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Smith Micro Reports Second Quarter 2021 Financial Results

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 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.

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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