00:05 Good afternoon, and welcome to the First Quarter 2022 Earnings Conference Call of Smith Micro. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. 00:45 I would now like to turn the conference over to Mr. Charles Messman. Thank you and over to you, sir.

00:54 Thank you, operator. Good afternoon, everyone. We appreciate you joining us today to discuss Smith Micro Software’s financial results for 2022 first quarter ended March 31, 2022. By now, you should have received a copy of the press release with our 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, Chief Financial Officer. 01:26 Please note that some of the information you will hear today during our discussion consist of forward-looking statements, including, without limitations, those regarding the company's future revenue and profitability, our future plans, new product development, new and expanded market opportunities, future product deployments, migrations, and/or growth by new and existing customers, operating expense, company cash reserves, and the expected impact of last year's acquisition of Avast's Family Safety Mobile Business and our business strategy, operations, and financial positions going forward. 01:56 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. 02:20 I'd like to point out that in the forthcoming prepared remarks, we will refer to certain non-GAAP financial measures. Please refer to our press release disseminated earlier today for a reconciliation of those non-GAAP financial measures. 02:31 With that said, I'll turn the call over to Bill. Bill?

02:33 Thanks, Charlie. Good afternoon and thank you for joining us today for our 2022 first quarter conference call. Our first quarter has been extremely busy on many fronts. As we continue down the path that we spoke about during our recent Q4 update. We are continuing to build on the momentum from the recent launch of SafePath 7. This launch should commence the drive to enhance subscriber growth beginning in the late Q2 or early Q3. With the resumption of growth, we can return the company back to our historical model of delivering strong growth, earnings power and cash generation. 03:20 We are also working diligently to get the other two U.S. Tier-1 carriers and our European customers on to the SafePath platform. This activity will enhance the Family Safety applications as the carriers with an expanded feature set, while allowing us to realize cost synergies as we consolidate to a single Family Safety platform. This critical initiative will bring the power of our SafePath platform to not only the mobile Family Safety space, but opens an even larger market opportunity with the digital family lifestyle marketplace. Overall, I am pleased with where we are today, as we are making great progress across the board with our carrier partners. 04:14 Another interesting note that is very encouraging is that several of our carrier customers have begun to reopen their offices, a milestone that I truly hope continues as we work through how the pandemic has changed their lives and how we conduct business. We believe that increased access to our customers is a critical and necessary step towards building deeper relationships throughout the different groups within the carriers. 04:46 Another exciting recent announcement that I am delighted to discuss is the expansion of our Board of Directors. Last month, we added two highly qualified individuals Asha Keddy and Chetan Sharma, both who are recognized strategic leaders in the mobile technology arena. Their combined knowledge, contacts and business acumen are a tremendous addition to Smith Micro. And I'm looking forward to seeing the positive impact they're going to have on our company. 05:22 Now let's turn the call over to Jim to discuss our first quarter 2022 results.

05:30 Thanks, Bill and good afternoon, everyone. As a reminder, we acquired Avast's Family Safety Mobile business in the second quarter of 2021, which impacts the period over period comparisons that I'll be covering today. As such, I will also be highlighting the sequential changes as well to provide some additional context on our quarterly results. 05:54 With that, let me cover the financial details for the first quarter of 2022. For the first quarter, we posted revenue of $12.7 million compared to $11.4 million for the same quarter last year, an increase of 12% as a result of an increase in Family Safety revenues, partially offset by a decline in CommSuite revenues. When compared to the fourth quarter of 2021, revenue was down approximately 13% driven primarily by decreases in revenues associated with CommSuite and our legacy Family Safety product lives. 06:32 During the first quarter of 2022, Family Safety revenue increased 64% to $10.4 million compared to the first quarter of last year. As a result of the additional Family Safety customers obtained through our acquisition from Avast. Family Safety revenues decreased 11% sequentially compared to the fourth quarter of 2021. The primary reasons for the sequential decrease in Family Safety revenue was the continued reduction of the legacy Safe & Found platform revenue related to declining Sprint subscribers and the accelerated recognition of certain deferred revenue in the fourth quarter of 2021, due to a contract amendment executed with one of our Tier 1 carrier clients. 07:20 During the first quarter of 2022, CommSuite revenue was $1.4 million, which declined $2.7 million compared to the $4.1 million in revenue produced in the first quarter of last year. Revenue from CommSuite decreased 35% sequentially compared to the fourth quarter of last year due to the continued decline in…

