Smith Micro Software, Inc. Q1 FY2021 Earnings Call

Good day and welcome to the Smith Micro Software’s Financial Results for the First Quarter of 2021. All participants will be in listen-only mode. 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, Vice President of Investor Relations and Corporate Development. Please go ahead.

Thank you, operator, and good afternoon, everyone. We appreciate you joining us today as we discuss Smith Micro Software’s financial results for the first quarter of 2021 ended March 31, 2021. 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, our Chief Financial Officer. Please note that some of the information you’ll hear during our discussion today consist of forward-looking statements, including, without limitations, those regarding the company’s future revenue and profitability, new product development, new market opportunities, operating expenses, company cash reserves, the recently completed acquisition of the Family Safety Mobile Business from Avast and how the acquisition may impact Smith Micro’s business strategy, operations and the financial position going forward. 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 risk factors included in our most recently filed Form 10-K and the preliminary prospectus supplement filed with respect to our public offering. Smith Micro assumes no obligation to update any forward-looking statements, which speak of our management’s beliefs and assumptions only as of the date they are made. I want to point out that in our forthcoming prepared remarks, we will refer to certain non-GAAP financial measures. Please refer back to our press release disseminated earlier today for the reconciliation of those 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 2021 first quarter conference call. I am very excited to be talking about our progress on what has been truly a transformational start to the 2021 fiscal year. Our forward-looking business case is the strongest it's ever been. And I'm incredibly proud of the team's execution in closing the Avast acquisition. Bolstered by our strengthened employee base and diversified customer portfolio, we are well-positioned to maximize revenues throughout the rest of the year and beyond. Let's look at the results for the first quarter of 2021. Revenues for the quarter came in at $11.4 million, which is better than the previous guidance provided in March. Non-GAAP net income for the first quarter was $700,000. The business generated solid free cash flow from operations of $3.5 million. During the quarter, we also continued to invest in R&D to accelerate the SafePath related product development. I believe we have now reached the point where we can ratchet back the growth of R&D spending. This will enable us to turn our attention to integrating the people, customers and technology gains through the Avast acquisition. Later in the call, I will add more color on our path forward. But for now, I'll turn the call over to Tim for an in depth look at our first quarter financial results. Tim?

