Financial Data and Key Metrics Changes - For Q3 2025, the company reported revenue of $4.3 million, a decrease of approximately 6% compared to $4.6 million in Q3 2024, and a decrease of $73,000 or 2% from Q2 2025 [12] - Year-to-date revenues through September 30, 2025, were $13.4 million, down approximately 14% from $15.6 million in the same period last year [12] - GAAP net loss attributable to common stockholders for Q3 2025 was $5.2 million, or $0.25 loss per share, compared to a loss of $6.4 million, or $0.54 loss per share in Q3 2024 [19] - Non-GAAP net loss for Q3 2025 was $2.6 million, or $0.12 loss per share, compared to a loss of approximately $3.6 million, or $0.30 loss per share in Q3 2024 [19] Business Line Data and Key Metrics Changes - Family safety revenue for Q3 2025 was $3.5 million, a decrease of approximately $410,000 or 10% compared to Q3 2024 [13] - CommSuite revenue was $792,000, an increase of approximately $148,000 compared to Q3 2024 [13] - The company sold its ViewSpot product for $1.3 million in June 2025, resulting in minimal revenue from this product in Q3 2025 [13] Market Data and Key Metrics Changes - The company is witnessing a shift in the carrier market with a renewed focus on family subscribers, which represent a high-value opportunity due to lower churn rates and higher lifetime value [8][9] - The expanded SafePath platform is tailored to family needs, aligning with carriers' core business strategies [9] Company Strategy and Development Direction - The company implemented strategic changes to realign its cost structure, aiming for approximately $7.2 million in annualized cost savings [5][6] - The company expects to be close to breakeven and profitable by mid-2026 [6] - The SafePath platform is being enhanced to support families, with ongoing trials and engagements with mobile operators worldwide [22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about entering a new phase of growth and profitability, supported by a strong pipeline and ongoing customer trials [7] - The company is focused on continuous improvement and operational efficiency while investing in strategic areas [6] - Management highlighted the importance of the family focus in the carrier market as a significant growth opportunity [25][26] Other Important Information - The company completed a follow-on offering of approximately $1.5 million and a private placement expected to raise about $2.7 million [10][11] - GAAP operating expenses for Q3 2025 were $7.7 million, a decrease of $2.1 million or 22% compared to Q3 2024 [16] Q&A Session Summary - There were no questions during the Q&A session, and the call concluded without any inquiries from participants [27]

Revenue Performance - Revenues for Q3 2025 decreased by 6% to $4.3 million compared to Q3 2024, primarily due to a $0.4 million decline in the Family Safety product line [121]. - Revenues decreased to $13.4 million for the nine months ended September 30, 2025, down 14% from $15.6 million in 2024, primarily due to declines in the Family Safety product line [139]. Gross Profit and Cost of Revenues - Gross profit for Q3 2025 was $3.2 million, representing 73.9% of revenues, a slight increase from 71.6% in Q3 2024 [131]. - Cost of revenues decreased to $1.1 million in Q3 2025 from $1.3 million in Q3 2024, reflecting cost reduction efforts [130]. - Cost of revenues reduced to $3.6 million in 2025 from $4.9 million in 2024, a decrease of $1.3 million attributed to lower revenue and cost reduction efforts [140]. - Gross profit was $9.8 million, representing 73.4% of revenues for the nine months ended September 30, 2025, compared to $10.7 million or 68.5% in 2024 [141]. Operating Expenses - Operating expenses decreased by approximately $2.1 million in Q3 2025 compared to Q3 2024, driven by reductions in sales and marketing and research and development expenses [121]. - Selling and marketing expenses were reduced to $1.5 million in Q3 2025 from $2.1 million in Q3 2024, due to personnel cost reductions [132]. - Research and development expenses decreased to $2.6 million in Q3 2025 from $3.6 million in Q3 2024, also attributed to cost reduction initiatives [133]. - Selling and marketing expenses decreased to $4.8 million in 2025 from $7.2 million in 2024, a reduction of approximately $2.4 million due to decreased personnel costs [142]. - Research and development expenses were $8.2 million for the nine months ended September 30, 2025, down from $11.3 million in 2024, a decrease of approximately $3.1 million [144]. - General and administrative expenses decreased to $7.7 million in 2025 from $8.2 million in 2024, a reduction of approximately $0.6 million [145]. Net Loss and Cash Flow - The net loss attributable to common stockholders for Q3 2025 was $5.2 million, resulting in a net loss of $0.25 per share [121]. - A goodwill impairment charge of $11.1 million was recorded for the nine months ended September 30, 2025, compared to $24.0 million in 2024 [148]. - Net cash used in operating activities was $5.0 million for the nine months ended September 30, 2025, compared to $9.4 million in 2024 [158][159]. - The company generated net cash provided by investing activities of $1.2 million in 2025, primarily from the sale of ViewSpot [160]. - Net cash provided by financing activities was $2.4 million for the nine months ended September 30, 2025, compared to $3.6 million in 2024 [161][162]. Strategic Initiatives - The company expects strategic cost reductions to result in savings of approximately $1.8 million per quarter, totaling about $7.2 million for 2026 [124]. - The company completed the development of SafePath 8 and plans to launch new features, aiming to grow Family Safety revenues with Tier 1 carriers [122]. - The sale of the ViewSpot product generated total consideration of $1.3 million, with $1.0 million received at closing [121].

Financial Performance - Smith Micro reported revenue of $4.3 million for Q3 2025, a decrease of 6.5% compared to $4.6 million in Q3 2024[3] - Year-to-date revenue for the nine months ended September 30, 2025, was $13.4 million, down from $15.6 million for the same period in 2024[7] - Revenues for Q3 2025 were $4,347, a decrease of 6.5% from $4,648 in Q3 2024[16] - Gross profit for Q3 2025 was $3,211, down 3.5% from $3,327 in Q3 2024[16] - Gross profit for the nine months ended September 30, 2025, was $9,824 million, a decrease of 7.9% compared to $10,695 million for the same period in 2024[21][22] Profitability Metrics - Gross profit for Q3 2025 was $3.2 million, with a gross profit margin of 73.9%, up from 71.6% in Q3 2024[4] - GAAP net loss for Q3 2025 was $5.2 million, or $0.25 loss per share, an improvement from a net loss of $6.4 million, or $0.54 loss per share, in Q3 2024[5] - Non-GAAP net loss for Q3 2025 was $2.6 million, or $0.12 loss per share, compared to a non-GAAP net loss of $3.6 million, or $0.30 loss per share, in Q3 2024[6] - Net loss attributable to common stockholders for Q3 2025 was $5,170, compared to $6,369 in Q3 2024, reflecting a 18.8% improvement[16] - GAAP net loss for the nine months ended September 30, 2025, was $25.4 million, or $1.30 loss per share, significantly improved from a loss of $44.3 million, or $4.17 loss per share, in the same period of 2024[8] - Net loss attributable to common stockholders for the nine months ended September 30, 2025, was $25,409 million, compared to a net loss of $44,306 million in 2024, indicating an improvement of 42.6%[21][22] - Loss per share for the nine months ended September 30, 2025, was $(1.30), an improvement from $(4.17) in the same period of 2024[21][22] Cash and Cash Equivalents - Total cash and cash equivalents as of September 30, 2025, were $1.4 million, down from $2.8 million at the end of 2024[15] - Cash and cash equivalents at the end of Q3 2025 were $1,394, down from $1,509 at the end of Q3 2024[17] Operating Expenses - Total operating expenses for the nine months ended September 30, 2025, were $34,470, a decrease of 38% from $55,604 in 2024[16] - Research and development expenses for Q3 2025 were $2,603, down 28.5% from $3,637 in Q3 2024[16] - Research and development expenses for the nine months ended September 30, 2025, were $7,640 million, down from $10,180 million in 2024, a decrease of 25.5%[21][22] - Selling and marketing expenses for the nine months ended September 30, 2025, were $4,079 million, compared to $6,060 million in 2024, a reduction of 32.8%[21][22] - General and administrative expenses for the nine months ended September 30, 2025, were $6,035 million, down from $6,197 million in 2024, a decrease of 2.6%[21][22] Strategic Focus - The company is focusing on expanding its "connected life" vision to attract family subscribers in the carrier market[2] - Smith Micro aims to strengthen its financial foundation and streamline operations for future growth opportunities[2] - The company is focusing on cost reduction strategies and improving operational efficiency to enhance future profitability[21][22] Impairments and Gains - The company reported a goodwill impairment of $11,052 for the nine months ended September 30, 2025[17] - Goodwill impairment for the nine months ended September 30, 2025, was $11,052 million, significantly lower than the $23,989 million recorded in 2024[21][22] - The company reported a gain on the sale of ViewSpot of $1,287 million in 2025, which was not present in 2024[21][22]

Core Viewpoint - Wall Street anticipates a year-over-year increase in earnings for Smith Micro Software, Inc. despite lower revenues, with actual results being crucial for stock price movement [1][2]. Earnings Expectations - The consensus estimate indicates a quarterly loss of $0.13 per share, reflecting a year-over-year improvement of +56.7% [3]. - Expected revenues are projected at $4.4 million, which is a decline of 5.4% compared to the same quarter last year [3]. Estimate Revisions - The consensus EPS estimate has been revised 5% higher in the last 30 days, indicating a reassessment by analysts [4]. - It is important to note that the direction of estimate revisions may not always align with the overall change in consensus estimates [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model compares the Most Accurate Estimate to the Zacks Consensus Estimate, suggesting that recent revisions may provide more accurate predictions [8]. - A positive Earnings ESP reading is a strong indicator of potential earnings beats, especially when combined with a favorable Zacks Rank [10].