15:14 Thanks, Jim. Now let's take a closer look at our product platforms. We are very focused on continuing the migration of our carrier customers in both North America and Europe to the new SafePath 7 platform. We are adding features found in the acquired Avast platform to SafePath 7. The result will be an even more robust SafePath offering going forward. Being the market leader means providing a constant flow of new features. This expanded roadmap of new features and functionality allow our carrier customers to better utilize the SafePath platform as well as offering expanded capabilities such as SafePath Home, SafePath Drive and SafePath IoT. 16:06 I believe the market is ripe for the inclusion of SafePath Home in carrier provided 5G routers as carriers, driven by the rollout of 5G, gain relevance in the home broadband market. With the emergence of SafePath Home, we can deliver on the family digital lifestyle mantra of safeguarding the family both when mobile and at home. SafePath 7 was expected to launch at T-Mobile in the weeks following our last earnings presentation. 16:40 As we announced in late March, that launch occurred as anticipated and the new application has been very well received in the market. This sets us up extremely well for the next phase of growing new subscribers as we continue to gauge the apps performance to ensure all is working well with the application. From a Verizon perspective, progress is being made on several fronts as efforts continue to prepare for the switch to the SafePath platform. 17:16 A good example is the launch of our pilot ViewSpot initiative underway throughout Verizon corporate-owned retail stores. There has been a great new avenue to build awareness for the Smart Family products, particularly with the sales reps who are at…

24:29 Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Josh Nichols with B. Riley, FBR. Please go ahead.

25:12 Yeah. Thanks for taking my question and good to see everything with T-Mobile get launched here. I know that's been a long time in the making, and the team put a lot of effort into that. Could you dive into a little bit about where T-Mobile is terms of the marketing and training initiatives, has that begun to be rolled out of there spiffs that have been put in place to begin to ramp this and your kind of expectation for what you may do, whether it's trading or help with digital marketing initiatives?

25:48 Yeah, Josh. I guess the way to kind of look at, first off, that's the question you're really going to have to ask of T-Mobile, we can’t really directly answer that. It's really something that's confidential to them. So we're working hard with them. We are focused with them. They are focused. So everything is positive, but that you're going to have -- to ask them.

26:15 Fair enough. And then just looking at the trajectory here, you mentioned that you're expecting to see a ramp in revenue in the second half, which you've kind of mentioned before and with revenue kind of flattish for 2Q. Just curious like how much of the revenue left in CommSuite is related to like the legacy Sprint stuff, if we're trying to figure out how much of that may be due to the potential run off over the next couple of quarters?

26:45 We would anticipate like roughly in the second quarter, maybe a third of the revenue would be related to the Sprint, T-Mobile portion.

26:57 Thanks. So then if I'm just looking for AT&T (ph) and Verizon. You mentioned before and reaffirming that you expect to migrate both those customers over the SafePath platform by the end of this year. Fair to assume that, that would require a new contract signing, given the economics of the old agreement are probably not reflective of the value that you bring? And when do you think that we might see some type of update contract agreement, if that is the case?

27:29 When we have a contract done and we have approval from our customer we’ll come to the Street and talk about it, but at this time, we can’t.

27:39 Fair enough. I'll hop back in the queue. Thanks, guys.

27:47 Thank you. The next question comes from Jim McIlree with Dawson James. Please go ahead.

27:56 Yeah. Thank you. Good afternoon. You talked about increased costs for contractors for the migration and I was hoping you could size how big that's going to get in dollars? And then secondly, do those costs go away when the migration is done or do the cost just get redeployed into something else that is, are these contractor costs permanent, but they just might get spent on something else?

