Business Wire | Mar 8, 2021 04:00PM EST

Smith Micro Reports Fourth Quarter and Fiscal Year 2020 Financial Results

Mar. 08, 2021

PITTSBURGH--(BUSINESS WIRE)--Mar. 08, 2021--Smith Micro Software, Inc. (NASDAQ: SMSI) ("Smith Micro" or the "Company") today reported financial results for its fourth quarter and fiscal year ended December 31, 2020.

"2020 was a very successful year for Smith Micro," said William W. Smith, Jr., President and CEO of Smith Micro Software. "Despite unique challenges caused by a global pandemic, we achieved our best fiscal year in nearly a decade and grew annual revenues 18% year-over-year.

"During 2020, we also strengthened our future business case and technology portfolio by completing the integration of Circle's parental controls and enhancing our SafePath(r) Connected Lifestyle Platform with new driver safety functionality, while also bringing to market key functionality for our ViewSpot(r) smart retail solution," Smith continued. "Despite the substantial capital investment that these activities required, we remained profitable throughout the year and generated $7.9 million in cash from operations."

Fourth Quarter 2020 Financial Results

Smith Micro reported revenue of $12.4 million for the fourth quarter ended December 31, 2020, compared to $12.3 million reported in the fourth quarter ended December 31, 2019.

Fourth quarter 2020 gross profit was $11.0 million compared to $11.3 million reported in the fourth quarter of 2019.

Gross profit as a percentage of revenue was 89 percent for the fourth quarter of 2020 compared to 92 percent for the fourth quarter of 2019.

Generally accepted accounting principles in the United States ("GAAP") net income available to common stockholders for the fourth quarter of 2020 was $580 thousand, or $0.01 diluted earnings per share, compared to GAAP net income available to common stockholders of $3.7 million, or $0.09 diluted earnings per share, for the fourth quarter of 2019.

Non-GAAP net income (which excludes stock-based compensation, amortization of intangibles, transaction gains, and acquisitions costs) for the fourth quarter of 2020 was $1.4 million, or $0.03 diluted earnings per share, compared to non-GAAP net income of $4.3 million, or $0.10 diluted earnings per share, for the fourth quarter of 2019.

Fiscal Year 2020 Financial Results

Smith Micro reported revenue of $51.3 million for the year ended December 31, 2020, compared to $43.3 million reported in the year ended December 31, 2019.

Gross profit for the year ended December 31, 2020 was $46.1 million compared to $39.4 million reported for the same period in 2019.

Gross profit as a percentage of revenue was 90 percent for the year ended December 31, 2020 compared to 91 percent for the year ended December 31, 2019.

GAAP net income available to common stockholders for the year ended December 31, 2020 was $4.2 million, or $0.10 diluted earnings per share, compared to GAAP net income available to common stockholders of $10.6 million, or $0.29 diluted earnings per share, for the same period in 2019.

Non-GAAP net income (which excludes stock-based compensation, amortization of intangibles, transaction gains, acquisition costs, and preferred stock dividends) for the year ended December 31, 2020 was $10.4 million, or $0.24 diluted earnings per share, compared to non-GAAP net income of $12.8 million, or $0.35 diluted earnings per share, for the year ended December 31, 2019.

Total cash and cash equivalents at December 31, 2020 were $25.8 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 before taxes, net income available to common stockholders, and earnings 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, transaction gains, acquisition costs, and preferred stock dividends. 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 income and net 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-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, March 8, 2021 at 4:30 p.m. ET, to discuss the Company's fourth quarter and fiscal year 2020 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. 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 and the Smith Micro logo 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 customer concentration, given that the majority of our sales depend on a few large customer relationships, 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, 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 data) - unaudited



Stock Intangibles Gain on Preferred Non- GAAP Sale of Acquisition Stock Compensation Amortization Software Costs Dividends GAAP Product

