Smith Micro Software Inc (SMSI) 2018 Q2 法說會逐字稿

Good day, everyone, and welcome to the Smith Micro second quarter earnings conference call. (Operator Instructions) Please note, today's event is being recorded.

And at this time, I'd like to turn the conference call over to Charles Messman, Vice President of Investor Relations and Corporate Development. Sir, please go ahead.

Thank you, operator, and good afternoon, everyone. Thanks for joining us today to discuss Smith Micro Software's financial results for the second quarter of our fiscal 2018 fiscal year ended June 30, 2018. 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 smithmicro.com or call us at (949) 362-5800 and we'll e-mail one to you immediately.

On today's call, we have Bill Smith, Chairman of the Board, President and Chief Executive Officer of Smith Micro; and Tim Huffmyer, Chief Financial Officer.

Please note that some of the information you'll hear during our discussion today will consist of forward-looking statements, including, without limitation, those regarding the company's future revenue and profitability, new product development and new market opportunities, 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 discussed in Smith Micro's recently filed 10-K. Smith Micro assumes no obligation to update any forward-looking statements, which speaks to our management's belief and assumptions only as of the date they are made.

I want to point out that in the forthcoming prepared remarks, we will refer to certain non-GAAP financial measures. Please refer back to our press release disseminated earlier today for a reconciliation of the non-GAAP financial measures.

Before I turn the call over to Bill, I also want to note that we're pleased by our addition to the Russell Microcap Index, which occurred on June 22. We see this as a positive step for the company.

With all that said, I'll now turn the call over to Bill. Bill?

Thanks, Charlie, and good afternoon to everyone. Thank you for joining us today for our 2018 second quarter earnings conference call. I am pleased with the progress made during the second quarter and over the first half of 2018 year.

Revenue for the quarter came in at $6.9 million, up from $5.9 million in the second quarter last year and up $1.5 million from the first quarter 2018 revenue. The growth is attributable to our 2 core wireless products, SafePath and CommSuite.

The gross profit improved in the quarter to $5.8 million, and I was very pleased that we achieved non-GAAP profitability of $226,000 or $0.01 earnings per share. This is a significant milestone for the company and sets us up for a great second half of the year.

Later in the call, I will go into more detail, but now I'll turn the call over to Tim for a detailed financial review of the second quarter. Tim?

Thank you, Bill. As a reminder and discussed during our last quarterly earnings call, in May, we completed a private placement of common stock and warrants. The funding was completed on May 3 and provided $6.3 million of net cash to support the business as we prioritize our resource allocation and product road maps, look at M&A opportunities and as the Sprint SafePath platform continues to grow. The newly issued common stock was priced above market at $2.21 and included the issuance of a warrant for each share purchased for total proceeds of $7 million. In addition to these securities purchase agreement, the company also entered into a registration rights agreement, and all initial obligations within the agreement have been completed. We are extremely excited with this new round of funding as we continue our journey back to revenue and profit growth.

Now let's review the numbers for the second quarter. For the second quarter, we posted revenue of $6.9 million compared to $5.9 million for the same quarter last year, an increase of 19%. The wireless segment reported quarterly revenue of $6.5 million compared to $4.6 million last year.

Our graphics segment reported quarterly revenue of $400,000 compared to $1.2 million last year. For the second quarter year-to-date, revenue was $12.4 million compared to $11.4 million last year, an increase of 9%.

The increase in the wireless revenue was a result of growth in both CommSuite and SafePath revenues as customer adoption rates increased for both product families. During the fourth quarter of 2017, we rolled out CommSuite product enhancements, which has now resulted in 3 consecutive quarters of revenue growth. We do expect modest revenue growth for the rest of 2018 in the CommSuite family.

During the second quarter of 2018, revenue from the Sprint SafePath contract grew by over 100%. We expect revenue acceleration to continue through 2018 based on recent and expected Sprint actions. These actions are completely dependent on Sprint execution, and we continue to support efforts as required.

As previously discussed, the Sprint launch is unique in that Sprint has an existing base of subscribers using a similar legacy product. The legacy product was originally due to sunset in the first quarter of 2018 but has subsequently been delayed. This change was based on a Sprint operational decision.