Thanks, Bill. Before we review the first quarter results, let me provide a summary of activities since our last call. On March 15, we closed the previously announced public offering and issued 9.5 million shares of common stock. After deducting all the related costs, the net proceeds were approximately $60 million. On April 16, we also completed the previously announced acquisition of substantially all the assets of the Avast Family Safety Mobile Software Business, including certain liabilities, along with all the membership interests of Location Labs, LLC, a US-based subsidiary. The base purchase price of $66 million was delivered through the payment of $56 million in cash raised in the public offering, and an issuance of approximately $1.5 million unregistered shares of common stock. As Bill mentioned, we are very pleased that the efforts extended to complete these transactions on time and as planned. Now, let's cover the financial details of the first quarter. For the first quarter, we posted revenue of $11.4 million, compared to $13.3 million for the same quarter last year, a decrease of 15%. When compared to the fourth quarter of 2020, revenue was down 8%, which was better than our expectations communicated last quarter. During the first quarter of 2021, our Family Safety revenue, inclusive of our SafePath product, decreased 20% to $6.3 million compared to the first quarter of last year, and increased 3% sequentially compared to the fourth quarter of 2020. This increase exceeded our expectations communicated last quarter. The primary reason for the sequential increase in Family Safety revenue was related to a customer contract modification, resulting in an acceleration of previously recorded deferred revenue. The contract modification was related to a UK-based customer, acquired in the Circle acquisition and was a result of the customer exercising an option to reduce the service period by two years. Instead of ending in 2024, the contract is now expected to end in 2022. This increase in Family Safety revenue was offset by the expected reduction of Sprint subscribers. As a reminder, all current marketing initiatives are only focused on T-Mobile branded products and not the Sprint branded products. In the coming quarter, based on the current subscriber trends through April, and our newly acquired Family Safety products on April 16, we expect Family Safety revenue to increase by 70% to 75% compared to the first quarter. This guidance assumes the current subscriber trends continue through the second quarter of 2021. During the first quarter of 2021, CommSuite platform revenue was $4.1 million, which was down 9% from the first quarter of last year. Revenue from the CommSuite platform decreased 13% sequentially compared to the fourth quarter of 2020. This decrease was slightly greater than communicated last quarter. This decrease was due to an expected loss of subscribers offset by better than expected advertising revenue. We continue to navigate the T-Mobile/Sprint merger as subscribers now have an option to move from Sprint to the T-Mobile network for voice services. As the subscribers transition from the Sprint network, we expect a continued decline in Sprint CommSuite subscribers. As a reminder, Boost Mobile, formerly owned by Sprint is now part of DISH and comprised approximately 25% of the CommSuite platform revenue. We look forward to expanding our relationship with DISH in the future including the goal to increase Boost Mobile CommSuite subscribers. During the second quarter of 2021, we expect CommSuite platform revenue to be down 5% to 10% compared to the first quarter. ViewSpot revenue was approximately $930,000 for the first quarter of 2021, up 25% compared to the first quarter of last year and down 32% compared to the fourth quarter of 2020. This decrease was slightly higher than our expectations communicated last quarter and was primarily related to a lower volume of variable revenue with our Tier 1 US customer. Based on the current outlook, we expect ViewSpot revenue in the second quarter to be higher by 5% to 10% compared to the first quarter. This increase is primarily related to our near term visibility of variable revenue activity. For the second quarter of 2021, we expect consolidated revenue, including the newly acquired Family Safety products to be higher by approximately 30% to 35%, compared to the first quarter of 2021. For the first quarter, gross profit was $9.8 million compared to $12.1 million during the same period last year. Gross Margin was 86% for the first quarter compared to 91% last year. GAAP operating expense for the first quarter was $13.1 million, an increase of $2.9 million or 28% compared to last year. Non-GAAP operating expense for the first quarter was $9.1 million, an increase of $1 million or 13% compared to last year. The increase in the first quarter non-GAAP operating expense, compared to last year is primarily related to an increase of $1.5 million for compensation and employee-related expenses, as headcount increased 25% year over year, resulting in 264 employees at the end of the first quarter and an increase of $200,000 for third-party contract development costs. These costs are variable and allow us flexibility to increase or decrease the number of engaged resources. This increase was offset by a decrease of $700,000 related to trade show and business travel-related expenses. The first quarter non-GAAP operating expense of $9.1 million was $400,000 less than the fourth quarter of 2020 and exceeded the expectations communicated last quarter. During the first quarter, we reduced the third-party contract development costs and increased the employee run rate costs as we continue to phase in headcount throughout the quarter. For the second quarter of 2021, we expect consolidated non-GAAP operating expenses to be approximately 40% higher than the first quarter. This increase is mostly related to the additional 158 employees from the newly acquired Family Safety business. Then non-GAAP net income for the first quarter was $700,000 or $0.02 diluted earnings per share, compared to a non-GAAP net income of $4.1 million or $0.10 diluted earnings per share. 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 $1 million, intangible amortization of $2.3 million and acquisition costs of $611,000, some of which are non-cash items. The intangible amortization expense includes a one-time expense acceleration of $1.5 million related to the customer contract modification previously mentioned. 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 the 0% tax rate for both 2021 and 2020. Any resulting non-GAAP tax expense reflects the actual income tax expense during each period. This concludes my financial review. Now back to you, Bill.

