Business Wire | May 5, 2021 04:00PM EDT

Smith Micro Reports First Quarter 2021 Financial Results

May 05, 2021

PITTSBURGH--(BUSINESS WIRE)--May 05, 2021--Smith Micro Software, Inc. (NASDAQ: SMSI) ("Smith Micro" or the "Company") today reported financial results for its first quarter ended March 31, 2021.

"I'm incredibly proud of what we accomplished during the first quarter," said William W. Smith, Jr., President and CEO of Smith Micro Software. "We announced the largest acquisition in Company history and also raised additional capital in a successful follow-on public offering. Bolstered by our strengthened employee base and diversified customer portfolio, we believe we are well positioned to maximize revenues throughout the rest of the year and beyond."

First Quarter 2021 Financial Results

Smith Micro reported revenue of $11.4 million for the first quarter ended March 31, 2021, compared to $13.3 million reported in the first quarter ended March 31, 2020.

First quarter 2021 gross profit was $9.8 million compared to $12.1 million reported in the first quarter of 2020.

Gross profit as a percentage of revenue was 86 percent for the first quarter of 2021 compared to 91 percent for the first quarter of 2020.

Generally accepted accounting principles in the United States ("GAAP") net loss for the first quarter of 2021 was $3.2 million, or $0.07 diluted loss per share, compared to GAAP net income of $2.0 million, or $0.05 diluted earnings per share, for the first quarter of 2020.

Non-GAAP net income (which excludes stock-based compensation, amortization of intangibles, and acquisitions costs) for the first quarter of 2021 was $700 thousand, or $0.02 diluted earnings per share, compared to non-GAAP net income of $4.1 million, or $0.10 diluted earnings per share, for the first quarter of 2020.

Total cash and cash equivalents as of March 31, 2021 were $89.2 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), 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, 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 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, May 5, 2021 at 4:30 p.m. ET, to discuss the Company's first quarter 2021 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.

Consolidated Balance Sheets

(in thousands)

unaudited audited

March 31, December 31,

2021 2020

ASSETS

Current Assets:

Cash & cash equivalents $ 89,247 $ 25,754

Accounts receivable, net 8,333 12,347

Prepaid and other assets 908 1,189

Total current assets 98,488 39,290

Equipment & improvements, net 2,161 2,170

Right-of-use assets 5,690 5,785

Other assets 679 694

Intangible assets, net 10,400 12,698

Goodwill 12,266 12,266

TOTAL ASSETS $ 129,684 $ 72,903



LIABILITIES & STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable $ 2,640 $ 2,282

Accrued payroll and benefits 3,150 2,867

Current operating lease liabilities 1,427 1,433

Other accrued liabilities 188 216

Deferred revenue 1,027 1,572

Total current liabilities 8,432 8,370



Operating lease liabilities 4,627 4,805

Deferred rent 845 887

Deferred tax liability, net 59 59

Other long-term liabilities 66 66

Total non-current liabilities 5,597 5,817



Stockholders' Equity:

Common stock 52 41

Additional paid in capital 340,058 279,905

Accumulated comprehensive deficit (224,455 ) (221,230 )

Total stockholders' equity 115,655 58,716

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 129,684 $ 72,903



Smith Micro Software, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)

unaudited

For the Three Months

Ended March 31,

2021

2020

Revenues

$

11,381

$

13,322

Cost of revenues

1,545

1,173

Gross profit

9,836

12,149

Operating expenses:

Selling and marketing

4,232

2,787

Research and development

5,183

3,729

General and administrative

3,658

3,668

Restructuring expense

-

6

Total operating expenses

13,073

10,190

Operating income (loss)

(3,237

)

1,959

Non-operating income (expense):

Interest income, net

8

86

Other expense, net

4

-

Income (loss) before provision for income taxes

(3,225

)

2,045

Income tax expense

-

-

Net income (loss)

$

(3,225

)

$

2,045

Earnings (loss) per share:

Basic

$

(0.07

)

$

0.05

Diluted

$

(0.07

)

$

0.05

Weighted average shares outstanding:

Basic

43,368

39,482

Diluted

45,892

42,194

Smith Micro Software, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)

unaudited

For the Three Months

Ended March 31,

2021 2020

Revenues $ 11,381 $ 13,322

Cost of revenues 1,545 1,173

Gross profit 9,836 12,149



Operating expenses:

Selling and marketing 4,232 2,787

Research and development 5,183 3,729

General and administrative 3,658 3,668

Restructuring expense - 6

Total operating expenses 13,073 10,190

Operating income (loss) (3,237 ) 1,959

Non-operating income (expense):

Interest income, net 8 86

Other expense, net 4 -

Income (loss) before provision for income taxes (3,225 ) 2,045

Income tax expense - -

Net income (loss) $ (3,225 ) $ 2,045



Earnings (loss) per share:

Basic $ (0.07 ) $ 0.05

Diluted $ (0.07 ) $ 0.05



Weighted average shares outstanding:

Basic 43,368 39,482

Diluted 45,892 42,194

Smith Micro Software, Inc.