```markdown [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the company's unaudited consolidated financial statements, management's discussion and analysis, and controls and procedures [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements for Smith Micro Software, Inc. for the periods ended June 30, 2025, and December 31, 2024 (balance sheets), and for the three and six months ended June 30, 2025 and 2024 (statements of operations, stockholders' equity, and cash flows). It includes detailed financial figures and accompanying notes that provide context on the company's operations, accounting policies, financial health, and recent corporate actions [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This statement presents the company's financial position, including assets, liabilities, and equity, at specific points in time Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change | Percentage Change | | :-------------------------------- | :------------ | :---------------- | :----- | :------------------ | | Total Assets | $29,582 | $48,046 | $(18,464) | -38.4% | | Total Liabilities | $7,168 | $7,290 | $(122) | -1.7% | | Total Stockholders' Equity | $22,414 | $40,756 | $(18,342) | -45.0% | | Cash and Cash Equivalents | $1,401 | $2,808 | $(1,407) | -50.1% | | Accounts Receivable, net | $2,867 | $5,721 | $(2,854) | -49.9% | | Goodwill | $— | $11,052 | $(11,052) | -100.0% | | Intangible Assets, net | $21,044 | $23,597 | $(2,553) | -10.8% | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) This statement details the company's revenues, expenses, and net loss over specific reporting periods Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (YoY) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | Revenues | $4,420 | $5,140 | $(720) | $9,041 | $10,938 | $(1,897) | | Gross Profit | $3,249 | $3,533 | $(284) | $6,612 | $7,343 | $(731) | | Operating Loss | $(14,953) | $(6,979) | $(7,974) | $(20,164) | $(38,425) | $18,261 | | Goodwill Impairment | $11,052 | $— | $11,052 | $11,052 | $23,989 | $(12,937) | | Net Loss | $(15,062) | $(6,929) | $(8,133) | $(20,240) | $(37,936) | $17,696 | | Basic and Diluted Loss per Share | $(0.78) | $(0.66) | $(0.12) | $(1.08) | $(3.79) | $2.71 | - The company recorded a goodwill impairment charge of **$11.1 million** for the three and six months ended June 30, 2025, contributing significantly to the operating and net loss. This compares to a **$24.0 million** goodwill impairment charge for the six months ended June 30, 2024[12](index=12&type=chunk) - A gain on the sale of ViewSpot, net, of **$1.3 million** was recognized for the three and six months ended June 30, 2025[12](index=12&type=chunk) [Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) This statement shows changes in the company's equity accounts, including net loss and stock transactions, over time Changes in Stockholders' Equity (in thousands) | Metric | Balance, Dec 31, 2024 | Net Loss (6M 2025) | Restricted Stock Grants, net | Non-cash Compensation | Cancellation of Shares | Balance, June 30, 2025 | | :-------------------------------- | :-------------------- | :------------------- | :--------------------------- | :-------------------- | :--------------------- | :--------------------- | | Common Stock (Amount) | $18 | $— | $1 | $— | $— | $19 | | Additional Paid-in Capital | $395,383 | $— | $2,170 | $11 | $(286) | $397,280 | | Accumulated Comprehensive Deficit | $(354,645) | $(20,240) | $— | $— | $— | $(374,885) | | Total Stockholders' Equity | $40,756 | $(20,240) | $2,171 | $11 | $(286) | $22,414 | - Total stockholders' equity decreased from **$40.8 million** at December 31, 2024, to **$22.4 million** at June 30, 2025, primarily due to a net loss of **$20.2 million**[14](index=14&type=chunk) - The number of issued and outstanding common shares increased from **17,673,404** at December 31, 2024, to **19,382,014** at June 30, 2025, largely due to restricted stock grants[9](index=9&type=chunk)[14](index=14&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes the cash inflows and outflows from operating, investing, and financing activities Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :----- | | Net Cash Used in Operating Activities | $(2,870) | $(5,553) | $2,683 | | Net Cash Provided by Investing Activities | $956 | $187 | $769 | | Net Cash Provided by Financing Activities | $507 | $3,869 | $(3,362) | | Net Decrease in Cash and Cash Equivalents | $(1,407) | $(1,497) | $90 | | Cash and Cash Equivalents, End of Period | $1,401 | $5,628 | $(4,227) | - Net cash used in operating activities decreased by **$2.7 million**, from **$5.6 million** in H1 2024 to **$2.9 million** in H1 2025, primarily due to a lower net loss and changes in working capital[18](index=18&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk) - Net cash provided by investing activities increased significantly to **$1.0 million** in H1 2025, driven by **$987 thousand** from the sale of ViewSpot, compared to **$187 thousand** in H1 2024[18](index=18&type=chunk)[146](index=146&type=chunk) - Net cash provided by financing activities decreased substantially from **$3.9 million** in H1 2024 to **$0.5 million** in H1 2025, mainly due to the absence of large common stock offerings seen in the prior year[18](index=18&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk) [Notes to the Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the consolidated financial statements [Note 1. The Company (Business Overview & Reverse Stock Split)](index=9&type=section&id=Note%201.%20The%20Company) This note describes the company's business, recent corporate actions, and significant events like product sales and stock splits - Smith Micro Software, Inc. develops software to simplify and enhance the mobile experience, offering family safety solutions (e.g., SafePath) and visual voice messaging to wireless service providers globally[21](index=21&type=chunk)[27](index=27&type=chunk) - On June 3, 2025, the Company sold its ViewSpot product for **$1.3 million**, with **$1.0 million** received at closing and the remainder in installments[22](index=22&type=chunk) - A one-for-eight (1:8) reverse stock split was effected on April 10, 2024, reducing outstanding shares from approximately **76.8 million** to **9.6 million**, with all share and per share amounts retroactively adjusted[23](index=23&type=chunk)[25](index=25&type=chunk) [Note 2. Accounting Policies](index=9&type=section&id=Note%202.%20Accounting%20Policies) This note outlines the significant accounting principles and methods used in preparing the financial statements - The unaudited consolidated financial statements are prepared in accordance with SEC rules and U.S. GAAP, reflecting all normal and recurring adjustments[26](index=26&type=chunk)[28](index=28&type=chunk) - The Company adopted ASU 2023-07 (Segment Reporting) with no material effect other than additional disclosures in Note 11[30](index=30&type=chunk) - The Company is evaluating ASU 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation Disclosures), which are not anticipated to have a significant impact other than new disclosures[31](index=31&type=chunk)[32](index=32&type=chunk) [Note 3. Going Concern](index=10&type=section&id=Note%203.%20Going%20Concern) This note addresses the company's ability to continue operations and management's plans to mitigate financial risks - Substantial doubt exists about the Company's ability to continue as a going concern within one year due to recurring operating losses and negative cash flows[33](index=33&type=chunk) - Management's plans to alleviate this doubt include expanding subscriber growth, acquiring new customers, expanding offerings, and raising additional capital through equity or debt financings[34](index=34&type=chunk) - Additional actions to preserve liquidity may include further restructuring, cost reductions, securing a revolving line of credit, disposing of product lines, or selling/licensing intellectual property[34](index=34&type=chunk)[40](index=40&type=chunk) [Note 4. Common Stock (Nasdaq Compliance & Offerings)](index=11&type=section&id=Note%204.