Smith Micro Software, Inc. (NASDAQ:SMSI) Q3 2022 Results Conference Call November 9, 2022 4:30 PM ET Company Participants Charles Messman - VP, IR and Corporate Development Bill Smith - Chairman, President and CEO Jim Kempton - CFO Conference Call Participants Scott Searle - Roth Capital Josh Nichols - B. Riley Jim McIlree - Dawson James Operator Thank you for holding. Good day, and welcome to the Smith Micro Third Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operato ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The unaudited statements show declining revenue and profit, a larger net loss, and negative operating cash flow for the first half of 2022 [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets and stockholders' equity decreased as of June 30, 2022, driven by a significant reduction in cash and cash equivalents Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 (unaudited) | December 31, 2021 (audited) | | :--- | :--- | :--- | | Cash and cash equivalents | $5,357 | $16,078 | | Total current assets | $19,433 | $28,656 | | Goodwill | $35,041 | $35,041 | | Total assets | $100,845 | $114,512 | | Total current liabilities | $10,160 | $9,368 | | Total liabilities | $13,917 | $13,952 | | Total stockholders' equity | $86,928 | $100,560 | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) Revenues declined and net losses widened for both the second quarter and first six months of 2022 compared to the prior year Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | Six Months 2022 | Six Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $12,674 | $15,919 | $25,409 | $27,300 | | Gross Profit | $9,057 | $12,561 | $18,156 | $22,397 | | Operating Loss | ($8,479) | ($5,210) | ($15,459) | ($8,447) | | Net Loss | ($8,493) | ($5,203) | ($15,496) | ($8,428) | | Loss Per Share (Basic & Diluted) | ($0.15) | ($0.10) | ($0.28) | ($0.17) | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations turned negative in the first half of 2022, contributing to a substantial decrease in cash and cash equivalents Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($11,627) | $1,496 | | Net cash used in investing activities | ($29) | ($57,132) | | Net cash provided by financing activities | $935 | $59,818 | | Net (decrease) increase in cash | ($10,721) | $4,182 | | Cash and cash equivalents, end of period | $5,357 | $29,936 | [Notes to the Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) Notes highlight significant customer concentration, revenue disaggregation, and a post-quarter private placement of convertible notes - The company has **significant customer concentration**, with two customers accounting for 44% and 37% of revenues in Q2 2022, and three customers representing 47%, 26%, and 14% of accounts receivable[54](index=54&type=chunk)[55](index=55&type=chunk) - On August 11, 2022, the company entered into a private placement for **$15 million in senior secured convertible notes** and also sold common stock and warrants, raising additional capital[68](index=68&type=chunk) - The company's credit facility with Wells Fargo was terminated on August 11, 2022, in connection with the new financing transactions[31](index=31&type=chunk) Disaggregation of Revenues for the Six Months Ended June 30 (in thousands) | Revenue Type | 2022 | 2021 | | :--- | :--- | :--- | | Cloud based usage fees | $19,548 | $15,602 | | Hosted environment usage fees | $2,863 | $8,097 | | License and service fees | $1,861 | $2,382 | | Consulting services and other | $1,137 | $1,219 | | **Total revenues** | **$25,409** | **$27,300** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the revenue decline driven by T-Mobile's subscriber migration, its impact on margins, and the need for recent financing - **Q2 2022 revenues declined by 20%** to $12.7 million compared to Q2 2021, primarily due to a $2.5 million decrease in CommSuite revenues and a $1.0 million decrease in the family safety product line[78](index=78&type=chunk) - The revenue decline is attributed to T-Mobile's accelerated migration of legacy Sprint subscribers, with **CommSuite services expected to end-of-life before the end of 2022**[78](index=78&type=chunk) - **Gross margin decreased** in Q2 2022 due to the costs of maintaining multiple family safety platforms, with improvement expected once migrations to the flagship SafePath platform are complete[78](index=78&type=chunk)[80](index=80&type=chunk) Comparison of Operating Results (in thousands) | Metric | Q2 2022 | Q2 2021 | Change | Reason for Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $12,674 | $15,919 | ($3,245) | Decrease in CommSuite and legacy family safety products | | Gross Profit | $9,057 | $12,561 | ($3,504) | Lower revenue and higher costs from maintaining multiple platforms | | R&D Expenses | $8,213 | $7,063 | $1,150 | Increased contractor costs for SafePath development | | Net Loss | ($8,493) | ($5,203) | ($3,290) | Lower gross profit and higher operating expenses | [Item 4. Controls and Procedures](index=23&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and CFO concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - Management determined that as of June 30, 2022, the company's **disclosure controls and procedures were effective**[107](index=107&type=chunk) - No changes in internal controls over financial reporting occurred during the quarter ended June 30, 2022, that have **materially affected, or are reasonably likely to materially affect**, these controls[110](index=110&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=24&type=section&id=Item%201.