Smith Micro Software Q3 2024 Earnings Call Transcript

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Provided by Quartr
November 13, 2024

Key Takeaways

  • Negative Sentiment: Q3 revenue was $4.6 million, down 58% year-over-year, and the company reported a GAAP net loss of $6.4 million, driven by the conclusion of major carrier contracts.
  • Positive Sentiment: Smith Micro achieved $1.9 million in quarterly cost reductions in Q3 and expects $2.4 million–$2.8 million in savings in Q4, positioning it for profitability and free cash flow in 2025.
  • Positive Sentiment: The company expects to sign its first SafePath OS contract with a U.S. MD&O in the coming weeks, with deployments slated for Q1 2025 and recurring subscription fees to boost revenue.
  • Positive Sentiment: Through a partnership with the Competitive Carrier Association, Smith Micro is marketing SafePath Global Family Safety as “Safe Tools” to multiple carriers, and a European carrier launch is anticipated by year-end.
  • Positive Sentiment: In October, the company raised $6.9 million in gross proceeds—including a $3 million CEO investment—and issued warrants, lifting cash from $1.5 million at quarter-end and extending its cash runway.
AI Generated. May Contain Errors.
Earnings Conference Call
Smith Micro Software Q3 2024
00:00 / 00:00

There are 8 speakers on the call.

Operator

Good day, and welcome to the Smith Micro Software's Financial Results for the Q3 Ended September 30, 2024. 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 Marketing.

Operator

Please go ahead.

Speaker 1

Thank you, operator, and good afternoon, everyone. We appreciate you joining us today to discuss Smith Micro Software's financial results for the Q3 ended September 30, 2024. 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, our Chairman of the Board, President and Chief Executive Officer and Jim Kempton, our Chief Financial Officer.

Speaker 1

Please note that some of the information you will hear during today's discussion consist of forward looking statements, including without limitation, those regarding the company's future revenue and profitability, our plans and expectations, new product development and availability, new and expanded market opportunities, future product developments, migrations and or growth by new and existing customers, operating expenses 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 ks. Smith Micro assumes no obligation to update any forward looking statements, which speak to the management's beliefs and assumptions only as of the date they are made. I want to point out in the forthcoming prepared remarks, we will refer to specific non GAAP financial measures.

Speaker 1

Please refer to our press release disseminated earlier today for a reconciliation of these non GAAP financial measures. With that said, I'll turn the call over to Bill. Bill?

Speaker 2

Thanks, Charlie. Good afternoon and thank you for joining us today for our 2024 Q3 conference call. We appreciate your interest. Let me begin the call today with some quick updates on the overall business as we remain very focused and excited about the path forward. Our primary objective is to return to profitability and the generation of free cash flow.

Speaker 2

Let's begin with our European carrier that we have discussed on earlier calls. I had hoped to be able to announce the carrier's name with you today, but we must continue to wait for the official launch, which we expect to happen soon. We are looking forward to sharing details of the launch with our shareholders. Now let's look at the progress being made on the new business side of things. First, we expect to sign our first contract for the deployment of our SafePath OS solution with a U.

Speaker 2

S. Based MD and O in the coming weeks. SafePath OS is yet another innovation within our SafePath platform that enables mobile operators to offer an otherwise standard mobile device as a kid's phone or tablet with built in limits aimed at a safer mobile experience that kids cannot bypass. We accelerated our deployment schedule for SafePath OS given the strong interest we are seeing in the market. We expect to see the first deployments of SafePath OS in the Q1 of 2025.

Speaker 2

Additionally, we are focusing on building our pipeline for SafePath OS and we expect it will be a strong contributor to our business going forward. We believe that the recurring fees from this deployment model will meaningfully contribute to our 2025 revenues. I also want to note another key component that is the recurring theme as we expand our SafePath offerings, bringing our partners solutions that build on the core values of what they do best, namely selling devices and subscription plans. On our last call, we discussed our marketing engagement agreement with the competitive carrier association, CCA. This is the completion of that agreement.

