8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 4, 2020

Smith Micro Software, Inc.

(Exact name of Registrant as Specified in Its Charter)

Delaware	001-35525	33-0029027
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

5800 Corporate Drive Pittsburgh, PA	15237
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code: (412) 837-5300

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	SMSI	NASDAQ

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02.Results of Operations and Financial Condition

On November 4, 2020, Smith Micro Software, Inc. issued a press release announcing its financial results for the three and nine months ended September 30, 2020. A copy of the press release is hereby furnished to the Securities and Exchange Commission as Exhibit 99.1 and incorporated by reference herein.

In accordance with General Instruction B.2 of Form 8-K, the information in this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.

Item 9.01.Financial Statements and Exhibits.

(d) Exhibits

Exhibit	Description
99.1	Press Release issued on November 4, 2020
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Smith Micro Software, Inc.
Date:  November 4, 2020	By:	/s/ Timothy C. Huffmyer
		Timothy C. Huffmyer
		Vice President and Chief Financial Officer

EX-99.1

EXHIBIT 99.1

IR INQUIRIES:

Charles Messman

Investor Relations

949-362-5800

IR@smithmicro.com

Smith Micro Reports Third Quarter 2020 Financial Results

PITTSBURGH, PA, November 4, 2020– Smith Micro Software, Inc. (NASDAQ: SMSI) (“Smith Micro” or the “Company”) today reported financial results for its third quarter ended September 30, 2020.

“Our third quarter was extremely productive and I am pleased that our financial results came in above street expectations,” said William W. Smith, Jr., President and CEO of Smith Micro Software. “During the quarter, we invested in R&D as well as sales and marketing initiatives, and will continue to do so throughout the remainder of 2020.  I am very pleased that we remain profitable and cash-flow positive, as the company generated $8 million of cash in the first three quarters of 2020. Moving into 2021, we remain well-positioned for growth and continued profitability as we look to launch our solutions with multiple carrier customers.”

Third Quarter 2020 Financial Results

Smith Micro reported revenue of $12.6 million for the third quarter ended September 30, 2020, compared to $11.8 million reported in the third quarter ended September 30, 2019.

Third quarter 2020 gross profit was $11.3 million compared to $10.8 million reported in the third quarter of 2019.

Gross profit as a percentage of revenue was 90 percent for the third quarter of 2020 compared to 91 percent for the third quarter of 2019.

Generally accepted accounting principles in the United States (“GAAP”) net income available to common stockholders for the third quarter of 2020 was $161 thousand, or $0.00 diluted earnings per share,

Smith Micro Software Third Quarter 2020 Financial Results Page 2

compared to GAAP net incomeavailable to common stockholdersof $3.5 million, or $0.09diluted earnings per share, for the third quarter of 2019.

Non-GAAP net income (which excludes stock-based compensation, amortization of intangibles, transaction gains, acquisitions costs, and preferred stock dividends) for the third quarter of 2020 was $1.8 million, or $0.04 diluted earnings per share, compared to non-GAAP net income of $4.2 million, or $0.11 diluted earnings per share, for the third quarter of 2019.

Third Quarter Year-to-Date 2020 Financial Results

Smith Micro reported revenue of $38.9 million for the nine months ended September 30, 2020, compared to $31.1 million reported in the nine months ended September 30, 2019.

Gross profit for the nine months ended September 30, 2020 was $35.1 million compared to $28.2 million reported for the same period in 2019.

Gross profit as a percentage of revenue was 90 percent for the nine months ended September 30, 2020 compared to 91 percent for the nine months ended September 30, 2019.

GAAP net income available to common stockholders for the nine months ended September 30, 2020 was $3.6 million, or $0.08 diluted earnings per share, compared to GAAP net income available to common stockholders of $6.9 million, or $0.20 diluted earnings per share, for the same period in 2019.

Non-GAAP net income (which excludes stock-based compensation, amortization of intangibles, transaction gains, acquisition costs, and preferred stock dividends) for the nine months ended September 30, 2020 was $9.0 million, or $0.21 diluted earnings per share, compared to non-GAAP net income of $8.5 million, or $0.24 diluted earnings per share, for the nine months ended September 30, 2019.

