Smith Micro Reports 2016 Third Quarter Financial Results

“With the shortfall in near term revenues, the Company has begun making some significant changes throughout the organization, lowering costs, better integrating the teams from our recent acquisitions, and streamlining our operations.

“With the shortfall in near term revenues, the Company has begun making some significant changes throughout the organization, lowering costs, better integrating the teams from our recent acquisitions, and streamlining our operations. We don’t expect these changes to have an impact on our ability to grow revenue as we look to return to profitability.”

Fiscal Third Quarter 2016 Financial Results:

Smith Micro Software reported revenues of $6.5 million for the third quarter ended September 30, 2016, compared to $9.6 million reported in the third quarter ended September 30, 2015.

Third quarter 2016 gross profit on both a GAAP and non-GAAP basis (which excludes stock-based compensation) was $4.7 million, compared to $7.6 million reported in the third quarter of 2015.

GAAP gross profit as a percentage of revenue was 72.2 percent for the third quarter of 2016, compared to 79.6 percent for the third quarter of 2015. Non-GAAP gross profit as a percentage of revenue was 72.3 percent for the third quarter of 2016, compared to 79.6 percent for the same quarter last year.

GAAP net loss for the third quarter of 2016 was $4.3 million, or $0.35 loss per diluted share, compared to a GAAP net loss of $0.8 million, or $0.07 loss per diluted share, for the third quarter of 2015.

Non-GAAP net loss (which excludes stock-based compensation, amortization of intangibles, and non-cash tax expense) for the third quarter of 2016 was $2.4 million, or $0.19 loss per diluted share, compared to a non-GAAP net loss of $0.1 million, or $0.01 loss per diluted share, for the third quarter of 2015.

Fiscal September Year-To-Date 2016 Financial Results:

For the nine months ended September 30, 2016, the Company reported revenues of $21.2 million, compared to $29.5 million for the nine months ended September 30, 2015.

GAAP and non-GAAP (which excludes stock-based compensation) gross profit was $15.3 million for the nine months ended September 30, 2016, compared to $23.4 million for the nine months ended September 30, 2015.

GAAP and non-GAAP gross profit as a percentage of revenues was 72.5 percent for the nine months ended September 30, 2016, compared to 79.2 percent for the same period last year.

GAAP net loss for the nine months ended September 30, 2016 was $11.3 million, or a loss of $0.96 per diluted share, compared to a GAAP net loss for the nine months ended September 30, 2015 of $2.0 million, a loss of $0.17 per diluted share.

Non-GAAP net loss (which excludes stock-based compensation, amortization of intangibles, and non-cash tax expense) for the nine months ended September 30, 2016 was $6.2 million, or $0.52 loss per diluted share, compared to a non-GAAP net loss of $0.2 million, or $0.02 per diluted share, for the nine months ended September 30, 2015.

Total cash and cash equivalents and short-term investments at September 30, 2016 were $5.9 million.

Fully diluted weighted average common shares outstanding as of September 30, 2016 were 11.8 million, compared to 11.5 million fully diluted weighted average common shares outstanding as of September 30, 2015.

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 and the amortization of intangible assets 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 period ended September 30, 2016 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 third quarter 2016 results at 4:30 p.m. ET, October 26, 2016. To access the call, dial (800) 343-0821, international participants can call 785-830-1978, when prompted provide the participant pass code 2135096. 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 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.

Smith Micro Software, Inc.

Reconciliation of GAAP to Non-GAAP Results

(in thousands, except per share amounts) – unaudited

Stock

Non-

GAAP

Compensation

Amortization

Taxes

GAAP

Three Months Ended 9/30/16:

Gross profit

$4,680

$1

$-

$-

$4,681

Loss before provision for income taxes

($4,303)

$408

$85

$-

($3,810)

Net loss

($4,314)

$408

$85

$1,459

($2,362)

EPS-diluted

($0.35)

$0.03

$0.01

$0.12

($0.19)

Three Months Ended 9/30/15:

Gross profit

$7,627

$3

$-

$-

$7,630

Loss before provision for income taxes

($764)

$544

$-

$-

($220)

