| --- | --- | --- | |-------|----------------------------|-------| | | | | | | SMITHMICRO S O F T W A R E | | | | INVESTOR OVERVIEW | | | | August 2021 | | (@2021 Smith Micro Scftware, Inc. Confidental, Any unauthorized discloure or distribution is strictly problibited, All frights researce FORWARD-LOOKING STATEMENTS This presentation includes, and any related discussion may include, forward-looking statements regarding future events or results. All statements other than statements of historical fact may be ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents Smith Micro Software's unaudited financial statements, management's discussion, and controls for the period [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section provides Smith Micro Software's unaudited consolidated financial statements and detailed explanatory notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets and stockholders' equity significantly increased due to the Avast acquisition and a common stock offering | Metric (in thousands) | June 30, 2021 | December 31, 2020 | Change | % Change | | :-------------------- | :------------ | :---------------- | :----- | :------- | | Cash and cash equivalents | $29,936 | $25,754 | $4,182 | 16.2% | | Total current assets | $46,923 | $39,290 | $7,633 | 19.4% | | Intangible assets, net | $41,255 | $12,698 | $28,557 | 224.9% | | Goodwill | $40,085 | $12,266 | $27,819 | 226.8% | | Total assets | $137,425 | $72,903 | $64,522 | 88.5% | | Total current liabilities | $12,712 | $8,370 | $4,342 | 51.9% | | Total stockholders' equity | $119,473 | $58,716 | $60,757 | 103.5% | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) Revenues increased, but higher costs and operating expenses led to a net loss for the three and six months ended June 30, 2021 | Metric (in thousands) | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Revenues | $15,919 | $12,933 | $2,986 | 23.1% | | Cost of revenues | $3,358 | $1,269 | $2,089 | 164.6% | | Gross profit | $12,561 | $11,664 | $897 | 7.7% | | Total operating expenses | $17,771 | $10,287 | $7,484 | 72.7% | | Operating income (loss) | $(5,210) | $1,377 | $(6,587) | -478.4% | | Net income (loss) | $(5,203) | $1,379 | $(6,582) | -477.3% | | Basic and diluted EPS | $(0.10) | $0.03 | $(0.13) | -433.3% | | Metric (in thousands) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Revenues | $27,300 | $26,255 | $1,045 | 4.0% | | Cost of revenues | $4,903 | $2,441 | $2,462 | 100.9% | | Gross profit | $22,397 | $23,814 | $(1,417) | -5.9% | | Total operating expenses | $30,844 | $20,477 | $10,367 | 50.6% | | Operating income (loss) | $(8,447) | $3,337 | $(11,784) | -353.1% | | Net income (loss) | $(8,428) | $3,424 | $(11,852) | -346.2% | | Basic and diluted EPS | $(0.17) | $0.08 | $(0.25) | -312.5% | [Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity significantly increased due to a common stock offering and shares for the Avast acquisition, despite a net loss - Total stockholders' equity increased from **$58,716 thousand** at December 31, 2020, to **$119,473 thousand** at June 30, 2021[14](index=14&type=chunk) - Key contributors to the increase in additional paid-in capital include **$59,701 thousand** from a common stock offering and **$8,380 thousand** from common shares issued for the Avast Family Safety Mobile acquisition[14](index=14&type=chunk) - The company recognized a net loss of **$(8,428) thousand** for the six months ended June 30, 2021, impacting accumulated comprehensive deficit[14](index=14&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash and cash equivalents increased, driven by financing activities offsetting investing outflows and lower operating cash flow | Cash Flow Activity (in thousands) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | | :-------------------------------- | :--------------------------- | :--------------------------- | :----- | | Net cash provided by operating activities | $1,496 | $4,335 | $(2,839) | | Net cash used in investing activities | $(57,132) | $(13,206) | $(43,926) | | Net cash provided by financing activities | $59,818 | $4,217 | $55,601 | | Net increase (decrease) in cash and cash equivalents | $4,182 | $(4,654) | $8,836 | | Cash and cash equivalents, end of period | $29,936 | $23,614 | $6,322 | - Investing activities for the six months ended June 30, 2021, were primarily driven by a **$56.9 million** net cash payment for the acquisition of the Family Safety Mobile Business[19](index=19&type=chunk) - Financing activities for the six months ended June 30, 2021, were significantly boosted by **$59.7 million** in net proceeds from a common stock offering[19](index=19&type=chunk) [Notes to the Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) These notes provide essential context and detailed information on the company's business, accounting policies, and financial activities [1. The Company](index=8&type=section&id=1.