Speaker 2

Smith Micro and CCA have partnered to market our SafePath Global Family Safety solution to CCA's carrier members under a single brand name of Safe Tools. This partnership enables CCA carrier members of any size to offer this valuable solution to their subscribers under the rapid go to market model that SafePath Global supports. We currently have contracts in process with multiple CCA members under this arrangement and I expect it will sign additional CCA member carriers in the coming weeks months. This quick to market approach truly expands our brand and market opportunity, delivering our SafePath platform to more families across the U. S.

Speaker 2

I want to touch on our reduced cost structure before turning the call over to Jim. In our previous quarterly calls, we committed to eliminating at least $2,000,000 in quarterly expenses by Q4 of this year. I am pleased to tell you that we've already achieved $1,900,000 in cost reductions in Q3 and have yet to realize the full quarterly benefit of these actions. As Jim will describe in more detail, we are up in the range of quarterly cost savings that we are targeting for the Q4 to a goal of $2,400,000 to $2,800,000 We believe these changes have positioned our company to execute with more agility and to be nimbler in responding to market demands. We believe the actions we've taken to rationalize our costs, coupled with the expansion of our revenue opportunities, have positioned us for a return to profitability and free cash flow during 2025.

Speaker 2

I'll take a deeper dive into this in a few minutes. But first, let's turn the call over to Jim to review our financial results in more detail. Jim? Thanks, Bill, and good afternoon, everyone. I'll now be covering the financial results for the Q3 of 2024.

Speaker 3

During the Q3, we recognized revenue of $4,600,000 compared to $11,000,000 for the same quarter of 2023, a decrease of approximately 58%. When compared to the Q2 of 2024, revenue decreased by approximately $500,000 or 10%. Year to date revenues through September 30, 2024 were $15,600,000 versus $32,300,000 through the Q3 of last year. The 52% year to date decline compared to the prior year is primarily due to the conclusion of the Verizon Family Safety contract in the Q4 of 2023, coupled with a decline in Sprint Safe and Found Family Safety revenue related to the continued attrition of legacy Sprint subscribers driven by T Mobile's acquisition of Sprint. During the Q3 of 2024, Family Safety revenue was 3,900,000 dollars which decreased by approximately $5,200,000 or 57% compared to the Q3 of the prior year, primarily due to our having recognized no Verizon Family Safety revenue during the Q3 of 2024, as that contract concluded in the Q4 of 2023, coupled with the continued decline in the legacy Sprint Safe and Found revenue, as was expected.

Speaker 3

Family Safety revenues decreased by approximately $300,000 or 7% compared to the Q2 of 2024. During the Q3 of 2024, CommSuite revenue was approximately $600,000 which decreased by approximately $100,000 compared to the Q3 of 2023. Revenue from CommSuite increased by approximately $100,000 compared to the Q2 of 2020 4, as we have been experiencing subscriber growth on the Boost CommSuite premium visual voicemail platform and expect that trend to continue in the 4th quarter. ViewSpot revenue was approximately $100,000 for the Q3 of 2024, which declined by approximately $1,000,000 compared to the Q3 of the prior year. The decline in ViewSpot revenues compared to the Q3 of 2023 was primarily due to the previously announced terminations of 2 of our ViewSpot contracts.

Speaker 3

ViewSpot revenues decreased by approximately $300,000 compared to the Q2 of 2024. In the Q4 of 2024, we expect consolidated revenues to be in the range of approximately $5,000,000 to $5,200,000 This anticipated growth in revenues as compared to the 3rd quarter is driven in part by a projected increase in Family Safety revenues. For the Q3 of 2024, gross profit was approximately $3,300,000 compared to approximately $8,500,000 during the same period of the prior year, a decrease of approximately $5,100,000 primarily due to the period over period decline in revenues. Gross margin was at 72% for the quarter compared to the 77% realized in the Q3 of 2023. Gross profit of $3,300,000 in the Q3 of 2024 decreased by approximately $200,000 compared to the gross profit produced in the Q2 of 2024, driven by the sequential decline in revenues quarter over quarter.

