Smith Micro Software, Inc. (NASDAQ: SMSI) (“Smith Micro” or the “Company”) today reported financial results for its second quarter ended June 30, 2022.

“During the second quarter, we made significant progress on several key milestones related to the integration of our prior acquisitions of our two largest competitors. The consolidation of the best features and functionality of each solution into our Digital Family Lifestyle™ Platform has required a substantial investment since their respective acquisitions. I am very pleased that we are quickly approaching the completion of this mission,” said William W. Smith, Jr., President, CEO and Chairman of the Board of Smith Micro.

“With these efforts nearing completion, we expect to move forward with significant reductions in our operating expenses, starting in the third quarter, and accelerating through the remainder of the fiscal year, as we streamline our expenses to return back to more historical levels.”

“We see the enormous opportunity in front of us, not only with the Big 3 Tier 1 mobile operators in the US, but other Tier 1 operators in Europe, and elsewhere around the world, as we move to our next phase of growth on a single platform,” concluded Mr. Smith.

Second Quarter 2022 Financial Results

Smith Micro reported revenue of $12.7 million for the quarter ended June 30, 2022, compared to $15.9 million reported in the quarter ended June 30, 2021.

Gross profit for the quarter ended June 30, 2022 was $9.1 million, compared to $12.6 million for the quarter ended June 30, 2021.

Gross profit as a percentage of revenue was 71 percent for the quarter ended June 30, 2022, compared to 79 percent for the quarter ended June 30, 2021.

GAAP net loss for the quarter ended June 30, 2022 was $8.5 million, or $0.15 loss per share, compared to GAAP net loss of $5.2 million, or $0.10 loss per share, for the same period in 2021.

Non-GAAP net loss for the quarter ended June 30, 2022 was $5.1 million, or $0.09 loss per share, compared to non-GAAP net loss of $0.3 million, or $0.01 loss per share, for the quarter ended June 30, 2021. Non-GAAP net loss excludes stock-based compensation, amortization of intangible assets, personnel severance and reorganization activities, and acquisition costs.

Second Quarter Year-to-Date 2022 Financial Results

Smith Micro reported revenue of $25.4 million for the six months ended June 30, 2022, compared to $27.3 million reported in the six months ended June 30, 2021.

Gross profit for the six months ended June 30, 2022 was $18.2 million compared to $22.4 million reported for the same period in 2021.

Gross profit as a percentage of revenue was 71 percent for the six months ended June 30, 2022 compared to 82 percent for the six months ended June 30, 2021.

GAAP net loss for the six months ended June 30, 2022 was $15.5 million, or $0.28 loss per share, compared to GAAP net loss of $8.4 million, or $0.17 loss per share, for the same period in 2021.

Non-GAAP net loss (which excludes stock-based compensation, amortization of intangible assets, personnel severance and reorganization activities, and acquisition costs) for the six months ended June 30, 2022 was $9.4 million, or $0.17 diluted loss per share, compared to non-GAAP net income of $0.4 million, or $0.01 earnings per share, for the six months ended June 30, 2021.

Total cash and cash equivalents as of June 30, 2022 were $5.4 million and available borrowing capacity under the Company’s revolving credit facility was $7.0 million.

To supplement our financial information presented in accordance with GAAP, the Company considers, and has included in this press release, certain non-GAAP financial measures and a non-GAAP reconciliation from GAAP gross profit, net (loss) income before taxes, and net (loss) income to the following non-GAAP metrics: non-GAAP net (loss) income, and non-GAAP diluted earnings (loss) per share in the presentation of financial results in this press release. Management believes this non-GAAP presentation may be more meaningful in analyzing our income generation and has therefore excluded the following items from GAAP earnings calculations: stock-based compensation, amortization of intangible assets, personnel severance and reorganization activities, and acquisition costs. Additionally, since the Company currently has federal and state net operating loss carryforwards that can be utilized to reduce future cash payments for income taxes, these non-GAAP adjustments have not been tax effected, and the resulting income tax expense reflects actual taxes paid or accrued during each period. This presentation may be considered more indicative of our ongoing operational performance. The table below presents the differences between non-GAAP net (loss) income and net (loss) income on an absolute and per-share basis. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and the non-GAAP financial measures as reported by Smith Micro may not be comparable to similarly titled amounts reported by other companies.