%20Legal%20Proceedings) Management does not expect current legal proceedings to have a material adverse impact on the company's financial condition - While the company may become involved in legal proceedings, management does not currently expect them to have a **material adverse impact** on its consolidated financial results[113](index=113&type=chunk) [Item 1A. Risk Factors](index=24&type=section&id=Item%201A.%20Risk%20Factors) New risks related to the August 2022 convertible notes issuance have been added, concerning financing, dilution, and asset security - **New risks have been introduced** related to the recently issued convertible notes[114](index=114&type=chunk)[115](index=115&type=chunk) - The notes may restrict the ability to obtain additional financing and **dedicate cash flow to debt repayment**[115](index=115&type=chunk) - Conversion of the notes and exercise of associated warrants **will dilute the ownership interest** of existing stockholders[116](index=116&type=chunk) - The company's obligations under the notes are secured by a security interest in substantially all of its assets, and noteholders could **foreclose on these assets** in case of a default[118](index=118&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=25&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased over 163,000 shares during Q2 2022 to satisfy employee tax withholding obligations on vested stock awards Issuer Purchases of Equity Securities (Q2 2022) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 1 - 30, 2022 | 27,835 | $3.67 | | May 1 - 31, 2022 | 116,133 | $2.56 | | June 1 - 30, 2022 | 19,766 | $2.61 | | **Total** | **163,734** | **$2.95** | - The repurchased shares were acquired by the company to cover withholding taxes for employees upon the vesting of restricted stock awards[121](index=121&type=chunk) [Item 6. Exhibits](index=26&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including bylaws, agreements, and required officer certifications [Signatures](index=27&type=section&id=SIGNATURES) - The report was signed on August 12, 2022, by **William W. Smith, Jr. (CEO) and James M. Kempton (CFO)**[127](index=127&type=chunk)

Financial Data and Key Metrics Changes - Revenue for Q2 2022 was $12.7 million, a decrease of approximately 20% compared to $15.9 million in Q2 2021, and flat compared to Q1 2022 [16][14] - Non-GAAP net loss for Q2 2022 was $5.1 million or $0.09 loss per share, compared to a non-GAAP loss of approximately $300,000 or $0.01 loss per share in Q2 2021 [26][27] - GAAP operating expenses for Q2 2022 were $17.5 million, a decrease of approximately $200,000 or 1% compared to the same period last year [23] Business Line Data and Key Metrics Changes - Family Safety revenue decreased by about $1 million or 9% compared to Q2 2021, primarily due to the attrition of legacy Sprint subscribers [17] - CommSuite revenue was $1.4 million, down approximately $2.5 million compared to $3.9 million in Q2 2021, with expectations of very modest revenue from legacy Sprint subscribers in Q3 2022 [18] - ViewSpot revenue was approximately $1.1 million for Q2 2022, an increase of approximately $300,000 compared to Q2 2021, and up approximately 16% compared to Q1 2022 [19] Market Data and Key Metrics Changes - The company expects consolidated revenue for Q3 2022 to be lower by 5% to 10% compared to Q2 2022 due to ongoing market conditions [20] - Gross margin for Q2 2022 was 71.5%, down from 78.9% in Q2 2021, with expectations of a decline in gross margin by 1% to 2% in Q3 2022 [21] Company Strategy and Development Direction - The company is focused on consolidating acquired technologies into the SafePath platform, aiming to reduce operating expenses significantly by Q1 2023 [12][33] - A strong marketing team has been built to promote SafePath, with a target of 3 million to 5 million subscribers per Tier 1 carrier by 2025 [34][35] - The company is working on enhancing the SafePath platform with new features to drive subscriber growth [36][37] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about a recovery in revenue growth in Q4 2022, driven by marketing efforts at T-Mobile and AT&T [50] - The company anticipates a significant reduction in operating expenses, with a target of over $3 million in savings by the end of Q1 2023 [12][52] - Management