Smith Micro Q3 Loss Narrower Than Expected, Revenues Lag

Core Insights - Smith Micro Software Inc (SMSI) reported a non-GAAP loss of 30 cents per share for Q3 2024, compared to earnings of 8 cents in the same quarter last year, which was slightly better than the Zacks Consensus Estimate of a loss of 31 cents [1][2] - Revenues for the quarter were $4.6 million, missing the Zacks Consensus Estimate by 3.2%, and reflecting a significant year-over-year decline of 58% due to downturns across various revenue segments [2][3] Revenue Segments - The Family Safety segment saw revenues decline by nearly $5.2 million or 57% to $3.9 million, primarily due to the end of the Verizon Family Safety contract and ongoing weakness in Sprint Safe & Found revenues [3] - CommSuite segment revenues decreased approximately 14.3% year over year to $0.6 million, although there was a sequential increase of $0.1 million due to strong subscriber engagement on the Boost CommSuite platform [4] - Revenues from the ViewSpot segment fell by $1 million year over year to $0.1 million, mainly due to the termination of ViewSpot deals [4] Financial Performance - Gross margin for the September quarter decreased to 71.6% from 77% in the prior-year quarter, attributed to top-line contraction [5] - Non-GAAP operating expenses for Q3 were $6.8 million, down nearly 12% year over year, while total operating expenses were $9.8 million, down 8% year over year [5][6] Balance Sheet and Cash Flow - As of September 30, 2024, SMSI had total cash and cash equivalents of $1.5 million, a decrease from $5.6 million as of June 30, 2024 [7] - For the nine months ended September 30, 2024, SMSI used $9.4 million in cash from operating activities, compared to $6 million in the same period last year [8] Q4 Outlook - SMSI estimates Q4 revenues to be in the range of $5-$5.2 million, with gross margin expected between 72-75% [9] - Management anticipates achieving cost savings of at least $2.4 million to $2.8 million by Q4 2024, with non-GAAP operating expenses forecasted to decrease by 7% to 12% compared to Q3 2024 [9] Stock Performance - Following the earnings announcement, SMSI shares fell by 12.2% in premarket trading, and over the past year, shares have declined by 86.3%, contrasting with a 21.7% growth in the subindustry [5]