Business Wire | Nov 10, 2021 04:06PM EST

Smith Micro Reports Third Quarter 2021 Financial Results

Nov. 10, 2021

PITTSBURGH--(BUSINESS WIRE)--Nov. 10, 2021--Smith Micro Software, Inc. (NASDAQ: SMSI) ("Smith Micro" or the "Company") today reported financial results for its third quarter ended September 30, 2021.

"I am pleased with the important milestones the Company achieved since we last reported earnings," said William W. Smith, Jr., President and CEO of Smith Micro Software. "We made significant progress with all three of our U.S.-based Tier 1 carrier customers, including finalizing the commercial agreement for one carrier's next-generation family safety service, which will be powered by our SafePath(r) 7 platform. We are now strategically positioned to offer our market-leading family safety platform to the majority of U.S. mobile subscribers for the foreseeable future.

"Consumer demand for digital lifestyle services continues to grow, the total addressable market for our core product line is massive, and our working relationships with our major customers have never been more productive," Smith continued. "The next chapter of the Smith Micro growth story is just beginning."

Third Quarter 2021 Financial Results

Smith Micro reported revenue of $16.4 million for the third quarter ended September 30, 2021, compared to $12.6 million reported in the third quarter ended September 30, 2020.

Third quarter 2021 gross profit was $12.8 million compared to $11.3 million reported in the third quarter of 2020.

Gross profit as a percentage of revenue was 78 percent for the third quarter of 2021 compared to 90 percent for the third quarter of 2020.

Generally accepted accounting principles in the United States ("GAAP") net loss for the third quarter of 2021 was $18.6 million, or $0.34 loss per share, compared to GAAP net income of $161 thousand, or break even on a diluted earnings per share basis, for the third quarter of 2020.

Non-GAAP net loss (which excludes stock-based compensation, amortization of intangibles, CFO transition costs, acquisition costs including changes in fair value of contingent consideration, and costs related to the acquisition of certain non-development intellectual property) for the third quarter of 2021 was $258 thousand, or break even on an earnings per share basis, compared to non-GAAP net income of $1.8 million, or $0.04 diluted earnings per share, for the third quarter of 2020.

Third Quarter Year-to-Date 2021 Financial Results

Smith Micro reported revenue of $43.7 million for the nine months ended September 30, 2021, compared to $38.9 million reported in the nine months ended September 30, 2020.

Gross profit for the nine months ended September 30, 2021 and 2020 was $35.1 million.

Gross profit as a percentage of revenue was 80 percent for the nine months ended September 30, 2021 compared to 90 percent for the nine months ended September 30, 2020.

GAAP net loss for the nine months ended September 30, 2021 was $27.0 million, or $0.54 loss per share, compared to GAAP net income of $3.6 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, CFO transition costs, acquisition costs including changes in fair value of contingent consideration, and costs related to the acquisition of certain non-development intellectual property) for the nine months ended September 30, 2021 was $139 thousand, or break even on an earnings per share basis, compared to non-GAAP net income of $9.0 million, or $0.21 diluted earnings per share, for the nine months ended September 30, 2020.

Total cash and cash equivalents as of September 30, 2021 were $32.4 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 free cash flow, and 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, CFO transition costs, acquisition costs including changes in fair value of contingent consideration, and costs related to the acquisition of certain non-development intellectual property. 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, November 10, 2021 at 4:30 p.m. ET, to discuss the Company's third 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 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, the impact of the COVID-19 pandemic on our business and financial results, delays in adoption of our products and services by our customers and their end users, 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

September 30, December 31,

2021 2020

ASSETS

Current Assets:

Cash & cash equivalents $ 32,372 $ 25,754

Accounts receivable, net 12,616 12,347

Prepaid and other assets 1,926 1,189

Total current assets 46,914 39,290

Equipment & improvements, net 3,212 2,170

Right-of-use assets 6,051 5,785

Other assets 700 694

Intangible assets, net 38,240 12,698

Goodwill 39,591 12,266

TOTAL ASSETS $ 134,708 $ 72,903



LIABILITIES & STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable $ 4,326 $ 2,282