%20Common%20Stock) This note details common stock activities, including Nasdaq compliance, stock offerings, and share changes - The Company received Nasdaq notices regarding non-compliance with the **$1.00** minimum bid price requirement on December 27, 2023, November 26, 2024, and June 23, 2025. Compliance was regained in April 2024 and January 2025, but a new notice was received in June 2025, providing a compliance period until December 22, 2025[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk) - In May 2024, the Company completed a registered direct offering and private placement, selling **1,065,000** shares of Common Stock and pre-funded warrants, generating **$3.4 million** in net cash proceeds[39](index=39&type=chunk)[41](index=41&type=chunk)[44](index=44&type=chunk) - In October 2024, the Company completed two securities offerings (registered direct offering and private placement), raising aggregate gross proceeds of **$6.9 million** (**$6.6 million** net cash proceeds), including participation from the CEO[45](index=45&type=chunk)[49](index=49&type=chunk) [Note 5. Warrant Liabilities](index=14&type=section&id=Note%205.%20Warrant%20Liabilities) This note explains the company's warrant obligations and their fair value measurement - The Company has Notes Warrants and Additional Warrants issued in 2022, which are measured at fair value and recognized in the consolidated statements of operations[50](index=50&type=chunk)[51](index=51&type=chunk)[53](index=53&type=chunk) - The fair value of these warrant liabilities is determined using a Black-Scholes option pricing model, considering factors like common stock market price, risk-free interest rate, expected term, and volatility[53](index=53&type=chunk) Warrant Liabilities Fair Value (in thousands) | Warrant Type | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Notes Warrants | $107 | $197 | | Additional Warrants | $14 | $27 | | **Total** | **$121** | **$224** | [Note 6. Fair Value of Financial Instruments](index=15&type=section&id=Note%206.%20Fair%20Value%20of%20Financial%20Instruments) This note describes the valuation hierarchy and changes in fair value for financial instruments - Fair value measurements are categorized into a three-tier hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[55](index=55&type=chunk)[57](index=57&type=chunk) - The Company's warrant liabilities are classified as Level 3 fair value measurements[56](index=56&type=chunk) Changes in Fair Value of Warrant Liabilities (in thousands) | Metric | Notes Warrants | Additional Warrants | Total | | :-------------------------- | :------------- | :------------------ | :---- | | Measurement at Dec 31, 2024 | $197 | $27 | $224 | | Change in fair value (Q1 2025) | $(107) | $(16) | $(123) | | Measurement at Mar 31, 2025 | $90 | $11 | $101 | | Change in fair value (Q2 2025) | $17 | $3 | $20 | | Measurement at June 30, 2025 | $107 | $14 | $121 | [Note 7. Goodwill and Intangible Assets](index=16&type=section&id=Note%207.%20Goodwill%20and%20Intangible%20Assets) This note discusses the company's goodwill and intangible assets, including impairment charges and amortization - The Company recorded a full goodwill impairment charge of **$11.1 million** for the three and six months ended June 30, 2025, due to recent financial performance, stock valuation trends, equity raise pricing, and a Nasdaq minimum bid price notice[61](index=61&type=chunk)[125](index=125&type=chunk)[136](index=136&type=chunk) - An interim quantitative impairment test in Q1 2024 resulted in a goodwill impairment charge of **$24.0 million**[60](index=60&type=chunk)[136](index=136&type=chunk) Intangible Assets, Net (in thousands) | Asset Type | June 30, 2025 Net Book Value | December 31, 2024 Net Book Value | | :-------------------- | :--------------------------- | :------------------------------- | | Purchased technology | $3,849 | $4,568 | | Customer relationships | $14,921 | $16,268 | | Customer contracts | $190 | $275 | | Software license | $1,934 | $2,293 | | Patents | $150 | $193 | | **Total** | **$21,044** | **$23,597** | - Intangible asset amortization expense was **$1.3 million** for Q2 2025 (down from **$1.5 million** in Q2 2024) and **$2.6 million** for H1 2025 (down from **$3.3 million** in H1 2024)[62](index=62&type=chunk)[123](index=123&type=chunk)[134](index=134&type=chunk) [Note 8. Earnings Per Share](index=18&type=section&id=Note%208.%20Earnings%20Per%20Share) This note presents the calculation of basic and diluted earnings per share, including anti-dilutive adjustments Basic and Diluted Loss Per Share (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Loss | $(15,062) | $(6,929) | $(20,240) | $(37,936) | | Weighted Average Shares Outstanding (Basic & Diluted) | 19,417 | 10,567 | 18,820 | 10,016 | | Loss Per Share (Basic & Diluted) | $(0.78) | $(0.66) | $(1.08) | $(3.79) | - For periods with a net loss, dilutive common stock equivalents (options, warrants) are excluded from the diluted EPS calculation as their effect would be anti-dilutive[66](index=66&type=chunk) Anti-Dilutive Shares Excluded from EPS Calculation (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Outstanding Stock Options | 31 | 9 | 27 | 10 | | Outstanding Warrants | 8,382 | 1,477 | 8,382 | 949 | | **Total Anti-Dilutive Shares** | **8,413** | **1,486** | **8,409** | **959** | [Note 9. Stock-Based Compensation](index=19&type=section&id=Note%209.%20Stock-Based%20Compensation) This note details the company's stock-based compensation plans, grants, and associated expenses - Stockholders approved an increase of **3.0 million** shares to the Omnibus Equity Incentive Plan (OEIP) on June 3, 2025, bringing total available shares for future grants to approximately **3.2 million** as of June 30, 2025[68](index=68&type=chunk) - During the first six months of 2025, the Company granted **2.0 million** shares of restricted stock and **25,000** stock options under the OEIP[69](index=69&type=chunk) Non-Cash Stock-Based Compensation Expense (in thousands) | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Sales and marketing | $263 | $345 | $498 | $653 | | Research and development | $204 | $245 | $418 | $509 | | General and administrative | $629 | $548 | $1,267 | $1,110 | | **Total** | **$1,096** | **$1,138** | **$2,183** | **$2,272** | - As of June 30, 2025, there was approximately **$2.9 million** in unrecognized compensation costs related to unvested stock options and restricted stock awards[73](index=73&type=chunk) [Note 10. Revenues (Revenue Recognition & Disaggregation)](index=20&type=section&id=Note%2010.%20Revenues) This note explains the company's revenue recognition policies and disaggregation of revenue by type - Revenue is recognized based on a five-step analysis, depicting the transfer of promised goods or services to customers in an amount reflecting expected consideration. The majority of revenue is generated from usage-based fees[76](index=76&type=chunk) - The Company considers software licenses and cloud services provided to MNO customers as a single performance obligation, recognizing revenue based on active subscribers' access and usage[77](index=77&type=chunk) Disaggregated Revenues (in thousands) | Revenue Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (YoY) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :-------------------------- | :------------------------------- | :------------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | License and service fees | $795 | $761 | $34 | $1,590 | $1,538 | $52 | | Hosted environment usage fees | $777 | $531 | $246 | $1,511 | $1,196 | $315 | | Cloud based usage fees | $2,835 | $3,645 | $(810) | $5,921 | $7,670 | $(1,749) | | Consulting services and other | $13 | $203 | $(190) | $19 | $534 | $(515) | | **Total Revenues** | **$4,420** | **$5,140** | **$(720)** | **$9,041** | **$10,938** | **$(1,897)** | [Note 11. Segment, Customer Concentration and Geographical Information](index=21&type=section&id=Note%2011.%20Segment,%20Customer%20Concentration%20and%20Geographical%20Information) This note provides insights into the company's operating segments, major customers, and revenue by region - The Company operates as a single primary business unit: Wireless, which includes Family Safety (SafePath®), CommSuite®, and ViewSpot® products[80](index=80&type=chunk) Wireless Revenues by Product Line (in thousands) | Product Line | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (YoY) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :------------- | :------------------------------- | :------------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | Family Safety | $3,626 | $4,221 | $(595) | $7,414 | $8,685 | $(1,271) | | CommSuite | $777 | $531 | $246 | $1,511 | $1,196 | $315 | | ViewSpot | $17 | $388 | $(371) | $116 | $1,057 | $(941) | | **Total Wireless Revenues** | **$4,420** | **$5,140** | **$(720)** | **$9,041** | **$10,938** | **$(1,897)** | - Customer concentration is high: for Q2 2025, three customers accounted for **61%**, **21%**, and **18%** of revenues. For H1 2025, three customers made up **61%**, **20%**, and **17%** of revenues[88](index=88&type=chunk) Revenues by Geographical Location (in thousands) | Region | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (YoY) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :------- | :------------------------------- | :------------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | Americas | $4,407 | $4,943 | $(536) | $9,022 | $10,420 | $(1,398) | | EMEA | $13 | $197 | $(184) | $19 | $518 | $(499) | | **Total Revenues** | **$4,420** | **$5,140** | **$(720)** | **$9,041** | **$10,938** | **$(1,897)** | [Note 12. Commitments and Contingencies](index=23&type=section&id=Note%2012.