highlighted the importance of marketing initiatives to drive subscriber growth and stabilize revenue streams [41][42] Other Important Information - The company reported $5.4 million in cash and cash equivalents as of June 30, 2022, and announced a $15 million convertible note transaction to supplement liquidity [29][30] - The company terminated its Wells Fargo revolving credit facility in conjunction with the capital raise [30][46] Q&A Session Summary Question: Visibility on marketing campaigns at T-Mobile - Management indicated strong plans in place with both T-Mobile and AT&T, expecting successful outcomes from ongoing marketing efforts [50] Question: Timing of cost reductions - Management confirmed that the expected reduction of over $3 million in operating expenses would be fully realized by the end of Q1 2023 [52] Question: Updates on Tier 1 operators in Europe - Management stated that there is ongoing activity but no specific updates could be provided at this time [53] Question: Health of the consumer and appetite for family plans - Management noted that the marketing approach for SafePath is multifaceted, focusing on various channels to drive growth [58] Question: Focus on subscriber additions versus new services - Management acknowledged that while carriers focus on customer acquisition, there is still significant potential for selling value-added services like SafePath [62] Question: Clarification on CommSuite revenues - Management clarified that the legacy Sprint revenue stream is expected to decline significantly, while DISH revenues are anticipated to continue [66] Question: Clarification on subscriber numbers - Management confirmed that the 3 million to 5 million figure refers to family coverage, with expectations of achieving this by 2025 [75]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the unaudited consolidated financial statements and management's discussion and analysis for the company [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) This section presents Smith Micro Software, Inc.'s unaudited consolidated financial statements and detailed notes for Q1 2022 and 2021 [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position at specific points in time Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2022 | December 31, 2021 | Change (vs. Dec 31, 2021) | | :-------------------------- | :------------- | :---------------- | :------------------------ | | Cash and cash equivalents | $9,831 | $16,078 | -$6,247 | | Accounts receivable, net | $12,058 | $10,590 | +$1,468 | | Total current assets | $24,086 | $28,656 | -$4,570 | | Intangible assets, net | $40,987 | $42,631 | -$1,644 | | Goodwill | $35,041 | $35,041 | $0 | | Total assets | $108,509 | $115,356 | -$6,847 | | Total current liabilities | $9,342 | $9,368 | -$26 | | Total non-current liabilities | $4,984 | $5,428 | -$444 | | Total stockholders' equity | $94,183 | $100,560 | -$6,377 | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) This section details the company's revenues, expenses, and net loss over a specific period Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change (YoY) | | :-------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Revenues | $12,735 | $11,381 | +$1,354 | | Cost of revenues | $3,637 | $1,545 | +$2,092 | | Gross profit | $9,098 | $9,836 | -$738 | | Total operating expenses | $16,077 | $13,073 | +$3,004 | | Operating loss | $(6,979) | $(3,237) | -$(3,742) | | Net loss | $(7,002) | $(3,225) | -$(3,777) | | Basic and diluted loss per share | $(0.13) | $(0.07) | -$(0.06) | [Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) This section outlines changes in the company's equity due to net loss, stock grants, and other transactions Consolidated Stockholders' Equity Highlights (in thousands) | Metric | December 31, 2021 | March 31, 2022 | | :-------------------------------- | :---------------- | :------------- | | Total Stockholders' Equity | $100,560 | $94,183 | | Net loss | — | $(7,002) | | Restricted stock grants, net | — | $1,045 | | Cancellation of shares for payment of withholding tax | — | $(474) | - Total stockholders' equity decreased from **$100,560 thousand** at December 31, 2021, to **$94,183 thousand** at March 31, 2022, primarily due to a **net loss of $7,002 thousand**[14](index=14&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section reports on the cash generated and used by operating, investing, and financing activities Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash (used in) provided by operating activities | $(6,589) | $3,700 | | Net cash used in investing activities | $(51) | $(179) | | Net cash provided by financing activities | $393 | $59,972 | | Net (decrease) increase in cash and cash equivalents | $(6,247) | $63,493 | | Cash and cash equivalents, end of period | $9,831 | $89,247 | - The company experienced a **net decrease in cash and cash equivalents of $6,247 thousand** for the three months ended March 31, 2022, a significant shift from the **$63,493 thousand increase** in the prior year, primarily driven by cash used in operating activities[17](index=17&type=chunk) [Notes to the Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) This section provides detailed disclosures on accounting policies, credit facilities, intangible assets, revenue, and other financial notes [Note 1. The Company](index=7&type=section&id=Note%201.