Smith Micro Reports Second Quarter 2019 Financial Results

Achieved Revenue of $10.9 Million

And Non-GAAP Earnings per Share of $0.08

PITTSBURGH–(BUSINESS WIRE)–Smith Micro Software, Inc. (NASDAQ: SMSI) (“Smith Micro” or the “Company”) today reported financial results for its second quarter ended June 30, 2019.

I am very pleased with the continued growth and profitability we delivered in the second quarter of 2019,” said William W. Smith, Jr., President and CEO of Smith Micro. “We saw growth across all three wireless solutions, again mostly driven by our SafePath® platform. We also achieved another consecutive quarter of subscriber revenue growth from the CommSuite® platform, as well as continued growth with ViewSpot™, our recent Smart Retail acquisition that closed in the first quarter.”

Mr. Smith concluded, “The outlook for the second half of 2019 is very strong. Our sales pipeline continues to grow across all three wireless solutions and, with the successful launch of our first SafePath IOT device, our product offering has strengthened and we’ve now entered a new market.”

Second Quarter 2019 Financial Results:

Smith Micro reported revenue of $10.9 million for the second quarter ended June 30, 2019, compared to $6.9 million reported in the second quarter ended June 30, 2018.

Second quarter 2019 gross profit was $9.9 million compared to $5.8 million reported in the second quarter of 2018.

Gross profit as a percentage of revenue was 91 percent for the second quarter of 2019 compared to 84 percent for the second quarter of 2018.

Generally accepted accounting principles in the United States (“GAAP”) net income available to common stockholders for the second quarter of 2019 was $3.4 million, or $0.11 basic earnings per share and $0.10 diluted earnings per share, compared to a GAAP net loss available to common stockholders of $2.4 million, or $0.11 loss per share, for the second quarter of 2018.

Non-GAAP net income (which excludes stock-based compensation, amortization of intangibles, debt issuance and discount costs, fair value adjustments, transaction gains, acquisition costs, preferred stock dividends, and a normalized tax expense) for the second quarter of 2019 was $2.7 million, or $0.08 earnings per share, compared to a non-GAAP net income of $226 thousand, or $0.01 earnings per share, for the second quarter of 2018.

Second Quarter Year-to-Date 2019 Financial Results:

Smith Micro reported revenue of $19.3 million for the six months ended June 30, 2019, compared to $12.4 million reported in the six months ended June 30, 2018.

Gross profit for the six months ended June 30, 2019 was $17.4 million compared to $10.0 million reported for the same period in 2018.

Gross profit as a percentage of revenue was 90 percent for the six months ended June 30, 2019 compared to 81 percent for the six months ended June 30, 2018.

GAAP net income available to common stockholders for the six months ended June 30, 2019 was $3.4 million, or $0.11 basic earnings per share and $0.10 diluted earnings per share, compared to a GAAP net loss available to common stockholders of $4.9 million, or $0.26 loss per share, for the same period in 2018.

Non-GAAP net income (which excludes stock-based compensation, amortization of intangibles, debt issuance and discount costs, fair value adjustments, transaction gains, acquisition costs, preferred stock dividends, and a normalized tax expense) for the six months ended June 30, 2019 was $3.3 million, or $0.10 earnings per share, compared to a non-GAAP net loss of $1.2 million, or $0.07 loss per share, for the six months ended June 30, 2018.

Total cash and cash equivalents at June 30, 2019 were $6.6 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, including a non-GAAP reconciliation of gross profit, income (loss) before taxes, net income (loss) available to common stockholders, and 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 intangibles, debt issuance and discount costs, fair value adjustments, transaction gains, acquisition costs, and preferred stock dividends. Additionally, since we are in a cumulative loss position, a non-GAAP income tax expense (benefit) was computed using a 24 percent tax rate for 2019 and 2018 using the Company’s normalized combined U.S. federal, state, and foreign statutory tax rates less various tax adjustments. This presentation may be considered more indicative of our ongoing operational performance. The table below presents the differences between non-GAAP net income (loss) and net income (loss) 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-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, July 25, 2019 at 4:30 p.m. EDT, to discuss the Company’s second quarter 2019 financial results. To access the call, dial 1-877-270-2148; international participants can call 1-412-902-6510. 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. 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, SafePath, CommSuite and ViewSpot 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, 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 changes in demand for our products from our customers and their end-users, customer concentration, given that the majority of our sales depend on a few large customer relationships, 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, customer acceptance and timing of deployment of those technologies, and our ability to compete effectively with other software and technology companies. 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.