Investor Conference Call

Smith Micro will hold an investor conference call today, August 11, 2022, at 4:30 p.m. ET, to discuss the Company’s second quarter 2022 financial results. To access the call, dial 1-844-701-1164; international participants can call 1-412-317-5492. A passcode is not required to join the call; ask the operator to be placed into the Smith Micro conference. Participants are asked to call the assigned number approximately 10 minutes before the conference call begins. An internet webcast is available at https://event.choruscall.com/mediaframe/webcast.html?webcastid=Gxhhaskc. In addition, the conference call will be available on the Smith Micro website in the Investor Relations section.

About Smith Micro Software, Inc.

Smith Micro develops software to simplify and enhance the mobile experience, providing solutions to some of the leading wireless service providers and cable MSOs around the world. From enabling the family digital lifestyle to providing powerful voice messaging capabilities, our solutions enrich today’s connected lifestyles while creating new opportunities to engage consumers via smartphones and consumer IoT devices. The Smith Micro portfolio also includes a wide range of products for creating, sharing, and monetizing rich content, such as visual voice messaging, optimizing retail content display and performing analytics on any product set. For more information, visit www.smithmicro.com.

Smith Micro, the Smith Micro logo and SafePath are registered trademarks or trademarks of Smith Micro Software, Inc. All other trademarks and product names are the property of their respective owners.

Forward-Looking Statements

Certain statements in this press release are, and certain statements on the related conference call may be, forward-looking statements regarding future events or results within the meaning of the Private Securities Litigation Reform Act, including statements related to our financial prospects and other projections of our outlook or performance and our future business plans, and statements using such words as “expect,” “anticipate,” “believe,” “plan,” “intend,” “could,” “will” and other similar expressions. Forward-looking statements involve risks and uncertainties, which could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Among the important factors that could cause or contribute to such differences are customer concentration, given that the majority of our sales depend on a few large customer relationships, delay or failure of our customers to accept and deploy our products and services or new or upgraded versions thereof, delay or failure of our customers’ end users to adopt our products and services or new or upgraded versions thereof, the impact of the COVID-19 pandemic on our business and financial results, changes in demand for our products from our customers and their end users, changes in requirements for our products imposed by our customers or by the third party providers of software and/or platforms that we use, our ability to effectively integrate, market and sell acquired product lines, new and changing technologies and customer acceptance and timing of deployment of those technologies, our ability to compete effectively with other software and technology companies, and the existence and terms of our convertible notes and related agreements, including that they may restrict our ability to obtain additional financing, and adversely affect our business, financial condition and cash flows from operations in the future. These and other factors discussed in our filings with the Securities and Exchange Commission, including our filings on Forms 10-K and 10-Q, could cause actual results to differ materially from those expressed or implied in any forward-looking statements. The forward-looking statements contained in this release are made on the basis of the views and assumptions of management, and we do not undertake any obligation to update these statements to reflect events or circumstances occurring after the date of this release.

Smith Micro Software, Inc.

 

 

 

Consolidated Balance Sheets

 

 

 

(in thousands except share and par value data)

 

 

 

 

 

 

 

 

June 30, 2022

 

December 31, 2021

 

(unaudited)

 

(audited)

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

5,357

 

 

$

16,078

 

Accounts receivable, net of allowance for doubtful accounts and other adjustments of $3 and $2 (2022 and 2021, respectively)

 

11,562

 

 

 

10,590

 

Prepaid expenses and other current assets

 

2,514

 

 

 

1,988

 

Total current assets

 

19,433

 

 

 

28,656

 

Equipment and improvements, net

 

2,129

 

 

 

2,698

 

Right-of-use assets

 

4,291

 

 

 

4,866

 

Other assets

 

541

 

 

 

620

 

Intangible assets, net

 

39,410

 

 

 

42,631

 

Goodwill

 

35,041

 

 

 

35,041

 

Total assets

$

100,845

 

 

$

114,512

 

Liabilities and Stockholders' Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

3,774

 

 

$

3,301

 

Accrued payroll and benefits

 

3,759

 

 

 

4,055

 

Current operating lease liabilities

 

1,400

 

 

 

1,400

 

Other accrued liabilities

 

1,227

 

 

 

612

 

Total current liabilities

 