%20The%20Company) This note describes Smith Micro Software, Inc.'s business, focusing on mobile experience enhancement solutions - Smith Micro Software, Inc. develops software to simplify and enhance the mobile experience, offering solutions to wireless and cable service providers globally. Its portfolio includes products for family digital lifestyle, visual voice messaging, and retail content display optimization[20](index=20&type=chunk)[26](index=26&type=chunk) [Note 2. Accounting Policies](index=7&type=section&id=Note%202.%20Accounting%20Policies) This note outlines the significant accounting principles used in preparing the unaudited interim financial statements - The unaudited interim consolidated financial statements are prepared in accordance with SEC rules and US GAAP, with certain disclosures omitted. Management confirms all adjustments are normal and recurring, and prior period amounts have been reclassified for comparability[21](index=21&type=chunk)[22](index=22&type=chunk)[23](index=23&type=chunk) [Note 3. Credit Facility](index=7&type=section&id=Note%203.%20Credit%20Facility) This note details the company's revolving credit facility with Wells Fargo Bank for working capital needs - On March 31, 2022, the Company entered into a **$7.0 million secured revolving credit facility** with Wells Fargo Bank, National Association, maturing on March 31, 2023, for working capital and general corporate purposes. As of March 31, 2022, there were **no outstanding borrowings**[24](index=24&type=chunk)[25](index=25&type=chunk)[27](index=27&type=chunk) [Note 4. Goodwill and Intangible Assets](index=8&type=section&id=Note%204.%20Goodwill%20and%20Intangible%20Assets) This note provides information on the company's goodwill and intangible assets, including amortization schedules - Goodwill is reviewed annually for impairment on December 31, with **no impairment identified** as of March 31, 2022, or December 31, 2021. Intangible assets, net, totaled **$40,987 thousand** as of March 31, 2022, amortized over a weighted average period of approximately **10 years**[28](index=28&type=chunk)[29](index=29&type=chunk) Intangible Assets, Net (in thousands) | Intangible Asset | March 31, 2022 Net Book Value | December 31, 2021 Net Book Value | | :----------------- | :---------------------------- | :------------------------------- | | Purchased technology | $9,241 | $9,765 | | Customer relationships | $24,623 | $25,144 | | Customer contracts | $2,190 | $2,559 | | Software license | $4,436 | $4,626 | | Non-compete | $68 | $87 | | Patents | $429 | $450 | | Total | $40,987 | $42,631 | Estimated Amortization Expense (in thousands) | Year Ending December 31, | Amortization Expense | | :----------------------- | :------------------- | | 2022 (remainder) | $4,666 | | 2023 | $5,874 | | 2024 | $5,635 | | 2025 | $5,402 | | 2026 | $5,007 | | 2027 and thereafter | $14,403 | | Total | $40,987 | [Note 5. Earnings Per Share](index=8&type=section&id=Note%205.%20Earnings%20Per%20Share) This note explains the calculation of basic and diluted earnings per share, especially during periods of net loss - Basic and diluted EPS are calculated based on net income available to common stockholders and weighted average shares outstanding. For periods with a net loss, dilutive common stock equivalents are excluded from diluted EPS calculation[31](index=31&type=chunk)[32](index=32&type=chunk) Basic and Diluted Loss Per Share (in thousands, except per share amounts) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(7,002) | $(3,225) | | Weighted average shares outstanding – basic | 54,501 | 43,368 | | Weighted average shares outstanding – diluted | 54,501 | 43,368 | | Basic loss per common share | $(0.13) | $(0.07) | | Diluted loss per common share | $(0.13) | $(0.07) | [Note 6. Stock-Based Compensation](index=9&type=section&id=Note%206.%20Stock-Based%20Compensation) This note details the company's stock-based compensation plans, including restricted stock grants - During the three months ended March 31, 2022, the Company granted **1.2 million shares** of restricted stock under its 2015 Omnibus Equity Incentive Plan. Approximately **2.6 million shares** remained available for future grants as of March 31, 2022[34](index=34&type=chunk) [Note 7. Revenues](index=10&type=section&id=Note%207.