Accrued payroll and benefits 3,956 2,867

Current operating lease liabilities 1,440 1,433

Other accrued liabilities 14,588 216

Deferred revenue 701 1,572

Total current liabilities 25,011 8,370



Operating lease liabilities 4,860 4,805

Deferred rent 892 887

Deferred tax liability, net 59 59

Other long-term liabilities 66 66

Total non-current liabilities 5,877 5,817



Stockholders' Equity:

Common stock 55 41

Additional paid in capital 352,030 279,905

Accumulated comprehensive deficit (248,265 ) (221,230 )

Total stockholders' equity 103,820 58,716

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 134,708 $ 72,903



Smith Micro Software, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)

unaudited

unaudited

For the Three Months

For the Nine Months

Ended September 30,

Ended September 30,

2021

2020

2021

2020

Revenues

$

16,443

$

12,629

$

43,743

$

38,883

Cost of revenues

3,692

1,326

8,595

3,767

Gross profit

12,751

11,303

35,148

35,116

Operating expenses:

Selling and marketing

5,046

2,655

14,131

8,055

Research and development

8,159

5,455

21,315

13,787

General and administrative

5,143

2,997

13,746

9,741

Change in fair value of contingent consideration

12,864

-

12,864

-

Total operating expenses

31,212

11,107

62,056

31,583

Operating income (loss)

(18,461

)

196

(26,908

)

3,533

Non-operating income (expense):

Interest income, net

1

7

25

94

Other income (expense), net

(2

)

3

7

3

Income (loss) before provision for income taxes

(18,462

)

206

(26,876

)

3,630

Income tax expense

145

45

159

45

Net income (loss)

$

(18,607

)

$

161

$

(27,035

)

$

3,585

Earnings (loss) per share:

Basic

$

(0.34

)

$

0.00

$

(0.54

)

$

0.09

Diluted

$

(0.34

)

$

0.00

$

(0.54

)

$

0.08

Weighted average shares outstanding:

Basic

53,939

41,351

50,147

40,656

Diluted

53,939

43,026

50,147

42,577

Smith Micro Software, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)

unaudited unaudited

For the Three Months For the Nine Months

Ended September 30, Ended September 30,

2021 2020 2021 2020

Revenues $ 16,443 $ 12,629 $ 43,743 $ 38,883

Cost of revenues 3,692 1,326 8,595 3,767

Gross profit 12,751 11,303 35,148 35,116



Operating expenses:

Selling and marketing 5,046 2,655 14,131 8,055

Research and development 8,159 5,455 21,315 13,787

General and administrative 5,143 2,997 13,746 9,741

Change in fair value of 12,864 - 12,864 - contingent consideration

Total operating expenses 31,212 11,107 62,056 31,583

Operating income (loss) (18,461 ) 196 (26,908 ) 3,533

Non-operating income (expense):

Interest income, net 1 7 25 94

Other income (expense), net (2 ) 3 7 3

Income (loss) before (18,462 ) 206 (26,876 ) 3,630 provision for income taxes

Income tax expense 145 45 159 45

Net income (loss) $ (18,607 ) $ 161 $ (27,035 ) $ 3,585



Earnings (loss) per share:

Basic $ (0.34 ) $ 0.00 $ (0.54 ) $ 0.09

Diluted $ (0.34 ) $ 0.00 $ (0.54 ) $ 0.08



Weighted average shares outstanding:

Basic 53,939 41,351 50,147 40,656

Diluted 53,939 43,026 50,147 42,577

Smith Micro Software, Inc.