Net loss

($770)

$544

$-

$89

($137)

EPS-diluted

($0.07)

$0.05

$0.00

$0.01

($0.01)

Nine Months Ended 9/30/16:

Gross profit

$15,327

$3

$-

$-

$15,330

Loss before provision for income taxes

($11,252)

$1,175

$112

$-

($9,965)

Net loss

($11,300)

$1,175

$112

$3,835

($6,178)

EPS-diluted

($0.96)

$0.10

$0.01

$0.33

($0.52)

Nine Months Ended 9/30/15:

Gross profit

$23,353

$9

$-

$-

$23,362

Loss before provision for income taxes

($1,988)

$1,697

$-

$-

($291)

Net loss

($2,011)

$1,697

$-

$133

($181)

EPS-diluted

($0.17)

$0.15

$0.00

$0.00

($0.02)

Smith Micro Software, Inc.

Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2016 and 2015

(in thousands, except per share amounts) – unaudited

For the Three Months

For the Nine Months

Ended September 30,

Ended September 30,

2016

2015

2016

2015

Revenues

$ 6,478

$ 9,586

$ 21,151

$ 29,501

Cost of revenues

1,798

1,959

5,824

6,148

Gross profit

4,680

7,627

15,327

23,353

Operating expenses:

Selling and marketing

2,541

2,220

7,389

6,639

Research and development

4,174

3,480

12,204

10,268

General and administrative

2,522

2,695

7,878

8,437

Total operating expenses

9,237

8,395

27,471

25,344

Operating loss

(4,557)

(768)

(12,144)

(1,991)

Non-operating income:

Change in fair value of warrant liability

335

335

Change in fair value of contingent liability

11

668

Interest income (expense), net

(83)

(81)

Other income (expense), net

(9)

4

(30)

3

Loss before provision for income taxes

(4,303)

(764)

(11,252)

(1,988)

Provision for income tax expense

11

6

48

23

Net loss

$ (4,314)

$ (770)

$ (11,300)

$ (2,011)

Other comprehensive income, before tax:

Unrealized holding gains on available-for-sale securities

2

1

Other comprehensive income, net of tax

2

1

Comprehensive loss

$ (4,314)

$ (770)

$ (11,298)

$ (2,010)

Loss per share:

Basic and diluted

$ (0.35)

$ (0.07)

$ (0.96)

$ (0.17)

Weighted average shares outstanding:

Basic and diluted

12,209

11,540

11,826

11,494

Smith Micro Software, Inc.

Consolidated Balance Sheets

(in thousands)

September 30,

December 31,

2016

2015

(unaudited)

(audited)

ASSETS

Current Assets:

Cash & cash equivalents

$ 5,943

$ 8,819

Short term investments

1

4,078

Accounts receivable, net

5,257

8,145

Income tax receivable

17

13

Inventory, net

18

39

Prepaid and other assets

1,225

692

Total current assets

12,461

21,786

Equipment & improvements, net

1,834

2,492

Other assets

154

195

Intangible assets, net

1,241

Goodwill

3,368

TOTAL ASSETS

$ 19,058

$ 24,473

LIABILITIES & STOCKHOLDERS’ EQUITY

Current Liabilities:

Accounts payable

$ 1,775

$ 1,708

Accrued liabilities

4,665

5,064

Warrant liability

1,761

Deferred revenue

591

440

Total current liabilities

8,792

7,212

Related party notes payable, net

883

Notes payable, net

883

Other long-term liabilities

3,108

3,235

Total non-current liabilities

4,874

3,235

Stockholders’ Equity:

Common stock

12

46

Additional paid in capital

227,565

224,867

Accumulated comprehensive deficit

(222,185)

(210,887)

Total stockholders’ equity

5,392

14,026

TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY

$ 19,058

$ 24,473

PR INQUIRIES:

IR INQUIRIES:

Suzanne Runald

Charles Messman

Public Relations

Investors Relations

949-362-5800

949-362-5800

pr@smithmicro.com

IR@smithmicro.com

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SOURCE Smith Micro Software, Inc.

Related Links

http://smithmicro.com

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