Speaker 3

In the Q4 of 2024, we expect gross margins to be in the range of 72% to 75%. For the year to date period ended September 30, 2024, gross profit was $10,700,000 compared to $23,900,000 during the corresponding period last year. Gross margin was 68% for the September 30, 2024 year to date period compared to 74% for the 9 months ended September 30, 2023. GAAP operating expenses for the Q3 of 2024 were $9,800,000 a decrease of approximately $800,000 or 8 percent compared to the Q3 of 2023, primarily attributable to the cost reduction activities undertaken during the 2nd and third quarters of 2024, partially offset by severance related costs. GAAP operating expenses for the year to date period ended September 30, 2024 were $55,600,000 compared to 36,200,000 dollars in the prior year's date period, an increase of $19,400,000 compared to last year.

Speaker 3

This period over period increase was driven by the non cash goodwill impairment charge of $24,000,000 incurred in the Q1 of this year, which was partially offset by reductions in personnel costs associated with the cost reduction activities undertaken in 2024 and decreases in marketing related expenses. Non GAAP operating expenses for the Q3 of 2024 were $6,800,000 compared to $7,700,000 in the Q3 of 2023, a decrease of $900,000 or 12%. Sequentially, non GAAP operating expenses decreased by approximately $700,000 or 10% from the Q2 of 2024. As we noted in our last earnings call, we did undertake further cost reduction actions in the Q3 as we work to return the company to profitability. Through the Q3, we successfully achieved $1,900,000 in quarterly savings as a result of the actions taken.

Speaker 3

As such, we now expect to recognize quarterly savings in a range of $2,400,000 to $2,800,000 which is higher than the targeted range of $2,000,000 to $2,500,000 that we have established on our prior earnings call. In other words, we anticipate that our total quarterly non GAAP operating expenses and cost of sales will decrease by $2,400,000 to $2,800,000 when comparing Q1 2024 costs to the Q4 of 2024 based on the cost reduction activities executed this year. As a result of the timing of the actions undertaken during the Q3, we expect Q4 2024 non GAAP operating expenses to decrease by 7% to 12% compared to the Q3 of 2024. Non GAAP operating expenses for the year to date period through September 30, 2024 were approximately $22,400,000 compared to approximately $27,300,000 for the year to date period ended September 30, 2023, a decrease of approximately $4,800,000 or 18 percent compared to last year. The GAAP net loss for the Q3 of 2024 was $6,400,000 or $0.54 loss per share compared to a GAAP net loss of $5,100,000 or $0.61 loss per share in the Q3 of 2023.

Speaker 3

GAAP net loss for the 9 months ended September 30, 2024 was $44,300,000 or $4.17 loss per share compared to a GAAP net loss of $17,700,000 or a $2.27 loss per share for the 9 months ended September 30, 2023. The non GAAP net loss for the Q3 of 2024 was $3,600,000 or a $0.30 loss per share compared to a non GAAP net income of approximately 600,000 dollars or $0.08 earnings per share in the Q3 of 2023. Non GAAP net loss for the 9 months ended September 30, 2024 was 11,800,000 dollars or $1.11 loss per share compared to a non GAAP net loss of $3,600,000 or $0.46 loss per share for the 9 months ended September 30, 2023. Within today's press release, we have provided a reconciliation of our non GAAP metrics to the most comparable GAAP metric. For the Q3 of 2024, the reconciliation includes adjustments for intangible asset amortization of 1,300,000 dollars stock compensation expense of $1,200,000 severance related costs of approximately $300,000 depreciation expense of approximately $100,000 and transaction related expenses of approximately 100,000 dollars partially offset by changes in the fair value of warrants of approximately $200,000 For the year to date period, the non GAAP reconciliation includes adjustments for goodwill impairment of $24,000,000 intangible asset amortization of $4,600,000 stock compensation expense of $3,500,000 depreciation of $300,000 and non recurring expenses including severance related costs of approximately $800,000 partially offset by approximately $400,000 in changes to the fair value of warrants.

