Smith Micro Reports Second Quarter and Year-to-Date 2023 Financial Results

PITTSBURGH--()--Smith Micro Software, Inc. (NASDAQ: SMSI) (“Smith Micro” or the “Company”) today reported financial results for its second quarter ended June 30, 2023.

“The Company achieved a number of significant targets across multiple fronts during the second quarter of 2023,” said William W. Smith, Jr., president, chief executive officer, and chairman of the board of Smith Micro. “Notably, we have now completed our development efforts to merge the code from our various acquisitions into our flagship SafePath® platform after a very complex and lengthy process, which represents a significant milestone for the Company.”

Smith continued, “From a financial perspective, I am pleased that we exceeded our quarterly cost reduction goal of $4 million in savings compared to the fourth quarter of 2022, which has created momentum in optimizing our organizational footprint and positioning the Company to see a return to growth, improved gross margins, and profitability on a non-GAAP basis during the third quarter.”

Second Quarter 2023 Financial Results

Smith Micro reported revenue of $10.3 million for the quarter ended June 30, 2023, compared to $12.7 million reported in the quarter ended June 30, 2022.

Gross profit for the quarter ended June 30, 2023 was $7.7 million, compared to $9.1 million for the quarter ended June 30, 2022. Non-GAAP gross profit for the quarter ended June 30, 2023 was $7.8 million compared to $9.1 million for the quarter ended June 30, 2022.

Gross profit as a percentage of revenue was 75 percent for the quarter ended June 30, 2023, compared to 71 percent for the quarter ended June 30, 2022. Non-GAAP gross profit as a percentage of revenue was 75 percent for the quarter ended June 30, 2023 and 72 percent for the quarter ended June 30, 2022.

GAAP net loss for the quarter ended June 30, 2023 was $5.7 million, or $0.09 loss per share, compared to GAAP net loss of $8.5 million, or $0.15 loss per share, for the quarter ended June 30, 2022.

Non-GAAP net loss for the quarter ended June 30, 2023 was $0.6 million, or $0.01 loss per share, compared to non-GAAP net loss of $4.8 million, or $0.09 loss per share, for the quarter ended June 30, 2022. Non-GAAP net loss excludes the items noted below under "Non-GAAP Measures."

Second Quarter Year to Date 2023 Financial Results

Smith Micro reported revenue of $21.3 million for the six months ended June 30, 2023, compared to $25.4 million reported in the six months ended June 30, 2022.

Gross profit for the six months ended June 30, 2023 was $15.4 million compared to $18.2 million reported for the same period in 2022.

Gross profit as a percentage of revenue was 72 percent for the six months ended June 30, 2023 compared to 71 percent for the six months ended June 30, 2022.

GAAP net loss for the six months ended June 30, 2023 was $12.6 million, or $0.21 loss per share, compared to GAAP net loss of $15.5 million, or $0.28 loss per share, for the six months ended June 30, 2022.

Non-GAAP net loss for the six months ended June 30, 2023 was $4.2 million, or $0.07 loss per share, compared to non-GAAP net loss of $8.7 million, or $0.16 loss per share, for the six months ended June 30, 2022. Non-GAAP net loss excludes the items noted below under "Non-GAAP Measures".

Total cash and cash equivalents as of June 30, 2023 were $6.4 million.