The decrease in graphics revenue was a result of the termination of the CLIP STUDIO distribution agreement and lower unit sales of legacy products. We recently launched a new product into our channels and expect additional product launches later this year.

For the second quarter, gross profit was $5.8 million compared to $4.6 million during the same period last year. Gross margin was 84% for the second quarter compared to 78% last year. The increase in gross margin is directly related to the higher wireless revenue just mentioned.

For the second quarter year-to-date, gross profit was $10 million compared to $8.9 million during the same period last year. Gross margin was 81% for the second quarter year-to-date compared to 78% last year.

Operating expense for the second quarter was $5.8 million, a decrease of $400,000 or 7% compared to last year. Operating expense for the second quarter year-to-date was $11.9 million, a decrease of $1.1 million or 9% compared to last year.

During the second quarter of 2018, we executed on a cost-reduction program, resulting in modest restructuring expense. This cost-reduction program included a reduction of staff and other cost-management activities, with an expected annual savings of $1 million. We expect our new quarterly operating expense to be approximately $5.5 million, which excludes any unannounced restructuring plans.

The non-GAAP operating income for the second quarter was $298,000 compared to a non-GAAP operating loss of $1.4 million last year. The non-GAAP operating loss for the second quarter year-to-date was $1.6 million compared to a non-GAAP operating loss of $3.6 million last year.

The non-GAAP net income for the second quarter was $226,000 or $0.01 earnings per share compared to a non-GAAP net loss of $845,000 or $0.06 loss per share last year. The non-GAAP net loss for the second quarter year-to-date was $1.2 million or $0.07 loss per share compared to a non-GAAP net loss of $2.2 million or $0.18 loss per share last year.

Within the recently issued press release, we have provided a reconciliation of our non-GAAP metrics to the most comparable GAAP metrics. For the second quarter, the reconciliation includes the following: stock compensation expense of $247,000, intangible amortization of $64,000, amortization of debt discount and issuance cost of $66,000, fair value adjustments of $2.1 million and preferred dividends of $185,000.

For the second quarter year-to-date, the reconciliation includes the following: stock compensation expense of $410,000, intangible amortization of $128,000, amortization of debt discount and issuance cost of $131,000, fair value adjustments of $2.2 million and preferred dividends of $326,000.

Due to our cumulative net losses over the past few years, our GAAP tax expense is primarily due to foreign income taxes. For non-GAAP purposes, we utilized a 24% tax rate for 2018. The resulting second quarter non-GAAP tax expense was $72,000, and the second quarter year-to-date non-GAAP tax benefit was $394,000.

This concludes my financial review. Now back to Bill.

Thanks, Tim. Let's jump into some details, starting with SafePath. I am happy to report that this was the first quarter in which we saw a significant contribution from SafePath to our top line revenue, generating $700,000 in sales versus $300,000 in Q1 2018.

First off, important progress was made with the rollout of Sprint Safe & Found service, which continues to add new subscribers on a daily basis. As I spoke about last quarter, Sprint launched a new nationwide retail campaign to promote value-added services, which includes Safe & Found. While the campaign is still in the early stages, we are very pleased with the progress. When you have a chance, stop by your local Sprint store to check out the materials and ask a sales associate about Safe & Found.

As I just mentioned, Sprint is actively pushing Safe & Found in the retail stores across the country and compensating sales associates to sell the service to new and existing subscribers. We continue to work very closely with Sprint on sales training and new digital marketing efforts focused on the retail store environments. An integrated digital marketing campaign is also in the works that will augment the ongoing retail push and coincide with some new significant upgrades planned for Safe & Found in the near future.

As you can tell, we continue to gain momentum with this deployment and are putting in the necessary behind-the-scenes work to maximize subscriber adoption of Safe & Found.

On our last call, I spoke briefly about our continuing efforts to upgrade and enhance SafePath. Features such as upgrades to the accuracy of location services as well as enhanced parental controls and web filtering functionality are on the horizon. But these feature enhancements are just the beginning. The SafePath platform is expanding its scope as we build a new partner ecosystem beyond just family safety. This ecosystem will include consumer wearables and pet trackers as well as other types of digital lifestyle technology, such as smart home security and connected cars. Known as the SafePath Connected Life platform, this expanded offering will provide families with a central hub to monitor all of the connected devices in the 21st century household.

