Smith Micro Software(SMSI) - 2025 Q2 - Quarterly Results

Executive Summary & Business Outlook This section provides management's commentary on Q2 2025 performance, upcoming product launches, and future revenue expectations Management Commentary 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] - 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] - Company expects sequential quarterly revenue growth for the second half of 2025[1][2] Financial Performance Overview 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 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 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] - 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] Non-GAAP Measures and Reconciliation 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 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] - 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] - 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] Reconciliation of GAAP to Non-GAAP Results (Three Months Ended June 30) 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) 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 This section presents the company's consolidated balance sheets, statements of operations, and cash flows for the specified periods Consolidated Balance Sheets 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 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 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] - Proceeds from Common Stock, Warrants, and Pre-Funded Warrants Offering, net: $0 in YTD 2025 vs. $3,351 thousand in YTD 2024[15] Additional Information 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 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] - Dial-in: 1-844-701-1164 (US) / 1-412-317-5492 (International)[9] - Internet webcast available at https://event.choruscall.com/mediaframe/webcast.html?webcastid=8AVPRziL[9](index=9&type=chunk) About Smith Micro Software, Inc. 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] - Provides solutions to leading wireless service providers around the world[10] - Solutions include enabling the family digital lifestyle and powerful voice messaging capabilities, engaging consumers via smartphones and consumer IoT devices[10] Forward-Looking Statements 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] - Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially[12] - 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]