Smith Micro Reports First Quarter 2020 Financial Results

Total First Quarter Revenue Grew to $13.3 million, a 58% Increase over First Quarter 2019

PITTSBURGH–(BUSINESS WIRE)–Smith Micro Software, Inc. (NASDAQ: SMSI) (“Smith Micro” or the “Company”) today reported financial results for its first quarter ended March 31, 2020.

The first quarter of 2020 was another very solid quarter for the Company and I was very pleased with the strong results that delivered revenue growth, profitability and strong free cash flow,” said William W. Smith, Jr., President and CEO of Smith Micro. “In response to the current worldwide crisis caused by the COVID-19 pandemic, our global workforce transitioned seamlessly to remote operations and continues to be very productive working from home.

Like most companies navigating current market conditions we expect some impact in the short term, but we are in the enviable position of being able to maintain our profitability and free cash flow and have a solid and growing balance sheet at hand as we work through current headwinds.”

First Quarter 2020 Financial Results

Smith Micro reported revenue of $13.3 million for the first quarter ended March 31, 2020, compared to $8.4 million reported in the first quarter ended March 31, 2019.

First quarter 2020 gross profit was $12.1 million compared to $7.5 million reported in the first quarter of 2019.

Gross profit as a percentage of revenue was 91 percent for the first quarter of 2020 compared to 89 percent for the first quarter of 2019.

Generally accepted accounting principles in the United States (“GAAP”) net income available to common stockholders for the first quarter of 2020 was $2.0 million, or $0.05 diluted earnings per share, compared to a GAAP net income available to common stockholders of $14 thousand, or $0.00 diluted earnings per share, for the first quarter of 2019.

Non-GAAP net income (which excludes stock-based compensation, amortization of intangibles, acquisitions costs, and preferred stock dividends) for the first quarter of 2020 was $4.1 million, or $0.10 diluted earnings per share, compared to a non-GAAP net income of $776 thousand, or $0.02 diluted earnings per share, for the first quarter of 2019.

Total cash and cash equivalents at March 31, 2020 were $19.5 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, 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, May 6, 2020 at 4:30 p.m. EDT, to discuss the Company’s first quarter 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

 

 

 

 

 

 

 

 

 

 

 

 

GAAP

 

Stock

Compensation

 

Intangibles

Amortization

 

Acquisition

Costs

Preferred Stock

Dividends

 

Non-

GAAP

Three Months Ended 3/31/20

 

 

 

 

 

 

 

 

 

 

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 available to common stockholders

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended 3/31/19

 

 

 

 

 

 

 

 

 

 

 

Gross profit

$

7,516

 

$

 

 

$

 

 

$

 

 

$

 

$

7,516

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing expenses

 

1,968

 

 

(53

)

 

 

(91

)

 

 

 

 

 

 

 

1,824

Research and development expenses

 

2,682

 

 

(66

)

 

 

(105

)

 

 

 

 

 

 

 

2,511

General and administrative expenses

 

2,700

 

 

(337

)

 

 

 

 

 

(76

)

 

 

 

 

2,287

Restructuring expense

 

104

 

 

 

 

 

 

 

 

 

 

 

 

 

104

Total operating expenses

 

7,454

 

 

(456

)

 

 

(196

)

 

 

(76

)

 

 

 

 

6,726

 

 

 

 

 

 

 

 

 

 

 

 

Income before provision for income taxes

 

52

 

 

456

 

 

 

196

 

 

 

76

 

 

 

 

 

780

Net income available to common stockholders

 

14

 

 

456

 

 

 

196

 

 

 

76

 

 

 

34

 

 

776

Earnings per share: basic

 

0.00

 

 

0.01

 

 

 

0.01

 

 

 

0.00

 

 

 

0.00

 

 

0.02

Earnings per share: diluted

 

0.00

 

 

0.01

 

 

 

0.01

 

 

 

0.00

 

 

 

0.00

 

 

0.02

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

Smith Micro Software, Inc.

Consolidated Statements of Operations

(in thousands, except per share data) – unaudited

 

 

 

 

 

For the Three Months

 

Ended March 31,

 

2020

 

2019

Revenues

$

13,322

 

$

8,432

 

Cost of revenues

 

1,173

 

 

916

 

Gross profit

 

12,149

 

 

7,516

 

 

 

 

 

Operating expenses:

 

 

 

Selling and marketing

 

2,787

 

 

1,968

 

Research and development

 

3,729

 

 

2,682

 

General and administrative

 

3,668

 

 

2,700

 

Restructuring expense

 

6

 

 

104

 

Total operating expenses

 

10,190

 

 

7,454

 

Operating income

 

1,959

 

 

62

 

Non-operating income (expense):

 

 

 

Interest income, net

 

86

 

 

Other expense, net

 

 

(10

)

Income before provision for income taxes

 

2,045

 

 

52

 

Income tax expense

 

 

4

 

Net income

 

2,045

 

 

48

 

Less preferred stock dividends

 

 

(34

)

Net income available to common stockholders

$

2,045

 

$

14

 

 

 

 

 

Earnings per share:

 

 

 

Basic

$

0.05

 

$

0.00

 

Diluted

$

0.05

 

$

0.00

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

Basic

 

39,482

 

 

31,297

 

Diluted

 

42,194

 

 

31,323

 

Smith Micro Software, Inc.