The SafePath Connected Life platform is comprised of 2 distinct solutions: SafePath Family, which provides family location services and parental controls; and SafePath IoT, a service for enabling consumer IoT devices in the home. It is also important to note that our strong history and knowledge of the IoT space has been vital for us as we expand our SafePath Connected Life platform into the evolving consumer IoT market. Needless to say, a lot of exciting things are on the horizon for our SafePath platform.

Now on to another exciting topic. Revenues generated by our CommSuite platform increased substantially in Q2. Building on the momentum we've gained over the past 9 months with Sprint's Visual Voicemail service, both prepaid and postpaid subscribers increased last quarter. We have now achieved 3 quarters of consecutive growth, and I am pleased to share that our subscriber base is at the highest it has been in nearly 3 years. As I mentioned during the last earnings call, the majority of this subscriber growth can be attributed to improvements we made late last year to back-end billing integration and UI/UX enhancements. I strongly believe that we have the best carrier-grade visual voicemail product available in the market today. But we aren't done yet. Our development pipeline is very strong, and we have expanded our investment in this product to develop new features that will enhance end-user value and experience while adding additional revenue opportunities.

By integrating voice-assisted services, such as Google Home and Amazon Alexa, into our offering, we are making voicemail easier to access and use. Just as important, we are meeting the needs of the next generations of mobile users by providing a modern messaging platform that fits into the everyday life of young people. We are transitioning a legacy service to meet the expectations of millennials and the Generation Z. With these enhancements, we will continue to provide a relevant service that generates value-added service revenue for mobile operators. We remain focused on providing compelling voice solutions that enable rich and seamless communication experiences for connected consumers.

Now for a bit about our QuickLink IoT platform. With the seemingly endless explosion of connected smart devices, paired with the steady improvement of wireless network performance and security, we are witnessing a continuous stream of new, intriguing IoT use cases. While this exciting innovation has begun to transform the world as we know it, the majority of the IoT ecosystem remains fragmented and nascent. As you know, our QuickLink IoT platform directly addresses these challenges. As a standards-based solution, QuickLink IoT provides end-to-end security, robustness and on-device intelligence, attributes that are all critical to activating the true value of IoT for connected businesses, smart cities and smart consumer applications.

The challenge is solved by QuickLink IoT such as IoT Device Management, carrier compliance and secure over-the-air device updates remains top-of-mind for businesses across a variety of industries. As such, we continue to see healthy interest in the platform from the marketplace.

Moving on to NetWise. Smith Micro's intelligent connectivity platform continues to remain highly relevant to tier 1 carriers, cable MSOs and MVNOs as end users consume mobile data at unprecedented rates. The popularity of high-bandwidth use cases, such as video streaming, paired with the increasing complexity of wireless network cause challenges related to limited network capacity and quality of service for all types of communication service providers. By helping these operators to reduce costs while simultaneously enhancing the quality of experience for mobile end users, NetWise continues to have a compelling business case on several fronts.

With our graphics business, we continue to make progress in revamping this business side and launching of new products into our established channels.

While the termination of distribution rights of CLIP STUDIO will have a short-term negative impact on revenue, we expect it to pick back up late in the year as we unveil new software titles and release a new version of Moho, our leading 2D animation product.

As I stated earlier, we are excited with the overall progress we have made as a company in the first half of the year, but understand, we still have some ways to go. We see an enormous opportunity in front of us, and we'll be both focused and decisive as we act in bold ways to execute on our emerging business case.

With that, operator, I'll open the call for questions.

(Operator Instructions) Our first question today comes from Brian Swift from Sutter Securities.

Could you give us a little bit of color on the Sprint subscriber base in terms of -- you said you generated $700,000-plus in revenues for the quarter. Could you give us a mix of how much of that is from new subscribers versus people that have converted from the incumbent?

Yes, Brian, this is Bill. Actually, we can't really give you that data. That's something that needs to be kept with Sprint. All I can say is that the base continues to grow, and it grows every day, and 7 days a week, and things are going well.