%20The%20Company) Smith Micro Software develops mobile experience software solutions for wireless and cable service providers globally - Smith Micro develops software to simplify and enhance the mobile experience for leading wireless and cable service providers[21](index=21&type=chunk) - The company's product portfolio includes solutions for family digital lifestyle, powerful voice messaging, retail content display optimization, and performance analytics[21](index=21&type=chunk) [2. Accounting Policies](index=8&type=section&id=2.%20Accounting%20Policies) This section details the basis of financial statement presentation, COVID-19 impact, revenue recognition, and fair value measurement policies - The unaudited consolidated financial statements are prepared in accordance with SEC rules and GAAP, with certain disclosures omitted[22](index=22&type=chunk) - COVID-19 has led to a reduction in SafePath® platform subscribers and delays in customer decisions for ViewSpot platform, impacting financial estimates and assumptions[26](index=26&type=chunk) - Revenue recognition follows FASB ASC Topic No. 606, recognizing revenue upon transfer of promised goods or services, with specific considerations for software licenses, usage-based revenue, and consulting services[28](index=28&type=chunk)[29](index=29&type=chunk)[31](index=31&type=chunk) - Fair value measurements are categorized into a three-tier hierarchy (Level 1, 2, 3) based on the observability of inputs, with cash equivalents in Level 1 and goodwill/acquisition-related contingent consideration in Level 3[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk) [3. Acquisitions](index=10&type=section&id=3.%20Acquisitions) Smith Micro acquired Avast's Family Safety Mobile Business for **$72.7 million**, significantly impacting assets and future revenues - Smith Micro acquired substantially all assets of Avast's Family Safety Mobile Business on April 16, 2021[38](index=38&type=chunk) Acquisition Metric (in thousands) | Acquisition Metric (in thousands) | Amount | | :-------------------------------- | :----- | | Fair value of assets acquired | $75,626 | | Fair value of liabilities assumed | $2,893 | | Total purchase price | $72,733 | | Cash consideration | $63,216 | | Common stock consideration | $8,381 | | Contingent consideration | $1,136 | - The acquisition resulted in the recognition of **$33.5 million** in intangible assets and **$27.8 million** in goodwill[39](index=39&type=chunk) - From April 16 to June 30, 2021, the acquired business contributed approximately **$6.0 million** in revenues and **$1.7 million** in cost of revenues[41](index=41&type=chunk) [4. Goodwill and Intangible Assets](index=11&type=section&id=4.%20Goodwill%20and%20Intangible%20Assets) Goodwill showed no impairment, but a customer contract termination resulted in a **$1.5 million** intangible asset impairment charge - Goodwill recoverability is reviewed annually, with no impairment found as of June 30, 2021, or December 31, 2020[44](index=44&type=chunk) - A customer contract acquired from Circle Media Labs Inc. was terminated effective April 15, 2021, leading to a **$1.5 million** impairment charge on the related intangible asset, recognized in selling and marketing expenses[45](index=45&type=chunk) [5. Earnings Per Share](index=11&type=section&id=5.%20Earnings%20Per%20Share) Basic and diluted EPS show a net loss per share for the current period, with anti-dilutive shares excluded | EPS Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | | :--------- | :--------------------------- | :--------------------------- | | Basic EPS | $(0.10) | $0.03 | | Diluted EPS | $(0.10) | $0.03 | | EPS Metric | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :--------- | :--------------------------- | :--------------------------- | | Basic EPS | $(0.17) | $0.08 | | Diluted EPS | $(0.17) | $0.08 | - For periods with a net loss, dilutive common stock equivalents are excluded from the diluted EPS calculation[46](index=46&type=chunk) [6. Stock-Based Compensation](index=12&type=section&id=6.