Total cash and cash equivalents at September 30, 2020 were $25.9 million.

To supplement our financial information presented in accordance with GAAP, the Company considers and has included in this press release certain non-GAAP financial measures, including a non-GAAP reconciliation of gross profit, income before taxes, net income available to common stockholders, and earnings per share in the presentation of financial results in this press release. Management believes this non-GAAP presentation may be more meaningful in analyzing our income generation and has therefore excluded the following items from GAAP earnings calculations: stock-based compensation, amortization of intangibles, transaction gains, acquisition costs, and preferred stock dividends. Additionally, since the Company currently has federal and state net operating loss carryforwards that can be utilized to reduce

Smith Micro Software Third Quarter 2020 Financial Results Page 3

future cash payments for income taxes, these non-GAAP adjustments have not been tax effected and the resulting income tax expense reflects actual taxes paid or accrued during each period. This presentation may be considered more indicative of our ongoing operational performance. The table below presents the differences between non-GAAP net income and net income on an absolute and per-share basis. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and the non-financial measures as reported by Smith Micro may not be comparable to similarly titled amounts reported by other companies.

Investor Conference Call

Smith Micro will hold an investor conference call today, November 4, 2020 at 4:30 p.m. EDT, to discuss the Company’s third quarter 2020 financial results. To access the call, dial 1-844-701-1164; international participants can call 1-412-317-5492. A passcode is not required to join the call; ask the operator to be placed into the Smith Micro conference. Participants are asked to call the assigned number approximately 10 minutes before the conference call begins. In addition, the conference call will be available on the Smith Micro website in the Investor Relations section.

About Smith Micro Software, Inc.

Smith Micro develops software to simplify and enhance the mobile experience, providing solutions to some of the leading wireless service providers and cable MSOs around the world. From enabling the family digital lifestyle to providing powerful voice messaging capabilities, our solutions enrich today’s connected lifestyles while creating new opportunities to engage consumers via smartphones and consumer IoT devices. The Smith Micro portfolio also includes a wide range of products for creating, sharing and monetizing rich content, such as visual voice messaging, optimizing retail content display and performing analytics on any product set. For more information, visit www.smithmicro.com.

Smith Micro and the Smith Micro logo are registered trademarks or trademarks of Smith Micro Software, Inc. All other trademarks and product names are the property of their respective owners.

Smith Micro Software Third Quarter 2020 Financial Results Page 4

Forward-Looking Statements

Certain statements in this press release are, and certain statements on the related conference call may be, forward-looking statements regarding future events or results, including statements related to our financial prospects and other projections of our outlook or performance and our future business plans, and statements using such words as “expect,” “anticipate,” “believe,” “plan,” “intend,” “could,” “will” and other similar expressions. Forward-looking statements involve risks and uncertainties, which could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Among the important factors that could cause or contribute to such differences are customer concentration, given that the majority of our sales depend on a few large customer relationships, the impact of the COVID-19 pandemic on our business and financial results, changes in demand for our products from our customers and their end-users, changes in requirements for our products imposed by our customers or by the third party providers of software and/or platforms that we use, our ability to effectively integrate, market and sell acquired product lines, new and changing technologies, customer acceptance and timing of deployment of those technologies, and our ability to compete effectively with other software and technology companies. These and other factors discussed in our filings with the Securities and Exchange Commission, including our filings on Forms 10-K and 10-Q, could cause actual results to differ materially from those expressed or implied in any forward-looking statements. The forward-looking statements contained in this release are made on the basis of the views and assumptions of management, and we do not undertake any obligation to update these statements to reflect events or circumstances occurring after the date of this release.