Three Months Ended 12/31/20

Gross profit $ 10,994 $ - $ - $ - $ - $ - $ 10,994



Selling andmarketing 2,649 (145 ) (383 ) - - - 2,121 expenses

Research anddevelopment 5,297 (147 ) (332 ) - - - 4,818 expenses

General andadministrative 3,060 (520 ) - - - - 2,540 expenses

Restructuring - - - - - - - expense

Totaloperating 11,006 (812 ) (715 ) - - - 9,479 expenses



Income beforeprovision for 696 812 715 (711 ) - - 1,512

income taxes

Net incomeavailable to 580 812 715 (711 ) - - 1,396 commonstockholders

Earnings per 0.01 0.02 0.02 (0.02 ) - - 0.03 share: basic

Earnings per 0.01 0.02 0.02 (0.02 ) - - 0.03 share: diluted



Three Months Ended 12/31/19

Gross profit $ 11,253 $ - $ - $ - $ - $ - $ 11,253



Selling andmarketing 1,988 (67 ) (74 ) - - - 1,847 expenses

Research anddevelopment 3,194 (72 ) (153 ) - - - 2,969 expenses

General andadministrative 2,400 (215 ) - - (74 ) - 2,111 expenses

Restructuring 40 - - - - - 40 expense

Totaloperating 7,622 (354 ) (227 ) - (74 ) - 6,967 expenses



Income beforeprovision for 3,743 354 227 - 74 - 4,398

income taxes

Net incomeavailable tocommon 3,671 354 227 - 74 - 4,326

stockholders

Earnings per 0.10 0.01 0.01 - 0.00 - 0.11 share: basic

Earnings per 0.09 0.01 0.01 - 0.00 - 0.10 share: diluted



Twelve Months Ended 12/31/20

Gross profit $ 46,110 $ - $ - $ - $ - $ - $ 46,110



Selling andmarketing 10,698 (549 ) (1,608 ) - - - 8,541 expenses

Research anddevelopment 19,071 (559 ) (1,312 ) - - - 17,200 expenses

General andadministrative 12,801 (1,956 ) - - (918 ) - 9,927 expenses

Restructuring 19 - - - - - 19 expense

Totaloperating 42,589 (3,064 ) (2,920 ) - (918 ) - 35,687 expenses



Income beforeprovision for 4,325 3,064 2,920 (711 ) 918 - 10,516

income taxes

Net incomeavailable to 4,165 3,064 2,920 (711 ) 918 - 10,356 commonstockholders

Earnings per 0.10 0.08 0.07 (0.02 ) 0.02 - 0.25 share: basic

Earnings per 0.10 0.07 0.07 (0.02 ) 0.02 - 0.24 share: diluted



Twelve Months Ended 12/31/19

Gross profit $ 39,419 $ - $ - $ - $ - $ - $ 39,419



Selling andmarketing 7,517 (247 ) (369 ) - - - 6,901 expenses

Research anddevelopment 11,682 (278 ) (563 ) - - - 10,841 expenses

General andadministrative 9,921 (969 ) - - (152 ) - 8,800 expenses

Restructuring 194 - - - - - 194 expense

Totaloperating 29,314 (1,494 ) (932 ) - (152 ) - 26,736 expenses



Income beforeprovision for 10,802 1,494 932 (483 ) 152 - 12,897

income taxes

Net incomeavailable tocommon 10,603 1,494 932 (483 ) 152 119 12,817

stockholders

Earnings per 0.31 0.04 0.03 (0.01 ) 0.00 0.00 0.37 share: basic

Earnings per 0.29 0.04 0.03 (0.01 ) 0.00 0.00 0.35 share: diluted



Smith Micro Software, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)

unaudited

audited

For the Three Months

For the Twelve Months

Ended December 31,

Ended December 31,

2020

2019

2020

2019

Revenues

$

12,416

$

12,278

$

51,300

$

43,346

Cost of revenues

1,422

1,025

5,190

3,927

Gross profit

10,994

11,253

46,110

39,419

Operating expenses:

Selling and marketing

2,649

1,988

10,698

7,517

Research and development

5,297

3,194

19,071

11,682

General and administrative

3,060

2,400

12,801

9,921

Restructuring expense

-

40

19

194

Total operating expenses

11,006

7,622

42,589

29,314

Operating income (loss)

(12

)

3,631

3,521

10,105

Non-operating income (expense):

Interest income, net

2

111

96

228

Gain on sale of software product

711

-

711

483

Other expense, net

(5

)

1

(3

)

(14

)

Income before provision for income taxes

696

3,743

4,325

10,802

Income tax expense

116

72

160

80

Net income

580

3,671

4,165

10,722

Less preferred stock dividends

-

-

-

(119

)

Net income available to common stockholders

$

580

$

3,671

$

4,165

$

10,603

Earnings per share:

Basic

$

0.01

$

0.10

$

0.10

$

0.31

Diluted

$

0.01

$

0.09

$

0.10

$

0.29

Weighted average shares outstanding:

Basic

41,262

38,501

40,808

34,513

Diluted

43,305

41,767

42,764

36,991

Smith Micro Software, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)

unaudited audited

For the Three Months For the Twelve Months

Ended December 31, Ended December 31,

2020 2019 2020 2019

Revenues $ 12,416 $ 12,278 $ 51,300 $ 43,346

Cost of revenues 1,422 1,025 5,190 3,927

Gross profit 10,994 11,253 46,110 39,419



Operating expenses:

Selling and marketing 2,649 1,988 10,698 7,517

Research and development 5,297 3,194 19,071 11,682

General and administrative 3,060 2,400 12,801 9,921

Restructuring expense - 40 19 194

Total operating expenses 11,006 7,622 42,589 29,314

Operating income (loss) (12 ) 3,631 3,521 10,105

Non-operating income (expense):

Interest income, net 2 111 96 228

Gain on sale of software product 711 - 711 483

Other expense, net (5 ) 1 (3 ) (14 )

Income before provision for 696 3,743 4,325 10,802 income taxes

Income tax expense 116 72 160 80

Net income 580 3,671 4,165 10,722

Less preferred stock dividends - - - (119 )

Net income available to common $ 580 $ 3,671 $ 4,165 $ 10,603 stockholders



Earnings per share:

Basic $ 0.01 $ 0.10 $ 0.10 $ 0.31

Diluted $ 0.01 $ 0.09 $ 0.10 $ 0.29



Weighted average shares outstanding:

Basic 41,262 38,501 40,808 34,513

Diluted 43,305 41,767 42,764 36,991

Smith Micro Software, Inc.

Consolidated Balance Sheets

(in thousands)

audited

audited

December 31,

December 31,

2020

2019

ASSETS

Current Assets:

Cash & cash equivalents

$

25,754

$

28,268

Accounts receivable, net

12,347

10,894

Prepaid and other assets

1,189

802

Total current assets

39,290

39,964

Equipment & improvements, net

2,170

2,109

Right-of-use assets

5,785

6,464

Deferred tax asset, net

-

94

Other assets

694

234

Intangible assets, net

12,698

4,535

Goodwill

12,266

7,797

TOTAL ASSETS

$

72,903

$

61,197

LIABILITIES & STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable

$

2,282

$

2,050

Accrued payroll and benefits

2,867

2,107

Current operating lease liabilities

1,433

1,221

Other accrued liabilities

216

244

Deferred revenue

1,572

98

Total current liabilities

8,370

5,720

Operating lease liabilities

4,805

5,774

Deferred rent

887

885

Deferred tax liability, net

59

-

Other long-term liabilities

66

134

Total non-current liabilities

5,817

6,793

Stockholders' Equity:

Common stock

41

38

Additional paid in capital

279,905

274,041

Accumulated comprehensive deficit

(221,230

)

(225,395

)

Total stockholders' equity

58,716

48,684

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY

$

72,903

$

61,197

Smith Micro Software, Inc.