Consolidated Statements of Cash Flows

(in thousands)

unaudited

unaudited

For the Three Months

For the Nine Months

Ended September 30,

Ended September 30,

2021

2020

2021

2020

Operating activities:

Net income (loss)

$

(18,607

)

$

161

$

(27,035

)

$

3,585

Adjustments to reconcile net income (loss) to net cash

provided by operating activities:

Depreciation and amortization

3,391

1,014

8,872

2,676

Non-cash lease expense

201

294

819

805

Change in fair value of contingent consideration

12,864

-

12,864

-

Provision for doubtful accounts and other adjustments

to accounts receivable

-

(50

)

(3

)

(59

)

Provision for excess and obsolete inventory

-

-

(97

)

-

Stock based compensation

1,327

811

3,622

2,252

Changes in operating accounts:

Accounts receivable

2,311

2,796

5,951

1,159

Prepaid expenses and other assets

26

103

(199

)

(530

)

Accounts payable and accrued liabilities

(571

)

(1,099

)

(1,648

)

(1,785

)

Deferred revenue

(163

)

(89

)

(871

)

173

Net cash provided by operating activities

779

3,941

2,275

8,276

Investing activities:

Acquisitions, net

-

(1,350

)

(56,865

)

(13,500

)

Capital expenditures

(402

)

(360

)

(738

)

(1,212

)

Other investing activities

5

11

74

(193

)

Net cash used in investing activities

(397

)

(1,699

)

(57,529

)

(14,905

)

Financing activities:

Proceeds from common stock offering, net

-

-

59,711

-

Proceeds from exercise of common stock warrants

2,026

-

2,066

4,196

Other financing activities

28

16

95

37

Net cash provided by financing activities

2,054

16

61,872

4,233

Net increase (decrease) in cash and cash equivalents

2,436

2,258

6,618

(2,396

)

Cash and cash equivalents, beginning of period

29,936

23,614

25,754

28,268

Cash and cash equivalents, end of period

$

32,372

$

25,872

$

32,372

$

25,872

Free cash flow:

Net cash provided by operating activities

$

779

$

3,941

$

2,275

$

8,276

Capital expenditures

(402

)

(360

)

(738

)

(1,212

)

Free cash flow (1)

$

377

$

3,581

$

1,537

$

7,064

(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 Nine Months

Ended September 30, Ended September 30,

2021 2020 2021 2020

Operating activities:

Net income (loss) $ (18,607 ) $ 161 $ (27,035 ) $ 3,585

Adjustments to reconcilenet income (loss) to netcash

provided by operatingactivities:

Depreciation and 3,391 1,014 8,872 2,676 amortization

Non-cash lease expense 201 294 819 805

Change in fair value of 12,864 - 12,864 - contingent consideration

Provision for doubtfulaccounts and otheradjustments - (50 ) (3 ) (59 )

to accounts receivable

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

Stock based compensation 1,327 811 3,622 2,252

Changes in operating accounts:

Accounts receivable 2,311 2,796 5,951 1,159

Prepaid expenses and 26 103 (199 ) (530 )other assets

Accounts payable and (571 ) (1,099 ) (1,648 ) (1,785 )accrued liabilities

Deferred revenue (163 ) (89 ) (871 ) 173

Net cash provided by 779 3,941 2,275 8,276 operating activities

Investing activities:

Acquisitions, net - (1,350 ) (56,865 ) (13,500 )

Capital expenditures (402 ) (360 ) (738 ) (1,212 )

Other investing 5 11 74 (193 )activities

Net cash used in (397 ) (1,699 ) (57,529 ) (14,905 )investing activities

Financing activities:

Proceeds from common - - 59,711 - stock offering, net

Proceeds from exercise 2,026 - 2,066 4,196 of common stock warrants

Other financing 28 16 95 37 activities

Net cash provided by 2,054 16 61,872 4,233 financing activities

Net increase (decrease)in cash and cash 2,436 2,258 6,618 (2,396 )equivalents

Cash and cashequivalents, beginning 29,936 23,614 25,754 28,268 of period

Cash and cashequivalents, end of $ 32,372 $ 25,872 $ 32,372 $ 25,872 period



Free cash flow:

Net cash provided by $ 779 $ 3,941 $ 2,275 $ 8,276 operating activities

Capital expenditures (402 ) (360 ) (738 ) (1,212 )