%20Revenues) This note describes the company's revenue recognition policies and disaggregates revenue by type - Revenue is recognized based on a five-step analysis, depicting the transfer of promised goods or services to customers. The Company primarily generates revenue from usage-based fees, and considers software licenses and cloud services as a single performance obligation due to their integrated nature[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk) Disaggregation of Revenues (in thousands) | Revenue Type | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------------------- | :-------------------------------- | :-------------------------------- | | License and service fees | $828 | $1,587 | | Hosted environment usage fees | $1,429 | $4,141 | | Cloud based usage fees | $9,878 | $4,963 | | Consulting services and other | $600 | $690 | | Total revenues | $12,735 | $11,381 | [Note 8. Segment, Customer Concentration and Geographical Information](index=11&type=section&id=Note%208.%20Segment%2C%20Customer%20Concentration%20and%20Geographical%20Information) This note provides details on the company's operating segment, customer concentration, and geographical revenue distribution - The Company operates with **one primary business unit, Wireless**, which includes SafePath®, CommSuite®, and ViewSpot® products. Revenues are not allocated to specific product lines or geographic locations beyond the Wireless segment[40](index=40&type=chunk)[41](index=41&type=chunk) Wireless Revenues by Product Line (in thousands) | Product Line | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------- | :-------------------------------- | :-------------------------------- | | SafePath | $10,366 | $6,267 | | CommSuite | $1,429 | $4,128 | | ViewSpot | $935 | $930 | | Other | $5 | $56 | | Total wireless revenues | $12,735 | $11,381 | - Customer concentration is significant, with **three customers accounting for 40%, 37%, and 10% of revenues** for Q1 2022. Geographically, the Americas generated **$12,193 thousand** in revenue, while EMEA generated **$542 thousand** for the three months ended March 31, 2022[43](index=43&type=chunk)[44](index=44&type=chunk) [Note 9. Commitments and Contingencies](index=11&type=section&id=Note%209.%20Commitments%20and%20Contingencies) This note discusses potential legal proceedings, indemnities, and other commitments the company faces - The Company may be involved in various legal proceedings, but management does not anticipate a material adverse impact on financial results. It also has various indemnities, commitments, and guarantees in its normal course of business, for which no liability has been recorded[45](index=45&type=chunk)[46](index=46&type=chunk) [Note 10. Leases](index=12&type=section&id=Note%2010.%20Leases) This note outlines the company's lease obligations for office space and equipment, including lease costs and maturities - The Company leases office space and equipment, recording leases with terms greater than twelve months on the balance sheet. Operating lease cost for the three months ended March 31, 2022, was **$416 thousand**, with a weighted average remaining lease term of **3.8 years**[47](index=47&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk) Maturity of Operating Lease Liabilities (in thousands) | Year Ending December 31, | Lease Payments | | :----------------------- | :------------- | | 2022 | $1,261 | | 2023 | $1,687 | | 2024 | $1,526 | | 2025 | $1,168 | | 2026 | $481 | | Total lease payments | $6,123 | | Present value of lease liabilities | $5,473 | [Note 11. Income Taxes](index=12&type=section&id=Note%2011.%20Income%20Taxes) This note details the company's accounting for income taxes, including deferred tax amounts and valuation allowances - The Company accounts for income taxes under FASB ASC Topic No. 740, recognizing the financial statement impact of a tax position when it is more likely than not to be sustained. Due to a three-year historical cumulative loss as of fiscal 2021, the Company continues to reserve its U.S.-based deferred tax amounts, totaling **$57.3 million** as of March 31, 2022[50](index=50&type=chunk)[51](index=51&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk) [Note 12. Subsequent Events](index=13&type=section&id=Note%2012.%20Subsequent%20Events) This note confirms the evaluation of events occurring after the balance sheet date, with no further disclosures required - Subsequent events have been evaluated as of the filing date, and no further disclosures are required[56](index=56&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=14&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of the company's financial condition, operational results, liquidity, and critical accounting policies [Forward-Looking Statements and Risk Factors](index=14&type=section&id=Forward-Looking%20Statements%20and%20Risk%20Factors) This section highlights forward-looking statements and key risks that could impact the company's future performance - The report contains forward-looking statements regarding projected revenues, market acceptance, competition, and profitability, which are