Okay. Can you -- maybe you can put it another way as a percentage of the installed base that has ported over? That way you've never given any numbers as to how many that number was. But just give us an -- kind of an idea of how much progress you're making in that migration without the benefit of a end-of-life date set?

It's Charles. We're not allowed to give that out. But I think it's fair to say that if it's healthy on both sides and, I think, as we start to grow, that'll be a metric that we'll share as we start to grow. But we're just not allowed to do it at this time.

And what kind of progress are you making in terms of bringing other carrier subscribers either in North America or around the world? Could you kind of give us an update on that?

Yes, there's a lot of sales activity underway with a number of tier 1 carriers that we are focused on. We are getting a good reception. I don't have anything new to tell you today. As soon as we do, we'll, obviously, bring the news to The Street. But I would just say that it's encouraging the level of interest that we're getting, and just stand by.

How about the existing international customers? The ones that you've had signed up for the past year or so? Anything of interest going on with those?

They continue to perform. They are active in pushing the product, and they're good, solid customers. I really can't say much else.

Our next question comes from Jon Gruber from Gruber McBaine.

I'm impressed with your turning profitability but unimpressed with your answers to Brian's questions. You were supposed to be converted on this Sprint by now, that was May, end of May. And now we're here, we're into almost August and we're getting no information on how we're doing other than we did $700,000 of revenue. What was the revenue in American mobile? You didn't give any on that or any of the other guys in the program. And then maybe an update on the AT&T, which we've been talking about a long time. And anything -- what are the efforts -- where the efforts stand in Verizon because very few people are Sprint prescribers relative to the U.S. universe. And so where are we -- what progress you're making on the rest of the guys, Verizon, AT&T, T-Mobile?

Okay, Jon. First off, the $700,000 is total revenues from SafePath from all customers, so you can't segment that. As far as the movement of the installed base at Sprint over to our platform, it continues. Obviously, it's gone slower than we had hoped. But nonetheless, we are, I think, performing well as a company, and I look forward to a strong 2018.

But when do you think you're converted? And how many new subscribers are you adding that weren't in the Sprint base that were Sprint -- new Sprint sign-ups?

Yes, the subscriber growth for new users is quite strong and very comparable to the number of users that have moved over. So no, we feel very good about the progress that's been made. As far as when the legacy system will be brought down, that's really a Sprint decision. I really can't talk to that. As far as the other carriers that you mentioned, AT&T, Verizon and T-Mobile, all I can say is that we are active with all of those companies, and we are very aggressive. And we believe that we will have good news in the future, all I can say.

Our next question comes from Kris Tuttle from SoundView.

Yes, if I could follow up on -- you mentioned this QuickLink IoT product. Can you give some more information on that? Is that where you're currently -- are you currently a customer for that? How does the price compare to the other product? And just how should we be thinking about that product line from a revenue standpoint?

We're having a little bit of a tough time answering so I'll repeat. Maybe he just wanted an update on QuickLink IoT and the type of customers we have and just a general view on that.

Okay. We have a number of customers in a variety of different markets. We not only have IoT, but we also have more traditional [ONDM], support for handsets and things like that, that all come under the QuickLink IoT banner. It is an exciting space, and we think that it will do well for us. But candidly, we -- but most of our emphasis is on SafePath and on CommSuite because that's where the money is.

Okay, that's fair. And then one other question. I know you've probably heard this before, but some of these opportunities you're working on are enormous and I'm puzzled why you mentioned you still have the sort of 2D graphics program that you're working on sort of rejuvenating. How material is that to the business? And is there any synergy between that business and these others that are growing more rapidly?

Yes, it's a business we got into a number of years ago. It has performed well. Of late, it's come under some pressure. The products are really call brand kind of products. They're really good. But I think when you say -- when you look at it in relation to the wireless business, clearly, it's all about wireless.

Our next question comes from Jeff Bernstein with Cowen.