Consolidated Statements of Cash Flows

(in thousands)

unaudited

For the Three Months

Ended March 31,

2021

2020

Operating activities:

Net income (loss)

$

(3,225

)

$

2,045

Adjustments to reconcile net income (loss) to net cash

provided by operating activities:

Depreciation and amortization

2,497

644

Non-cash lease expense

307

244

Restructuring costs

-

6

Provision for doubtful accounts and other adjustments

to accounts receivable

(3

)

(4

)

Provision for excess and obsolete inventory

(97

)

-

Stock based compensation

1,016

632

Changes in operating accounts:

Accounts receivable

4,018

(983

)

Prepaid expenses and other assets

381

215

Accounts payable and accrued liabilities

(649

)

(840

)

Deferred revenue

(545

)

302

Net cash provided by operating activities

3,700

2,261

Investing activities:

Acquisition of Circle operator business, net

-

(12,150

)

Capital expenditures

(190

)

(771

)

Proceeds from sale of software products

11

10

Other investing activities

-

(225

)

Net cash used in investing activities

(179

)

(13,136

)

Financing activities:

Proceeds from common stock offering, net

59,898

-

Proceeds from exercise of common stock warrants

40

2,045

Other financing activities

34

18

Net cash provided by financing activities

59,972

2,063

Net increase (decrease) in cash and cash equivalents

63,493

(8,812

)

Cash and cash equivalents, beginning of period

25,754

28,268

Cash and cash equivalents, end of period

$

89,247

$

19,456

Free cash flow:

Net cash provided by operating activities

$

3,700

$

2,261

Capital expenditures

(190

)

(771

)

Free cash flow (1)

$

3,510

$

1,490

(1) Free cash flow, which is a non-GAAP financial measure, is calculated as net cash provided by operating activities reduced by capital expenditures.

Smith Micro Software, Inc.

Consolidated Statements of Cash Flows

(in thousands)

unaudited

For the Three Months

Ended March 31,

2021 2020

Operating activities:

Net income (loss) $ (3,225 ) $ 2,045

Adjustments to reconcile net income (loss) to netcash

provided by operating activities:

Depreciation and amortization 2,497 644

Non-cash lease expense 307 244

Restructuring costs - 6

Provision for doubtful accounts and otheradjustments (3 ) (4 )

to accounts receivable

Provision for excess and obsolete inventory (97 ) -

Stock based compensation 1,016 632

Changes in operating accounts:

Accounts receivable 4,018 (983 )

Prepaid expenses and other assets 381 215

Accounts payable and accrued liabilities (649 ) (840 )

Deferred revenue (545 ) 302

Net cash provided by operating activities 3,700 2,261

Investing activities:

Acquisition of Circle operator business, net - (12,150 )

Capital expenditures (190 ) (771 )

Proceeds from sale of software products 11 10

Other investing activities - (225 )

Net cash used in investing activities (179 ) (13,136 )

Financing activities:

Proceeds from common stock offering, net 59,898 -

Proceeds from exercise of common stock warrants 40 2,045

Other financing activities 34 18

Net cash provided by financing activities 59,972 2,063

Net increase (decrease) in cash and cash equivalents 63,493 (8,812 )

Cash and cash equivalents, beginning of period 25,754 28,268

Cash and cash equivalents, end of period $ 89,247 $ 19,456



Free cash flow:

Net cash provided by operating activities $ 3,700 $ 2,261

Capital expenditures (190 ) (771 )

Free cash flow (1) $ 3,510 $ 1,490



(1) Free cash flow, which is a non-GAAP financial measure, is calculated as net cash provided by operating activities reduced by capital expenditures.

Smith Micro Software, Inc.

Reconciliation of GAAP to Non-GAAP Results

(in thousands, except per share data) - unaudited

GAAP

Stock

Compensation

Intangibles

Amortization

Acquisition Costs

Non-

GAAP

Three Months Ended 3/31/2021

Gross profit

$

9,836

$

-

$

-

$

-

$

9,836

Selling and marketing expenses

4,232

(189

)

(1,988

)

-

2,055

Research and development expenses

5,183

(193

)

(310

)

-

4,680

General and administrative expenses

3,658

(634

)

-

(611

)

2,413

Restructuring expense

-

-

-

-

-

Total operating expenses

13,073

(1,016

)

(2,298

)

(611

)

9,148

Income (loss) before provision

for income taxes

(3,225

)

1,016

2,298

611

700

Net income (loss)

(3,225

)

1,016

2,298

611

700

Earnings (loss) per share: basic

(0.07

)

0.02

0.05

0.01

0.02

Earnings (loss) per share: diluted

(0.07

)

0.02

0.05

0.01

0.02

Three Months Ended 3/31/2020

Gross profit

$

12,149

$

-

$

-

$

-

$

12,149

Selling and marketing expenses

2,787

(114

)

(267

)

-

2,406

Research and development expenses

3,729

(118

)

(248

)

-

3,363

General and administrative expenses

3,668

(400

)

-

(918

)

2,350

Restructuring expense

6

-

-

-

6

Total operating expenses

10,190

(632

)

(515

)

(918

)

8,125

Income before provision

for income taxes

2,045

632

515

918

4,110

Net income

2,045

632

515

918

4,110

Earnings per share: basic

0.05

0.02

0.01

0.02

0.10

Earnings per share: diluted

0.05

0.01

0.01

0.02

0.10

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