%20Commitments%20and%20Contingencies) This note outlines the company's potential legal liabilities, indemnities, and guarantees - The Company may be involved in various legal proceedings, but management does not believe their ultimate disposition will have a material adverse impact on consolidated results, cash flows, or financial position[91](index=91&type=chunk) - The Company has made indemnities, commitments, and guarantees related to products, facility leases, vendors, and directors/officers, for which no liability has been recorded in the consolidated balance sheets[92](index=92&type=chunk) [Note 13. Leases](index=23&type=section&id=Note%2013.%20Leases) This note describes the company's lease arrangements, related expenses, and future lease payment maturities - The Company leases office space and equipment, recording leases with terms greater than twelve months on the balance sheet, with lease expense recognized on a straight-line basis[93](index=93&type=chunk)[94](index=94&type=chunk) - Operating lease costs were **$0.4 million** for each of the three months ended June 30, 2025 and 2024, and **$0.8 million** for each of the six months ended June 30, 2025 and 2024[95](index=95&type=chunk) Maturity of Operating Lease Liabilities (in thousands, as of June 30, 2025) | Year Ending December 31, | Amortization Expense | | :----------------------- | :------------------- | | 2025 | $796 | | 2026 | $977 | | 2027 | $377 | | 2028 | $62 | | **Total Lease Payments** | **$2,212** | | Less Imputed Interest | $148 | | **Present Value of Lease Liabilities** | **$2,064** | [Note 14. Income Taxes](index=24&type=section&id=Note%2014.%20Income%20Taxes) This note discusses the company's income tax provisions, deferred tax assets, and valuation allowances - The Company has determined it is more likely than not that it will not realize its U.S.-based deferred tax assets, totaling **$70.2 million** as of June 30, 2025, due to cumulative losses and uncertain market conditions[98](index=98&type=chunk)[99](index=99&type=chunk) - The provision for income tax expense consists of state income taxes, foreign tax withholdings, and foreign income taxes, with no material period-to-period changes[127](index=127&type=chunk)[139](index=139&type=chunk) [Note 15. Subsequent Events](index=24&type=section&id=Note%2015.%20Subsequent%20Events) This note reports significant events that occurred after the balance sheet date but before the financial statements were issued - On July 18, 2025, the Company closed a registered direct offering of **1,612,903** shares of Common Stock and a concurrent private placement of unregistered warrants, generating approximately **$1.5 million** in gross proceeds[102](index=102&type=chunk) - The warrants issued have an exercise price of **$1.20** per share (subject to adjustments) and are immediately exercisable, though subject to limitations until stockholder approval for issuance of more than **19.9%** of outstanding shares[102](index=102&type=chunk)[103](index=103&type=chunk) - The Company paid Chardan Capital Markets LLC a cash fee of **6.5%** of the total gross proceeds for its financial advisory services[103](index=103&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations for the three and six months ended June 30, 2025, compared to the same periods in 2024. It covers revenue trends, cost management, profitability, liquidity, and capital resources, highlighting key drivers and challenges, including the impact of goodwill impairment and strategic product divestitures [Forward-Looking Statements and Risk Factors](index=26&type=section&id=Forward-Looking%20Statements%20and%20Risk%20Factors) This section discusses forward-looking statements and key risk factors that could materially affect the company's actual results - The report contains forward-looking statements based on current expectations, estimates, and projections, which are subject to risks and uncertainties that could cause actual results to differ materially[106](index=106&type=chunk) - Key risk factors include customer concentration, ability to maintain strategic relationships, dependency on third-party platforms, security breaches, ability to remain a going concern, profitability, rapid technological evolution, and intense competition[106](index=106&type=chunk)[113](index=113&type=chunk) - Management does not undertake any obligation to update these statements to reflect events or circumstances occurring after the filing date[108](index=108&type=chunk) [Overview](index=28&type=section&id=Overview) This section provides a high-level summary of the company's business, recent financial performance, and strategic positioning - Smith Micro provides software solutions like Digital Family Lifestyle™ and visual voice messaging to wireless service providers, focusing on innovation in digital lifestyle services, online safety, and consumer IoT[109](index=109&type=chunk)[110](index=110&type=chunk) - Q2 2025 revenues decreased by **14.0%** to **$4.4 million**, primarily due to declines in Family Safety (**$0.6 million**) and ViewSpot (**$0.4 million**) revenues, leading to a **$0.3 million** decrease in gross profit[111](index=111&type=chunk) - The Company recorded an **$11.1 million** non-cash goodwill impairment charge in Q2 2025 and sold its ViewSpot product for **$1.3 million**. Net loss for Q2 2025 was **$15.1 million**, or **$0.78** per share[111](index=111&type=chunk) - The Company believes it is strategically positioned to grow Family Safety revenues with Tier 1 carriers through existing platforms and new product expansions like SafePath Kids, SafePath OS, and the upcoming SafePath 8[112](index=112&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) This section analyzes the company's revenues, gross profit, operating expenses, and net loss for the reported periods - Revenues decreased by **$0.7 million** (**14.0%**) for Q2 2025 and **$1.9 million** (**17.3%**) for H1 2025, primarily due to declines in Family Safety (Sprint Safe & Found migration) and ViewSpot (contract conclusion and sale), partially offset by CommSuite growth[118](index=118&type=chunk)[128](index=128&type=chunk) - Gross profit decreased by **$0.3 million** for Q2 2025 and **$0.7 million** for H1 2025, driven by lower revenue volume, despite cost reduction efforts[120](index=120&type=chunk)[130](index=130&type=chunk) - Operating expenses increased significantly in Q2 2025 due to the **$11.1 million** goodwill impairment, offset by a **$1.3 million** gain on ViewSpot sale and reductions in selling & marketing and R&D expenses from cost reduction initiatives[111](index=111&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk) - Net loss for Q2 2025 was **$15.1 million** (vs. **$6.9 million** in Q2 2024) and for H1 2025 was **$20.2 million** (vs. **$37.9 million** in H1 2024), with the H1 2024 loss being higher due to a larger goodwill impairment charge[12](index=12&type=chunk)[111](index=111&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet its short-term and long-term financial obligations and fund operations - As of June 30, 2025, cash and cash equivalents were approximately **$1.4 million**. The Company's principal liquidity sources are existing cash and cash generated by operations[140](index=140&type=chunk) - The Company's cash and cash equivalents may be insufficient to fund operations over the next twelve months, raising substantial doubt about its ability to continue as a going concern[141](index=141&type=chunk)[142](index=142&type=chunk) - Subsequent to June 30, 2025, a registered direct offering and concurrent private placement provided gross proceeds of approximately **$1.5 million**, enhancing liquidity[140](index=140&type=chunk) [Cash Flows](index=33&type=section&id=Cash%20Flows) This section analyzes the company's cash generation and usage from operating, investing, and financing activities Net Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(2,870) | $(5,553) | | Net