Speaker 3

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 utilized a 0% tax rate for the Q3 of 20242023. The resulting non GAAP tax expense reflects the actual income taxes expense during each period. We reported $1,500,000 of cash and cash equivalents as of September 30, 2024. As previously announced, we did complete a capital raise at the beginning of October, grossing approximately $6,900,000 in cash before transaction related fees.

Speaker 3

Bill, our Chief Executive Officer, led the capital raise by investing $3,000,000 via private placement. The remaining $3,900,000 was raised off our existing shelf registration. The purchase price per share of common stock was $1.165 for both transactions. Unregistered warrants were issued as part of both transactions with an exercise price of $1.04 per share. The warrants issued in each transaction become exercisable 6 months after the offering date and expire 5.5 years from the offering date.

Speaker 3

This concludes my financial review. Now back to Bill.

Speaker 2

Thanks, Jim. As I started the call by talking about some of our new customer opportunities, let me pivot to providing you with some updates on our ongoing carrier partners. Boost is ramping up the marketing of the SafePath based Boost Family Guard in its retail footprint. They provided marketing collateral to their retail stores in September and are providing this for their retail employees, which we believe is an effective tool to drive awareness of the new product offering. Outside of the retail stores, Boost continues to leverage other avenues to promote Boost Family Guard throughout its subscriber base using SMS, e mail and website promotions to promote Boost Family Guard and attract more family plan subscribers to the Boost mobile network.

Speaker 2

In addition to the progress being made with Boost Family Guard, Boost has continued to grow its value added service premium visual voicemail, which is powered by our CommSuite platform during Q3. The expansion of subscribers boost experienced on the premium visual voicemail platform during the Q3 translated into the meaningful increase in our CommSuite revenues, representing over 20% growth versus the 2nd quarter. Boost is continuing to conduct promotional activities for this product, which we believe will help to drive continued subscriber growth in the 4th quarter. Overall, we maintain a strong and collaborative relationship with Boost and are aligned with them on our goals for the success of both products. Let's talk about AT and T and the new promotional activity for AT and T Secure Family.

Speaker 2

It is currently happening. In November, we began a new social media influencer campaign for AT and T's Secure Family with a group of selected influencers who are purposely driving awareness of the product's features. More than just focusing on family and relevant issues faced by parents in today's world, these influencers are also parents who have the same concerns as all parents, which makes each of them an outstanding spokesperson on social media platforms to promote the benefits of AT and T's secure family. This campaign is just getting started and we expect it to continue over the coming months and into 2025. In addition, AT and T Secure Family has been recently featured within connected television advertising.

Speaker 2

This advertising content has shown on platforms such as Paramount, Pluto, Warner Brothers, Discovery and Disney, just to name a few. This is another fresh approach to raising awareness of the benefits of this app. These activities are in addition to the ongoing digital advertising. With all these marketing efforts, we remain very optimistic about the opportunity with AT and T and are looking forward to seeing growth in the coming months resulting from these efforts. At T Mobile, we continue to explore our expanded SafePath platform for opportunities to broaden our relationship.

Speaker 2

Our sales and marketing teams are working together to further our progress by widening our reach within the organization. In the meantime, T Mobile continues to be a key customer for us. As I mentioned in my beginning remarks, we are focused on aligning our SafePass sales with those things that carriers do best, namely selling phones and rate plans to their customers. 1st, we start with how we can align with phone sales. SafePath OS is a groundbreaking delivery platform crafted to support the 1st connected experience for young users that guides them through their digital journey in a secure age appropriate way.