Yes, just like to get some details on NetWise. I guess, with Comcast and Charter now both live and this subscriber number is kind of building up, can you give us some detail on what kind of revenue you're getting there? Or whether there were an initial purchase of a bunch of licenses that they haven't burned through? Or what exactly -- when do we start to see some kind of correlation with the subscriber growth?

We're positioned well with the mobile operators. As their numbers grow, we would expect additional license purchases on our end. The numbers aren't significantly material right now. So there is not a ton of emphasis on them in our disclosures and in the growth activity that we have. But we certainly continue to sell licenses in that -- on that platform and to those customers. And we continue to be positive in the future. As we see that industry significantly grow, we believe we're positioned well there.

So you've had revenues year-to-date from those guys for NetWise?

Yes, we have.

Correct.

Got you, okay. And so now they're ought to scale as they continue to grow their subscriber bases there?

Yes.

Okay. And is there any change in pricing that happens at a certain scale or a certain size? Or kind of the pricing is -- the pricing and -- on, I guess, together, I don't know, there's 300,000 subscribers or something like that. It's just not a lot of money because that's the price, or just give a little more detail on that.

For the near term, the pricing is what it is. As it scales into the millions there's some break there, but right now, we're not near that. So the price is what it is related to the licensing.

Our next question comes from Mark Gomes from Pipeline Data.

Want to kick off with -- on the Safe & Found. Looking at the reasons for the delay in sunsetting on Sprint side, I know you can't comment specifically, but given what you know about that, would it be safe to say that it would be a positive indicator for how difficult it might be to knock you guys out of an account once entrenched there?

Yes. Any time that you're dealing with a tier 1 carrier and they go to make a big change like what they've done here, it's not easy. It's not easy for the carriers to do that. They have an installed base. And so yes, I always think of our business case as being very sticky. I don't see a threat to customers leaving us. So yes, I feel very positive about it. That's the essence of what we do.

Great. So if we look at products like FamilyMode that T-Mobile recently introduced, how would you compare and contrast Safe and -- SafePath to that product? And, I guess, the next question on that is, do you still feel confident around your positioning in that particular account in terms of opportunity?

Yes. First off, yes, they did launch a new product. Yes, it's -- it has some strengths. It also has some rather profound weaknesses. Probably the biggest one is that while it's very strong in parental controls, location controls are wholly lacking. So there are differences. And I think that when you look at the total SafePath offering, we have a lot to be proud of and a lot that we can sell to them. When you add to what we're doing and you bring in the concept of the connected family with all the connected devices in the home and managing all of that, not just parental controls or location controls but also everything else that's digitally important to a family, we separate ourselves. There is no competitor today that's trying to compete at that level. And that's really -- if you're going to lead a market, that's how you do it. You don't stand still, you just keep moving forward. And that's what we've done, and I think that's going to be a very successful point for us.

Okay. So I think you probably answered my next question. It appears that you're really gunning to be the premier player, best-of-breed product supplier to the carriers in this category, is that safe to say?

Absolutely. Our goal is to be #1. There -- it's nice to be 2 and 3, but there's nothing like being #1, and that's where we want to be.

Okay. And is there any way you could expand a little bit on -- you mentioned you expect continued growth in Safe & Found based on recent and expected Sprint actions. Can you provide any color on that?

Well, there's a lot of activities going on, both at the retail points with the stores as well as digitally. And we are active in supporting those efforts for Sprint, and we have a good partnership. And we have a very strong customer for us, and everything is going fine. It just takes sometimes a little longer than (inaudible).

Absolutely. Okay. So final question on Safe & Found, and then I'll cede the floor for a bit. You know I'll have more questions later. But the -- when you mentioned the new versus legacy, when you're -- when you look at Sprint bringing in new customers, first-time customers for a product like this, and obviously you're the choice for that, do you anticipate linear growth there or accelerating growth in that area?

Mark, that was specific to new subscribers?

Specific to new subscribers, yes.

Yes, we think there's a large opportunity with Sprint, with the Sprint subscriber base as a whole. The existing subscriber base on the legacy platform is interesting, but there's a real opportunity in accessing and getting exposure to the larger population of subscribers.

So given what you know about the demographics of the Sprint customer base, are you saying that you believe that the opportunity with the new customers is larger or substantially larger than the installed base?