Free cash flow (1) $ 377 $ 3,581 $ 1,537 $ 7,064



(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

CFO Transition Costs

Acquisition Costs

Non Development Intellectual Property

Non- GAAP

Three Months Ended 9/30/2021

Gross profit

$

12,751

$

-

$

-

$

-

$

-

$

-

$

12,751

Selling and marketing expenses

5,046

(238

)

(1,979

)

-

-

-

2,829

Research and development expenses

8,159

(270

)

(1,036

)

-

-

-

6,853

General and administrative expenses

5,143

(819

)

-

(143

)

-

(1,000

)

3,181

Change in fair value of contingent consideration

12,864

-

-

-

(12,864

)

-

-

Total operating expenses

31,212

(1,327

)

(3,015

)

(143

)

(12,864

)

(1,000

)

12,863

Loss before provision for income taxes

(18,462

)

1,327

3,015

143

12,864

1,000

(113

)

Net loss

(18,607

)

1,327

3,015

143

12,864

1,000

(258

)

Earnings (loss) per share: basic

(0.34

)

0.02

0.06

0.00

0.24

0.02

(0.00

)

Earnings (loss) per share: diluted

(0.34

)

0.02

0.06

0.00

0.24

0.02

(0.00

)

Three Months Ended 9/30/2020

Gross profit

$

11,303

$

-

$

-

$

-

$

-

$

-

$

11,303

Selling and marketing expenses

2,655

(146

)

(475

)

-

-

-

2,034

Research and development expenses

5,455

(147

)

(366

)

-

-

-

4,942

General and administrative expenses

2,997

(518

)

-

-

-

-

2,479

Total operating expenses

11,107

(811

)

(841

)

-

-

-

9,455

Income before provision for income taxes

206

811

841

-

-

-

1,858

Net income

161

811

841

-

-

-

1,813

Earnings per share: basic

0.00

0.02

0.02

-

-

-

0.04

Earnings per share: diluted

0.00

0.02

0.02

-

-

-

0.04

Nine Months Ended 9/30/2021

Gross profit

$

35,148

$

1

$

-

$

-

$

-

$

-

$

35,149

Selling and marketing expenses

14,131

(663

)

(5,703

)

-

-

-

7,765

Research and development expenses

21,315

(704

)

(2,255

)

-

-

-

18,356

General and administrative expenses

13,746

(2,254

)

-

(143

)

(1,587

)

(1,000

)

8,762

Change in fair value of contingent consideration

12,864

-

-

-

(12,864

)

-

-

Total operating expenses

62,056

(3,621

)

(7,958

)

(143

)

(14,451

)

(1,000

)

34,883

Income (loss) before provision for income taxes

(26,876

)

3,622

7,958

143

14,451

1,000

298

Net income (loss)

(27,035

)

3,622

7,958

143

14,451

1,000

139

Earnings (loss) per share: basic

(0.54

)

0.07

0.16

0.00

0.29

0.02

0.00

Earnings (loss) per share: diluted

(0.54

)

0.07

0.16

0.00

0.29

0.02

0.00

Nine Months Ended 9/30/2020

Gross profit

$

35,116

$

-

$

-

$

-

$

-

$

-

$

35,116

Selling and marketing expenses

8,055

(404

)

(1,225

)

-

-

-

6,426

Research and development expenses

13,787

(412

)

(980

)

-

-

-

12,395

General and administrative expenses

9,741

(1,436

)

-

-

(918

)

-

7,387

Total operating expenses

31,583

(2,252

)

(2,205

)

-

(918

)

-

26,208

Income before provision for income taxes

3,630

2,252

2,205

-

918

-

9,005

Net income

3,585

2,252

2,205

-

918

-

8,960

Earnings per share: basic

0.09

0.06

0.05

-

0.02

-

0.22

Earnings per share: diluted

0.08

0.05

0.05

-

0.02

-

0.21

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20211110006279/en/

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