Business Wire | Aug 4, 2021 04:06PM EDT

Smith Micro Reports Second Quarter 2021 Financial Results

Aug. 04, 2021

PITTSBURGH--(BUSINESS WIRE)--Aug. 04, 2021--Smith Micro Software, Inc. (NASDAQ: SMSI) ("Smith Micro" or the "Company") today reported financial results for its second quarter ended June 30, 2021.

"I remain very bullish about where things stand for Smith Micro after a successful quarter," said William W. Smith, Jr., President and CEO of Smith Micro Software. "Second quarter financial results came in-line with our expectations as we continue to integrate the people, customers and technology gained through the largest acquisition in Company history. Strategic discussions with our largest carrier customers continue to move in the right direction, which we believe will set the Company up for a strong back half in 2021 and beyond."

Second Quarter 2021 Financial Results

Smith Micro reported revenue of $15.9 million for the second quarter ended June 30, 2021, compared to $12.9 million reported in the second quarter ended June 30, 2020.

Second quarter 2021 gross profit was $12.6 million compared to $11.7 million reported in the second quarter of 2020.

Gross profit as a percentage of revenue was 79 percent for the second quarter of 2021 compared to 90 percent for the second quarter of 2020.

Generally accepted accounting principles in the United States ("GAAP") net loss for the second quarter of 2021 was $5.2 million, or $0.10 loss per share, compared to GAAP net income of $1.4 million, or $0.03 diluted earnings per share, for the second quarter of 2020.

Non-GAAP net loss (which excludes stock-based compensation, amortization of intangibles, and acquisitions costs) for the second quarter of 2021 was $307 thousand, or $0.01 loss per share, compared to non-GAAP net income of $3.0 million, or $0.07 diluted earnings per share, for the second quarter of 2020.

Second Quarter Year-to-Date 2021 Financial Results

Smith Micro reported revenue of $27.3 million for the six months ended June 30, 2021, compared to $26.3 million reported in the six months ended June 30, 2020.

Gross profit for the six months ended June 30, 2021 was $22.4 million compared to $23.8 million reported for the same period in 2020.

Gross profit as a percentage of revenue was 82 percent for the six months ended June 30, 2021 compared to 91 percent for the six months ended June 30, 2020.

GAAP net loss for the six months ended June 30, 2021 was $8.4 million, or $0.17 loss per share, compared to GAAP net income of $3.4 million, or $0.08 diluted earnings per share, for the same period in 2020.

Non-GAAP net income (which excludes stock-based compensation, amortization of intangibles, and acquisition costs) for the six months ended June 30, 2021 was $393 thousand, or $0.01 diluted earnings per share, compared to non-GAAP net income of $7.1 million, or $0.17 diluted earnings per share, for the six months ended June 30, 2020.

Total cash and cash equivalents as of June 30, 2021 were $29.9 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, August 4, 2021 at 4:30 p.m. ET, to discuss the Company's second 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

June 30, December 31,

2021 2020

ASSETS

Current Assets:

Cash & cash equivalents $ 29,936 $ 25,754

Accounts receivable, net 14,941 12,347

Prepaid and other assets 2,046 1,189

Total current assets 46,923 39,290

Equipment & improvements, net 3,186 2,170

Right-of-use assets 5,379 5,785

Other assets 597 694

Intangible assets, net 41,255 12,698

Goodwill 40,085 12,266

TOTAL ASSETS $ 137,425 $ 72,903



LIABILITIES & STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable $ 3,372 $ 2,282

Accrued payroll and benefits 4,748 2,867

Current operating lease liabilities 1,401 1,433

Other accrued liabilities 2,327 216

Deferred revenue 864 1,572

Total current liabilities 12,712 8,370



Operating lease liabilities 4,311 4,805

Deferred rent 804 887

Deferred tax liability, net 59 59

Other long-term liabilities 66 66

Total non-current liabilities 5,240 5,817



Stockholders' Equity:

Common stock 54 41

Additional paid in capital 349,077 279,905

Accumulated comprehensive deficit (229,658 ) (221,230 )

Total stockholders' equity 119,473 58,716

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 137,425 $ 72,903

Smith Micro Software, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)

unaudited

unaudited

For the Three Months

For the Six Months

Ended June 30,

Ended June 30,

2021

2020

2021

2020

Revenues

$

15,919

$

12,933

$

27,300

$

26,255

Cost of revenues

3,358

1,269

4,903

2,441

Gross profit

12,561

11,664

22,397

23,814

Operating expenses:

Selling and marketing

4,853

2,613

9,085

5,400

Research and development

7,972

4,604

13,155

8,333

General and administrative

4,946

3,070

8,604

6,744

Total operating expenses

17,771

10,287

30,844

20,477

Operating income (loss)

(5,210

)

1,377

(8,447

)