cash provided by investing activities | $956 | $187 | | Net cash provided by financing activities | $507 | $3,869 | | **Net decrease in cash and cash equivalents** | **$(1,407)** | **$(1,497)** | - Operating cash usage decreased in H1 2025 due to a lower net loss and changes in accounts receivable, partially offset by decreases in accounts payable and accrued liabilities[144](index=144&type=chunk)[145](index=145&type=chunk) - Investing activities provided cash in H1 2025 primarily from the sale of ViewSpot, contrasting with H1 2024 which saw proceeds from patent licensing[146](index=146&type=chunk) - Financing cash inflows significantly decreased in H1 2025 compared to H1 2024, as the prior year included substantial proceeds from common stock offerings[147](index=147&type=chunk)[148](index=148&type=chunk) [Recent Accounting Guidance & Critical Accounting Estimates](index=33&type=section&id=Recent%20Accounting%20Guidance%20%26%20Critical%20Accounting%20Estimates) This section provides updates on new accounting standards and any material changes to critical accounting estimates - Information regarding recent accounting guidance is provided in Note 2 to the Consolidated Financial Statements[149](index=149&type=chunk) - There have been no material changes to the Company's critical accounting estimates since the 2024 Form 10-K[150](index=150&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the Company's disclosure controls and procedures and management's responsibility for financial statements. It confirms the effectiveness of disclosure controls as of June 30, 2025, and states that no material changes occurred in internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[151](index=151&type=chunk) - Management is responsible for the integrity and objectivity of the financial statements, which are prepared in conformity with U.S. GAAP and reflect management's best estimates and judgments[152](index=152&type=chunk) - There have been no material changes in internal control over financial reporting during the quarter ended June 30, 2025[154](index=154&type=chunk) [PART II. OTHER INFORMATION](index=35&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section contains additional disclosures not included in the financial statements, such as legal proceedings and risk factors [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) This section addresses potential legal proceedings the Company may face. Management believes that the ultimate resolution of these matters will not materially impact the Company's financial position, but acknowledges the inherent unpredictability of litigation - The Company may be involved in various legal proceedings arising from its business activities[156](index=156&type=chunk) - Management does not believe the ultimate disposition of these matters will have a material adverse impact on the Company's consolidated results of operations, cash flows, or financial position[156](index=156&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the risk factors discussed in the Company's 2024 Form 10-K and highlights the ongoing risk of delisting from Nasdaq due to failure to meet the minimum bid price requirement, and the potential consequences of such an event - The Company received a Nasdaq notice on June 23, 2025, indicating non-compliance with the **$1.00** minimum bid price requirement, providing a compliance period until December 22, 2025[159](index=159&type=chunk)[160](index=160&type=chunk) - Failure to regain compliance could lead to delisting from Nasdaq, reducing stock liquidity, adversely affecting its value, and potentially making it harder to raise capital[158](index=158&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk) - A reverse stock split, if pursued, offers no assurance of sustained price increase and could trigger immediate delisting proceedings if non-compliance recurs within one year[161](index=161&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on the Company's repurchases of equity securities during the three months ended June 30, 2025, specifically detailing shares acquired for the payment of withholding taxes related to restricted stock awards Issuer Purchases of Equity Securities (Three Months Ended June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :----------------- | :------------------------------- | :--------------------------- | | April 1 - 30, 2025 | 44,929 | $0.81 | | May 1 - 31, 2025 | 114,098 | $0.94 | | June 1 - 30, 2025 | 40,898 | $0.95 | | **Total** | **199,925** | **$0.91** | - These repurchases were for the payment of withholding taxes in connection with the vesting of restricted stock awards, and all acquired shares were cancelled[165](index=165&type=chunk) [Item 5. Other Information](index=36&type=section&id=Item%205.%20Other%20Information) This section confirms that no directors or officers adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended June 30, 2025 - No directors or officers adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended June 30, 2025[166](index=166&type=chunk) [Item 6. Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q, including forms of warrants, securities purchase agreements, offer letters, amendments to equity incentive plans, and certifications required by the Sarbanes-Oxley Act - Exhibits include the form of Common Stock Purchase Warrant dated July 17, 2025, and the Securities Purchase Agreement for the registered shelf takedown offering[167](index=167&type=chunk) - Also included are an offer letter for Timothy C. Huffmyer and an amendment to the Amended and Restated Omnibus Equity Incentive Plan[167](index=167&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are provided[167](index=167&type=chunk) [SIGNATURES](index=38&type=section&id=SIGNATURES) This section contains the formal declarations by authorized officers confirming the accuracy and completeness of the report - The report is signed by William W. Smith, Jr., Chairman of the Board, President and Chief Executive Officer, and Timothy C. Huffmyer, Vice President, Chief Operating Officer, Chief Financial Officer and Treasurer, on August 7, 2025[171](index=171&type=chunk) ```

Financial Data and Key Metrics Changes - For Q2 2025, the company reported revenue of $4.4 million, a decrease of 14% compared to $5.1 million in Q2 2024 [9] - Year-to-date revenue through June 30, 2025, was $9 million, down 17% from $10.9 million in the same period last year [10] - GAAP net loss for Q2 2025 was $15.1 million, or $0.78 loss per share, compared to a GAAP net loss of $6.9 million, or $0.66 loss per share in Q2 2024 [15] - Non-GAAP net loss for Q2 2025 was $2.8 million, or $0.14 loss per share, compared to a non-GAAP net loss of approximately $4 million, or $0.38 loss per share in Q2 2024 [16] Business Line Data and Key Metrics Changes - Family Safety revenue for Q2 2025 was $3.6 million, a decrease of 14% compared to the same quarter last year [10] - CommSuite revenue increased to $777,000 in Q2 2025, up $246,000 from Q2 2024 [10] - ViewSpot revenue was nominal for Q2 2025, declining by $371,000 compared to Q2 2024, with the product line sold for $1.3 million [11] Market Data and Key Metrics Changes - The company is actively engaged in discussions with mobile operators in North America and Europe, focusing on the SafePath platform [5] - The SafePath OS for kids and seniors is positioned to capture significant market opportunities, aligning with carrier partners' long-term strategies [20][27] Company Strategy and Development Direction - The company is focused on expanding its portfolio with significant upgrades to the SafePath platform, including the AI-enabled SafePath 8 [19] - The launch of SafePath OS for seniors is expected by the end of the quarter, targeting an underserved market [26] - The company aims to leverage AI solutions to enhance family safety offerings, including social media intelligence and AI blocking functionalities [24][25] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about a meaningful turnaround, with expectations for sequential quarterly revenue growth in Q4 2025 [32] - The family safety market is seen as entering a new phase of relevance, with opportunities for growth as carriers seek to attract family subscribers [38] - Management believes the senior market could be larger than the kids' market, indicating a significant untapped opportunity [39] Other Important Information - The company completed a follow-on offering of approximately 1.6 million shares, resulting in proceeds of about $1.5 million before fees [9][18] - GAAP operating expenses for Q2 2025 were $18.2 million, an increase of 73% compared to Q2 2024, primarily due to a goodwill impairment charge [13] Q&A Session Summary Question: Can you comment on any change in the size of the family safety market? - Management noted that the family safety market is entering a new time of relevance, with growth opportunities as carriers seek to attract family subscribers [38] Question: What are you seeing in terms of in-house development at the MNOs? - Management observed that MNOs are focused on expanding their subscriber base, particularly targeting family subscribers, which tend to churn less and spend more [38]