10,160

 

 

 

9,368

 

Non-current liabilities:

 

 

 

Operating lease liabilities

 

3,640

 

 

 

4,467

 

Deferred tax liabilities, net

 

117

 

 

 

117

 

Total non-current liabilities

 

3,757

 

 

 

4,584

 

Commitments and contingencies

 

 

 

Stockholders' equity:

 

 

 

Common stock, par value $0.001 per share; 100,000,000 shares authorized; 55,121,767 and 54,259,390 shares issued and outstanding (2022 and 2021, respectively)

 

55

 

 

 

54

 

Additional paid-in capital

 

354,641

 

 

 

352,779

 

Accumulated comprehensive deficit

 

(267,768

)

 

 

(252,273

)

Total stockholders’ equity

 

86,928

 

 

 

100,560

 

Total liabilities and stockholders' equity

$

100,845

 

 

$

114,512

 

Smith Micro Software Inc.

 

 

 

 

 

 

 

Consolidated Statement of Operations

 

 

 

 

 

 

 

(in thousands except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended June 30,

 

For the Six Months Ended June 30,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenues

$

12,674

 

 

$

15,919

 

 

$

25,409

 

 

$

27,300

 

Cost of revenues

 

3,617

 

 

 

3,358

 

 

 

7,253

 

 

 

4,903

 

Gross profit

 

9,057

 

 

 

12,561

 

 

 

18,156

 

 

 

22,397

 

Operating expenses:

 

 

 

 

 

 

 

Selling and marketing

 

3,720

 

 

 

3,117

 

 

 

6,706

 

 

 

5,361

 

Research and development

 

8,213

 

 

 

7,063

 

 

 

15,615

 

 

 

11,936

 

General and administrative

 

4,026

 

 

 

4,946

 

 

 

8,073

 

 

 

8,604

 

Amortization of intangible assets

 

1,577

 

 

 

2,645

 

 

 

3,221

 

 

 

4,943

 

Total operating expenses

 

17,536

 

 

 

17,771

 

 

 

33,615

 

 

 

30,844

 

Operating loss

 

(8,479

)

 

 

(5,210

)

 

 

(15,459

)

 

 

(8,447

)

Other income (expense):

 

 

 

 

 

 

 

Interest income (expense), net

 

2

 

 

 

16

 

 

 

(2

)

 

 

24

 

Other income, net

 

15

 

 

 

5

 

 

 

15

 

 

 

9

 

Loss before provision for income taxes

 

(8,462

)

 

 

(5,189

)

 

 

(15,446

)

 

 

(8,414

)

Provision for income tax expense

 

31

 

 

 

14.00

 

 

 

50

 

 

 

14

 

Net loss

$

(8,493

)

 

$

(5,203

)

 

$

(15,496

)

 

$

(8,428

)

 

 

 

 

 

 

 

 

Loss per share:

 

 

 

 

 

 

 

Basic and diluted

$

(0.15

)

 

$

(0.10

)

 

$

(0.28

)

 

$

(0.17

)

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic and diluted

 

55,183

 

 

 

53,017

 

 

 

55,844

 

 

 

48,219

 

Smith Micro Software, Inc.

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows

 

 

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended June 30,

 

For the Six Months Ended June 30,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

Operating activities:

 

 

 

 

 

 

 

Net loss

$

(8,493

)

 

$

(5,203

)

 

$

(15,496

)

 

$

(8,428

)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

1,904

 

 

 

2,984

 

 

 

3,902

 

 

 

5,481

 

Non-cash lease expense

 

335

 

 

 

311

 

 

 

673

 

 

 

618

 

Provision for doubtful accounts

 

(5

)

 

 

 

 

 

 

 

 

(3

)

Provision for excess and obsolete inventory

 

 

 

 

 

 

 

 

 

 

(97

)

Stock based compensation

 

1,688

 

 

 

1,279

 

 

 

2,754

 

 

 

2,295

 

Changes in operating accounts:

 

 

 

 

 

 

 

Accounts receivable

 

497

 

 

 

(378

)

 

 

(975

)

 

 

3,640

 

Prepaid expenses and other assets

 

(309

)

 

 

(606

)

 

 

(527

)

 

 

(225

)

Accounts payable and accrued liabilities

 

(640

)