Yes, that's a fair statement. I think that if you look at -- if I could show you a chart, the growth of the new users is just going straight up. It's actually a very strong move.

(Operator Instructions) Our next question comes from [Mike Hackey] from Steel City Capital.

So I just wanted to go back to the SafePath revenue question and ask it perhaps in a more pointed way than some of the other people have. On previous calls, you guys have been very explicit about talking about a $14 million annual run rate from the legacy customers. That was seemingly absent from today's prepared remarks. So I just wanted to ask, is that still your expectation and guidance? Or based on the slow start, has that number changed?

No, nothing has changed. That's the opportunity with the installed base. Based on my prior question that I just answered, you can also look for accelerated growth from new users. So I would say that to answer your question, nothing has changed. That's the number, and we'll get there. I just don't know exactly when, it takes time.

And our next question is a follow-up from Mark Gomes from Pipeline Data.

All right. Moving on to CommSuite. It sounded very bullish, highest number of subs in 3 years. How do you guys feel about that? And what kind of stickiness do you have in that product?

We are shipped as a preload on all android devices that Sprint sells. It's -- we've had this business for a number of years. We understand the business. We are growing our product. We're going to be adding new features and capabilities so that we can take what -- somewhat of a legacy from the standpoint of voice and bring it into something new and exciting. We are heavily focused on trying to map our products in a way that it will appeal to the younger users as well. So no, we think this is a long-term play, and we're pretty bullish about it.

Okay. And can you expand a little bit on what you said earlier about -- it sounded like you believe that you are the most competitive offering in this space. I'd like to hear a little bit more about that because if you are the most competitive product, then it, obviously, decreases the odds of losing any customers and increases the odds of winning new customers.

Yes, it does. And I think that we're at an inflection point where there's some changes going on in the voice world. In prior years, we have always tried to sell to others, other than just Sprint. But a lot of the other carriers already had a solution, and there really wasn't a market opportunity. I think that's changing. I think we have an opportunity now to go back to other tier 1 carriers and offer them something that's new and fresh and that could be really, really positive. I think the SBS -- the integration of Amazon Alexa and Google Voice (sic) [Google Home] is all really positive stuff. It's new, it's fresh, and it's got a little bit of [sex] to it. So we feel really, really good. And really, to your prior question, there's really not a space that is more sticky than what we do with Visual Voicemail. It would be almost impossible to change. I'm not challenging anybody, but it's a very sticky space.

On that Google Home and Alexa integration, I'm kind of an old dog, new tricks kind of guy. So can you provide, like, one or two use cases? Like what -- exactly, what would you do? What's the one or two things that you could do with the CommSuite product set integrated into Google Home or Alexa?

Mark, so you can think of it as walking in the home and saying, "Hey, who called me last? Alexa, who called me?" And they'll read the phone -- they'll read the actual voicemail to you. That's the one application for it. And then you can, obviously, take that further into other areas of, "Hey, Alexa, how many voicemails do I have?" Or any sort of messaging from your phone through Alexa would be the way to go. I mean, think of these other things you could do as well if you think about setting up your voicemail and things like that as it evolves going forward. Does that make sense?

Yes, that makes perfect sense. Appreciate it. One last one in round two. Before I cede the floor, one more. Sequentially, revenues were up like $1.5 million and cost of goods sold were actually down sequentially. What was the mix shift there that created that dynamic?

Yes. The mix shift there is higher margins on our SafePath and CommSuite products there, Mark. So we're just overachieving what we've done in the past associated with the profit levels.

Yes, higher margins doesn't account for -- you need a 100-plus percent margins to account for a decrease in cost of goods sold. So maybe some lower margin products had lower revenue or did you just get higher margin across the board with these other products somehow?

We were achieving higher margins with our current product sets.

Okay. So that brought the cost of goods sold down, not just at a percentage basis, but okay.

Yes.

Our next question comes from Brian Swift from Sutter Securities.

I wonder if you clarify a little bit. You said that shortly, you'll be able to be launching a new platform that would have the SafePath IoT for the home. Is that weeks away, months away, quarters away? And then secondly, when do you think that Sprint and any others would have some of the platforms or some of the modules for that platform like the vehicles, find your vehicle, and kept tracking and stuff. Is that, again, months, quarters, or how far away are some of these things going to be?