[Executive Summary & Business Outlook](index=1&type=section&id=Executive%20Summary%20%26%20Business%20Outlook) This section provides management's commentary on Q2 2025 performance, upcoming product launches, and future revenue expectations [Management Commentary](index=1&type=section&id=Management%20Commentary) CEO William W. Smith Jr. highlighted significant progress in Q2 2025, including the upcoming launch of SafePath® 8 with AI-driven features, which is expected to broaden reach with carrier partners. The company anticipates sequential quarterly revenue growth for the second half of 2025 due to strong customer relationships and new feature set launches - Significant progress in Q2 2025, culminating in the upcoming launch of SafePath® 8 later this month[2](index=2&type=chunk) - SafePath 8 will introduce powerful AI-driven features and is already opening many channels for us as we broaden our reach across our carrier partners and prospects[2](index=2&type=chunk) - Company expects sequential quarterly revenue growth for the **second half of 2025**[1](index=1&type=chunk)[2](index=2&type=chunk) [Financial Performance Overview](index=1&type=section&id=Financial%20Performance%20Overview) This section details the company's financial results for Q2 and year-to-date 2025, including revenue, gross profit, and net loss figures [Second Quarter 2025 Financial Results](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Results) Smith Micro reported a decrease in revenue for Q2 2025 compared to Q2 2024, but an improvement in gross profit percentage. GAAP net loss widened significantly, primarily due to goodwill impairment, while non-GAAP net loss improved Q2 2025 Financial Highlights | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | YoY Change | | :----- | :--------------------- | :--------------------- | :--------- | | Revenue | $4,420 | $5,140 | -14.0% | | Gross Profit | $3,249 | $3,533 | -8.0% | | Gross Profit % of Revenue | 73.5% | 68.7% | +4.8 pp | | GAAP Net Loss | $(15,062) | $(6,929) | +117.4% | | GAAP Loss Per Share | $(0.78) | $(0.66) | +18.2% | | Non-GAAP Net Loss | $(2,754) | $(3,977) | -30.8% | | Non-GAAP Loss Per Share | $(0.14) | $(0.38) | -63.2% | [Year-to-Date 2025 Financial Results](index=2&type=section&id=Year-to-Date%202025%20Financial%20Results) For the six months ended June 30, 2025, revenue and gross profit decreased compared to the prior year period. However, both GAAP and non-GAAP net losses significantly improved. The company's cash and cash equivalents stood at $1.4 million, with an additional $1.5 million raised post-quarter end YTD 2025 Financial Highlights | Metric | YTD 2025 (in thousands) | YTD 2024 (in thousands) | YoY Change | | :----- | :---------------------- | :---------------------- | :--------- | | Revenue | $9,041 | $10,938 | -17.3% | | Gross Profit | $6,612 | $7,343 | -9.9% | | Gross Profit % of Revenue | 73.1% | 67.1% | +6.0 pp | | GAAP Net Loss | $(20,240) | $(37,936) | -46.6% | | GAAP Loss Per Share | $(1.08) | $(3.79) | -71.5% | | Non-GAAP Net Loss | $(5,619) | $(8,193) | -31.4% | | Non-GAAP Loss Per Share | $(0.30) | $(0.82) | -63.4% | - Total cash and cash equivalents as of June 30, 2025 were **$1.4 million**[7](index=7&type=chunk) - Subsequent to quarter end, on July 18, 2025, Smith Micro completed a registered direct offering and sale of Company common stock and a concurrent private placement of unregistered common stock purchase warrants which generated gross proceeds of **$1.5 million**[7](index=7&type=chunk) [Non-GAAP Measures and Reconciliation](index=2&type=section&id=Non-GAAP%20Measures%20and%20Reconciliation) This section explains the company's non-GAAP financial measures and provides detailed reconciliations from GAAP to non-GAAP results for both quarterly and year-to-date periods [Explanation of Non-GAAP Measures](index=2&type=section&id=Explanation%20of%20Non-GAAP%20Measures) Smith Micro uses non-GAAP financial measures, including non-GAAP net loss, gross profit, and basic/diluted loss per share, to supplement GAAP information. These measures exclude items like stock compensation, intangibles amortization, depreciation, fair value adjustments, goodwill impairment, and non-recurring items, aiming to provide a clearer view of ongoing operational performance - Non-GAAP financial measures include non-GAAP net loss, non-GAAP gross profit, and non-GAAP basic and diluted loss per share[8](index=8&type=chunk) - Excluded items from GAAP earnings calculations are stock compensation, intangibles amortization, depreciation, fair value adjustments, goodwill impairment, and adjustment for non-recurring items (including gain from sale of ViewSpot)[8](index=8&type=chunk) - Management believes this non-GAAP presentation may be more meaningful in analyzing the Company's income generation and is considered more indicative of the Company's ongoing operational performance[8](index=8&type=chunk) [Reconciliation of GAAP to Non-GAAP Results (Three Months Ended June 30)](index=7&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Results%20%28Three%20Months%20Ended%20June%2030%29) The reconciliation for the three months ended June 30, 2025, and 2024, details the adjustments made to GAAP figures to arrive at non-GAAP results. Key adjustments include stock compensation, intangibles amortization, depreciation, and significant goodwill impairment in Q2 2025, alongside the gain on sale of ViewSpot GAAP to Non-GAAP Reconciliation (Q2) | Adjustment Category | Q2 2025 (in thousands) | Q2 2024 (in thousands) | | :------------------ | :--------------------- | :--------------------- | | Stock Compensation | $(1,096) | $(1,138) | | Intangibles Amortization | $(1,276) | $(1,450) | | Depreciation | $(73) | $(91) | | Fair Value Adjustments | $20 | $(42) | | Goodwill Impairment | $(11,052) | $0 | | Non-Recurring Items | $1,209 | $299 | | **Total Adjustments to Net Loss** | **$(12,178)** | **$(2,422)** | | GAAP Net Loss | $(15,062) | $(6,929) | | Non-GAAP Net Loss | $(2,754) | $(3,977) | [Reconciliation of GAAP to Non-GAAP Results (Six Months Ended June 30)](index=9&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Results%20%28Six%20Months%20Ended%20June%2030%29) The reconciliation for the six months ended June 30, 2025, and 2024, shows the cumulative impact of non-GAAP adjustments. Significant adjustments include stock compensation, intangibles amortization, and substantial goodwill impairment in both periods, with a notable gain from the sale of ViewSpot in 2025 GAAP to Non-GAAP Reconciliation (YTD) | Adjustment Category | YTD 2025 (in thousands) | YTD 2024 (in thousands) | | :------------------ | :---------------------- | :---------------------- | | Stock Compensation | $(2,183) | $(2,272) | | Intangibles Amortization | $(2,552) | $(3,266) | | Depreciation | $(146) | $(183) | | Fair Value Adjustments | $(103) | $(227) | | Goodwill Impairment | $(11,052) | $(23,989) | | Non-Recurring Items | $1,209 | $436 | | **Total Adjustments to Net Loss** | **$(14,787)** | **$(29,499)** | | GAAP Net Loss | $(20,240) | $(37,936) | | Non-GAAP Net Loss | $(5,619) | $(8,193) | [Consolidated Financial Statements](index=4&type=section&id=Consolidated%20Financial%20Statements) This section presents the company's consolidated balance sheets, statements of operations, and cash flows for the specified periods [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets decreased significantly to **$29.6 million** from **$48.0 million** at December 31, 2024, primarily due to the elimination of goodwill. Cash and cash equivalents also declined. Total stockholders' equity decreased from **$40.8 million** to **$22.4 million** Consolidated Balance Sheet Summary | Balance Sheet Item | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change | | :----------------- | :--------------------------- | :------------------------------- | :----- | | Cash and cash equivalents | $1,401 | $2,808 | $(1,407) | | Accounts receivable, net | $2,867 | $5,721 | $(2,854) | | Total current assets | $5,865 | $9,996 | $(4,131) | | Intangible assets, net | $21,044 | $23,597 | $(2,553) | | Goodwill | $0 | $11,052 | $(11,052) | | Total assets | $29,582 | $48,046 | $(18,464) | | Total current liabilities | $6,273 | $5,651 | $622 | | Total non-current liabilities | $895 | $1,639 | $(744) | | Total stockholders' equity | $22,414 | $40,756 | $(18,342) | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) The statements show a decline in revenue for both the three and six months ended June 30, 2025, compared to 2024. Operating loss significantly increased in Q2 2025 due to a goodwill impairment charge of **$11.052 million**, partially offset by a gain on sale of ViewSpot. YTD operating loss improved due to a larger goodwill impairment in the prior year Consolidated Statements of Operations Summary | Metric (in thousands) | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------- | :------ | :------ | :------- | :------- | | Revenues | $4,420 | $5,140 | $9,041 | $10,938 | | Gross profit | $3,249 | $3,533 | $6,612 | $7,343 | | Selling and marketing | $1,665 | $2,529 | $3,309 | $5,143 | | Research and development | $2,752 | $3,702 | $5,609 | $7,691 | | General and administrative | $2,671 | $2,740 | $5,395 | $5,496 | | Depreciation and amortization | $1,349 | $1,541 | $2,698 | $3,449 | | Gain on sale of ViewSpot, net | $(1,287) | $0 | $(1,287) | $0 | | Goodwill impairment | $11,052 | $0 | $11,052 | $23,989 | | Total operating expenses | $18,202 | $10,512 | $26,776 | $45,768 | | Operating loss | $(14,953) | $(6,979) | $(20,164) | $(38,425) | | Net loss | $(15,062) | $(6,929) | $(20,240) | $(37,936) | | Basic and diluted loss per share | $(0.78) | $(0.66) | $(1.08) | $(3.79) | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash used in operating activities decreased to **$2.87 million** from **$5.55 million** in the prior year. Investing activities provided cash, primarily from the sale of ViewSpot. Financing activities provided significantly less cash compared to the prior year, resulting in a net decrease in cash and cash equivalents Consolidated Statements of Cash Flows Summary | Cash Flow Item (in thousands) | YTD 2025 | YTD 2024 | | :---------------------------- | :------- | :------- | | Net cash used in operating activities | $(2,870) | $(5,553) | | Net cash provided by investing activities | $956 | $187 | | Net cash provided by financing activities | $507 | $3,869 | | Net decrease in cash and cash equivalents | $(1,407) | $(1,497) | | Cash and cash equivalents, end of period | $1,401 | $5,628 | - Proceeds from sale of ViewSpot, net: **$987 thousand** in YTD 2025[15](index=15&type=chunk) - Proceeds from Common Stock, Warrants, and Pre-Funded Warrants Offering, net: **$0** in YTD 2025 vs. **$3,351 thousand** in YTD 2024[15](index=15&type=chunk) [Additional Information](index=2&type=section&id=Additional%20Information) This section provides details on the upcoming investor conference call, an overview of Smith Micro Software, Inc., and important forward-looking statements [Investor Conference Call](index=2&type=section&id=Investor%20Conference%20Call) Smith Micro will host an investor conference call on August 6, 2025, at 4:30 p.m. ET to discuss the Q2 2025 financial results, with dial-in and webcast options available - Investor conference call on **August 6, 2025, at 4:30 p.m. ET**[9](index=9&type=chunk) - Dial-in: **1-844-701-1164 (US)** / **1-412-317-5492 (International)**[9](index=9&type=chunk) - Internet webcast available at https://event.choruscall.com/mediaframe/webcast.html?webcastid=8AVPRziL[9](index=9&type=chunk) [About Smith Micro Software, Inc.](index=3&type=section&id=About%20Smith%20Micro%20Software%2C%20Inc.) Smith Micro Software, Inc. develops software to simplify and enhance the mobile experience for leading wireless service providers globally. Their solutions focus on enabling the family digital lifestyle and providing voice messaging capabilities, enriching connected lifestyles and creating consumer engagement opportunities via smartphones and IoT devices - Smith Micro develops software to simplify and enhance the mobile experience[10](index=10&type=chunk) - Provides solutions to leading wireless service providers around the world[10](index=10&type=chunk) - Solutions include enabling the family digital lifestyle and powerful voice messaging capabilities, engaging consumers via smartphones and consumer IoT devices[10](index=10&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section contains cautionary forward-looking statements regarding future events and financial prospects, which are subject to various risks and uncertainties. These risks include customer concentration, delays in product deployment and adoption, reliance on third-party technologies and app stores, development cycle delays, resource constraints, cost reduction impacts, personnel retention, changes in demand, and competition - Statements regarding financial prospects, goals, business plans, and expressions like 'expect,' 'anticipate,' 'believe,' 'plan,' 'intend,' 'could,' 'will' are forward-looking[12](index=12&type=chunk) - Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially[12](index=12&type=chunk) - Important factors include customer concentration, delays in product deployment/adoption, reliance on third-party operating systems/app stores, development delays, resource allocation, cost reduction impacts, key personnel retention, changes in demand/requirements, and competition[12](index=12&type=chunk)

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) Unaudited Q1 2025 financials show decreased revenue, a net loss, and declining assets, raising going concern doubts [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased to $43.4 million by March 31, 2025, from $48.0 million, with stockholders' equity declining to $36.6 million Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 (unaudited) | December 31, 2024 (audited) | | :--- | :--- | :--- | | Cash and cash equivalents | $2,288 | $2,808 | | Total current assets | $6,961 | $9,996 | | Goodwill | $11,052 | $11,052 | | Total assets | $43,364 | $48,046 | | Total current liabilities | $5,671 | $5,651 | | Total liabilities | $6,802 | $7,290 | | Total stockholders' equity | $36,562 | $40,756 | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) Q1 2025 revenues decreased 20.3% to $4.6 million, resulting in a $5.2 million net loss, significantly improved from Q1 2024's $31.0 million loss Consolidated Statements of Operations (in thousands, except per share data) | Metric | Q1 2025 (unaudited) | Q1 2024 (unaudited) | Change | | :--- | :--- | :--- | :--- | | Revenues | $4,621 | $5,798 | -20.3% | | Gross Profit | $3,363 | $3,810 | -11.7% | | Operating Loss | ($5,210) | ($31,446) | 83.4% improvement | | Goodwill Impairment | $0 | $23,989 | N/A | | Net Loss | ($5,178) | ($31,007) | 83.3% improvement | | Basic and Diluted Loss per Share | ($0.28) | ($3.28) | 91.5% improvement | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities improved to $0.6 million in Q1 2025, with cash and equivalents ending at $2.3 million Consolidated Cash Flow Highlights (in thousands) | Cash Flow Activity | Q1 2025 (unaudited) | Q1 2024 (unaudited) | | :--- | :--- | :--- | | Net cash used in operating activities | ($602) | ($1,345) | | Net cash (used in) provided by investing activities | ($4) | $194 | | Net cash provided by financing activities | $86 | $181 | | **Net decrease in cash and cash equivalents** | **($520)** | **($970)** | | **Cash and cash equivalents, end of period** | **$2,288** | **$6,155** | [Notes to the Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) Notes detail a 1-for-8 reverse stock split, substantial doubt about going concern, goodwill impairment, and extreme customer concentration - The company executed a **1-for-8 reverse stock split** effective April 10, 2024, to regain compliance with Nasdaq's minimum bid price requirement, with all share and per-share data retroactively adjusted[21](index=21&type=chunk)[35](index=35&type=chunk) - Management has concluded there is **substantial doubt about the Company's ability to continue as a going concern** due to recurring operating losses and negative cash flows, with future viability dependent on uncertain revenue growth or additional capital[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) - A **$24.0 million goodwill impairment charge** was recorded in Q1 2024 due to a decline in the company's market capitalization and revised internal projections[57](index=57&type=chunk) Revenue by Product Line (in