Smith Micro Reports 2017 First Quarter Financial Results

ALISO VIEJO, Calif.--()--Smith Micro Software, Inc. (NASDAQ: SMSI) today reported financial results for its first quarter ended March 31, 2017.

We have essentially completed the execution of Smith Micro’s restructuring plan, implemented over the past two quarters, to achieve a reduction of costs, improve utilization of our total resources, and streamline our management and business processes,” said William W. Smith, Jr., President and CEO of Smith Micro Software. “With our progress on these strategic efforts, we are excited and remain confident about maximizing the opportunities we continue to see ahead, particularly with our SafePath and QuickLink IoT Services (formerly known as NetWise DM/FOTA) Platforms.”

Fiscal First Quarter 2017 Financial Results:

Smith Micro Software reported revenue of $5.6 million for the first quarter ended March 31, 2017, compared to $7.2 million reported in the first quarter of 2016.

First quarter gross profit was $4.3 million, compared to $5.1 million reported in the first quarter of 2016.

Gross profit as a percentage of revenue was 77.0 percent for the first quarter of 2017, compared to 70.7 percent for the same quarter last year.

GAAP net loss for the first quarter of 2017 was $2.2 million, or a loss of $0.18 per share, compared to GAAP net loss of $3.7 million, or $0.32 per share, for the first quarter of 2016.

Non-GAAP net loss (which excludes stock-based compensation, amortization of intangible assets, fair value adjustments, non-cash debt issuance and discount costs, and normalizes tax expense) for the first quarter of 2017 was $1.4 million, or $0.11 loss per share, compared to non-GAAP net loss of $2.1 million, or $0.18 per share, for the first quarter of 2016.

Total cash and cash equivalents at March 31, 2017 were $2.5 million.

The Company uses 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 that this presentation may be more meaningful in analyzing our income generation since stock-based compensation, amortization of intangible assets, fair value adjustments, and non-cash debt issuance and discount costs are excluded from the non-GAAP earnings calculation and adjustments are made for Proforma taxes. Since we are in a cumulative loss position, the non-GAAP income tax expense (benefit) for the fiscal year 2017 was computed by using a tax rate of 38 percent 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 tables below present the differences between non-GAAP earnings 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-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 Software will hold an investor conference call today to discuss the Company’s first quarter 2017 results at 4:30 p.m. ET, May 3, 2017. To access the call, dial 888-466-4582; international participants can call 719-325-2457. When prompted provide the participant pass code 5156133. 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, device manufacturers, and enterprise businesses around the world. From optimizing wireless networks to uncovering customer experience insights, and from streamlining Wi-Fi access to ensuring family safety, our solutions enrich today’s connected lifestyles while creating new opportunities to engage consumers via smartphones. Our portfolio also includes a wide range of products for creating, sharing and monetizing rich content, such as visual messaging, video streaming, and 2D/3D graphics applications. For more information, visit smithmicro.com. (NASDAQ: SMSI)

Safe Harbor Statement:

This release contains forward-looking statements that involve risks and uncertainties, including without limitation, forward-looking statements relating to the company’s financial prospects and other projections of its performance, the existence of new sales opportunities and interest in the company’s products and solutions, the company's ability to increase its revenue by capitalizing on new opportunities, and customer concentration given that the majority of our sales depend on a few large client relationships, including Sprint. Among the important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements are the company’s ability to continue as a going concern, our ability to raise more funds to meet our capital needs, changes in demand for the company’s products from its customers and their end-users, new and changing technologies, customer acceptance and timing of deployment of those technologies, and the company's ability to compete effectively with other software and technology companies. These and other factors discussed in the company's 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 regarding future events and business performance as of the date of this release, and the company does not undertake any obligation to update these statements to reflect events or circumstances occurring after the date of this release.

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 companies.