Thanks, Tim. Let's start out with CommSuite, our voice messaging platform. We will focus on CommSuite to DISH, the newest tier one carrier in the United States. DISH’s goal of expanding their 5G network to cover about 70% of the US population by June of 2023 is a great opportunity for Smith Micro to build yet another profitable user base, not just for CommSuite, but for our other products as well. I believe that DISH could become a major carrier customer for us once their mobile network rollout is completed. Boost Mobile, owned by DISH and already a CommSuite customer, has initiated some strategic marketing efforts to increase the conversion of trial premium Visual Voicemail users into paying subscribers. This marketing campaign commenced in the first quarter and is gaining momentum. Boost launched a new value-added service offering in the first quarter that includes premium digital voicemail, granted privacy premium. This service bundles premium Visual Voicemail with secure WiFi and call screener premium, other services popular with their users. As mobile phone vulnerabilities addressed by this bundle pose a risk to every smartphone user, we view this as a good opportunity to grow the CommSuite revenues for premium Visual Voicemail app Boost. Now let's take a look at ViewSpot, our smart retail platform. It is no secret that the COVID-19 pandemic has significantly reduced traffic in retail brick and mortar stores. The good news is that trend may be about to change. And with that shift, the future for ViewSpot may be very bright. Thanks to the aggressive delivery of COVID vaccines here in the US, it is now conceivable that shopping habits by consumers will return to storefronts. It is also reasonable to assume that as vaccine distribution accelerates in both Europe and the Middle East, a return to additional retail activity should follow. Thus, the retail sector's ongoing return to normalcy paired with a rising consumer demand for 5G cable phones bodes well for ViewSpot revenues. And that has me excited for what the balance of 2021 and 2022 holds for ViewSpot. On-device promotions delivered via ViewSpot promise to be a critical component of our carrier customers' in-store promotions going forward. Now, let's turn to Family Safety, where we are clearly the number one software provider to wireless carriers. I am, as I commented earlier, very excited about the Avast acquisition, and I'm proud of how Smith Micro has hit the ground running. As I stated during our last call, we will initially run two Family Safety applications. This strategy will enable us to minimize disruption for our new Family Safety clients and maximize the productivity of the talented team we gained as part of the acquisition. I'm happy to report that this transition of these 158 employees went quite smoothly. We are thrilled to welcome these experienced and highly capable individuals to the Smith Micro family. Our first quarter Family Safety revenues were slightly higher than expected. We believe we have significant growth potential going forward, far larger than the first quarter's positive results. Now let's look to see where things stand with some of our largest Family Safety deployments. Currently, T-Mobile is on track to launch the new SafePath 7 to their subscriber base mid-year. We've been working hand-in-hand with T-Mobile on building out an integrated, multi-channel marketing strategy to support this launch. In this regard, the experience we've gained over the past few years in supporting other Family Safety customers has been invaluable. It has enabled us to develop a plan geared towards both new user acquisition and user retention. At a high level, I believe this campaign will follow a blueprint similar to the successful Sprint initiatives executed in support of safe and sound prior to the merger with T-Mobile. In addition to these launch preparations, we have made progress in renegotiating the Family Safety contract with T-Mobile, which we gained as part of the Circle acquisition completed in 2020 to better align with our business case. While still a work in progress, we remain confident in reaching a positive outcome. We are also confident this new SafePath 7 launch with T-Mobile will ignite a new growth engine for Smith Micro, resulting in a meaningful impact on revenues in the back half of 2021 and beyond. Now let's shift our direction to Verizon. With the Avast acquisition closed and in the books, we have started working closely with our newly acquired Family Safety customers with a strong focus on Verizon. We look to enhance and expand a new joint marketing program designed to drive new user acquisition, encourage greater app engagement and maximize revenue for Verizon’s smart family products. The untapped potential here is very exciting and should drive revenue growth in the coming quarters. Lastly, I'd like to provide you a little bit more color around our long-term vision for our Family Safety business. As you would correctly assume, we do not plan on running two separate parallel Family Safety code bases in perpetuity. Our product strategy team has already developed a solid plan to blend the very best components from both the SafePath and Avast platforms. We have an enormous amount of talent and resources to deliver on this directive. Over the coming quarters, as we integrate the two teams and code bases, we will develop a unified SafePath code base to support all of our family safety deployments at our wireless carriers. As we also continue to work to streamline processes and grow margins, rightsizing our expenses to maximize profits while significantly growing our revenue base is our mission. With that said, there are a number of reasons we are very well positioned for a strong resurgence in the coming quarters. As more people are vaccinated, more retail stores will reopen, and the economy will continue to recover. Carriers around the world continue to show growing interest in our products. Our growing customer base continues to diversify. And we have a new partnership in place with Avast that will generate additional opportunities for revenue growth. The future has never been brighter for Smith Micro. With that, I will open the call for questions. Operator?

We will now begin the question-and-answer session. The first question comes from Scott Searle with ROTH Capital. Please go ahead.

Hey, good afternoon. Thanks for taking my questions. It's nice to hear T-Mobile moving ahead on schedule and sounds like a lot of energy going around related to Verizon. A couple of quick points to clarify, I'm not sure I heard the numbers right. Tim, could you repeat what you said sequentially in terms of the outlook for ViewSpot? I don't know as well, did you quantify the SafePath revenue attributable to the accounting change? I'm sure we could back into it from the deferred revenues. And then the outlook for location in SafePath services was 70% sequential growth, is that correct? And then add a couple of follow-ups.