Let me just talk about the part that we can control. We will have product that (inaudible) demonstrate in live mode probably within the next quarter, if not a little sooner. We should have a product that is shippable before the end of the year, and we have a lot of efforts underway with a number of Tier -- Tier 1 carriers. The interest in wearables, pet trackers, integration to home security, car monitoring, these are the things that carriers are very active and sourcing right now. And what they're looking for is to have a single application that will provide access to a family user with just one app instead of having 10, 12, 15 apps. So they get to brand it, they get to make it their view to the family, and it's something that's pretty exciting.

Okay. And I may have been kind of go back to speaker when you answered the question of how far away is this launch of this platform. Could you...

Okay. Yes, what I said was that we will be able to demo the platform in a live environment within the next quarter, if not a little sooner. And that, by the end of the year, this product should be shipped.

Our next question comes from Kris Tuttle from SoundView.

I guess, I'm a little obsessed with this whole integration with the IoT stuff as well because I know the carriers are not lightning fast, but if I were a carrier observing what's going on with Alexa, for instance, I would desperately want a more powerful way to participate in that and connect my customers. So to sum up -- so this is the area that you just talked about having something that you can demonstrate in Q3, potentially shippable by year-end.

That would be for the SafePath IoT part of the overall SafePath platform.

I think he's actually referring to CommSuite.

I'm sorry...

When CommSuite was launched this year. Is that what you were saying?

Yes, I mean, my question is with the super well formed, but it's -- the carrier's ability to really participate in the consumer IoT space, which, I mean, at least as a casual observer, I'd say they have next to no participation right now, but they -- I would imagine they severely want to change that.

Yes, I would say that we're looking at a timetable towards -- by the end of the year that we could have the Alexa working with CommSuite. That's our goal. If you made a comment now about the consumer IoT market, it's really not a knock on the carrier that they are not a big player in the space. This is a part of the market that's -- it's a part of the market that's just starting to work out some of the kinks. So I think they are really in the forefront. I think they see the value to their subscriber base. They see a way that they can add value, and I think that they will. So this is not the industrial IoT market, that's been around for a while. But the consumer IoT market is something that's fresh. And by the way, when you say you want to be #1, you want to enter a market that doesn't have a whole lot of established players, and that's how you get to earn that right to be able to say you're the top dog.

Our next question comes from Jeff Bernstein from Cowen.

Yes, I just wanted to follow up on the CommSuite discussion. And -- so, I guess, today, with Siri on an Apple phone, you can ask Siri to read your texts, you can ask Siri how many voicemails you have, et cetera, et cetera. So can you not do that in the Android world at all with, I don't know, Samsung's Bixby, or whatever it is, does that just not exist? And it's going to exist once CommSuite is integrated with Alexa or other of these voice services?

Jeff, it's Charles. Basically, I think that at this stage, it doesn't work that way. So it's not available on Android.

Got you. So this is kind of evening the score with Android phones to what already exists in the market if you've got Siri on your Apple phone?

Yes, it's a closed system, right? So Apple can have that full (inaudible). So I think that -- we think this is a unique way to go in. Again, I think you can even take it to a broader sense that you can get your voicemails now, you can go walk in their home and say, who's called me? And again, there's also the next steps of setting up, maybe even set up your voicemail. There's lots of different ways as it builds over and over the time.

Got you. And then, I just wanted to clarify you were talking about potentially having this out by year-end. Are you already in the queue for Alexa certification, which I understand is very backlogged right now, or have you not gone there yet?

Yes, we're definitely there.

And ladies and gentlemen, at this time, I'm showing no additional questions. I'd like to turn the comments -- call back over to Charles Messman for any closing remarks.

So I'd like to thank everybody for being on the call today. We're obviously very excited here. And I think we're not done yet. Please feel free to reach out to me directly if you have further questions, and I hope everybody has a great weekend. We look forward to talking to you on our next earnings call. Thanks, and have a great day.

Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending today's presentation. You may now disconnect your lines.