Note: Financial Schedules Attached

Smith Micro Software, Inc.
Reconciliation of GAAP to Non-GAAP Results
(in thousands, except per share amounts) - unaudited
             
Stock Intangibles Change in Note Issue/ Non-

GAAP

Compensation

Amortization

Fair Value

Discount

Taxes

GAAP

Three Months Ended 3/31/17:

Gross profit $4,293 $- $- $- $- $- $4,293
Loss before provision for income taxes ($2,224 ) $446 $65 ($708 ) $190 $- ($2,231 )
Net loss ($2,232 ) $446 $65 ($708 ) $190 $856 ($1,383 )
EPS-diluted ($0.18 ) $0.04 $0.00 ($0.06 ) $0.02 $0.07 ($0.11 )
 

Three Months Ended 3/31/16:

Gross profit $5,101 $2 $- $- $- $- $5,103
Loss before provision for income taxes ($3,680 ) $361 $- $- $- $- ($3,319 )
Net loss ($3,706 ) $361 $- $- $- $1,287 ($2,058 )
EPS-diluted ($0.32 ) $0.03 $0.00 $0.00 $0.00 $0.11 ($0.18 )
 
Smith Micro Software, Inc.
Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2017 and 2016
(in thousands, except per share amounts) - unaudited
   
For the Three Months
Ended March 31,

2017

2016

Revenues $ 5,576 $ 7,214
Cost of revenues   1,283     2,113  
Gross profit 4,293 5,101
 
Operating expenses:
Selling and marketing 1,793 2,370
Research and development 2,497 3,923
General and administrative 2,189 2,486
Restructuring expense   392     -  
Total operating expenses   6,871     8,779  
Operating loss (2,578 ) (3,678 )
Non-operating income:
Change in fair value of warrant liability 708 -
Interest income (expense), net (344 ) 1
Other expense   (10 )   (3 )
Loss before provision for income taxes   (2,224 )   (3,680 )
Provision for income tax expense   8     26  
Net loss $ (2,232 ) $ (3,706 )
 
Other comprehensive income, before tax:
Unrealized holding gains on available-for-sale securities   -     2  
Other comprehensive income, net of tax   -     2  
Comprehensive loss $ (2,232 ) $ (3,704 )
 
Loss per share:
Basic and diluted $ (0.18 ) $ (0.32 )
 
Weighted average shares outstanding:
Basic and diluted 12,163 11,524
 
Smith Micro Software, Inc.
Consolidated Balance Sheets
(in thousands)
  March 31,   December 31,

2017

2016

(unaudited) (audited)
ASSETS
Current Assets:
Cash & cash equivalents $ 2,504 $ 2,229
Accounts receivable, net 4,705 4,962
Income tax receivable 1 1
Inventory, net 13 12
Prepaid and other assets   508     713  
Total current assets 7,731 7,917
Equipment & improvements, net 1,651 1,811
Other assets 146 149
Intangible assets, net 680 745
Goodwill   3,685     3,686  
TOTAL ASSETS $ 13,893   $ 14,308  
 
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,600 $ 1,907
Accrued liabilities 3,281 3,503
Related party notes payable 2,000 -
Deferred revenue   684     98  
Total current liabilities 7,565 5,508
 
Related party notes payable, net 1,062 967
Notes payable, net 1,062 967
Warrant liability 502 1,210
Other long-term liabilities 2,873 2,971
Deferred tax liability   181     181  
Total non-current liabilities 5,680 6,296
 
Stockholders' Equity:
Common stock 12 12
Additional paid in capital 228,265 227,889
Accumulated comprehensive deficit   (227,629 )   (225,397 )
Total stockholders' equity   648     2,504  
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 13,893   $ 14,308  

Contacts

IR INQUIRIES:
Smith Micro Software, Inc.
Charles Messman
Investor Relations
949-362-5800
IR@smithmicro.com

Release Summary

Smith Micro Software (NASDAQ: SMSI) reports First Quarter 2017 Financial Results

Contacts

IR INQUIRIES:
Smith Micro Software, Inc.
Charles Messman
Investor Relations
949-362-5800
IR@smithmicro.com