Smith Micro Software Third Quarter 2020 Financial Results Page 5

Smith Micro Software, Inc.
Reconciliation of GAAP to Non-GAAP Results
(in thousands, except per share data) - unaudited
	GAAP		Stock Compensation			Intangibles Amortization			Gain on Sale of Software Product			Acquisition Costs			Preferred Stock Dividends		Non- GAAP
Three Months Ended 9/30/20
Gross profit	$	11,303	$	-		$	-		$	-		$	-		$	-	$	11,303
Selling and marketing expenses		2,655		(146	)		(475	)		-			-			-		2,034
Research and development expenses		5,446		(147	)		(366	)		-			-			-		4,933
General and administrative expenses		2,997		(518	)		-			-			-			-		2,479
Restructuring expense		9		-			-			-			-			-		9
Total operating expenses		11,107		(811	)		(841	)		-			-			-		9,455
Income before provision for     income taxes		206		811			841			-			-			-		1,858
Net income available to      common stockholders		161		811			841			-			-			-		1,813
Earnings per share: basic		0.00		0.02			0.02			-			-			-		0.04
Earnings per share: diluted		0.00		0.02			0.02			-			-			-		0.04
Three Months Ended 9/30/19
Gross profit	$	10,771	$	-		$	-		$	-		$	-		$	-	$	10,771
Selling and marketing expenses		1,793		(65	)		(88	)		-			-			-		1,640
Research and development expenses		3,063		(72	)		(152	)		-			-			-		2,839
General and administrative expenses		2,396		(214	)		-			-			-			-		2,182
Restructuring expense		39		-			-			-			-			-		39
Total operating expenses		7,291		(351	)		(240	)		-			-			-		6,700
Income before provision for     income taxes		3,567		351			240			-			-			-		4,158
Net income available to common      stockholders		3,515		351			240			-			-			52		4,158
Earnings per share: basic		0.10		0.01			0.01			-			-			0.00		0.12
Earnings per share: diluted		0.09		0.01			0.01			-			-			0.00		0.11
Nine Months Ended 9/30/20
Gross profit	$	35,116	$	-		$	-		$	-		$	-		$	-	$	35,116
Selling and marketing expenses		8,049		(404	)		(1,225	)		-			-			-		6,420
Research and development expenses		13,774		(412	)		(980	)		-			-			-		12,382
General and administrative expenses		9,741		(1,436	)		-			-			(918	)		-		7,387
Restructuring expense		19		-			-			-			-			-		19
Total operating expenses		31,583		(2,252	)		(2,205	)		-			(918	)		-		26,208
Income before provision for     income taxes		3,630		2,252			2,205			-			918			-		9,005
Net income available to      common stockholders		3,585		2,252			2,205			-			918			-		8,960
Earnings per share: basic		0.09		0.06			0.05			-			0.02			-		0.22
Earnings per share: diluted		0.08		0.05			0.05			-			0.02			-		0.21
Nine Months Ended 9/30/19
Gross profit	$	28,166	$	-		$	-		$	-		$	-		$	-	$	28,166
Selling and marketing expenses		5,529		(179	)		(295	)		-			-			-		5,055
Research and development expenses		8,487		(205	)		(410	)		-			-			-		7,872
General and administrative expenses		7,522		(755	)		-			-			(76	)		-		6,691
Restructuring expense		154		-			-			-			-			-		154
Total operating expenses		21,692		(1,139	)		(705	)		-			(76	)		-		19,772
Income before provision for     income taxes		7,059		1,139			705			(483	)		76			-		8,496
Net income available to common      stockholders		6,932		1,139			705			(483	)		76			119		8,488
Earnings per share: basic		0.21		0.03			0.02			(0.01	)		0.00			0.00		0.26
Earnings per share: diluted		0.20		0.03			0.02			(0.01	)		0.00			0.00		0.24