Reconciliation of GAAP to Non-GAAP Results

(in thousands, except per share amounts) – unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP

 

 

Stock

Compensation

 

 

Intangibles

Amortization

 

 

Note

Issue/

Discount

 

 

Fair Value Adjustments

 

 

Gain on Sale of Software Product

 

 

Acquisition Costs

 

 

Preferred Stock Dividends

 

 

Taxes

 

 

Non-

GAAP

 

Three Months Ended 6/30/19:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

$

9,880

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

9,880

 

Income before provision for

income taxes

 

3,440

 

 

 

333

 

 

 

268

 

 

 

 

 

 

 

 

 

(483

)

 

 

 

 

 

 

 

 

 

 

 

3,558

 

Net income available to

common stockholders

 

3,402

 

 

 

333

 

 

 

268

 

 

 

 

 

 

 

 

 

(483

)

 

 

 

 

 

34

 

 

 

(850

)

 

 

2,704

 

Earnings per share: basic

 

0.11

 

 

 

0.01

 

 

 

0.01

 

 

 

 

 

 

 

 

 

(0.02

)

 

 

 

 

 

0.00

 

 

 

(0.03

)

 

 

0.08

 

Earnings per share: diluted

 

0.10

 

 

 

0.01

 

 

 

0.01

 

 

 

 

 

 

 

 

 

(0.01

)

 

 

 

 

 

0.00

 

 

 

(0.02

)

 

 

0.08

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended 6/30/18:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

$

5,829

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

5,829

 

Income (loss) before provision for

income taxes

 

(2,164

)

 

 

247

 

 

 

64

 

 

 

66

 

 

 

2,085

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

298

 

Net income (loss) available to common

stockholders

 

(2,362

)

 

 

247

 

 

 

64

 

 

 

66

 

 

 

2,085

 

 

 

 

 

 

 

 

 

185

 

 

 

(59

)

 

 

226

 

Earnings (loss) per share: basic and

diluted

 

(0.11

)

 

 

0.01

 

 

 

0.00

 

 

 

0.00

 

 

 

0.10

 

 

 

 

 

 

 

 

 

0.01

 

 

 

(0.00

)

 

 

0.01

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended 6/30/19:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

$

17,395

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

17,395

 

Income before provision for

income taxes

 

3,492

 

 

 

788

 

 

 

465

 

 

 

 

 

 

 

 

 

(483

)

 

 

76

 

 

 

 

 

 

 

 

 

4,338

 

Net income available to common

stockholders

 

3,417

 

 

 

788

 

 

 

465

 

 

 

 

 

 

 

 

 

(483

)

 

 

76

 

 

 

67

 

 

 

(1,033

)

 

 

3,297

 

Earnings per share: basic

 

0.11

 

 

 

0.02

 

 

 

0.01

 

 

 

 

 

 

 

 

 

(0.02

)

 

 

0.00

 

 

 

0.00

 

 

 

(0.03

)

 

 

0.10

 

Earnings per share: diluted

 

0.10

 

 

 

0.02

 

 

 

0.01

 

 

 

 

 

 

 

 

 

(0.00

)

 

 

0.00

 

 

 

0.00

 

 

 

(0.03

)

 

 

0.10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended 6/30/18:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

$

9,983

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

9,983

 

Loss before provision for

income taxes

 

(4,535

)

 

 

410

 

 

 

128

 

 

 

131

 

 

 

2,224

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,642

)

Net loss available to common

stockholders

 

(4,884

)

 

 

410

 

 

 

128

 

 

 

131

 

 

 

2,224

 

 

 

 

 

 

 

 

 

326

 

 

 

417

 

 

 

(1,248

)

Loss per share: basic and

diluted

 

(0.26

)

 

 

0.02

 

 

 

0.01

 

 

 

0.01

 

 

 

0.12

 

 

 

 

 

 

 

 

 

0.02

 

 

 

0.02

 

 

 

(0.07

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note: Earnings (loss) per share: basic and diluted – may be impacted by rounding to allow rows to calculate.

Smith Micro Software, Inc.