subject to various risks and uncertainties. Key risk factors include customer concentration, ability to maintain strategic relationships, security breaches, failure to realize acquisition benefits, and rapid technological evolution[59](index=59&type=chunk)[60](index=60&type=chunk) [Overview](index=15&type=section&id=Overview) This section provides a general business description and summarizes key financial highlights for the reporting period - Smith Micro provides software solutions to wireless and cable service providers, focusing on digital lifestyle services and online safety. In Q1 2022, revenues increased by **12% to $12.7 million**, driven by a **64% increase** in family safety products due to the Avast Family Safety Mobile Business acquisition in April 2021[62](index=62&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk) - The acquisition led to a **decline in gross margin** and **higher development costs** due to maintaining multiple family safety platforms during integration. The company aims to fully migrate customers to its SafePath platform within the next year to improve gross margins and reduce development costs[64](index=64&type=chunk)[65](index=65&type=chunk) - Net loss for Q1 2022 was **$7.0 million**, or **$0.13 per basic and diluted share**. CommSuite revenues decreased by **$2.7 million** due to T-Mobile winding down Sprint's legacy premium visual voicemail service[64](index=64&type=chunk) [Results of Operations](index=16&type=section&id=Results%20of%20Operations) This section analyzes the company's revenues, cost of revenues, gross profit, and operating expenses for the period Key Financial Metrics as a Percentage of Revenues | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Revenues | 100.0 % | 100.0 % | | Cost of revenues | 28.6 % | 13.6 % | | Gross profit | 71.4 % | 86.4 % | | Selling and marketing | 23.4 % | 19.7 % | | Research and development | 58.1 % | 42.8 % | | General and administrative | 31.8 % | 32.1 % | | Amortization of intangible assets | 12.9 % | 20.2 % | | Total operating expenses | 126.2 % | 94.6 % | | Operating loss | (54.8)% | (8.2)% | | Net loss | (54.9)% | (8.1)% | - Revenues increased by **$1.4 million (12%) to $12.7 million** in Q1 2022, primarily due to the Family Safety Mobile Business acquisition, offset by declines in CommSuite and legacy family safety products[69](index=69&type=chunk) - Cost of revenues increased by **$2.1 million to $3.6 million**, mainly due to supporting the acquired Family Safety Mobile Business and maintaining multiple family safety platforms. This led to a decrease in gross profit margin from **86% to 71%**[70](index=70&type=chunk)[71](index=71&type=chunk) - Operating expenses increased by **$3.0 million**, with selling and marketing up **$0.8 million**, research and development up **$2.5 million** (due to Family Safety Mobile Business and SafePath development), and general and administrative up **$0.3 million**. Amortization of intangible assets decreased by **$0.7 million** due to accelerated amortization in 2021[72](index=72&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk) [Liquidity and Capital Resources](index=17&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, credit facilities, and cash flow from operating, investing, and financing activities - The Company's liquidity sources include cash and cash equivalents (**$9.8 million** as of March 31, 2022) and a **$7.0 million secured revolving credit facility**, with **$6.97 million net availability**. No borrowings were outstanding under the credit facility as of March 31, 2022[77](index=77&type=chunk)[78](index=78&type=chunk) - Net cash used in operating activities was **$6.6 million** for Q1 2022, compared to **$3.7 million provided** in Q1 2021, primarily due to a net loss and increases in accounts receivable[79](index=79&type=chunk)[80](index=80&type=chunk) - Net cash provided by financing activities was **$0.4 million** in Q1 2022, mainly from an insurance premium financing arrangement, significantly lower than the **$60.0 million** in Q1 2021 which included proceeds from a common stock offering[82](index=82&type=chunk)[83](index=83&type=chunk) [Off-Balance Sheet Arrangements](index=17&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of off-balance sheet arrangements and notes certain indemnities and commitments - The Company does not have any off-balance sheet arrangements. It has made certain indemnities, commitments, and guarantees in the normal course of business, for which no liability has been recorded[84](index=84&type=chunk)[85](index=85&type=chunk) [Recent Accounting Guidance](index=18&type=section&id=Recent%20Accounting%20Guidance) This section refers to disclosures regarding recently adopted or issued accounting pronouncements - Information regarding recent accounting guidance is provided in Note 2 of the Notes to the Consolidated Financial Statements[87](index=87&type=chunk) [Critical Accounting Policies and Estimates](index=18&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights the significant accounting policies and estimates requiring management judgment - The Company's financial statements require estimates and judgments affecting reported amounts. Critical accounting policies and estimates are detailed in Note 1 of the Annual Report on Form 10-K[88](index=88&type=chunk) [Item 4. Controls and Procedures](index=18&type=section&id=Item%204.