helpful. Glad to hear like the second half of the year, it's going to be back, especially in 4Q, the business-as-usual. And you did mention the shelf, I was a little bit curious like, I would imagine you're going to have the best platform? It looks like once you have SafePath 7.0 with the acquisition of Circle. Are you seeing in the current environment that there's a lot of more attractive pricing for doing some like a bolt-on or tangential M&A as a lot of companies are struggling to maybe don't have the type of cash flow that you guys have?

Yes, we see it as an opportunity. I think you should view the shelf as just good corporate governance. It needs to be in place such that if we are presented with a very compelling opportunity, we can go and raise capital if we need it. Clearly, in the current times, as we sit here right now, there's no chance whatsoever that we would want to pull down that shelf. And as such, it's just there for the future. And I think that's the way the market should see it.

Yes, makes sense, always good corporate governance to have that in place. And then good to see the -- obviously, a lot of confidence in the business like -- as depicted by the fact that you're one of the few employers out there that's probably been hiring. Do you have any kind of a target headcount that you're looking to kind of get to when you think you have the platform built out that you'd be ready to tackle all these different opportunities that are coming up?

So we're ready to tackle them now. As far as the platform, it is a constant effort of growth. We will be in a spot now where we'll be looking to add more IoT devices and IoT focus areas. Clearly, we are very heavily focused on getting SafePath 7.0 done to get the power of the Circle parental controls into SafePath as well as delivering the SafePath Home technology as a finished product and that we can actually go to business with them and working with carriers going forward for deployment in 5G routers and 5G router strategies going forward. So right now, we have immense opportunities almost everywhere we look. We have a number of deals that we expect to see us launch in a reasonable time frame. So there's a lot of reasons to look for the future, and there's a lot of reasons to be very bullish on our business case.

And then last question for me, two part like, one, do you think -- I guess, it's fair to say that there's a good chance you may have already been able -- you may have already announced a couple of deals if it wasn't for this COVID-19, but you're feeling pretty confident about the ability to close one or two deals across different areas of the platform over the next, like, six months or so. And then once things are finalized with T-Mobile for the second part, like, could you provide a little bit of high-level color about how you think that rollout might take place, as the sales staff gets trained up to sell like it did at Sprint?

Yes, we will have a complete training program as part of our overall project strategy. T-Mobile has made it clear that they expect that from us as well. They're looking for that. We're working with them on the marketing side as to how to go to market. We're -- so there's a lot that goes on, there's a lot more than just delivering software and bringing a service offering up. And in their particular case, because they have a legacy platform that was based on the Circle code, and they also now have a legacy platform that was based on the SafePath code, is a strategy how to move both of those platforms forward to the point that they decide they want to conjoin them, and then we have one big large offering. The work that we're doing with T-Mobile is immense, it's a big undertaking. The new T-Mobile is a big carrier, and their market opportunities are huge, much, much bigger than what Sprint was able to offer. And as such, we need to pay a lot of attention to our new customer. There's a lot that they are going to look for from us, and we want to be the partner that can get it done.

Thanks for the detail. Appreciate.

[Operator Instructions] The next question comes from Jim McIlree of Chardan. Please go ahead.

Yes. Thanks. Tim, can you address OpEx in Q2? It seems like SG&A and R&D, both go up a little bit as you have a full quarter of Circle, and plus all of the programs you have underway, but G&A down because you -- because of the absence of the acquisition expenses, is that the right direction on those? And can you put either a range or a number on total OpEx?

Yes. So we've been growing a couple hundred per quarter. I'm taking non-GAAP now, and I included a non-GAAP OpEx reconciliation in the press release. So we did $8.1 million in the first quarter. So you should be taking several hundreds of thousands increase. Most of that coming on the R&D line item. Some of it on the sales and marketing line item. The Circle acquisition didn't necessarily in and of itself drive OpEx, because we didn't acquire any people. But we're certainly working and spending with our own teams, extra money, extra hours, extra time to get that integration done as well as hiring. As well as I alluded in my prepared remarks to the possibility of some contract labor to help us through what we see as a, as Bill indicated, an amount of work that we need to we need to perform for. So we see that as an opportunity. So, you should be thinking several hundreds of thousands increase into 2Q.

Okay. Thank you. And then anything special or unusual about operating cash flow we should be aware of for the rest of the year in terms of the acquisition or any programs that you might have going on that would impact working capital? Is there anything unusual to take note of?

With the acquisition, just the start-up of the billing process, the carrier terms are typically longer. So just like last year with ViewSpot, you may see a three to six month delay before we start flowing cash associated with the revenues that I've talked about associated with Circle, but nothing significant and material. And I expect all that to flush out by the third quarter. So you might see a delay in the second quarter, measured in $0.5 million to $700,000 just because of the start-up billing process. But you'll see that all open up as we get into the third quarter, into the fourth quarter, no problems there. So nothing that we expect any disruptions to that.

Okay. Great. That’s it for me. Thanks a lot. Good luck with everything.

Thanks, Jim.

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

I want to thank everyone for joining us today. We hope you are all safe. We look forward to speaking to you in the future. And should you have any questions or further comments, please feel free to give us a call. And I hope everyone has a great afternoon, and we look forward to talking to you in the third quarter. Bye.

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