Speaker 2

FacePath OS empowers carriers and MVNOs to launch dedicated kids focused devices. Whether it's a Wi Fi only or connected Android tablet or phone, carers can offer a customized child friendly experience rather than just a generic device, enhancing value for both kids and parents. SafePath OS complements our traditional over the top solution, providing partners with significant market flexibility. With Carrier's strong track record in device sales, SafePath OS offers an exceptional opportunity for differentiation and growth, positioning carriers and MVNOs as leaders in kid focused technology. 2nd, we are introducing the SafePath Kids plan, which allows us to align with the sale of rate plans.

Speaker 2

With SafePath Kids plan, the carrier provides a rate plan that includes software to enforce the rules of the rate plan and sets predetermined time limits and age appropriate content filters for kids. These plans are shaped by industry leading online child safety experts and thought leaders that have done scientific research in this field. Such plans incorporate best practices in digital parenting, offering tailored guidance on appropriate screen time by age with maximum limits for gaming, social media and video watching. Crucially, parents have the flexibility to adjust these settings, providing them with a sense of control and peace of mind while giving children safe, age suitable online access. SafePath Kids plan is designed to ease parental concern by addressing the harmful effects of excess screen time, which can impact children's physical and mental health.

Speaker 2

Whether it be SafePath OS or SafePath Kids plan, Smith Micro's technology enables mobile operators to provide a trusted, balanced approach to digital wellness that also empowers parents. New laws and regulations around online safety for children in various stages of development across many countries can act as a catalyst for the adoption of either of these offerings. Our sales pipeline is quite strong. As I noted in my opening remarks, the competitive carrier association market agreement that we announced during the last earnings call is already yielding positive outcomes. In addition to opportunities with CCA and the SafePath OS contract underway that I touched on earlier, there are several other exciting opportunities in the sales pipeline.

Speaker 2

In Europe, we have ongoing discussions with several carriers in various countries and truly believe that our European Tier 1 carrier launch will ignite further conversations. We are also in discussions here in the U. S. With carriers to launch SafePath as a strategy to attract new family subscribers. Overall, we believe that these new opportunities bring significant upside and the potential for AT and T's Secure Family with several new marketing initiatives positions us for growth over the coming quarters.

Speaker 2

I am very confident that the business case for SafePath is strong, coupled with a significantly reduced cost structure. I believe that we are on the path back to profitability and positive cash flow. In fact, I'm so confident in our prospects, our business case and our mission that in addition to the stock in the company I already own, I invested an additional $3,000,000 into the company last month as part of our $6,900,000 capital raise. I believe in our team and our mission and in the solutions that we offer to our carriers and their subscribers around the world. With that, operator, let's open the call for questions.

Operator

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

Speaker 4

Hey, good afternoon. Thanks for taking the questions. Nice to see the sequential guide up guys. Looks like we've put the bottom in here. Maybe first to dive in, Bill, it sounds like you're expecting European operator to launch shortly.

Speaker 4

I just want to dig in on a little bit of that. If your expectation is still to see the launch in the current quarter? And then any other updates that you've got in terms of SafePath Global, what we could be expecting over the next couple of quarters?

Speaker 2

Yes, Scott. I fully expect the European carrier to launch before the end of the year. And we just have to be patient. It's part of a process when carriers of this size are launching new offerings. As far as other opportunities, I'm very excited about the SafePath OS opportunity that I mentioned.

Speaker 2

We're seeing good traction through the CCA with a number of different member carriers now in the process and expect more to follow. So overall, I feel very bullish about the overall growth of our sales going forward and the breadth of our customer relationships.

Speaker 4

Maybe to dig in a little bit further, I think at the midpoint of guidance for December, you're looking at about a $500,000 sequential uplift. I'm wondering if you could give us an idea of where that comes from? It sounds like the European carrier is part of that, but who else is providing a positive trajectory on that front and contributing to that increase?