3,337

Non-operating income:

Interest income, net

16

2

24

87

Other expense, net

5

-

9

-

Income (loss) before provision for income taxes

(5,189

)

1,379

(8,414

)

3,424

Income tax expense

14

-

14

-

Net income (loss)

$

(5,203

)

$

1,379

$

(8,428

)

$

3,424

Earnings (loss) per share:

Basic

$

(0.10

)

$

0.03

$

(0.17

)

$

0.08

Diluted

$

(0.10

)

$

0.03

$

(0.17

)

$

0.08

Weighted average shares outstanding:

Basic

53,017

41,127

48,219

40,305

Diluted

53,017

43,079

48,219

42,346

Smith Micro Software, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)

unaudited unaudited

For the Three Months For the Six Months

Ended June 30, Ended June 30,

2021 2020 2021 2020

Revenues $ 15,919 $ 12,933 $ 27,300 $ 26,255

Cost of revenues 3,358 1,269 4,903 2,441

Gross profit 12,561 11,664 22,397 23,814



Operating expenses:

Selling and marketing 4,853 2,613 9,085 5,400

Research and development 7,972 4,604 13,155 8,333

General and administrative 4,946 3,070 8,604 6,744

Total operating expenses 17,771 10,287 30,844 20,477

Operating income (loss) (5,210 ) 1,377 (8,447 ) 3,337

Non-operating income:

Interest income, net 16 2 24 87

Other expense, net 5 - 9 -

Income (loss) before provision for (5,189 ) 1,379 (8,414 ) 3,424 income taxes

Income tax expense 14 - 14 -

Net income (loss) $ (5,203 ) $ 1,379 $ (8,428 ) $ 3,424



Earnings (loss) per share:

Basic $ (0.10 ) $ 0.03 $ (0.17 ) $ 0.08

Diluted $ (0.10 ) $ 0.03 $ (0.17 ) $ 0.08



Weighted average shares outstanding:

Basic 53,017 41,127 48,219 40,305

Diluted 53,017 43,079 48,219 42,346

Smith Micro Software, Inc.

Consolidated Statements of Cash Flows

(in thousands)

unaudited

unaudited

For the Three Months

For the Six Months

Ended June 30,

Ended June 30,

2021

2020

2021

2020

Operating activities:

Net income (loss)

$

(5,203

)

$

1,379

$

(8,428

)

$

3,424

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

Depreciation and amortization

2,984

1,018

5,481

1,662

Non-cash lease expense

311

267

618

511

Provision for doubtful accounts and other adjustments to accounts receivable

-

(5

)

(3

)

(9

)

Provision for excess and obsolete inventory

-

-

(97

)

-

Stock based compensation

1,279

809

2,295

1,441

Changes in operating accounts:

Accounts receivable

(378

)

(654

)

3,640

(1,637

)

Prepaid expenses and other assets

(606

)

(848

)

(225

)

(633

)

Accounts payable and accrued liabilities

(428

)

148

(1,077

)

(686

)

Deferred revenue

(163

)

(40

)

(708

)

262

Net cash provided by (used in) operating activities

(2,204

)

2,074

1,496

4,335

Investing activities:

Acquisitions, net

(56,865

)

-

(56,865

)

(12,150

)

Capital expenditures

(146

)

(81

)

(336

)

(852

)

Other investing activities

58

11

69

(204

)

Net cash used in investing activities

(56,953

)

(70

)

(57,132

)

(13,206

)

Financing activities:

Proceeds (payments) from common stock offering, net

(187

)

-

59,711

-

Proceeds from exercise of common stock warrants

-

2,151

40

4,196

Other financing activities

33

3

67

21

Net cash provided by (used in) financing activities

(154

)

2,154

59,818

4,217

Net increase (decrease) in cash and cash equivalents

(59,311

)

4,158

4,182

(4,654

)

Cash and cash equivalents, beginning of period

89,247

19,456

25,754

28,268

Cash and cash equivalents, end of period

$

29,936

$

23,614

$

29,936

$

23,614

Free cash flow:

Net cash provided by (used in) operating activities

$

(2,204

)

$

2,074

$

1,496

$

4,335

Capital expenditures

(146

)

(81

)

(336

)

(852

)

Free cash flow (1)

$

(2,350

)

$

1,993

$

1,160

$

3,483

(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 unaudited

For the Three Months For the Six Months

Ended June 30, Ended June 30,

2021 2020 2021 2020

Operating activities:

Net income (loss) $ (5,203 ) $ 1,379 $ (8,428 ) $ 3,424

Adjustments to reconcilenet income (loss) to netcash provided by (used in) operatingactivities:

Depreciation and 2,984 1,018 5,481 1,662 amortization

Non-cash lease expense 311 267 618 511

Provision for doubtfulaccounts and other - (5 ) (3 ) (9 )adjustments to accountsreceivable