Non-GAAP Measures

To supplement our financial information presented in accordance with GAAP, the Company considers, and has included in this press release, the following non-GAAP financial measures and a non-GAAP reconciliation from the equivalent GAAP metric: non-GAAP net loss, non-GAAP gross profit, non-GAAP gross profit as a percentage of revenue and non-GAAP diluted (loss) 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 compensation, intangibles amortization, depreciation, fair value adjustments, amortization of debt issuance costs and discount, and personnel severance and reorganization activities. 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 loss and net 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-GAAP 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 9, 2023, at 4:30 p.m. ET, to discuss the Company’s second quarter 2023 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. An internet webcast is available at https://event.choruscall.com/mediaframe/webcast.html?webcastid=3Ib7tsp6. 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, the Smith Micro logo and SafePath 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, goals 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 reduction in revenue from a customer transition services agreement earlier than expected, delays in our ability to fully execute on any remaining expense reduction plans, the risk of harm to our business resulting from our cost reduction efforts, customer concentration, given that the majority of our sales depend on a few large customer relationships and the loss of any of them could materially and negatively affect our business, delay or failure of our customers to accept and deploy our products and services or new or upgraded versions thereof, delay or failure of our customers’ end users to adopt our products and services or new or upgraded versions thereof, our reliance on third party application stores for the distribution of our software applications to users and any barriers to such distribution, including any delay or failure of such third party to approve new versions of our applications or their implementation of policies that may be harmful to our business, 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 and customer acceptance and timing of deployment of those technologies, our ability to compete effectively with other software and technology companies, and the existence and terms of our convertible notes and related agreements, including that they may restrict our ability to obtain additional financing, and adversely affect our business, financial condition and cash flows from operations in the future. 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 except share and par value data)

 

 

 

 

 

 

 

 

June 30,
2023

 

December 31,
2022

 

(unaudited)

 

(audited)

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

6,417

 

 

$

14,026

 

Accounts receivable, net of allowance for doubtful accounts of $3 and $3 (2023 and 2022, respectively)

 

11,871

 

 

 

10,501

 

Prepaid expenses and other current assets

 

3,351

 

 

 

1,983

 

Total current assets

 

21,639

 

 

 

26,510

 

Equipment and improvements, net

 

1,117

 

 

 

1,498

 

Right-of-use assets

 

3,033

 

 

 

3,722

 

Other assets

 

485

 

 

 

490

 

Intangible assets, net

 

33,355

 

 

 

36,320

 

Goodwill

 

35,041

 

 

 

35,041

 

Total assets

$

94,670

 

 

$

103,581

 

Liabilities and Stockholders' Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

3,343

 

 

$

3,236

 

Accrued payroll and benefits

 

2,708

 

 

 

3,883

 

Current operating lease liabilities

 

1,454

 

 

 

1,441

 

Other current liabilities

 

1,829

 

 

 

1,589

 

Current portion of convertible notes payable

 

7,062

 

 

 

9,007

 

Derivative liabilities

 

217

 

 

 

1,575

 

Total current liabilities

 

16,613

 

 

 

20,731

 

Non-current liabilities:

 

 

 

Warrant liabilities

 

1,194

 

 

 

3,317

 

Operating lease liabilities

 

2,196

 

 

 

2,976

 

Deferred tax liabilities, net

 

178

 

 

 

178

 

Total non-current liabilities

 

3,568

 

 

 

6,471

 

Commitments and contingencies

 

 

 

Stockholders' equity:

 

 

 

Common stock, par value $0.001 per share; 100,000,000 shares authorized; 65,202,050 and 56,197,910 shares issued and outstanding (2023 and 2022, respectively)

 

65

 

 

 

56

 

Additional paid-in capital

 

368,527

 

 

 

357,875

 

Accumulated comprehensive deficit

 

(294,103

)

 

 

(281,552

)

Total stockholders’ equity

 

74,489

 

 

 

76,379

 

Total liabilities and stockholders' equity

$

94,670

 

 

$

103,581

 

Smith Micro Software, Inc.