All right, Scott, the ViewSpot guidance that I gave was 5% to 10% greater than the first quarter. The deferred revenue impact that I discussed was about $600,000. And the last question, so as we look forward here, we're going to be looking at Family Safety, which will include multiple products, our product portfolio now, which includes the purchased Avast product and the SafePath product. So we will be talking about that revenue in total. And the guidance I gave and the outlook I provided for that was a 70% to 75% growth on top of the first quarter's revenues.

Got you. And, Tim, just to clarify further so that growth is on the $6.3 million not the $6.3 million net of the one-time benefit. Is that correct?

It's growth on the $6.3 million. That's fair.

Perfect. Okay. And Bill, it sounds like you continue to progress with T-Mobile. I was wondering if you could provide any additional color in terms of how aggressive this push could be? How does the rollout initially look? Should we be expecting a soft launch initially followed by something more aggressive with some of the omni-channel strategy that you're talking about? And as well, kind of shifting to rising quickly? As you're re-engaging with that customer base, what are your expectations? When does that start to accelerate from a subscriber standpoint again?

Okay, Scott, those are good questions. On the T-Mobile side, I think they will start with a soft launch initially. That soft launch could take a matter of a few weeks to a month or so. Just to make sure everything is set as planned, and then we would go into a more full rollout. So I think that's probably the expectation we should set. On the Verizon side, we have had very, very good conversations. I think we have a good understanding between both Smith Micro and Verizon of what our goals are going forward. Clearly, there's a strong desire to grow the size of the user base, and to do that with a multi-pronged marketing strategy. These are the things that we're working on now. There are going to be a lot of follow-up discussions over the next few weeks, then I would say, by this time next quarter, it should be fairly clear. So I won't be able to give you some better guidance that I can now.

Okay. Perfect. Very helpful. And lastly, if I could from a high level, Bill, there's been a lot of activity within the industry, broadly speaking. You go back a week or so ago, Apple introduced their Apple Tags. And while it's not directly competitive, it is building the ecosystem, right? In terms of connectivity and location and tracking. So I'm wondering that, along with Life360 is now brought Jiobit, you're starting to really see location kind of pushed to the forefront. So I guess with those items in mind, what do you see in terms of the development of your ecosystem in terms of bringing the devices and expanding it to get the platform? Now bringing those other devices on to the platform and being able to approach the carriers with that suite of services? And also the interest level now from the carrier for that suite of services. Effectively, with Apple kind of challenging for location capabilities, are they kind of understanding that? Are they fighting back and looking forward to fighting back with things, whether it's tracking people, pets, things or otherwise? The Apple Tags and dog tag type of equivalents? Thanks.

Yes, yes. Let me comment on that. I think the Apple launch is intriguing. I think it helps us validate the desire for this market segment to grow. I will, however, say that I think the Apple approach leaves a lot to be desired. I mean, candidly, the product is a Bluetooth device. It's basically a crowdsource network; you have to have other Apple iPhone users around you in order for the thing to function. If you don't, it just doesn't work. It is not a network like a carrier network that is carrier grade with carrier quality, and with all sorts of operating controls and security. So that said, I think there's great room for the carriers to play a significant role in the space. I think the fact that devices are cellular can reach out and cover a much broader geographical area than a Bluetooth device is the starting point. I think that you're going to see the embrace of what we call the family digital lifestyle going forward to be a major part of the marketing efforts that you'll see coming from carriers. And we obviously will be behind pushing that. And so yes, I think there's a lot of excitement in this market. I think that there are a lot of things that will develop through the end of this year. And we usually just sort of say stay tuned. I think the Apple launch just validates the market, but it's not the answer. You also mentioned the Life360 launch and their acquisition, again a group of Bluetooth enabled devices, which I think has the same frailties as the Apple one. But nonetheless, I think again, it does talk about the need in the marketplace. But this is a need that needs to be filled by the real professional carrier networks, and I think that's the answer.

Great. Thanks so much.

The next question comes from Eric Martinuzzi with Lake Street. Please go ahead.

I have a question regarding Family Safety, specifically about customer behavior rather than the financial aspects. If I understand correctly, the contract is ending in 2022 instead of 2024. What does this indicate about the customer relationship? Is this customer leaving? Is there a possibility for renewal under a different contract? Please help me understand the nature of the customer relationship.