Speaker 2

Yes, I don't really want to get into the name by name on the thing, but it's coming from a collection of activities with current customers as well as new customers. And so we feel very comfortable with it. And I think the other part to keep in mind is you add that growth to the fact that we're going to continue to reduce the overall expenses, will allow us to narrow the losses that we will see in Q4 and lead us to a trend that will take us to profitability in 'twenty five.

Speaker 4

And just to clarify that in terms of the new breakeven, Jim, it sounds like we're in the ballpark around $7,000,000 or so is kind of the breakeven level?

Speaker 3

Hey, Scott. How are you? As far as the breakeven, it's probably in the mid-seven range when you take into effect cost of sales.

Speaker 4

Got you. And lastly, if I could, SafePath OS sounds like it's a very exciting opportunity. I'm wondering if you could talk a little bit more about the model itself to you guys. You talked about the opportunity and where it gets implemented, but are you charging for the one time sale upfront? Is it a subscription based model?

Speaker 4

Are there advertising opportunities as well in terms of controlling content and otherwise on an ongoing basis? And then, Bill, also curious, there's I guess, Europe is further ahead on this front in terms of managing content to youth. Is that where

Speaker 2

you expect us to see some

Speaker 4

of the first traction? Thanks.

Speaker 2

Okay, Scott. First off, it is a subscription model. So it's a fee that will collect month after month as long as the device is still active and in use. So it's a gift that keeps on giving. It is a fee that frankly can be a little bit higher than what we get for value added services, because it's actually part of the device of the phone.

Speaker 2

It is a specialized version of the Android operating system. And we think that the probably the most salient point is that if there's one thing that carriers know how to do and do really, really well is sell new devices and to be able to align our business case with that activity, I think increases our chances for really positive growth. We also talked about the Safe, Fast, Kids plan, which aligns with carriers selling rate plans to their base. In either case, we're tying the software sale to the actual either device sale or rate plan sale. And I think this is a difference.

Speaker 2

I think it's a difference that makes a lot of sense. And I think it will serve us very well going forward.

Speaker 4

Bill. Just a couple of quick follow ups and then I'll get back in the queue. But I think you said at the beginning that you expect to sign a relationship this quarter. So is that a commercial relationship where you'll see revenue this quarter or should we expect to see that in the future? And then just 2 other follow ups on the product itself.

Speaker 4

I'm just kind of curious as to the interest level in the European theater and whether or not you are actually then becoming an MVNO on top of it? Thanks.

Speaker 2

Well, let me answer that last question really quick. No, we are not becoming an MVNO. So what I will say is that the SafePath OS opportunity, we believe will close this quarter. We have stated in the prepared remarks that we're looking for revenue to begin in 2025. It is possible we might be able to book some revenue in the current quarter, but we're really focusing on a Q1 launch.

Speaker 2

So that's where we see this opportunity. And there were other parts of your question, may I have to come back on?

Speaker 4

I think it's just Europe, just in terms of the interest level from the European carriers.

Speaker 2

There's a lot of activity in Europe, but there's still an awful lot of activity here in North America. So I don't think one trumps the other. I think they both are complementary. The biggest difference between North America and Europe is in Europe, it's more greenfield opportunities. They have not been active in the family safety market in general in Europe before, or that is something that you see more prevalent in North America, but both are great markets for us and we expect to see real meaningful growth.

Speaker 2

I think the point that this should be coming clear to all of you listening is the level of activity that we have ongoing right now on the sales front has really ratcheted up. And I think it will continue to do so.

Speaker 4

Great. Thanks so much. I'll get back in the queue.

Operator

The next question comes from Leo Carpio with Joseph Gunnar. Please go ahead.

Speaker 5

Good afternoon, gentlemen. A couple of quick questions. First one is regarding the operating cost savings that you realized. How was this incremental cost savings achieved in terms of what it sounds like you found more opportunities for automation and staff reductions. And what's left in that stone?

