The StoryTrading SMSI Research Group has been on the forefront of due diligence for SMSI stock. Our 180+ participants collaborate together on investigative journalism, channel checks, and discussions with management.
Recently, we pooled together a set of questions for management and just received a reply in writing. The answers to those questions are provided verbatim below and published with permission from management. Keep in mind, these questions were submitted before the June 14th launch of Sprint Tracker which SMSI has still not officially announced. In addition, management spoke to StoryTrading by phone just moments ago to discuss the recent Sprint Tracker deal. During this call management clarified the most pressing question investors had… is SMSI paid for each Tracker or is it a loss leader to bring people in to Safe & Found Family? Here is what we learned…
Sprint Tracker Deal
* This is not a loss leader for the company
* SMSI gets a small monthly fee for each tracker device
* As such, the deal represents incremental revenue beyond what Safe & Found Family was providing but would be very significant and material to the company if Sprint sold anywhere near 1 million trackers.
* SMSI gets nothing near the 50% they get for Safe & Found Family
* The change from Google Maps to MapBox was partially related to the above deal but may have been pursued anyway to reduce costs
* In pressing to quantify the revenue share, StoryTrading provided a ‘hopeful’ range of $0.50 to $1.00 monthly per tracker our investors are hoping to receive. Management responded that this range is in the right ballpark.
Below are answers to our questions for management.
Answers provided by email by CFO, Tim Huffmyer and VP of Investor Relations, Charles Messman at 1:53pm EST on 6/18/2019:
Q: We noticed Apple released a statement recently partially retracting their previous position and will allow MDM in certain cases. Does this change your previously announced plans to build a work-around?
A: NO, WE WILL PRIORITIZE AS WE DEEM NECESSARY WITH OTHER PRODUCT ROAD MAP ITEMS
Q: If proceeding on that work, will the MDM work-around impact OPEX in Q2 or is it all being handled in-house?
A: NO, BUT WE HAVE GUIDED TO INVESTING IN SAFEPATH IOT WHICH WILL SHOW UP IN R&D LINE ITEM
- SafePath IoT
Q: When SafePath IoT is launched – will this be through a separate and distinct app from Safe & Found (if Sprint signs up) or will IoT services be upsold to customers through the existing SafePath app? Long-term, will carriers require their customers to install both apps or can the more robust IoT app handle all the SafePath functions instead?
A: ONE APP ONE CODE BASE
- SafePath Home
Q: Is the Gryphon partnership expected to generate material revenue in the foreseeable future?
A: NO, WE HAVE NOT ANNOUNCED ANY NEW CONTRACTS OR CUSTOMERS
- SafePath Family
Q: Does Boost Mobile deal represent an increase in business beyond Sprint’s or Smith Micro’s original internal expectations or was Boost revenue always part of the expected calculation for the Sprint opportunity?
A: INCREASE IN ADDRESSABLE MARKET, REMEMBER WE ARE STARTING FROM ZERO WITH THE BOOST SUBS, AS NO SIMILAR PRODUCT EXISTED AT BOOST.
Q: Any color or data available regarding historical attach rates for Boost add-on services relative to Sprint? Higher, lower, the same?
Q: Does Boost plan any marketing activities for Safe & Found beyond what can be found on their website?
A: YES. SMSI AND SPRINT LEARNED A LOT ABOUT MARKETING OVER THE LAST YEAR. WE WILL SEE HOW BOOST PERFORMS.
Q: We have heard through the grapevine that Sprint aspires to sign up 2M subscribers. Is this an accurate representation of their original aspirations and now, 18 months into this… have their goals changed?
A: WE BELIEVE THAT WAS SPRINT’S GOAL WHEN THEY SIGNED THE CONTRACT, WE’VE PREVIOUSLY STATED THAT AND DO NOT HAVE AN UPDATE.
Q: How long is the contract with Sprint?
A: IT WAS A 3 YEAR DEAL WITH 2 X 1 YEAR RENEWALS
Q: Are AIS, Dtac, Meo and Familia Segura (Telcel), e-Di (T-Mobile Albania) still active SafePath accounts?
A: ALL EXCEPT DTAC AND TELCEL.
Q: We all would like to see a ViewSpot Demo.Thank you 🙂
A: WE ARE WORKING ON GETTING SOMETHING PUT TOGETHER. OTHERWISE YOU NEED INTO A STORE TO SEE IT IN ACTION.
[StoryTrading editorial comment: Early this morning, the SMSI Twitter account linked to this video which shows more detail than ever before on ViewSpot. We learned alot. It’s worth a watch!]
Q: Over the next 1-2 years, what percent of viewspot growth from existing customers? What percent from new customers?
A: WE HAVE NOT GUIDEED ON THIS. WE HAVE STATED THAT WE COULD SEE A ~50% INCREASE (OR $2 MILLION) IN EXISTING VIEWSPOT REVENUE BY EXPANSION INTO AUTHORIZED DEALERS.
Q: Are you pursuing other retail sectors outside wireless carriers?
A: NOT IN A MEANINGFUL WAY AT THIS TIME.
Q: Are there non-competes in place with ISM which prevent selling to certain retail sectors?
A: ISM IS NOT LIMITED WITHIN THE RETAIL SECTOR, BUT THEY ARE LIMITED IN SELLING COMPETITIVE PRODUCTS. ISM DOES NOT SELL TO CARRIER MARKETS NOR DO THEY HAVE ANY EXPERTISE IN THE VIEWSPOT AREA SINCE THEY SOLD ALL ASSETS AND KNOWLEDGE.
Q: By when do you anticipate that the previous drop in ad revenue will be addressed?
A: WE DISCUSSED THIS DURING THE MAY CONFERENCE CALL. AD REVENUE WAS TRENDING BETWEEN 400K-600K PER QUARTER IN 2018, THE NEW TARGET IS CLOSER TO 200K, Q1 WAS LESS THAN THAT AMOUNT. THIS IS A VARIABLE REVENUE STREAM AND IS BASED ON AD ACTIVITY.
- Sales Cycles
Q: Please provide some color on the sales cycle for signing a new T1. What is the biggest challenge? Agreeing on pricing? Contract/legal hold ups? Getting the product developed enough to fit a carrier’s specific needs? This color will help us understand why things may take longer than expected.
A: WE ARE WORKING TO STANDARDIZE THE PRODUCT AS MUCH AS POSSIBLE THROUGH INVESTING IN PEOPLE. ALL CARRIERS HAVE SPECIFIC NEEDS THAT WE MUST ADDRESS AND IS ALWAYS A CHALLENGE.
Q: It was previously communicated the sales cycle for ViewSpot is shorter than for other products. Any changes in that thinking?
A: WE RESTATED THIS DURING THE MAY CONFERENCE CALL.
- House Keeping
Q: Can we get an update on # of warrants remaining, how many converted, etc.
A: WE HAVE APPROXIMATELY 11 MILLION WARRANTS OUTSTANDING, ALL PRICED AROUND $2.10, NO MATERIAL MOVEMENT HAS OCCURRED.
Q: Can you comment on any succession plans which may be in place for when Bill Smith retires?
A: NOTHING HAS BEEN ANNOUNCED.
Q: Is the company aware of any direct transactions between institutions and ISM shareholders or warrant holders?
A: WE ARE NOT AWARE OF ANY TRANSACTIONS. ITS LIKELY ISM WOULD DO A TRANSACTIONS GIVEN OPPORTUNITY.
Q: What is the best way to contact Investor Relations to get a response?
A: SEND EMAIL TO CHARLIE AND I.