%20Controls%20and%20Procedures) This section evaluates the company's disclosure controls and procedures and reports on changes in internal control over financial reporting [Evaluation of disclosure controls and procedures](index=18&type=section&id=Evaluation%20of%20disclosure%20controls%20and%20procedures) This section confirms the effectiveness of the company's disclosure controls and procedures as of the reporting date - As of March 31, 2022, management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective in ensuring timely and accurate reporting of information required in Exchange Act reports[89](index=89&type=chunk) [Management's responsibility for financial statements](index=18&type=section&id=Management%27s%20responsibility%20for%20financial%20statements) This section outlines management's responsibility for the integrity and objectivity of the financial statements - 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. The Audit Committee oversees financial reporting and internal controls[90](index=90&type=chunk)[91](index=91&type=chunk) [Changes in internal control over financial reporting](index=18&type=section&id=Changes%20in%20internal%20control%20over%20financial%20reporting) This section reports on any material changes in the company's internal control over financial reporting - There have been no changes in internal controls over financial reporting during the quarter ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, the Company's internal controls[92](index=92&type=chunk) [PART II. OTHER INFORMATION](index=19&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section includes disclosures on legal proceedings, equity security sales, and a list of exhibits [Item 1. Legal Proceedings](index=19&type=section&id=Item%201.%20Legal%20Proceedings) This section addresses potential legal proceedings and their anticipated impact on the company's financial results - The Company may be involved in various legal proceedings, but management does not believe their ultimate disposition will have a material adverse impact on the Company's consolidated results of operations, cash flows, or financial position[95](index=95&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=19&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's repurchases of equity securities, primarily for withholding taxes on restricted stock Issuer Purchases of Equity Securities (Three Months Ended March 31, 2022) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :-------------------- | :----------------------------- | :--------------------------- | | January 1 - 31, 2022 | 30,466 | $4.37 | | February 1 - 28, 2022 | 27,123 | $4.04 | | March 1 - 31, 2022 | 63,283 | $3.65 | | Total | 120,872 | $3.92 | - The Company repurchased **120,872 shares** of stock during the three months ended March 31, 2022, at an average price of **$3.92 per share**. These repurchases were for the payment of withholding taxes related to the vesting of restricted stock awards and were subsequently cancelled[96](index=96&type=chunk) [Item 6. Exhibits](index=20&type=section&id=Item%206.%20Exhibits) This section lists all key exhibits filed as part of the Form 10-Q report, including bylaws and credit agreements - Key exhibits include the Certificate of Amendment of Amended and Restated Bylaws, Credit Agreement with Wells Fargo Bank, Security Agreements, and Certifications of the Chief Executive Officer and Chief Financial Officer[97](index=97&type=chunk) [SIGNATURES](index=21&type=section&id=SIGNATURES) This section contains the official signatures of the company's authorized officers, certifying the Form 10-Q filing - The report was signed on May 5, 2022, by William W. Smith, Jr., Chairman of the Board, President and Chief Executive Officer, and James M. Kempton, Vice President and Chief Financial Officer[101](index=101&type=chunk)

Smith Micro Software, Inc. (NASDAQ:SMSI) Q1 2022 Earnings Conference Call May 4, 2022 4:30 PM ET Company Participants Charles Messman - VP, IR and Corporate Development Bill Smith - Chairman, President and CEO James Kempton - CFO Conference Call Participants Josh Nichols - B. Riley Jim McIlree - Dawson James Bruce Goldfarb - Lake Street Capital Markets Disclaimer*: This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designe ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number 01-35525 SMITH MICRO SOFTWARE, INC. (Exact name of registrant as specified in its charter) Delaware 33-0029027 (State or other ju ...