 

 

(428

)

 

 

(1,812

)

 

 

(1,077

)

Deferred revenue

 

(15

)

 

 

(163

)

 

 

(146

)

 

 

(708

)

Net cash (used in) provided by operating activities

 

(5,038

)

 

 

(2,204

)

 

 

(11,627

)

 

 

1,496

 

Investing activities:

 

 

 

 

 

 

 

Acquisitions, net

 

 

 

 

(56,865

)

 

 

 

 

 

(56,865

)

Capital expenditures

 

(49

)

 

 

(146

)

 

 

(112

)

 

 

(336

)

Other investing activities

 

71

 

 

 

58

 

 

 

83

 

 

 

69

 

Net cash provided by (used in) investing activities

 

22

 

 

 

(56,953

)

 

 

(29

)

 

 

(57,132

)

Financing activities:

 

 

 

 

 

 

 

Proceeds from common stock offering, net of offering expenses

 

 

 

 

(187

)

 

 

 

 

 

59,711

 

Proceeds from exercise of common stock warrants

 

 

 

 

 

 

 

 

 

 

40

 

Proceeds from financing arrangements

 

750

 

 

 

 

 

 

1,291

 

 

 

 

Repayments of financing arrangements

 

(210

)

 

 

 

 

 

(391

)

 

 

 

Other financing activities

 

2

 

 

 

33

 

 

 

35

 

 

 

67

 

Net cash provided by (used in) financing activities

 

542

 

 

 

(154

)

 

 

935

 

 

 

59,818

 

Net (decrease) increase in cash and cash equivalents

 

(4,474

)

 

 

(59,311

)

 

 

(10,721

)

 

 

4,182

 

Cash and cash equivalents, beginning of period

$

9,831

 

 

$

89,247

 

 

$

16,078

 

 

$

25,754

 

Cash and cash equivalents, end of period

$

5,357

 

 

$

29,936

 

 

$

5,357

 

 

$

29,936

 

Smith Micro Software, Inc.

 

 

 

 

 

 

 

 

Reconciliation of GAAP to Non-GAAP Results

 

 

 

 

 

 

 

 

(in thousands, except per share data) - unaudited

 

 

 

 

 

 

 

 

 

GAAP

 

Stock Compensation

 

Intangibles Amortization

 

Personnel Severance and Reorganization Activities

 

Acquisition Costs

 

Non-GAAP

Three Months Ended June 30, 2022

 

 

 

 

 

 

 

 

 

 

 

Gross profit

$

9,057

 

 

$

(1

)

 

$

 

 

$

 

 

$

 

 

$

9,057

 

Selling and marketing expenses

 

3,720

 

 

 

(73

)

 

 

 

 

 

(721

)

 

 

 

 

 

2,926

 

Research and development expenses

 

8,213

 

 

 

(268

)

 

 

 

 

 

 

 

 

 

 

 

7,945

 

General and administrative expenses

 

4,026

 

 

 

(767

)

 

 

 

 

 

 

 

 

 

 

 

3,259

 

Amortization of intangible assets

 

1,577

 

 

 

 

 

 

(1,577

)

 

 

 

 

 

 

 

 

 

Total operating expenses

 

17,536

 

 

 

(1,108

)

 

 

(1,577

)

 

 

(721

)

 

 

 

 

 

14,130

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income before provision for income taxes

 

(8,462

)

 

 

1,109

 

 

 

1,577

 

 

 

721

 

 

 

 

 

 

(5,055

)

Net (loss) income

 

(8,493

)

 

 

1,109

 

 

 

1,577

 

 

 

721

 

 

 

 

 

 

(5,086

)

(Loss) earnings per share: basic and diluted

 

(0.15

)

 

 

0.02

 

 

 

0.03

 

 

 

0.01

 

 

 

 

 

 

(0.09

)

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

Gross profit

$

12,561

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

12,561

 

Selling and marketing expenses

 

3,117

 

 

 

(236

)

 

 

 

 

 

 

 

 

 

 

 

2,881

 

Research and development expenses

 

7,063

 

 

 

(241

)

 

 

 

 

 

 

 

 

 

 

 

6,822

 

General and administrative expenses

 

4,946

 

 

 

(802

)

 

 

 

 

 

 

 

 

(972

)

 

