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The SMTPHost setting is stored in the registry key HKEY_LOCAL_MACHINE\SOFTWARE\Red Gate\SQLBackup\BackupSettingsGlobal\SMTPHost. Pls check if the SQL Server service startup account has rights to the entire HKEY_LOCAL_MACHINE\SOFTWARE\Red Gate\SQLBackup node.
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This fixed the problem. I believe since my SQL Server service account is a domain account and not a local account, it could not read the key.
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master..sqlbackup '-SQL "BACKUP DATABASE [ISI] TO DISK = [d:\sql_data\MSSQL\BACKUP\<AUTO>] WITH LOGTO = [d:\sql_data\MSSQL\BACKUP\Logs\], MAILTO = ''<my email>''" -E'