Consolidated Balance Sheets

(in thousands)

audited audited

December 31, December 31,

2020 2019

ASSETS

Current Assets:

Cash & cash equivalents $ 25,754 $ 28,268

Accounts receivable, net 12,347 10,894

Prepaid and other assets 1,189 802

Total current assets 39,290 39,964

Equipment & improvements, net 2,170 2,109

Right-of-use assets 5,785 6,464

Deferred tax asset, net - 94

Other assets 694 234

Intangible assets, net 12,698 4,535

Goodwill 12,266 7,797

TOTAL ASSETS $ 72,903 $ 61,197



LIABILITIES & STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable $ 2,282 $ 2,050

Accrued payroll and benefits 2,867 2,107

Current operating lease liabilities 1,433 1,221

Other accrued liabilities 216 244

Deferred revenue 1,572 98

Total current liabilities 8,370 5,720



Operating lease liabilities 4,805 5,774

Deferred rent 887 885

Deferred tax liability, net 59 -

Other long-term liabilities 66 134

Total non-current liabilities 5,817 6,793



Stockholders' Equity:

Common stock 41 38

Additional paid in capital 279,905 274,041

Accumulated comprehensive deficit (221,230 ) (225,395 )

Total stockholders' equity 58,716 48,684

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 72,903 $ 61,197



Smith Micro Software, Inc.

Consolidated Statements of Cash Flows

(in thousands)

unaudited

audited

For the Three Months

For the Twelve Months

Ended December 31,

Ended December 31,

2020

2019

2020

2019

Operating activities:

Net income

$

580

$

3,671

$

4,165

$

10,722

Adjustments to reconcile net income to net cash provided

by operating activities:

Depreciation and amortization

906

344

3,582

1,341

Non-cash lease expense

305

224

1,110

954

Restructuring costs

-

40

19

194

Gain on sale of software product

(711

)

-

(711

)

(483

)

Provision for doubtful accounts and other adjustments

to accounts receivable

(1

)

16

(60

)

143

Provision for excess and obsolete inventory

-

-

-

1

Loss on disposal of fixed assets

-

-

-

6

Stock based compensation

812

355

3,064

1,494

Deferred income taxes

153

97

153

97

Changes in operating accounts:

Accounts receivable

(2,428

)

220

(1,269

)

(3,811

)

Prepaid expenses and other assets

142

(84

)

(388

)

(32

)

Accounts payable and accrued liabilities

(121

)

284

(1,925

)

(417

)

Deferred revenue

11

(7

)

184

(221

)

Net cash provided by (used in) operating activities

(352

)

5,160

7,924

9,988

Investing activities:

Acquisition of Circle operator business, net

-

-

(13,500

)

-

Acquisition of Smart Retail business, net

-

-

-

(3,974

)

Capital expenditures

(111

)

(835

)

(1,323

)

(1,659

)

Proceeds from sale of software products

335

7

367

370

Other investing activities

-

-

(225

)

-

Net cash provided by (used in) investing activities

224

(828

)

(14,681

)

(5,263

)

Financing activities:

Proceeds from exercise of common stock warrants

-

54

4,196

11,457

Dividends paid on preferred stock

-

-

-

(119

)

Other financing activities

10

12

47

46

Net cash provided by financing activities

10

66

4,243

11,384

Net increase (decrease) in cash and cash equivalents

(118

)

4,398

(2,514

)

16,109

Cash and cash equivalents, beginning of period

25,872

23,870

28,268

12,159

Cash and cash equivalents, end of period

$

25,754

$

28,268

$

25,754

$

28,268

Free cash flow:

Net cash provided by (used in) operating activities

$

(352

)

$

5,160

$

7,924

$

9,988

Capital expenditures

(111

)

(835

)

(1,323

)

(1,659

)

Free cash flow

$

(463

)

$

4,325

$

6,601

$

8,329

View source version on businesswire.com: https://www.businesswire.com/news/home/20210308005015/en/

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