Statements of Operations

(in thousands, except per share amounts) – unaudited

 

For the Three Months

 

 

For the Six Months

 

 

Ended June 30,

 

 

Ended June 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenues

$

10,854

 

 

$

6,945

 

 

$

19,286

 

 

$

12,408

 

Cost of revenues

 

974

 

 

 

1,116

 

 

 

1,891

 

 

 

2,425

 

Gross profit

 

9,880

 

 

 

5,829

 

 

 

17,395

 

 

 

9,983

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

1,768

 

 

 

1,447

 

 

 

3,735

 

 

 

3,177

 

Research and development

 

2,743

 

 

 

2,195

 

 

 

5,425

 

 

 

4,450

 

General and administrative

 

2,426

 

 

 

2,061

 

 

 

5,126

 

 

 

4,251

 

Restructuring expense

 

11

 

 

 

52

 

 

 

115

 

 

 

52

 

Total operating expenses

 

6,948

 

 

 

5,755

 

 

 

14,401

 

 

 

11,930

 

Operating income (loss)

 

2,932

 

 

 

74

 

 

 

2,994

 

 

 

(1,947

)

Non-operating income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income (expense), net

 

31

 

 

 

(143

)

 

 

30

 

 

 

(314

)

Change in fair value of warrant liability

 

 

 

 

(2,085

)

 

 

 

 

 

(2,224

)

Gain on sale of software product

 

483

 

 

 

 

 

 

483

 

 

 

 

Other expense, net

 

(6

)

 

 

(10

)

 

 

(15

)

 

 

(50

)

Income (loss) before provision for income taxes

 

3,440

 

 

 

(2,164

)

 

 

3,492

 

 

 

(4,535

)

Provision for income tax expense

 

4

 

 

 

13

 

 

 

8

 

 

 

23

 

Net income (loss)

 

3,436

 

 

 

(2,177

)

 

 

3,484

 

 

 

(4,558

)

Less preferred stock dividends

 

(34

)

 

 

(185

)

 

 

(67

)

 

 

(326

)

Net income (loss) available to common stockholders

$

3,402

 

 

$

(2,362

)

 

$

3,417

 

 

$

(4,884

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.11

 

 

$

(0.11

)

 

$

0.11

 

 

$

(0.26

)

Diluted

$

0.10

 

 

$

(0.11

)

 

$

0.10

 

 

$

(0.26

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

32,068

 

 

 

21,888

 

 

 

31,685

 

 

 

18,612

 

Diluted

 

35,308

 

 

 

21,888

 

 

 

33,365

 

 

 

18,612

 

Smith Micro Software, Inc.

Consolidated Balance Sheets

(in thousands)

 

June 30,

 

 

December 31,

 

 

2019

 

 

2018

 

ASSETS

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

Cash & cash equivalents

$

6,611

 

 

$

12,159

 

Accounts receivable, net

 

13,017

 

 

 

7,130

 

Prepaid and other assets

 

938

 

 

 

795

 

Total current assets

 

20,566

 

 

 

20,084

 

Equipment & improvements, net

 

930

 

 

 

865

 

Right-of-use assets

 

6,708

 

 

 

 

Deferred tax asset, net

 

191

 

 

 

191

 

Other assets

 

267

 

 

 

140

 

Intangible assets, net

 

5,002

 

 

 

238

 

Goodwill

 

7,797

 

 

 

3,685

 

TOTAL ASSETS

$

41,461

 

 

$

25,203

 

 

 

 

 

 

 

 

 

LIABILITIES & STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

Accounts payable

$

1,227

 

 

$

1,160

 

Accrued payroll and benefits

 

2,232

 

 

 

1,745

 

Current operating lease liabilities

 

1,057

 

 

 

 

Other accrued liabilities

 

246

 

 

 

450

 

Deferred revenue

 

183

 

 

 

28

 

Total current liabilities

 

4,945

 

 

 

3,383

 

 

 

 

 

 

 

 

 

Operating lease liabilities

 

6,135

 

 

 

 

Deferred rent

 

547

 

 

 

723

 

Other long-term liabilities

 

168

 

 

 

534

 

Total non-current liabilities

 

6,850

 

 

 

1,257

 

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

Common stock

 

32

 

 

 

28

 

Additional paid in capital

 

262,215

 

 

 

256,626

 

Accumulated comprehensive deficit

 

(232,581

)

 

 

(236,091

)

Total stockholders’ equity

 

29,666

 

 

 

20,563

 

TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY

$

41,461

 

 

$

25,203

 

 

 

 

 

 

 

 

 

 

Contacts

IR INQUIRIES:

Charles Messman

Investor Relations

949-362-5800

IR@smithmicro.com

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