Okay, Eric, yes, that’s a good question as well. This particular customer came to us via the acquisition of the Circle business unit. They're based in the UK. They're more on the cable side than they are on the cellular side. As such, they were really focused more on broadband service. So this product offering is as constituted didn't quite make as much sense as it does when you're talking about the name brand cellular service providers. Yes, I think the CSA takeaway, but I think it was somewhat preordained. I don't think that it was a well-conceived product to begin with, and it reflects that.

Okay. Regarding the T-Mobile contract, you emphasized the timing, which is crucial. I'm interested in understanding the next step. This ties back to my model, and I think other analysts share the view that Q3 represents a significant increase, particularly with Family Safety, but overall revenue for Smith Micro as well. If the next step involves what you've described as a soft launch that extends throughout much of the third quarter, then achieving our sequential growth scenario might become a bit more challenging, if you know what I mean.

Yes. But we're not a one-trick pony any longer. So there are multiple customers and they're big customers. When you start thinking about the growth of our business on a quarter-over-quarter basis, it's not just on the back of one name. So that's number one. Number two, I believe that there is a strong interest on the part of our customer T-Mobile to re-enter in a meaningful way, the Family Safety space. I think the family subscribers are important to their business case going forward, and they have obviously been incredibly successful. This all plays well in it. So I think we have to start thinking about this micros business case as being one of a number of players that all can be very meaningful simultaneously, as well as the fact that with the launch of SafePath 7, we now have a very significant customer in T-Mobile that we'll be able to really relaunch as the new T-Mobile in the Family Safety space. So let’s just wait and see how the numbers work out. But I remain very positive.

Okay. And then on the ViewSpot business, last quarter, we were talking about an issue with AT&T Mexico, kind of, just due to COVID, we had to take a pause here. Any signs that that business is recovering, returning?

Well, COVID is still an issue in Mexico. As it is in Europe and the Middle East. So it is still too early for that. I think you're starting to see however, the effect of the vaccines through this distribution here in the US, and you're starting to see stores reopen. I think you're going to see people re-entering the stores. And I think the demand for the ViewSpot product will grow. As that happens, as we are able to broaden the distribution of vaccines in places like Mexico, Europe, and the Middle East, I think you'll see the same trend follow up. So it’s all about timing. I don't think it's a question of if, I just think it's a question of when. But that's my judgment. You may not subscribe to that, but I think the facts will bear it out.

Last question is for Tim. I am wondering if you have the cash debt numbers for April 30 and what the balance sheet looked like after the closure.

Yes. On a cash-wise, we were sitting at about around $30 million, no debt.

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

Yes. Thanks for taking my question. Good to hear some of the updates on the code integration and the plans. Could you elaborate a little bit just on the potential timeline? And I know you just went through a large R&D investment cycle. It seems like you're going to start getting a little bit more leverage on that front. How long do you think it'll take for some of the code integration, some of the gross margin improvements? And what are some of the companies’ longer term key target metrics, given that this is a business that has historically had a lot of operating leverage?

Yes, Josh, as we said during the presentations we made to the street during the capital raise. We're a software company. We should be looking at gross margins in the 90% range, and these gross margins should then flow down to an even margin of around 25 points. We've said that is our goal. That's where we need to get back to. Clearly, the business that we acquired from Avast was not at that level. It is our goal to get it there. I think we'll be able to execute on that over the next few quarters such that we should start to see improvement in both the top line margins as well as the bottom line. We should start to approach our goal as early as possible in 2022. We have levers, and we know how to execute. We also have to take care of our new customers and make sure that we don't disrupt any of the business flow. So we're going to do this in a very thoughtful manner. Obviously, the right way to do it is to grow our gross margins, by increasing our revenues through additional sales, without increasing our expenses. And that is our first choice.

Okay. Thanks. And then, I know the company has announced a few other SafePath wins earlier this year. You hit on the company, of course, diversifying its revenue stream. Are those expected to add much revenue and kind of support the growth initiative in the second half of this year? And any updates you can provide on those wins?

Yes. Look, we look for these ventures to grow and to grow over time. They all start out slow and then they grow. I have always talked about history because I think it tends to repeat itself. If you look at what happened at Sprint, when we launched there, it was about a year from launch to the point where the revenue started to grow into a more meaningful flow. I think that will hold true for some of these accounts as well. But the good news is that we have established accounts now, both with T-Mobile and with Verizon, and others that should have growth and should be able to feel the kinds of numbers that we're looking for in 2021 and going into next year.

