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Smith Micro Reports Fourth Quarter and Fiscal Year 2018 Financial Results

ALISO VIEJO, Calif.--(BUSINESS WIRE)--

Company Achieves Growth and Profitability During the Quarter

Smith Micro Software, Inc. (NASDAQ: SMSI) today reported financial results for its fourth quarter and fiscal year ended December 31, 2018.

“Our fiscal 2018 was a solid year for the Company, achieving several significant milestones across all facets of the organization,” said William W. Smith Jr., President and CEO of Smith Micro Software. “We entered 2018 with a concentrated focus of returning the company to growth, profitability, and positive cash flow. I am pleased to report that we achieved success on all three fronts, while continuing to streamline our operations and rationalize our product lineup.”

“During the year, we significantly strengthened our balance sheet, paid down substantially all our debt obligations, and strategically acquired a third leg to our wireless product stool with the acquisition of the Smart Retail product suite that we have branded as ViewSpot.”

Mr. Smith concluded, “We enter 2019 with strong momentum, focused on maintaining our technology leadership position, adding new customers, and accelerating growth.”

Fourth Quarter 2018 Financial Results:

Smith Micro Software reported revenue of $7.4 million for the fourth quarter ended December 31, 2018, compared to $5.7 million reported in the fourth quarter ended December 31, 2017.

Fourth quarter 2018 gross profit was $6.4 million, compared to $4.4 million reported in the fourth quarter of 2017.

Gross profit as a percentage of revenue was 87 percent for the fourth quarter of 2018, compared to 76 percent for the fourth quarter of 2017.

Generally accepted accounting principles in the United States (“GAAP”) net income available to common stockholders for the fourth quarter of 2018 was $2.8 million, or $0.10 earnings per share, compared to a GAAP net loss available to common stockholders of $0.2 million, or $0.01 loss per share, for the fourth quarter of 2017.

Non-GAAP net income (which excludes stock-based compensation, amortization of intangibles, debt issuance and discount costs, fair value adjustments, loss on debt extinguishment, restructuring adjustments, acquisitions costs, preferred stock dividends, and a normalized tax expense) for the fourth quarter of 2018 was $0.9 million, or $0.03 earnings per share, compared to a non-GAAP net loss of $0.7 million, or $0.05 loss per share, for the fourth quarter of 2017.

Year Ended 2018 Financial Results:

Smith Micro Software reported revenue of $26.3 million for the year ended December 31, 2018, compared to $23.0 million reported for the year ended December 31, 2017.

Gross profit for the year ended December 31, 2018 was $22.0 million, compared to $17.9 million reported for the same period in 2017.

Gross profit as a percentage of revenue was 84 percent for the year ended December 31, 2018, compared to 78 percent for the year ended December 31, 2017.

GAAP net loss available to common stockholders for the year ended December 31, 2018 was $3.1 million, or $0.14 loss per share, compared to a GAAP net loss available to common stockholders of $6.7 million, or $0.49 loss per share, for the same period in 2017.

Non-GAAP net loss (which excludes stock-based compensation, amortization of intangibles, debt issuance and discount costs, fair value adjustments, loss on debt extinguishment, restructuring adjustments, acquisitions costs, preferred stock dividends, and a normalized tax expense) for the year ended December 31, 2018 was less than $0.1 million, or break-even earnings per share, compared to a non-GAAP net loss of $3.5 million, or $0.26 loss per share, for the year ended December 31, 2017.

Total cash and cash equivalents at December 31, 2018 were $12.2 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, loss on debt extinguishment, restructuring adjustments, acquisitions 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 and 38 percent tax rate for 2018 and 2017, respectively, 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 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, March 13, 2019 at 4:30 p.m. EDT, to discuss the Company’s fourth quarter and year ended 2018 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 and the Smith Micro logo 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, 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 Loss on Debt Extinguishment Restructuring Adjustments Acquisition Costs Preferred Stock Dividends   Taxes   Non-

GAAP

Three Months Ended 12/31/18:
Gross profit $ 6,424 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 6,424
Income before provision for

income taxes

2,783 261 60 42 (2,314 ) 203 - 201 - - 1,236
Net income available to

common stockholders

2,767 261 60 42 (2,314 ) 203 - 201 34 (315 ) 939
Earnings per share: basic 0.10 0.01 0.00 0.00 (0.09 ) 0.01 - 0.01 0.00 (0.01 ) 0.03
Earnings per share: diluted 0.10 0.01 0.00 0.00 (0.08 ) 0.01 - 0.01 0.00 (0.01 ) 0.03
 