 

 

 

 

 

 

 

Consolidated Statement of Operations

 

 

 

 

 

 

 

(in thousands except share data)

 

 

 

 

 

 

 

 

For the Three Months Ended June 30,

 

For the Six Months Ended

June 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

Revenues

$

10,338

 

 

$

12,674

 

 

$

21,268

 

 

$

25,409

 

Cost of revenues (including depreciation of $13, $27, $27, and $60 in the three and six months ended June 30, 2023 and 2022, respectively)

 

2,589

 

 

 

3,617

 

 

 

5,871

 

 

 

7,253

 

Gross profit

 

7,749

 

 

 

9,057

 

 

 

15,397

 

 

 

18,156

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling and marketing

 

2,628

 

 

 

3,720

 

 

 

6,182

 

 

 

6,701

 

Research and development

 

3,705

 

 

 

8,080

 

 

 

9,573

 

 

 

15,346

 

General and administrative

 

3,040

 

 

 

3,753

 

 

 

6,515

 

 

 

7,677

 

Depreciation and amortization

 

1,620

 

 

 

1,877

 

 

 

3,305

 

 

 

3,844

 

Total operating expenses

 

10,993

 

 

 

17,430

 

 

 

25,575

 

 

 

33,568

 

Operating loss

 

(3,244

)

 

 

(8,373

)

 

 

(10,178

)

 

 

(15,412

)

Other income (expense):

 

 

 

 

 

 

 

Change in fair value of warrant and derivative liabilities

 

429

 

 

 

 

 

 

3,413

 

 

 

 

Loss on derecognition of debt

 

(775

)

 

 

 

 

 

(1,402

)

 

 

 

Interest (expense) income, net

 

(2,037

)

 

 

2

 

 

 

(4,297

)

 

 

(2

)

Other expense, net

 

(36

)

 

 

(91

)

 

 

(76

)

 

 

(32

)

Loss before provision for income taxes

 

(5,663

)

 

 

(8,462

)

 

 

(12,540

)

 

 

(15,446

)

Provision for income tax expense

 

2

 

 

 

31

 

 

 

11

 

 

 

50

 

Net loss

$

(5,665

)

 

$

(8,493

)

 

$

(12,551

)

 

$

(15,496

)

 

 

 

 

 

 

 

 

Loss per share:

 

 

 

 

 

 

 

Basic and diluted

$

(0.09

)

 

$

(0.15

)

 

$

(0.21

)

 

$

(0.28

)

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic and diluted

 

62,453

 

 

 

55,183

 

 

 

59,726

 

 

 

55,844

 

Smith Micro Software, Inc.

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows

 

 

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

Operating activities:

 

 

 

 

 

 

 

Net loss

$

(5,665

)

 

$

(8,493

)

 

$

(12,551

)

 

$

(15,496

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

1,633

 

 

 

1,904

 

 

 

3,332

 

 

 

3,902

 

Non-cash lease expense

 

345

 

 

 

335

 

 

 

689

 

 

 

673

 

Change in fair value of warrant and derivative liabilities

 

(429

)

 

 

 

 

 

(3,413

)

 

 

 

Loss on derecognition of debt

 

775

 

 

 

 

 

 

1,402

 

 

 

 

Amortization of debt discount and issuance costs

 

1,938

 

 

 

 

 

 

4,055

 

 

 

 

Provision for doubtful accounts

 

 

 

 

(5

)

 

 

 

 

 

 

Stock based compensation

 

1,030

 

 

 

1,688

 

 

 

1,975

 

 

 

2,754

 

Gain on disposal of assets

 

14

 

 

 

 

 

 

11

 

 

 

 

Changes in operating accounts:

 

 

 

 

 

 

 

Accounts receivable

 

(688

)

 

 

497

 

 

 

(1,373

)

 

 

(975

)

Prepaid expenses and other assets

 

(94

)

 

 

(309

)

 

 

69

 

 

 

(527

)

Accounts payable and accrued liabilities

 

(1,872

)

 

 

(640

)

 

 

(2,309

)

 

 

(1,812

)

Other liabilities

 

857

 

 

 

(15

)

 

 

622

 

 

 

(146

)

Net cash used in operating activities

 

(2,156

)

 

 

(5,038

)

 

 

(7,491

)

 

 

(11,627

)

Investing activities:

 

 

 

 

 

 

 