thousands) | Product Line | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Family Safety | $3,788 | $4,464 | | CommSuite | $734 | $665 | | ViewSpot | $99 | $669 | | **Total Wireless revenues** | **$4,621** | **$5,798** | - The company has **extreme customer concentration**, with three customers accounting for **62%, 20%, and 16% of total revenues** in Q1 2025, and two customers accounting for **47% and 33% of accounts receivable** as of March 31, 2025[87](index=87&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 revenue decline, lower expenses, and liquidity issues raising substantial doubt about going concern [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Q1 2025 revenues decreased 20% to $4.6 million due to product declines, with improved gross profit margin and reduced operating expenses from cost cuts - Revenue decreased by **20% YoY**, primarily due to a **$0.7 million decline in Family Safety revenue** (from Sprint subscriber migration) and a **$0.6 million decline in ViewSpot revenue** from a contract that ended in 2024[113](index=113&type=chunk) - Selling, marketing, and research and development expenses **decreased by $1.0 million and $1.1 million**, respectively, due to cost reduction activities undertaken in 2024[116](index=116&type=chunk)[117](index=117&type=chunk) - The **significant decrease in operating loss** compared to Q1 2024 is mainly because a **$24.0 million goodwill impairment charge** from the prior-year period did not recur in Q1 2025[120](index=120&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) Precarious liquidity, with $2.3 million cash, raises substantial doubt about the company's ability to continue as a going concern without additional funding - The company's principal source of liquidity is its existing cash of approximately **$2.3 million** as of March 31, 2025[124](index=124&type=chunk) - Management acknowledges that cash and cash equivalents may be **insufficient to fund operations** at current levels over the next twelve months[125](index=125&type=chunk) - Due to uncertainties regarding future funding and operational cash generation, the company has been unable to alleviate **substantial doubt about its ability to continue as a going concern**[126](index=126&type=chunk) [Item 4. Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) As of March 31, 2025, CEO and CFO concluded disclosure controls were effective, with no material changes to internal control over financial reporting - Management, including the CEO and CFO, determined that as of March 31, 2025, the company's disclosure controls and procedures were **effective**[134](index=134&type=chunk) - **No changes in internal control over financial reporting** occurred during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls[137](index=137&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=27&type=section&id=Item%201.%20Legal%20Proceedings) The company does not expect current legal proceedings to have a material adverse impact on its financial condition or results of operations - While the company may be involved in legal proceedings, management does **not expect them to have a material adverse impact** on its consolidated financial results[139](index=139&type=chunk) [Item 1A. Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the 2024 Annual Report on Form 10-K have been reported - **No material changes** to the risk factors included in the 2024 Form 10-K have been reported[140](index=140&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=27&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q1 2025, the company repurchased 84,925 shares at an average price of $1.23 per share to cover withholding taxes for restricted stock awards Issuer Purchases of Equity Securities (Q1 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2025 | 20,410 | $1.23 | | February 2025 | 49,545 | $1.39 | | March 2025 | 14,970 | $0.72 | | **Total** | **84,925** | **$1.23** | - The repurchased shares were acquired by the company **to cover withholding taxes** for employees upon the vesting of restricted stock awards[141](index=141&type=chunk) [Item 6. Exhibits](index=28&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications and Inline XBRL financial data files

Financial Performance - Smith Micro Software, Inc. reported a quarterly loss of $0.16 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.11, representing an earnings surprise of -45.45% [1] - The company posted revenues of $4.62 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 3.73%, and down from $5.8 million year-over-year [2] - Over the last four quarters, the company has only surpassed consensus EPS estimates once and has not beaten consensus revenue estimates [2] Stock Performance - Smith Micro Software shares have declined approximately 29.5% since the beginning of the year, compared to a decline of -4.7% for the S&P 500 [3] - The current status of estimate revisions is mixed, leading to a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market in the near future [6] Future Outlook - The current consensus EPS estimate for the upcoming quarter is -$0.08 on revenues of $5.5 million, and for the current fiscal year, it is -$0.22 on revenues of $24.9 million [7] - The outlook for the industry, specifically the Computer - Software sector, is currently in the top 30% of Zacks industries, which may positively influence stock performance [8]

Financial Data and Key Metrics Changes - For Q1 2025, the company recognized revenue of $4.6 million, a decrease of approximately 20% compared to $5.8 million in Q1 2024 [9] - Family Safety revenues were $3.8 million, down approximately 15% year-over-year, primarily due to the decline in legacy Sprint safe and found revenue [9] - Gross profit for Q1 2025 was approximately $3.4 million, down from $3.8 million in the same period of the prior year, with a gross margin of 73% compared to 66% in Q1 2024 [11] - GAAP net loss for Q1 2025 was $5.2 million or $0.28 loss per share, significantly improved from a GAAP net loss of $31 million or $3.28 loss per share in Q1 2024 [12][13] Business Line Data and Key Metrics Changes - CommSuite revenue was approximately $700,000, an increase of $100,000 compared to Q1 2024, but decreased by $400,000 compared to Q4 2024 [10] - ViewSpot revenue was approximately $100,000, down $600,000 year-over-year, primarily due to the end of a contract [10] Market Data and Key Metrics Changes - The company expects consolidated revenues for Q2 2025 to be in the range of approximately $4.4 million to $4.8 million [11] - The company reported $2.3 million in cash and cash equivalents as of March 31, 2025, and filed a new shelf registration with $75 million capacity [15] Company Strategy and Development Direction - The company is focusing on SafePath OS for kids and senior phones, aiming to align with mobile operators' core business strengths [5] - SafePath eight, the next generation of the SafePath platform, will introduce AI-centric features to enhance family safety solutions [8][16] - The company is optimistic about closing new customer deals and expanding agreements with current customers [5][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong global demand for digital family safety solutions, viewing it as an immense opportunity for growth [7] - The company is seeing positive shifts in conversations with current and prospective customers regarding their latest solutions [24] - Management remains optimistic about the company's prospects for a return to growth and profitability [28] Other Important Information - The company has engaged in extensive discussions with mobile operator partners regarding new initiatives [5] - The new SafePath eight platform will include features such as social media intelligence and a family AI assistant [18][21] Q&A Session Summary Question: Metrics on SafePath 2.0 performance - Management indicated that SafePath 2.0 is off to a strong start with good adoption expected to improve during the summer and back-to-school period [31] Question: Engagements and pilots for SafePath Kids - Management confirmed expectations for meaningful launches in Q3, aligning with back-to-school opportunities [34] Question: Visibility on SafePath Seniors pilots and pricing thoughts on SafePath eight - Management noted that the first trial for SafePath Seniors has already occurred, with a potential launch in Q4 [38] Question: Relevance of tablets and potential impacts from global disruptions - Management stated that the SafePath OS solution will run on tablets and is compatible with existing carrier offerings [51]