Provision for excess and - - (97 ) - obsolete inventory

Stock based compensation 1,279 809 2,295 1,441

Changes in operating accounts:

Accounts receivable (378 ) (654 ) 3,640 (1,637 )

Prepaid expenses and (606 ) (848 ) (225 ) (633 )other assets

Accounts payable and (428 ) 148 (1,077 ) (686 )accrued liabilities

Deferred revenue (163 ) (40 ) (708 ) 262

Net cash provided by(used in) operating (2,204 ) 2,074 1,496 4,335 activities

Investing activities:

Acquisitions, net (56,865 ) - (56,865 ) (12,150 )

Capital expenditures (146 ) (81 ) (336 ) (852 )

Other investing 58 11 69 (204 )activities

Net cash used in (56,953 ) (70 ) (57,132 ) (13,206 )investing activities

Financing activities:

Proceeds (payments) fromcommon stock offering, (187 ) - 59,711 - net

Proceeds from exercise - 2,151 40 4,196 of common stock warrants

Other financing 33 3 67 21 activities

Net cash provided by(used in) financing (154 ) 2,154 59,818 4,217 activities

Net increase (decrease)in cash and cash (59,311 ) 4,158 4,182 (4,654 )equivalents

Cash and cashequivalents, beginning 89,247 19,456 25,754 28,268 of period

Cash and cashequivalents, end of $ 29,936 $ 23,614 $ 29,936 $ 23,614 period



Free cash flow:

Net cash provided by(used in) operating $ (2,204 ) $ 2,074 $ 1,496 $ 4,335 activities

Capital expenditures (146 ) (81 ) (336 ) (852 )

Free cash flow (1) $ (2,350 ) $ 1,993 $ 1,160 $ 3,483



(1) Free cash flow, which is a non-GAAP financial measure, is calculated as netcash 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 6/30/2021

Gross profit

$

12,561

$

-

$

-

$

-

$

12,561

Selling and marketing expenses

4,853

(236

)

(1,736

)

-

2,881

Research and development expenses

7,972

(241

)

(909

)

-

6,822

General and administrative expenses

4,946

(802

)

-

(972

)

3,172

Total operating expenses

17,771

(1,279

)

(2,645

)

(972

)

12,875

Income (loss) before provision for income taxes

(5,189

)

1,279

2,645

972

(293

)

Net income (loss)

(5,203

)

1,279

2,645

972

(307

)

Earnings (loss) per share: basic

(0.10

)

0.02

0.05

0.02

(0.01

)

Earnings (loss) per share: diluted

(0.10

)

0.02

0.05

0.02

(0.01

)

Three Months Ended 6/30/2020

Gross profit

$

11,664

$

-

$

-

$

-

$

11,664

Selling and marketing expenses

2,613

(144

)

(483

)

-

1,986

Research and development expenses

4,604

(146

)

(366

)

-

4,092

General and administrative expenses

3,070

(518

)

-

-

2,552

Total operating expenses

10,287

(808

)

(849

)

-

8,630

Income before provision for income taxes

1,379

808

849

-

3,036

Net income

1,379

808

849

-

3,036

Earnings per share: basic

0.03

0.02

0.02

-

0.07

Earnings per share: diluted

0.03

0.02

0.02

-

0.07

Six Months Ended 6/30/2021

Gross profit

$

22,397

$

-

$

-

$

-

$

22,397

Selling and marketing expenses

9,085

(426

)

(3,724

)

-

4,935

Research and development expenses

13,155

(434

)

(1,219

)

-

11,502

General and administrative expenses

8,604

(1,435

)

(1,583

)

5,586

Total operating expenses

30,844

(2,295

)

(4,943

)

(1,583

)

22,023

Income (loss) before provision for income taxes

(8,414

)

2,295

4,943

1,583

407

Net income (loss)

(8,428

)

2,295

4,943

1,583

393

Earnings (loss) per share: basic

(0.17

)

0.05

0.10

0.03

0.01

Earnings (loss) per share: diluted

(0.17

)

0.05

0.10

0.03

0.01

Six Months Ended 6/30/2020

Gross profit

$

23,814

$

-

$

-

$

-

$

23,814

Selling and marketing expenses

5,400

(258

)

(750

)

-

4,392

Research and development expenses

8,333

(265

)

(614

)

-

7,454

General and administrative expenses

6,744

(918

)

-

(918

)

4,908

Total operating expenses

20,477

(1,441

)

(1,364

)

(918

)

16,754

Income before provision for income taxes

3,424

1,441

1,364

918

7,147

Net income

3,424

1,441

1,364

918

7,147

Earnings per share: basic

0.08

0.04

0.03

0.02

0.18

Earnings per share: diluted

0.08

0.03

0.03

0.02

0.17

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

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