Consolidated Balance Sheets

(in thousands)

 

unaudited

 

audited

 

March 31,

 

December 31,

 

2020

 

2019

ASSETS

 

 

 

Current Assets:

 

 

 

Cash & cash equivalents

$

19,456

 

 

$

28,268

 

Accounts receivable, net

 

11,882

 

 

 

10,894

 

Prepaid and other assets

 

591

 

 

 

802

 

Total current assets

 

31,929

 

 

 

39,964

 

Equipment & improvements, net

 

2,152

 

 

 

2,109

 

Right-of-use assets

 

6,349

 

 

 

6,464

 

Deferred tax asset, net

 

94

 

 

 

94

 

Other assets

 

458

 

 

 

234

 

Intangible assets, net

 

15,875

 

 

 

4,535

 

Goodwill

 

11,493

 

 

 

7,797

 

TOTAL ASSETS

$

68,350

 

 

$

61,197

 

 

 

 

 

LIABILITIES & STOCKHOLDERS’ EQUITY

 

 

 

Current Liabilities:

 

 

 

Accounts payable

$

3,463

 

 

$

2,050

 

Accrued payroll and benefits

 

2,285

 

 

 

2,107

 

Current operating lease liabilities

 

1,273

 

 

 

1,221

 

Other accrued liabilities

 

271

 

 

 

244

 

Deferred revenue

 

1,690

 

 

 

98

 

Total current liabilities

 

8,982

 

 

 

5,720

 

 

 

 

 

Operating lease liabilities

 

5,548

 

 

 

5,774

 

Deferred rent

 

850

 

 

 

885

 

Other long-term liabilities

 

117

 

 

 

134

 

Total non-current liabilities

 

6,515

 

 

 

6,793

 

 

 

 

 

Stockholders’ Equity:

 

 

 

Common stock

 

40

 

 

 

38

 

Additional paid in capital

 

276,163

 

 

 

274,041

 

Accumulated comprehensive deficit

 

(223,350

)

 

 

(225,395

)

Total stockholders’ equity

 

52,853

 

 

 

48,684

 

TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY

$

68,350

 

 

$

61,197

 

Smith Micro Software, Inc.

Consolidated Statements of Cash Flows

(in thousands) – unaudited

 

 

For the Three Months Ended

 

 

March 31,

 

 

2020

 

2019

Operating activities:

 

 

 

 

Net income

 

$

2,045

 

 

$

48

 

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

 

 

 

 

Depreciation and amortization

 

 

644

 

 

 

321

 

Non-cash lease expense

 

 

244

 

 

 

194

 

Restructuring costs

 

 

6

 

 

 

104

 

Provision for doubtful accounts and other adjustments to accounts receivable

 

 

(4

)

 

 

(9

)

Provision for excess and obsolete inventory

 

 

 

 

 

1

 

Loss on disposal of fixed assets

 

 

 

 

 

(1

)

Stock based compensation

 

 

632

 

 

 

455

 

Changes in operating accounts:

 

 

 

 

Accounts receivable

 

 

(983

)

 

 

(1,759

)

Prepaid expenses and other assets

 

 

215

 

 

 

194

 

Accounts payable and accrued liabilities

 

 

(840

)

 

 

(117

)

Deferred revenue

 

 

302

 

 

 

(85

)

Net cash provided by (used in) operating activities

 

 

2,261

 

 

 

(654

)

Investing activities:

 

 

 

 

Acquisition of Circle operator business, net

 

 

(12,150

)

 

 

 

Acquisition of Smart Retail business, net

 

 

 

 

 

(3,974

)

Capital expenditures

 

 

(771

)

 

 

(110

)

Other investing activities

 

 

(215

)

 

 

 

Net cash used in investing activities

 

 

(13,136

)

 

 

(4,084

)

Financing activities:

 

 

 

 

Proceeds from exercise of common stock warrants

 

 

2,045

 

 

 

 

Dividends paid on preferred stock

 

 

 

 

 

(34

)

Other financing activities

 

 

18

 

 

 

(9

)

Net cash provided by (used in) financing activities

 

 

2,063

 

 

 

(43

)

Net decrease in cash and cash equivalents

 

 

(8,812

)

 

 

(4,781

)

Cash and cash equivalents, beginning of period

 

 

28,268

 

 

 

12,159

 

Cash and cash equivalents, end of period

 

$

19,456

 

 

$

7,378

 

 

 

 

 

 

Free cash flow:

 

 

 

 

Net cash provided by (used in) operating activities

 

$

2,261

 

 

$

(654

)

Capital expenditures

 

 

(771

)

 

 

(110

)

Free cash flow

 

$

1,490

 

 

$

(764

)

 

Contacts

IR INQUIRIES:
Charles Messman

Investor Relations

949-362-5800

IR@smithmicro.com

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