Speaker 5

Could there be more possibly to extract just by heading into 2025?

Speaker 3

I would say that as we went through the activities that we undertook in the Q3, we achieved more savings through that process than we had initially targeted. And so you're going to see the full effect of that in Q4. In 2025, at the current time, we would not contemplate additional reductions or anything of that nature.

Speaker 5

Okay. And then in terms of the your cash situation and cash runway, how much what type of cash runway are you looking at right now?

Speaker 3

Well, we finished the Q3 at $1,500,000 in cash and then we ended up with approximately $6,400,000 of additional cash out of the capital raise. So that gives you some flavor. And then if you model it out from there in terms of like how we're cutting down on the profitability or cutting down on the loss here as we go forward, you could kind of infer where that leads us.

Speaker 5

Okay. And then lastly, in terms of the CCO, what's the average deal size you're seeing there in terms of you're contemplating? That

Speaker 2

was on the CCA?

Speaker 3

CCA, yes.

Speaker 2

Yes. They vary in size from relatively small carriers up to carriers with a few million subs. So we expect in total as we see a number of these carriers going through the process of executing contracts and launching the Safe Tools product that will see this a very nice collective increase for us going forward.

Speaker 6

Okay. Thank you.

Speaker 3

Thanks, Leo.

Operator

The next question comes from Matthew Harrigan with Benchmark. Please go ahead.

Speaker 7

Thank you. I actually have 3 probably just do them individually. It's a little bit easier. It feels like you have a nice path now on both the revenue side and the cost side. So congratulations, it feels like a nice inflection point.

Speaker 7

But I guess firstly, you have a lot of new activity both in terms of the products and in terms of the clients and it doesn't feel like you have a lot of implementation costs for what you're doing on a de novo basis, presumably that's a function of SafePath Global and some other improvements you've made. But it's just really markedly low kind of the startup introduction costs and all that. I know in Europe, sometimes you're curious, do you think piecemeal on a market by market basis? But I assume that's a correct assumption given the guidance you've given for Q4 and for 2025 as well. And then I have 2 more questions after that.

Speaker 2

Yes. When you see launches in Europe, it will be launched a carrier may operate in a number of countries, but they will launch country by country. So it will be a stair step approach as to how it rolls out. It doesn't roll out over their entire footprint all at once.

Speaker 7

But even apart from the country issue, it just feels like you're able to do things faster and cheaper now than you could have done 12 or 18 months ago when you have a new client or new product. Is that a fair assumption?

Speaker 2

That's a good point. We talk about the various SafePath offerings, whether it's SafePath Global, SafePath Family, SafePath OS, SafePath Kids plan. They're all different offerings, but at the core, they're all the same product, they're all the same code base. So we went through that very difficult period where we were incorporating different acquisitions. That's all behind us.

Speaker 2

And the core to SafePath is all the same. So this is a much more manageable process. And it's one that can be done in a very cost effective manner. And that's why you see us being able to reduce expense, while at the same time launching more product offerings. It all makes sense, but you just have to kind of work your way through that how we go about doing that.

Speaker 7

And then secondly, I mean, clearly you have a multi $100,000,000 TAM that someone has to fill. I know Verizon is kind of clumsily doing everything, trying to do everything in house as they are willing to do on multiple fronts. But the demand is increasing rather than abating. Are you seeing anything on the competitive side? I mean, are you still kind of seeing the MNOs fumbling around and trying to emulate what you do in house?

Speaker 7

Is there anything because that feels like that's the biggest risk to me. And frankly, I know you don't want to give competitive information, but you seem to maybe talk about that and not so much, maybe that's just kind of how every company manages that issue. But if you had any thoughts in that regard, it would be helpful.