Capital expenditures, net

 

 

 

 

(49

)

 

 

3

 

 

 

(112

)

Other investing activities

 

71

 

 

 

71

 

 

 

71

 

 

 

83

 

Net cash provided by (used in) investing activities

 

71

 

 

 

22

 

 

 

74

 

 

 

(29

)

Financing activities:

 

 

 

 

 

 

 

Proceeds from financing arrangements

 

 

 

 

750

 

 

 

442

 

 

 

1,291

 

Repayments of financing arrangements

 

(222

)

 

 

(210

)

 

 

(642

)

 

 

(391

)

Other financing activities

 

 

 

 

2

 

 

 

8

 

 

 

35

 

Net cash (used in) provided by financing activities

 

(222

)

 

 

542

 

 

 

(192

)

 

 

935

 

Net decrease in cash and cash equivalents

 

(2,307

)

 

 

(4,474

)

 

 

(7,609

)

 

 

(10,721

)

Cash and cash equivalents, beginning of period

$

8,724

 

 

$

9,831

 

 

$

14,026

 

 

$

16,078

 

Cash and cash equivalents, end of period

$

6,417

 

 

$

5,357

 

 

$

6,417

 

 

$

5,357

 

Smith Micro Software, Inc.

 

 

 

Reconciliation of GAAP to Non-GAAP Results

 

 

 

(in thousands, except per share data) - unaudited

 

 

 

 

GAAP

Stock Compensation

Intangibles Amortization

Depreciation

Fair Value Adjustments

Amortization of Debt Issuance Costs and Discount

Personnel Severance and Reorganization Activities

Non-GAAP

Three Months Ended
June 30, 2023

 

 

 

 

 

 

 

 

Gross profit

$

7,749

 

$

 

$

 

$

13

 

$

$

$

 

$

7,762

 

Selling and marketing

 

2,628

 

 

(190

)

 

 

 

 

 

 

 

 

 

2,438

 

Research and development

 

3,705

 

 

(240

)

 

 

 

 

 

 

 

(9

)

 

3,456

 

General and administrative

 

3,040

 

 

(600

)

 

 

 

 

 

 

 

(75

)

 

2,365

 

Depreciation and amortization

 

1,620

 

 

 

 

(1,491

)

 

(129

)

 

 

 

 

 

 

Total operating expenses

 

10,993

 

 

(1,030

)

 

(1,491

)

 

142

 

 

 

 

(84

)

 

8,259

 

 

 

 

 

 

 

 

 

 

Loss before provision for income taxes

 

(5,663

)

 

1,030

 

 

1,491

 

 

142

 

 

346

 

1,938

 

84

 

 

(632

)

Net loss

 

(5,665

)

 

1,030

 

 

1,491

 

 

142

 

 

346

 

1,938

 

84

 

 

(634

)

(Loss) earnings per share: basic and diluted

 

(0.09

)

 

0.02

 

 

0.02

 

 

 

 

0.01

 

0.03

 

 

 

(0.01

)

 

 

 

 

 

 

 

 

 

Three Months Ended
June 30, 2022

 

 

 

 

 

 

 

 

Gross profit

$

9,057

 

$

1

 

$

 

$

27

 

$

$

$

 

$

9,085

 

Selling and marketing

 

3,720

 

 

(73

)

 

 

 

 

 

 

 

(721

)

 

2,926

 

Research and development

 

8,080

 

 

(268

)

 

 

 

 

 

 

 

 

 

7,812

 

General and administrative

 

3,753

 

 

(767

)

 

 

 

 

 

 

 

 

 

2,986

 

Depreciation and amortization

 

1,877

 

 

 

 

(1,577

)

 

(300

)

 

 

 

 

 

 

Total operating expenses

 

17,430

 

 

(1,108

)

 

(1,577

)

 

(300

)

 

 

 

(721

)

 

13,724

 

 

 

 

 

 

 

 

 

 

Loss before provision for income taxes

 

(8,462

)

 

1,109

 

 

1,577

 

 

327

 

 

 

 

721

 

 

(4,728

)

Net loss

 

(8,493

)

 

1,109

 

 

1,577

 

 

327

 

 

 

 

721

 

 

(4,759

)

(Loss) earnings per share: basic and diluted

 

(0.15

)

 

0.02

 

 

0.03

 

 

0.01

 

 

 

 

0.01

 

 

(0.09

)

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

Smith Micro Software, Inc.

