Smith Micro Reports First Quarter 2019 Financial Results

Revenue Increased to $8.4 Million

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, 2019.

We delivered a very solid quarter for the Company as we launched our
2019 fiscal year,” said William W. Smith Jr., President and CEO of Smith
Micro Software. “We saw accelerated revenue growth with our SafePath®
platform, a sixth consecutive quarter of subscriber revenue growth from
the CommSuite® platform, and strong contribution from
ViewSpot™, our recent Smart Retail acquisition that closed in early
January.”

Mr. Smith concluded, “We are off to a solid start to the fiscal year.
Our sales pipeline continues to grow across all three of our core
wireless solutions, with a broader geographical reach and a more viable
ecosystem of opportunities than we have seen in several years. Moving
forward, we will leverage and build upon that momentum and continue to
deliver growth and profitability throughout 2019.”

First Quarter 2019 Financial Results:

Smith Micro reported revenue of $8.4 million for the first quarter ended
March 31, 2019, compared to $5.5 million reported in the first quarter
ended March 31, 2018.

First quarter 2019 gross profit was $7.5 million compared to $4.2
million reported in the first quarter of 2018.

Gross profit as a percentage of revenue was 89 percent for the first
quarter of 2019 compared to 76 percent for the first quarter of 2018.

Generally accepted accounting principles in the United States (“GAAP”)
net income available to common stockholders for the first quarter of
2019 was $14 thousand, or break-even earnings per share, compared to a
GAAP net loss available to common stockholders of $2.5 million, or $0.16
loss per share, for the first quarter of 2018.

Non-GAAP net income (which excludes stock-based compensation,
amortization of intangibles, debt issuance and discount costs, fair
value adjustments, acquisition costs, preferred stock dividends, and a
normalized tax expense) for the first quarter of 2019 was $0.6 million,
or $0.02 earnings per share, compared to a non-GAAP net loss of $1.5
million, or $0.10 loss per share, for the first quarter of 2018.

Total cash and cash equivalents at March 31, 2019 were $7.4 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 a non-GAAP reconciliation
of gross profit, income (loss) before taxes, net income (loss) available
to common stockholders, 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, debt issuance and discount costs, fair value
adjustments, acquisition costs, and preferred stock dividends.
Additionally, since we are in a cumulative loss position, a non-GAAP
income tax expense (benefit) was computed using a 24 percent tax rate
for 2019 and 2018 using the Company’s normalized combined U.S. federal,
state, and foreign statutory tax rates less various tax adjustments.
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 Software 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 8, 2019 at
4:30 p.m. EDT, to discuss the Company’s first quarter 2019 financial
results. To access the call, dial 1-877-270-2148; international
participants can call 1-412-902-6510. 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, performing
analytics on any product set, and 2D/3D graphics applications. For more
information, visit www.smithmicro.com.

Smith Micro, the Smith Micro logo, SafePath, CommSuite and ViewSpot are
registered trademarks or trademarks of Smith Micro Software, Inc.
Third-party trademarks mentioned 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 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 changes in demand for our products from our customers and their
end-users, customer concentration, given that the majority of our sales
depend on a few large customer relationships, 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 amounts) – unaudited

 
 
GAAP

Stock
Compensation

Intangibles
Amortization

Note

Issue/

Discount

Fair Value
Adjustments

Acquisition
Costs

Preferred
Stock
Dividends

  Taxes   Non-

GAAP

Three Months Ended 3/31/19:
Gross profit $ 7,516 $ $ $ $ $ $ $ $ 7,516

Income before provision for income taxes

52 456 196 76 780

Net income available to common stockholders

14 456 196 76 34 (183 ) 593
Earnings per share: basic 0.00 0.01 0.01 0.00 0.00 (0.01 ) 0.02
Earnings per share: diluted 0.00 0.01 0.01 0.00 0.00 (0.01 ) 0.02
 
Three Months Ended 3/31/18:
Gross profit $ 4,154 $ $ $ $ $ $ $ $ 4,154

Loss before provision for income taxes

(2,371 ) 163 64 65 139 (1,940 )

Net loss available to common stockholders

(2,522 ) 163 64 65 139 141 476 (1,474 )

Loss per share: basic and diluted

(0.16 ) 0.01 0.00 0.00 0.01 0.01 0.03 (0.10 )
 
Note: Loss per share: basic and diluted – may be impacted by
rounding to allow rows to calculate.
 
 
Smith Micro Software, Inc.
Statements of Operations

(in thousands, except per share amounts) – unaudited

 
For the Three Months
Ended March 31,
2019   2018
Revenues $ 8,432 $ 5,463
Cost of revenues   916   1,309
Gross profit 7,516 4,154
 
Operating expenses:
Selling and marketing 1,968 1,730
Research and development 2,682 2,255
General and administrative 2,700 2,190
Restructuring expense   104  
Total operating expenses   7,454   6,175
Operating income (loss) 62 (2,021 )
Non-operating expenses:
Interest expense, net (171 )
Change in fair value of warrant liability (139 )
Other expense, net   (10 )   (40 )
Income (loss) before provision for income taxes 52 (2,371 )
Provision for income tax expense   4   10
Net income (loss) 48 (2,381 )
Less preferred stock dividends   (34 )   (141 )
Net income (loss) available to common stockholders $ 14 $ (2,522 )
 
Earnings (loss) per share:
Basic $ 0.00 $ (0.16 )
Diluted $ 0.00 $ (0.16 )
 
Weighted average shares outstanding:
Basic 31,297 15,299
Diluted 31,323 15,299
 
 
Smith Micro Software, Inc.
Consolidated Balance Sheets

(in thousands)

   
March 31, December 31,
2019 2018
ASSETS
Current Assets:
Cash & cash equivalents $ 7,378 $ 12,159
Accounts receivable, net 8,951 7,130
Prepaid and other assets   565   795
Total current assets 16,894 20,084
Equipment & improvements, net 852 865
Right-of-use assets 2,419
Deferred tax asset, net 191 191
Other assets 175 140
Intangible assets, net 5,270 238
Goodwill   7,797   3,685
TOTAL ASSETS $ 33,598 $ 25,203
 
LIABILITIES & STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable $ 1,249 $ 1,160
Accrued payroll and benefits 2,121 1,745
Current operating lease liabilities 987
Other accrued liabilities 330 450
Deferred revenue   234   28
Total current liabilities 4,921 3,383
 
Lease liabilities 1,876
Deferred rent 578 723
Other long-term liabilities   185   534
Total non-current liabilities 2,639 1,257
 
Stockholders’ Equity:
Preferred stock
Common stock 32 28
Additional paid in capital 261,990 256,626
Accumulated comprehensive deficit   (235,984 )   (236,091 )
Total stockholders’ equity   26,038   20,563
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY $ 33,598 $ 25,203

Contacts

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

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