Speaker 2

Sure. I would say this that if you look at the app ratings for the various SafePath offerings today, they're all in the upper 4s pushing up towards 5. If you look at the offering that was created in house at 1 of the large Tier 1s here in North America, you'll notice that their app ratings are very low. The acceptance of the product is not great. So while they may think they did the right thing, bringing it in house, the numbers don't prove that out.

Speaker 2

Our app ratings are growing and getting better all the time. And the acceptance of the product by the user base is something that's really critical. Now, as we move into more capabilities to enter mass markets through coupling with handset sales, coupling with rate plan sales, having those high app ratings going in, I think we're going to make a big difference. I think we're on the right path. I think it will lead us to strong growth, it will lead us to profitability and all that should be borne out in the stock price going forward.

Speaker 7

And then lastly, clearly when you look at that very substantial TAM, implicit in that is you have tens of millions of opportunity per carrier at least in the U. S. I know that European market and I spend a lot of my time focused on Europe, especially the U. K. Where you got too many carriers.

Speaker 7

But when you look at a really full blown relationship with a European MNO, Vodafone or Telefonica or TAF or whoever. I mean, do you think that relationship is potentially like half as valuable or 60% is valuable as the U. S. Guy as the U. S.

Speaker 7

Carrier or do you think that because you have so much uncertainty in terms of getting into all the markets and the timeline and all that that it's hugely discounted to an AT and T or T Mobile? Thanks.

Speaker 1

Hey, I'll take that, Matt. Nice to talk to you. I think that when we look at Europe, one of the things that's interesting as Bill said, it is country to country, but the countries work and talk to each other. So we see that as a good stepping stone and it's all greenfield. There just isn't a large base there.

Speaker 1

In the U. S, yes, there's still great opportunity with that as well. I mean, that TAM is huge as well. But I think with Europe, since it's so new, we think there's as big of an opportunity there as there is in the U. S.

Speaker 1

Does that make sense?

Speaker 7

It does. Great. Thank you.

Speaker 2

Thanks, Matt. Thanks, Matt.

Operator

The next question comes from Brian Swift with Security Research Associates. Please go ahead.

Speaker 6

Thanks.

Speaker 2

Most of my questions

Speaker 6

have been asked, but I do have one on the yet to be named European customer. Can you give us a little bit of color? I mean, the history of you getting launching with new carriers, first Sprint and then T Mobile, AT and T, it always seems to be taking forever to get significant revenue ramps out of these. Can you tell us what even though you can't say who your customer is, which really doesn't matter, what kind of marketing what might be what's going on with that launch that could be different than what our experience has been up to this point?

Speaker 2

Thanks, Brian. That's great question. Look, I've talked about this a couple of times now today. And the fact is that we are aligning our activities with the things that carriers do and they do it incredibly well. They sell rate plans and they sell devices.

Speaker 2

You should take this as we look to Europe, we're looking to really leverage that concept. And that brings you very quick access to a mass market versus going in and trying to sell a value added service offering that builds slowly over time. I think that's the answer that I'd rather just leave it at that.

Speaker 6

Anything on like what's the size of the first country in terms of market opportunity?

Speaker 2

No, I'm really yes, that was part of the rules of the game and we can't talk about who they are or what the country is or whatever. I'd just say that it's all meaningful.

Speaker 6

So how long would you think it would take to get meaningful revenues out of that European customer if they launch in the by the end of this Q4?

Speaker 2

Well, that's something that because we don't have a history to base this on yet, it's a little bit difficult to get the smoke out of the crystal ball. But I will say this, I think that this has the capability of being a very strong growth driver for us and that is something that we would see almost immediately.

Speaker 6

Okay. Thanks.

Operator

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

Speaker 1

I want to thank everyone for joining us today. We appreciate your interest in the company. As always, please reach out to us if you have further questions. I'll note that we'll be in New York next week. So if anyone happens to be in New York at the ROTH Conference, please reach out.

Speaker 1

We'd love to sit and chat with you. And with that, have a great day, everybody. Thank you.

Operator

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

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