%20Stock-Based%20Compensation) The company granted restricted stock and options, with **3.8 million** shares remaining available for future grants - **100,000 shares** of restricted stock and **10,000 incentive stock options** were granted in the three months ended June 30, 2021[49](index=49&type=chunk) - **1,100,000 shares** of restricted stock and **20,000 incentive stock options** were granted in the six months ended June 30, 2021[49](index=49&type=chunk) - Approximately **3.8 million shares** were available for future grants under the 2015 Plan as of June 30, 2021[49](index=49&type=chunk) [7. Revenues](index=12&type=section&id=7.%20Revenues) The company sells software, cloud services, and consulting, with revenue recognition following a five-step analysis, and experienced a **$0.6 million** deferred revenue recognition and **$1.5 million** impairment charge - Revenue recognition follows FASB ASC Topic 606, involving identifying contracts, performance obligations, transaction price, and allocation[51](index=51&type=chunk) - The company's cloud-based service, including software licenses, is considered a single performance obligation due to the integrated nature of the license and services[52](index=52&type=chunk) - Deferred revenue balance was **$0.9 million** as of June 30, 2021, with **$0.7 million** recognized as revenue during the six months ended June 30, 2021[55](index=55&type=chunk) Disaggregated Revenues (in thousands) | Revenue Type | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | License and service fees | $795 | $1,008 | $2,382 | $1,563 | | Hosted environment usage fees | $3,956 | $4,341 | $8,097 | $8,890 | | Cloud based usage fees | $10,555 | $6,705 | $15,602 | $14,352 | | Consulting services and other | $613 | $879 | $1,219 | $1,450 | | **Total revenues** | **$15,919** | **$12,933** | **$27,300** | **$26,255** | [8. Segment, Customer Concentration and Geographical Information](index=14&type=section&id=8.%20Segment,%20Customer%20Concentration%20and%20Geographical%20Information) The company operates in one Wireless segment, with significant customer concentration and the Americas as the dominant revenue source - The company has one primary business unit: Wireless, encompassing SafePath®, CommSuite®, and ViewSpot® products[58](index=58&type=chunk) Wireless Revenues by Product (in thousands) | Product | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Family Safety Mobile | $11,119 | $7,344 | $17,385 | $15,193 | | CommSuite | $3,944 | $4,330 | $8,073 | $8,869 | | ViewSpot | $817 | $971 | $1,746 | $1,716 | | Other | $39 | $288 | $96 | $477 | | **Total wireless revenues** | **$15,919** | **$12,933** | **$27,300** | **$26,255** | - Two customers accounted for **82% of revenues** for the three months ended June 30, 2021, and **79%** for the six months ended June 30, 2021[61](index=61&type=chunk) - The Americas region generated **$15.4 million** in revenue for the three months ended June 30, 2021, and **$25.5 million** for the six months ended June 30, 2021, representing the vast majority of total revenues[63](index=63&type=chunk) [9. Commitments and Contingencies](index=14&type=section&id=9.%20Commitments%20and%20Contingencies) The company faces potential legal proceedings and has various indemnities, but no material liabilities are recorded - The company may become involved in legal proceedings arising from business activities[64](index=64&type=chunk) - Management does not believe the ultimate disposition of these matters will have a material adverse impact[64](index=64&type=chunk) - Indemnities, commitments, and guarantees include intellectual property, facility leases, vendor claims, and director/officer indemnities, with no liability recorded as of the balance sheet date[65](index=65&type=chunk) [10. Leases](index=15&type=section&id=10.%20Leases) The company leases office space and equipment, with a total lease cost of **$819 thousand** and a **4.06-year** weighted average remaining lease term Operating Lease Cost (in thousands) | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :----- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Lease cost | $560 | $533 | $1,120 | $1,061 | | Sublease income | $(151) | $(151) | $(301) | $(301) | | **Total lease cost** | **$409** | **$382** | **$819** | **$760** | Operating Lease Liabilities (in thousands) | Year | Amount | | :--- | :----- | | 2021 | $916 | | 2022 | $1,621 | | 2023 | $1,606 | | 2024 | $1,227 | | 2025 | $867 | | Thereafter | $291 | | **Total lease payments** | **$6,528** | | Less imputed interest | $(816) | | **Present value of lease liabilities** | **$5,712** | - Weighted average remaining lease term is **4.06 years**, with a weighted average discount rate of **6.75%** as of June 30, 2021[68](index=68&type=chunk) [11. Income Taxes](index=16&type=section&id=11.