 

3,172

 

Amortization of intangible assets

 

2,645

 

 

 

 

 

 

(2,645

)

 

 

 

 

 

 

 

 

 

Total operating expenses

 

17,771

 

 

 

(1,279

)

 

 

(2,645

)

 

 

 

 

 

(972

)

 

 

12,875

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income before provision for income taxes

 

(5,189

)

 

 

1,279

 

 

 

2,645

 

 

 

 

 

 

972

 

 

 

(293

)

Net (loss) income

 

(5,203

)

 

 

1,279

 

 

 

2,645

 

 

 

 

 

 

972

 

 

 

(307

)

(Loss) earnings per share: basic and diluted

 

(0.10

)

 

 

0.02

 

 

 

0.05

 

 

 

 

 

 

0.02

 

 

 

(0.01

)

Note: (Loss) earnings per share: basic and diluted - may be impacted by rounding to allow rows to calculate.

Smith Micro Software, Inc.

 

 

 

 

 

 

 

 

Reconciliation of GAAP to Non-GAAP Results

 

 

 

 

 

 

 

 

(in thousands, except per share data) - unaudited

 

 

 

 

 

 

 

 

 

GAAP

 

Stock Compensation

 

Intangibles Amortization

 

Personnel Severance and Reorganization Activities

 

Acquisition Costs

 

Non-GAAP

Six Months Ended June 30, 2022

 

 

 

 

 

 

 

 

 

 

 

Gross profit

$

18,156

 

 

$

(1

)

 

$

 

 

$

 

 

$

 

 

$

18,155

 

Selling and marketing expenses

 

6,706

 

 

 

(157

)

 

 

 

 

 

(721

)

 

 

 

 

 

5,828

 

Research and development expenses

 

15,615

 

 

 

(529

)

 

 

 

 

 

 

 

 

 

 

 

15,086

 

General and administrative expenses

 

8,073

 

 

 

(1,488

)

 

 

 

 

 

 

 

 

 

 

 

6,585

 

Amortization of intangible assets

 

3,221

 

 

 

 

 

 

(3,221

)

 

 

 

 

 

 

 

 

 

Total operating expenses

 

33,615

 

 

 

(2,174

)

 

 

(3,221

)

 

 

(721

)

 

 

 

 

 

27,499

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income before provision for income taxes

 

(15,446

)

 

 

2,175

 

 

 

3,221

 

 

 

721

 

 

 

 

 

 

(9,329

)

Net (loss) income

 

(15,496

)

 

 

2,175

 

 

 

3,221

 

 

 

721

 

 

 

 

 

 

(9,329

)

(Loss) earnings per share: basic and diluted

 

(0.28

)

 

 

0.04

 

 

 

0.06

 

 

 

0.01

 

 

 

 

 

 

(0.17

)

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

Gross profit

$

22,397

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

22,397

 

Selling and marketing expenses

 

5,361

 

 

 

(426

)

 

 

 

 

 

 

 

 

 

 

 

4,935

 

Research and development expenses

 

11,936

 

 

 

(434

)

 

 

 

 

 

 

 

 

 

 

 

11,502

 

General and administrative expenses

 

8,604

 

 

 

(1,435

)

 

 

 

 

 

 

 

 

(1,583

)

 

 

5,586

 

Amortization of intangible assets

 

4,943

 

 

 

 

 

 

(4,943

)

 

 

 

 

 

 

 

 

 

Total operating expenses

 

30,844

 

 

 

(2,295

)

 

 

(4,943

)

 

 

 

 

 

(1,583

)

 

 

22,023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income before provision for income taxes

 

(8,414

)

 

 

2,295

 

 

 

4,943

 

 

 

 

 

 

1,583

 

 

 

407

 

Net (loss) income

 

(8,428

)

 

 

2,295

 

 

 

4,943

 

 

 

 

 

 

1,583

 

 

 

393

 

(Loss) earnings per share: basic and diluted

 

(0.17

)

 

 

0.04

 

 

 

0.09

 

 

 

 

 

 

0.03

 

 

 

0.01

 

Note: (Loss) earnings per share: basic and diluted - may be impacted by rounding to allow rows to calculate.

 

IR INQUIRIES: Charles Messman Investor Relations 949-362-5800 IR@smithmicro.com

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