Thanks, Bill. I'll let someone else take a turn.

Thanks, Josh.

The next question comes from Mark Schappel with Benchmark. Please go ahead.

Hi. Thank you for taking my question. It's just a couple of questions. One, with respect to ViewSpot, the expectation is for revenue to be up 5% to 10% sequentially in Q2, but is the expectation for the product to grow sequentially each quarter or beyond that this year?

Hey, Mark. Yes, we are looking for growth on ViewSpot year-over-year, and that's how it would lay out actually. Now I'll dial that into a 90-day view each quarter. But I think that's the right way to think about it.

Okay. Thanks. And then on CommSuite, the 25% that is Boost Mobile. Could you just comment on whether that portion is currently growing?

Yes, that portion in the first quarter did not grow. We're focused on continuing to work with Boost. Bill talked about some promotions that are out there that were positive about, and we'll continue to work with Boost and DISH to grow that revenue.

Okay. Thank you. That's all for me.

The next question comes from Jim McIlree with Chardan. Please go ahead.

Can you talk a little bit about gross margins? Why it was down this quarter versus prior? And what the impact of the Family Safety business will be in Q2?

Yes, thanks, Jim. Yes, so margins were down a little bit. Costs are a little bit higher and absorbing the SafePath 7 environments, which is a little more complicated environment, which we've been working on with the code integration for the last year. That's why we got some revenue sliding down, obviously, and we got increasing costs there. We do expect that to improve as the year goes on. Certainly now we're going to be merging in obviously, the purchased business, and our margins are going to start out lower than we would like, but we know that's where our opportunity is going to be, through the rest of this year into next year, is really getting in and dialing in on those costs and creating that respectable margin that Bill talked about.

So when we look at Q2, and blending in the Family Safety business, we're going to see another sequential decline in gross margin versus the 86% you reported this quarter? Did I hear that right?

Yes, the margin percentage will go down.

And, Jim, let me add, if I could, if you look at the gross margin percentage for the Avast business that we acquired, it was down in the low 70s. So there will be an initial impact on us, as we integrate this business in. We will be working on growing both revenues and reducing expense to get it back to something around the 90 points that you would expect to see.

Understood. Thank you. And I'm trying to understand the trajectory of the Family Safety business, primarily at Sprint and T-Mobile. So it sounds like to me that as the Sprint customer base continues to migrate off, it's not going to be replaced, or completely replaced, by the T-Mobile launch, at least in the early quarters, if it follows that same trajectory that you have talked about, Bill, that Sprint had. Am I hearing that correct?

Let me provide some additional insights. Part of the strategy involves transitioning Sprint users on Safe and Found to the T-Mobile billing system while keeping them on Safe and Sound. We anticipate a significant slowdown in the usual decline we've discussed in previous quarters. This transition is a key aspect of our overall approach as we work on smoothly transferring users from the Sprint Safe and Found product, as well as the acquired Sprint offerings from the Avast deal, to the T-Mobile platform. There are several components at play with the new T-Mobile, including the original FamilyMode, which was based on the Circle code, and the upcoming launch of SafePath 7, which features new SafePath products that blend the best of Circle with Smith Micro’s offerings. Additionally, we will have legacy products from the Avast transaction. The transition involves numerous factors, but we have put significant thought into making this process seamless. T-Mobile's aim is to transition all its users to the T-Mobile billing system. In the next quarter, we will likely discuss how users can remain on Safe and Sound while being on the T-Mobile billing system. We expect the decline to stabilize as we introduce FamilyMode 3, built on SafePath 7. It’s a complex execution, but considerable work and planning have gone into it.

Okay. That’s helpful. Thank you. Just to repeat, you’re reluctant to talk about the timing of the SafePath 7 launch at T-Mobile; is there anything more specific you can tell us other than mid-year?

We'll see as we're in May and mid-year is not that far off. But I think I've been pretty accurate about it right now. So obviously, it's subject to change; I'm working with a big carrier – that's life with carriers. But that's where the plans sit. That’s what we're all working towards.

Okay. Very good. Thanks a lot and good luck with everything.

Thanks, Joe.

Thanks, everyone for joining us today. We look forward to talking to you on our next quarterly conference call. Please feel free to reach out to us here, if you have any additional questions and have a great afternoon. Thanks.

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