%20Income%20Taxes) The company reserves **$49.4 million** in U.S.-based deferred tax assets due to historical losses, with no CARES Act impact - The company reserves its U.S.-based deferred tax amounts, totaling **$49.4 million** as of June 30, 2021, due to a five-year historical cumulative loss position[72](index=72&type=chunk) - The CARES Act changes regarding NOL carrybacks and interest expense limitation had no impact on the company's tax provision[74](index=74&type=chunk) [12. Equity Transactions](index=16&type=section&id=12.%20Equity%20Transactions) A public offering of **9.5 million** shares raised **$59.7 million** in net proceeds, partially funding the Avast acquisition - A registered public offering on March 15, 2021, issued **9,520,787 common shares** at **$6.85 per share**[75](index=75&type=chunk) - The offering generated net cash proceeds of approximately **$59.7 million**[75](index=75&type=chunk) - Proceeds from the offering were used to partially fund the acquisition of the Family Safety Mobile Business[75](index=75&type=chunk) [13. Subsequent Events](index=16&type=section&id=13.%20Subsequent%20Events) No further disclosures are required for subsequent events as of the filing date - No further disclosures are required for subsequent events as of the filing date[76](index=76&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, liquidity, and the Avast acquisition's impact, focusing on digital lifestyle services and off-balance sheet arrangements [Overview](index=18&type=section&id=Overview) Smith Micro develops mobile experience software, anticipating increased family safety platform revenue from the Avast acquisition - Smith Micro develops software to simplify and enhance the mobile experience, providing solutions to leading wireless and cable service providers[81](index=81&type=chunk) - The company's portfolio includes products for family digital lifestyle, voice messaging, retail content display optimization, and performance analytics[81](index=81&type=chunk) - Future family safety platform revenue is expected to increase due to the Avast acquisition, partially offset by reduced SafePath subscribers[83](index=83&type=chunk) [Results of Operations](index=18&type=section&id=Results%20of%20Operations) Revenues increased due to the Avast acquisition, but higher operating expenses and lower gross profit led to a net operating loss Key Financial Ratios (as % of Revenues) | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :----- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenues | 100.0% | 100.0% | 100.0% | 100.0% | | Cost of revenues | 21.1% | 9.8% | 18.0% | 9.3% | | Gross profit | 78.9% | 90.2% | 82.0% | 90.7% | | Selling and marketing | 30.5% | 20.2% | 33.3% | 20.6% | | Research and development | 50.1% | 35.6% | 48.2% | 31.7% | | General and administrative | 31.1% | 23.7% | 31.5% | 25.7% | | Operating income (loss) | (32.8)% | 10.7% | (31.0)% | 12.7% | | Net income (loss) | (32.8)% | 10.7% | (31.0)% | 13.0% | - Revenues increased by **$3.0 million (23%)** for the three months and **$1.0 million (4%)** for the six months ended June 30, 2021, primarily due to the Avast Family Safety Mobile Business acquisition[86](index=86&type=chunk)[92](index=92&type=chunk) - Gross profit percentage decreased from **90% to 79%** for the three months and from **91% to 82%** for the six months, driven by higher costs associated with operating the acquired business and the SafePath platform[88](index=88&type=chunk)[94](index=94&type=chunk) - Operating expenses (selling & marketing, R&D, G&A) significantly increased due to additional costs from the Avast acquisition, related intangible asset amortization, increased headcount, and transaction costs[89](index=89&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk) [Liquidity and Capital Resources](index=19&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and working capital stood at **$29.9 million** and **$34.2 million**, respectively, with financing offsetting acquisition-driven investing outflows - As of June 30, 2021, cash and cash equivalents were **$29.9 million**, and working capital was **$34.2 million**[98](index=98&type=chunk) - Net cash provided by operating activities was **$1.5 million** for the six months ended June 30, 2021, a decrease from **$4.3 million** in the prior year[99](index=99&type=chunk)[100](index=100&type=chunk) - Net cash used in investing activities was **$57.1 