Three Months Ended 12/31/17:
Gross profit $ 4,377 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 4,377
Loss before provision for

income taxes

(725 ) 169 63 66 - - (691 ) - - - (1,118 )
Net loss available to common

stockholders

(160 ) 169 63 66 - - (691 ) - - (140 ) (693 )
Loss per share: basic and

diluted

(0.01 ) 0.01 0.00 0.00 - - (0.05 ) - - (0.01 ) (0.05 )
 
Year Ended 12/31/18:
Gross profit $ 21,952 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 21,952
Loss before provision for

income taxes

(2,727 ) 935 249 239 812 203 - 201 - - (88 )
Net loss available to common

stockholders

(3,144 ) 935 249 239 812 203 - 201 404 34 (67 )
Loss per share: basic and

diluted

(0.14 ) 0.04 0.01 0.01 0.04 0.01 - 0.01 0.02 0.00 (0.00 )
 
Year Ended 12/31/17:
Gross profit $ 17,892 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 17,892
Loss before provision for

income taxes

(7,207 ) 1,170 258 460 - 405 (691 ) - - - (5,605 )
Net loss available to common

stockholders

(6,661 ) 1,170 258 460 - 405 (691 ) - - 1,584 (3,475 )
Loss per share: basic and

diluted

(0.49 ) 0.09 0.02 0.03 - 0.03 (0.05 ) - - 0.12 (0.26 )
 
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 For the Year Ended
Ended December 31, December 31,
2018   2017 2018   2017
Revenues $ 7,352 $ 5,732 $ 26,285 $ 22,974
Cost of revenues   928   1,355   4,333   5,082
Gross profit 6,424 4,377 21,952 17,892
 
Operating expenses:
Selling and marketing 1,296 1,519 5,784 6,186
Research and development 2,103 2,181 8,602 8,952
General and administrative 2,308 1,903 8,607 8,551
Restructuring expense   38   (691 )   173   (123 )
Total operating expenses   5,745   4,912   23,166   23,566
Operating income (loss) 679 (535 ) (1,214 ) (5,674 )
Non-operating expenses:
Interest expense, net (29 ) (192 ) (472 ) (1,120 )
Change in fair value of warrant liability 2,314 - (812 ) -
Loss on debt extinguishment (203 ) - (203 ) (405 )
Other income (expense), net   22   2   (26 )   (8 )
Income (loss) before provision for income taxes 2,783 (725 ) (2,727 ) (7,207 )
Provision for income tax expense (benefit)   (18 )   (565 )   13   (546 )
Net income (loss) 2,801 (160 ) (2,740 ) (6,661 )
Less preferred stock dividends   (34 )   -   (404 )   -
Net income (loss) available to common stockholders $ 2,767 $ (160 ) $ (3,144 ) $ (6,661 )
 
Earnings (loss) per share:
Basic $ 0.10 $ (0.01 ) $ (0.14 ) $ (0.49 )
Diluted $ 0.10 $ (0.01 ) $ (0.14 ) $ (0.49 )
 
Weighted average shares outstanding:
Basic 26,925 14,281 22,322 13,489
Diluted 27,395 14,281 22,322 13,489
 
   

Smith Micro Software, Inc.

Consolidated Balance Sheets

(in thousands)

 
December 31, December 31,
2018 2017
ASSETS
Current Assets:
Cash & cash equivalents $ 12,159 $ 2,205
Accounts receivable, net 7,130 5,145
Prepaid and other assets   795   576
Total current assets 20,084 7,926
Equipment & improvements, net 865 1,229
Deferred tax asset, net 191 404
Other assets 140 146
Intangible assets, net 238 487
Goodwill   3,685   3,685
TOTAL ASSETS $ 25,203 $ 13,877
 
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,160 $ 1,333
Accrued payroll and benefits 1,745 1,994
Related-party notes payable - 1,000
Other accrued liabilities 450 416
Deferred revenue   28   73
Total current liabilities 3,383 4,816
 
Related-party notes payable, net - 1,200
Notes payable, net - 1,558
Deferred rent 723 970
Other long-term liabilities   534   766
Total non-current liabilities 1,257 4,494
 
Stockholders' Equity:
Preferred stock - -
Common stock 28 14
Additional paid in capital 256,626 237,486
Accumulated comprehensive deficit   (236,091 )   (232,933 )
Total stockholders' equity   20,563   4,567
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 25,203 $ 13,877
 

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