 

 

 

Reconciliation of GAAP to Non-GAAP Results

 

 

 

(in thousands, except per share data) - unaudited

 

 

 

 

GAAP

Stock Compensation

Intangibles Amortization

Depreciation

Fair Value Adjustments

Amortization of Debt Issuance Costs and Discount

Personnel Severance and Reorganization Activities

Non-GAAP

Six Months Ended

June 30, 2023

 

 

 

 

 

 

 

 

Gross profit

$

15,397

 

$

 

$

 

$

27

 

$

 

$

$

183

 

$

15,607

 

Selling and marketing

 

6,182

 

 

(353

)

 

 

 

 

 

 

 

 

(93

)

 

5,736

 

Research and development

 

9,573

 

 

(464

)

 

 

 

 

 

 

 

 

(471

)

 

8,638

 

General and administrative

 

6,515

 

 

(1,159

)

 

 

 

 

 

 

 

 

(210

)

 

5,146

 

Depreciation and amortization

 

3,305

 

 

 

 

(2,965

)

 

(340

)

 

 

 

 

 

 

 

Total operating expenses

 

25,575

 

 

(1,976

)

 

(2,965

)

 

(340

)

 

 

 

 

(774

)

 

19,520

 

 

 

 

 

 

 

 

 

 

Loss before provision for income taxes

 

(12,540

)

 

1,976

 

 

2,965

 

 

367

 

 

(2,011

)

 

4,055

 

957

 

 

(4,231

)

Net loss

 

(12,551

)

 

1,976

 

 

2,965

 

 

367

 

 

(2,011

)

 

4,055

 

957

 

 

(4,242

)

(Loss) earnings per share: basic and diluted

 

(0.21

)

 

0.03

 

 

0.05

 

 

0.01

 

 

(0.03

)

 

0.07

 

0.02

 

 

(0.07

)

 

 

 

 

 

 

 

 

 

Six Months Ended

June 30, 2022

 

 

 

 

 

 

 

 

Gross profit

$

18,156

 

$

1

 

$

 

$

60

 

$

 

$

$

 

$

18,217

 

Selling and marketing expenses

 

6,701

 

 

(157

)

 

 

 

 

 

 

 

 

(721

)

 

5,823

 

Research and development expenses

 

15,346

 

 

(529

)

 

 

 

 

 

 

 

 

 

 

14,817

 

General and administrative expenses

 

7,677

 

 

(1,488

)

 

 

 

 

 

 

 

 

 

 

6,189

 

Change in fair value of contingent consideration

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

3,844

 

 

 

 

(3,221

)

 

(623

)

 

 

 

 

 

 

 

Total operating expenses

 

33,568

 

 

(2,174

)

 

(3,221

)

 

(623

)

 

 

 

 

(721

)

 

26,829

 

 

 

 

 

 

 

 

 

 

(Loss) Income before provision for income taxes

 

(15,446

)

 

2,175

 

 

3,221

 

 

683

 

 

 

 

 

721

 

 

(8,646

)

Net (loss) income

 

(15,496

)

 

2,175

 

 

3,221

 

 

683

 

 

 

 

 

721

 

 

(8,696

)

(Loss) earnings per share: basic and diluted

 

(0.28

)

 

0.04

 

 

0.06

 

 

0.01

 

 

 

 

 

0.01

 

 

(0.16

)

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

 

Contacts

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

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Contacts

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