million** for the six months ended June 30, 2021, primarily for the Avast acquisition[102](index=102&type=chunk) - Net cash provided by financing activities was **$59.8 million** for the six months ended June 30, 2021, mainly from a common stock offering[104](index=104&type=chunk) [Off-Balance Sheet Arrangements](index=20&type=section&id=Off-Balance%20Sheet%20Arrangements) The company has no off-balance sheet arrangements and has recorded no liabilities for indemnities or guarantees - The company does not have any off-balance sheet arrangements[105](index=105&type=chunk) - No liability has been recorded for indemnities, commitments, and guarantees, which include intellectual property, facility leases, and director/officer indemnities[106](index=106&type=chunk) [Recent Accounting Guidance](index=20&type=section&id=Recent%20Accounting%20Guidance) Refer to Note 2 of the Consolidated Financial Statements for recent accounting guidance information - Refer to Note 2 of the Notes to the Consolidated Financial Statements for information on recent accounting guidance[107](index=107&type=chunk) [Critical Accounting Policies and Estimates](index=20&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Financial statements rely on management estimates and judgments, with further details in Note 2 of the Consolidated Financial Statements - The preparation of financial statements requires management to make estimates and judgments that affect reported amounts[108](index=108&type=chunk) - Estimates are based on historical experience and various assumptions, with actual results potentially differing materially[108](index=108&type=chunk) - Refer to Note 2 of the Notes to the Consolidated Financial Statements for information on critical accounting policies and estimates[108](index=108&type=chunk) [Item 4. Controls and Procedures](index=21&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirmed the effectiveness of disclosure controls and procedures, with no material changes in internal control over financial reporting [Evaluation of disclosure controls and procedures](index=21&type=section&id=Evaluation%20of%20disclosure%20controls%20and%20procedures) The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2021 - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2021[110](index=110&type=chunk) - The controls ensure information required for Exchange Act reports is recorded, processed, summarized, and reported within specified time periods[110](index=110&type=chunk) [Management's responsibility for financial statements](index=21&type=section&id=Management's%20responsibility%20for%20financial%20statements) Management is responsible for the integrity and objectivity of financial statements, prepared in conformity with U.S. GAAP - Management is responsible for the integrity and objectivity of all information presented in the report[111](index=111&type=chunk) - Consolidated financial statements are prepared in conformity with U.S. GAAP and reflect management's best estimates and judgments[111](index=111&type=chunk) [Changes in internal control over financial reporting](index=21&type=section&id=Changes%20in%20internal%20control%20over%20financial%20reporting) No material changes in internal controls over financial reporting occurred during the quarter ended June 30, 2021 - No material changes in internal controls over financial reporting occurred during the quarter ended June 30, 2021[113](index=113&type=chunk) [PART II. OTHER INFORMATION](index=22&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, equity security sales, and a list of exhibits filed with the report [Item 1. Legal Proceedings](index=22&type=section&id=Item%201.%20Legal%20Proceedings) The company may face legal proceedings, but management anticipates no material adverse impact on financial results - The company may be involved in legal proceedings arising from business activities[116](index=116&type=chunk) - Management does not believe the ultimate disposition of these matters will have a material adverse impact on consolidated results of operations, cash flows, or financial position[116](index=116&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=22&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **90,274 shares** at **$5.37 per share** for withholding taxes on restricted stock awards Issuer Purchases of Equity Securities (3 Months Ended June 30, 2021) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :---------------- | :------------------------------- | :--------------------------- | | April 1 - 30, 2021 | 29,312 | $5.65 | | May 1 - 31, 2021 | 31,068 | $5.05 | | June 1 - 30, 2021 | 29,894 | $5.43 | | **Total** | **90,274** | **$5.37** | - Shares were repurchased for payment of withholding taxes in connection with the vesting of restricted stock awards and were subsequently cancelled[117](index=117&type=chunk) [Item 6. Exhibits](index=23&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including agreements, certifications, and XBRL documents - Exhibits include the Registration Rights Agreement, CEO and CFO certifications (Sarbanes-Oxley Act), and Inline XBRL documents[118](index=118&type=chunk) [SIGNATURES](index=24&type=section&id=SIGNATURES) The report is duly signed by the CEO and CFO of Smith Micro Software, Inc [SIGNATURES](index=24&type=section&id=SIGNATURES) The report was signed by William W. Smith, Jr., CEO, and Timothy C. Huffmyer, CFO, on August 12, 2021 - The report was signed by William W. Smith, Jr., CEO, and Timothy C. Huffmyer, CFO, on August 12, 2021[122](index=122&type=chunk)

Smith Micro Software Inc. (NASDAQ:SMSI) Q2 2021 Earnings Conference Call August 4, 2021 4:30 PM ET Company Participants Charles Messman - Vice President of Investor Relations and Corporate Governance Bill Smith - Chairman of the Board, President and Chief Executive Officer Tim Huffmyer - Chief Financial Officer Conference Call Participants Scott Searle - ROTH Capital Aman Gulani - B. Riley Jim McIlree - Dawson James Bruce Goldfarb - Lake Street Capital Markets Operator Good day, and welcome to the Smith Mi ...

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 March 31, 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 organ ...

Financial Data and Key Metrics Changes - Revenues for Q1 2021 were $11.4 million, a decrease of 15% compared to $13.3 million in Q1 2020 and down 8% from Q4 2020 [10][14] - Non-GAAP net income for Q1 2021 was $700,000, or $0.02 diluted earnings per share, compared to $4.1 million, or $0.10 diluted earnings per share in the same quarter last year [27] - Gross profit for Q1 2021 was $9.8 million with a gross margin of 86%, down from 91% in the previous year [24] Business Line Data and Key Metrics Changes - Family Safety revenue decreased 20% year-over-year to $6.3 million but increased 3% sequentially from Q4 2020 [15] - CommSuite platform revenue was $4.1 million, down 9% year-over-year and down 13% sequentially [19] - ViewSpot revenue was approximately $930,000, up 25% year-over-year but down 32% sequentially [22] Market Data and Key Metrics Changes - Family Safety revenue is expected to increase by 70% to 75% in Q2 2021 compared to Q1 2021, driven by current subscriber trends and the acquisition of Family Safety products [18] - CommSuite platform revenue is expected to decline by 5% to 10% in Q2 2021 compared to Q1 2021 [21] - ViewSpot revenue is expected to increase by 5% to 10% in Q2 2021 compared to Q1 2021 [23] Company Strategy and Development Direction - The company aims to integrate the newly acquired Family Safety business from Avast and focus on maximizing revenues through enhanced product offerings [8][12] - A strategic focus on expanding relationships with DISH and T-Mobile is emphasized, particularly in the context of the 5G rollout [31][41] - The company plans to develop a unified SafePath code base to streamline operations and improve margins [44] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of retail activity post-COVID-19, which is expected to benefit ViewSpot revenues [35][45] - The integration of the Avast acquisition is seen as a significant growth opportunity, with expectations of a strong resurgence in revenues [46] - Management highlighted the importance of the Family Safety segment and the potential for growth through new marketing strategies with T-Mobile and Verizon [41][42] Other Important Information - The company closed a public offering, raising approximately $60 million, and completed the acquisition of the Avast Family Safety Mobile Software Business for $66 million [12][13] - Non-GAAP operating expenses for Q1 2021 were $9.1 million, an increase of 13% year-over-year, primarily due to increased compensation and employee-related expenses [24][25] Q&A Session Summary Question: Can you clarify the sequential outlook for ViewSpot? - The guidance for ViewSpot was 5% to 10% greater than the first quarter [50] Question: What is the expected growth for Family Safety revenue? - The guidance for Family Safety revenue is a 70% to 75% growth on top of the first quarter's revenues [51] Question: What is the timeline for the T-Mobile rollout? - A soft launch is expected initially, followed by a full rollout [54] Question: How does the Apple launch impact the market? - The Apple launch validates the market but is not seen as a direct competitor due to its limitations [57][58] Question: What is the cash position post-acquisition? - The company had approximately $30 million in cash with no debt [70]