Start Time: 16:30 January 1, 0000 5:21 PM ET Smith Micro Software, Inc. (NASDAQ:SMSI) Q4 2021 Earnings Conference Call March 10, 2022, 16:30 PM ET Company Participants Bill Smith - Chairman, President and CEO James Kempton - CFO Charles Messman - VP, IR and Corporate Development Conference Call Participants Josh Nichols - B. Riley Scott Searle - ROTH Capital Eric Martinuzzi - Lake Street Capital Markets Jim McIlree - Dawson James Operator Good afternoon, and welcome to the Smith Micro Software Fourth Quarte ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10‑Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 001‑35525 SMITH MICRO SOFTWARE, INC. (Exact name of registrant as specified in its charter) DELAWARE 33‑0029027 (State or other jurisdiction of incorporation or o ...

INVESTOR OVERVIEW November 10, 2021 © 2021 Smith Micro Software, Inc. Confidential. Any unauthorized disclosure or distribution is strictly prohibited. All rights reserved. FORWARD-LOOKING STATEMENTS This presentation includes, and any related discussion may include, forward-looking statements regarding future events or results within the meaning of the Private Securities Litigation Reform Act. All statements other than statements of historical fact may be forward-looking statements, including but not limit ...

Financial Data and Key Metrics Changes - Revenue for Q3 2021 was $16.4 million, a 30% increase from $12.6 million in Q3 2020, and a sequential increase of approximately $524,000 from Q2 2021 [17][19] - Non-GAAP net loss for the quarter was $258,000, equating to breakeven per share, compared to a non-GAAP net income of $1.8 million or $0.04 diluted earnings per share in the same quarter last year [36][37] - Cash balance at the end of Q3 2021 was $32.4 million, with an earnout payment of $12.9 million made to Avast after the quarter [18][42] Business Line Data and Key Metrics Changes - Family Safety revenue, including SafePath and the Avast Family Safety Mobile business, increased 77% to $12 million compared to Q3 2020, but was slightly lower than expectations due to delays in the T-Mobile agreement [20][21] - CommSuite platform revenue was $3.5 million, down 24% from Q3 2020, and down 12% sequentially from Q2 2021, primarily due to legacy Sprint subscriber losses [24][26] - ViewSpot revenue was approximately $971,000 for Q3 2021, up 19% compared to Q2 2021, but expected to decrease by 20% to 25% in Q4 2021 due to seasonality [29][30] Market Data and Key Metrics Changes - The company anticipates a continued decline in CommSuite revenue, expecting it to decrease by 30% to 35% compared to Q3 2021, as legacy Sprint subscribers transition to T-Mobile [27] - Boost Mobile, now part of DISH, comprises approximately 35% of CommSuite platform revenue, with plans to expand the relationship [28] Company Strategy and Development Direction - The company aims to provide a comprehensive solution for families' digital lifestyles, focusing on smart home and IoT markets to increase the total addressable market [16] - The strategy includes transitioning all Family Safety business to the SafePath 7 platform by the end of 2022, with a focus on the three largest Tier 1 carriers in the U.S. [99][100] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth potential with T-Mobile, Verizon, and AT&T, highlighting the importance of marketing efforts and retail engagement to drive subscriber growth [75][81] - The company expects to see a return to growth in 2022, particularly with the launch of FamilyMode 3 and enhanced marketing initiatives [49][76] Other Important Information - The company is working on the formal purchase price allocation for the Avast Family Safety Mobile business, with adjustments expected in Q4 2021 [40] - GAAP operating expenses for Q3 2021 were $31.2 million, an increase of 181% compared to last year, primarily due to the Avast acquisition [33][34] Q&A Session Summary Question: What is the magnitude of the Family Locator app that goes away? - The Family Locator app's revenue impact is expected to be about $0.5 million drop in revenue due to its discontinuation [69] Question: How aggressive will T-Mobile be in marketing FamilyMode 3? - T-Mobile has a strong team committed to growing the business, and there is optimism for momentum and growth post-launch [81] Question: What are the expectations for Verizon's growth and rollout in 2022? - There is a significant growth opportunity with Verizon, with expectations for large growth over 2022 and beyond [75] Question: What expenses will be maintained for CommSuite at lower revenue levels? - The expense load for CommSuite is very low and will be adjusted based on the business opportunity presented by DISH [97] Question: When will all Family Safety business be on the SafePath 7 platform? - The goal is to have all customers transitioned to SafePath 7 by the end of 2022 [99]