28:32 So, the contractor costs are not permanent, a lot of thought behind bringing on these contractors is the fact that we're very focused on getting the two carriers migrated this year and we felt the most effective way to do that would be to bring on contractors in that way at the end -- as we get to the migrations, we'll be able to eliminate those costs with no real tail. So we would expect those to be eliminated when we are migrated. 29:09 For your first question, I would point back to the guidance to where we believe that the operating expenses in the second quarter will increase to 2% to 4% off of our first quarter and that's going to be largely driven by those contractor costs.

29:29 Okay. That's helpful. And then as far as Q2 goes, it sounds like -- it sounds like ViewSpot is flat to up CommSuite is down, and SafePath is flat to flat, is that directionally where we are?

29:56 Thank you. That's pretty, pretty much it. I think the good part is that much of the CommSuite revenue by the end of the year, almost all of it will be coming from ongoing business with DISH Wireless and their prepaid brands boost. And so I think that will end that drama and we would look to continue to regrow our CommSuite revenue going forward.

30:27 Got it, got it. And the risks to the SafePath growth, how would you rank that, is that mostly the customers staying on track. Is that migration issue that is in your control, how do you rank the risks to achieving your SafePath goals for the year?

30:56 That's a great question. I would view it in two different ways. First off, if you look at it from a migration standpoint, clearly, we have to perform and deliver the final software, but once that's done, a lot of the risks then goes over to our customers' hands, because they have to deploy it and get it up and running. So I mean, there is a certain amount of risk, I can sincerely say that we will do everything in our power to make sure that we meet our schedules, because we really want to get this migration complete. 31:37 I also believe that our customers will do everything in their power to deploy because this new product will have significant upgrades and improvements over the product that currently selling whether it's old SafePath or whether it's the old Ring – the old Avast Ring product. So there's plenty of motivation for both parties to get things done on time. The next part of it, where there is some risk. It's really all about the execution of the marketing plans. We are deeply involved in this, with all of our carriers. But in that final, you -- it does fall upon the carrier to execute the plan. 32:30 Again, from a financial standpoint, there is incredibly strong motivation for all parties to execute this sharply. So there's plenty of reasons to feel that the risks are reasonable and that we can deal with, but you also do need to recognize that there still are risks and we will work our way through.

33:03 All right. That's very helpful, Bill. Thanks a lot. I'll yield the floor. Take care, guys.

33:14 Thank you. [Operator Instructions] The next question comes from Bruce Goldfarb with Lake Street Capital Markets. Please go ahead.

33:27 Jim and Bill congratulations on all your progress. And thank you for taking my questions. When do you expect material revenue from the T-Mobile account?

33:40 Well, the material revenue now, so the first step was to get SafePath 7 in the marketplace. As I said, in the prepared comments, we're now going through a period of continued assessment to make sure that everything in the new product is functioning properly. And when the customer is happy with those results, then they can start really focusing on executing the growth strategy. So it's meaningful now, and we hope that it becomes even more meaningful as the growth starts.

34:22 Okay. And I think you've probably answered this earlier, but are you seeing signs of activity in retail T-Mobile stores. It sounded like you said earlier you didn't have visibility to that?

34:35 Well, again, we are not at a point where we can talk about that. So I really can't answer that question.

34:44 Okay. And then lastly, how are the -- how is the integration synergies tracking since the AFS acquisition.

34:54 It's really the real synergies that we'll be able to obtain will occur once we're able to transition to the SafePath platform on for all the carriers. We really are trying to push towards the, by the end of the year to have all those migrations complete and that will allow us to realize those synergies in the first quarter of 2023.

35:22 Great. Thank you. That's all my that’s -- that’s all are the questions and congrats again on all your progress.

35:32 Thank you.

35:39 Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Charles Messman for any closing remarks.

35:48 Well, thanks everybody for joining us. I know it's a very busy time. We appreciate that. If you have any further questions, please feel free to give us a call. Thanks again and have a great afternoon.

36:06 Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.