Financial Data and Key Metrics Changes - For fiscal 2020, total revenue from operations increased 18% to $51.3 million compared to $43.3 million in fiscal year 2019 [9] - For Q4 2020, revenue increased slightly to $12.4 million compared to $12.3 million in Q4 2019 [9] - Non-GAAP net income for 2020 was $10.4 million or $0.24 per share, while for Q4 it was $1.4 million or $0.03 per share [9][46] - Gross profit for Q4 was $11 million, with a gross margin of 89%, compared to $11.3 million and 92% in the same period last year [42] Business Line Data and Key Metrics Changes - SafePath revenue decreased 9% to $6.1 million in Q4 compared to Q4 2019, but increased 58% for the fiscal year from $17.8 million to $28.1 million [30] - CommSuite platform revenue was $4.8 million in Q4, consistent with the same quarter last year, but decreased 3% for the fiscal year [34] - ViewSpot revenue was approximately $1.4 million for Q4, up 146% year-over-year, and $4.2 million for the fiscal year, consistent with 2019 [38] Market Data and Key Metrics Changes - The Family Safety Mobile Software Business being acquired from Avast experienced an 18% revenue decline from 2019 to 2020 [27] - The acquisition adds five mobile operator contracts, including Verizon and two European carriers, enhancing the customer portfolio [13][79] Company Strategy and Development Direction - The acquisition of the Family Safety Mobile Business from Avast is seen as transformational, positioning the company as the number one family safety software provider to wireless carriers globally [52] - The company plans to operate SafePath and the acquired Family Safety as two separate product lines to ease customer transition [56] - The collaboration agreement with Avast is expected to create significant growth opportunities in the IoT security and family safety markets [54] Management's Comments on Operating Environment and Future Outlook - The management acknowledged the challenges posed by the COVID-19 pandemic and the merger of Sprint and T-Mobile, which impacted revenue growth [10][11] - The company remains optimistic about growth opportunities with T-Mobile and expects significant outcomes from the new SafePath 7 offering [66] - Management expressed confidence in the business case and competitive position moving into 2021, bolstered by the acquisition [62] Other Important Information - The company announced a follow-on public offering for $62 million to fund the cash portion of the acquisition and for general corporate purposes [19][26] - The acquisition is expected to close early in the next quarter, with a strong balance sheet projected post-offering [26] Q&A Session Summary Question: Update on T-Mobile and future opportunities - Management indicated that planning with T-Mobile is progressing well, with a new offering called FamilyMode expected to launch midyear [66] Question: Opportunities from the collaboration agreement with Avast - Management highlighted the potential for partnership in IoT security and family safety, emphasizing a complementary approach rather than competition [69] Question: Clarification on the Avast model and European carrier relationships - Management confirmed that Avast operates on a subscription model and mentioned new partnerships with Vodafone Czech and Wind Tre in Italy [78] Question: Revenue outlook for 2021 - Management stated that the $18 million to $19 million forecast reflects the entire year, prorated based on the expected closing date of the acquisition [84] Question: Customer excitement about the transaction - Management noted that being recognized as the leader in the space reassures carriers and fosters excitement about future growth [91] Question: CommSuite revenue surprises - Management attributed the strong performance to seasonal advertising revenue, while acknowledging ongoing challenges with Sprint subscribers [103] Question: Potential for future acquisitions - Management expressed a cautious approach to future acquisitions, focusing on opportunities where they can be a top player in the market [112]

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, 2020 ☐ 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 ...

| --- | --- | --- | |-------|----------------------------|-------| | | | | | | SMITHMICRO S O F T W A R E | | | | INVESTOR OVERVIEW | | | | January 2021 | | @ 2020 Schild Micro Software, Inc. Confidential, Any unauch brided disclosure or distibution is stictly one Wated, All rights research FORWARD-LOOKING STATEMENTS This presentation includes, and any related discussion may include, forward-looking statements regarding future events or results. All statements other than statements of historical fact may be ...

Financial Data and Key Metrics Changes - For Q3 2020, the company reported revenue of $12.6 million, an increase of 7% compared to $11.8 million in Q3 2019, but a 2% decrease from Q2 2020 [11][13] - Gross profit for the quarter was $11.3 million, up from $10.8 million year-over-year, with a gross margin of 90% [11][24] - Non-GAAP net income was $1.8 million or $0.04 per share, down from $4.2 million or $0.11 per share in the same quarter last year [31] - Cash flow from operations was $3.9 million, ending the quarter with approximately $26 million in cash [12][34] Business Line Data and Key Metrics Changes - SafePath revenue increased by 30% year-over-year to $6.8 million, but decreased by 8% sequentially [14][15] - CommSuite revenue was $4.5 million, down 1% year-over-year but up 5% sequentially [17] - ViewSpot revenue was approximately $1.2 million, down 8% year-over-year but up 19% sequentially [21] Market Data and Key Metrics Changes - The decline in SafePath revenue was attributed to reduced in-store marketing initiatives due to the Sprint and T-Mobile merger and COVID-19 impacts [15][16] - CommSuite's performance benefited from subscriber stability and growth in Sprint and Boost subscribers, with Boost now part of Dish [18][40] - ViewSpot's revenue increase was driven by variable revenue activity with a tier one U.S. customer [21] Company Strategy and Development Direction - The company launched SafePath7, enhancing its connected lifestyle platform and aiming to set a new standard in family safety applications [8][42] - Continued investment in R&D is planned to support customer deployments and product enhancements [10][50] - The company is pursuing multiple opportunities to sell the SafePath platform, focusing on North America, Europe, and the Middle East [29][49] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth despite short-term challenges due to COVID-19 and the T-Mobile merger [51] - The company expects fourth-quarter revenues to be flat to down by 5% compared to Q3 [24] - Management highlighted the importance of transitioning customers to SafePath7 and the potential for growth once this is achieved [90][91] Other Important Information - The company plans to continue hiring, expecting to add approximately 12 to 15 employees in Q4 2020 [27] - Non-GAAP operating expenses increased significantly due to higher compensation and contract development costs [25][26] Q&A Session Summary Question: What is the sequential guidance for CommSuite in Q4? - Guidance for CommSuite is flat to down for Q4 [56] Question: Can you provide more details on the T-Mobile and Sky onboarding? - The transition to SafePath7 is in progress, with a focus on a single family safety product for all T-Mobile customers [62] Question: What is the outlook for SafePath revenue? - SafePath revenue is expected to decline by 7% to 12% in Q4 based on current subscriber trends [16] Question: How does the company view the relationship with Dish? - The company is optimistic about its relationship with Dish and plans to work with them on both prepaid and postpaid services [63] Question: What is the expected impact of seasonality on ViewSpot? - ViewSpot is expected to see a sequential decline in Q1 but ramp up through the summer [86] Question: What are the factors contributing to the decline in SafePath? - The decline is primarily due to limitations in selling to Sprint customers and the need for a new product that can be marketed to all T-Mobile customers [88][90]

Smith Micro Software, Inc. (NASDAQ:SMSI) Q2 2020 Earnings Conference Call August 5, 2020 4:30 PM ET Company Participants Charles Messman - Vice President of Investor Relations Bill Smith - Chairman of the Board, President and Chief Executive Officer Tim Huffmyer - Chief Financial Officer Conference Call Participants Scott Searle - Roth Capital Josh Nichols - B. Riley Jim McIlree - Bradley Woods Operator Good day, and welcome to the Smith Micro Second Quarter 2020 Earnings Conference Call and Webcast. All pa ...