Smith Micro Software Third Quarter 2020 Financial Results Page 6

Smith Micro Software, Inc.
Consolidated Statements of Operations
(in thousands, except per share data) - unaudited
	For the Three Months					For the Nine Months
	Ended September 30,					Ended September 30,
	2020		2019			2020		2019
Revenues	$	12,629	$	11,782		$	38,883	$	31,068
Cost of revenues		1,326		1,011			3,767		2,902
Gross profit		11,303		10,771			35,116		28,166
Operating expenses:
Selling and marketing		2,655		1,793			8,049		5,529
Research and development		5,446		3,063			13,774		8,487
General and administrative		2,997		2,396			9,741		7,522
Restructuring expense		9		39			19		154
Total operating expenses		11,107		7,291			31,583		21,692
Operating income		196		3,480			3,533		6,474
Non-operating income (expense):
Interest income, net		7		87			94		117
Gain on sale of software product		—		—			—		483
Other expense, net		3		—			3		(15	)
Income before provision for income taxes		206		3,567			3,630		7,059
Income tax expense		45		—			45		8
Net income		161		3,567			3,585		7,051
Less preferred stock dividends		—		(52	)		—		(119	)
Net income available to common stockholders	$	161	$	3,515		$	3,585	$	6,932
Earnings per share:
Basic	$	0.00	$	0.10		$	0.09	$	0.21
Diluted	$	0.00	$	0.09		$	0.08	$	0.20
Weighted average shares outstanding:
Basic		41,351		36,094			40,656		33,170
Diluted		43,026		39,472			42,577		35,287

Smith Micro Software Third Quarter 2020 Financial Results Page 7

Smith Micro Software, Inc.
Consolidated Balance Sheets
(in thousands)
	unaudited			audited
	September 30,			December 31,
	2020			2019
ASSETS
Current Assets:
Cash & cash equivalents	$	25,872		$	28,268
Accounts receivable, net		9,797			10,894
Prepaid and other assets		1,329			802
Total current assets		36,998			39,964
Equipment & improvements, net		2,250			2,109
Right-of-use assets		6,090			6,464
Deferred tax asset, net		94			94
Other assets		441			234
Intangible assets, net		14,186			4,535
Goodwill		11,493			7,797
TOTAL ASSETS	$	71,552		$	61,197
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	1,855		$	2,050
Accrued payroll and benefits		2,705			2,107
Current operating lease liabilities		1,407			1,221
Other accrued liabilities		260			244
Deferred revenue		1,561			98
Total current liabilities		7,788			5,720
Operating lease liabilities		5,121			5,774
Deferred rent		928			885
Other long-term liabilities		83			134
Total non-current liabilities		6,132			6,793
Stockholders' Equity:
Common stock		41			38
Additional paid in capital		279,401			274,041
Accumulated comprehensive deficit		(221,810	)		(225,395	)
Total stockholders' equity		57,632			48,684
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$	71,552		$	61,197

Smith Micro Software Third Quarter 2020 Financial Results Page 8

Smith Micro Software, Inc.
Consolidated Statements of Cash Flows
(in thousands) - unaudited
	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,
	2020			2019			2020			2019
Operating activities:
Net income	$	161		$	3,567		$	3,585		$	7,051
Adjustments to reconcile net income to net cash provided    by operating activities:
Depreciation and amortization		1,014			316			2,676			997
Non-cash lease expense		294			249			805			730
Restructuring costs		13			39			19			154
Gain on sale of software product		—			—			—			(483	)
Provision for doubtful accounts and other adjustments    to accounts receivable		(50	)		119			(59	)		127
Provision for excess and obsolete inventory		—			—			—			1
Loss on disposal of fixed assets		—			—			—			6
Stock based compensation		811			351			2,252			1,139
Changes in operating accounts:
Accounts receivable		2,796			1,811			1,159			(4,031	)
Prepaid expenses and other assets		103			190			(530	)		52
Accounts payable and accrued liabilities		(1,112	)		(175	)		(1,804	)		(701	)
Deferred revenue		(89	)		(78	)		173			(214	)
Net cash provided by operating activities		3,941			6,389			8,276			4,828
Investing activities:
Acquisition of Circle operator business, net		(1,350	)		—			(13,500	)		—
Acquisition of Smart Retail business, net		—			—			—			(3,974	)
Capital expenditures		(360	)		(537	)		(1,212	)		(824	)
Other investing activities		11			13			(193	)		363
Net cash used in investing activities		(1,699	)		(524	)		(14,905	)		(4,435	)
Financing activities:
Proceeds from exercise of common stock warrants		—			11,403			4,196			11,403
Dividends paid on preferred stock		—			(52	)		—			(119	)
Other financing activities		16			43			37			34
Net cash provided by financing activities		16			11,394			4,233			11,318
Net increase (decrease) in cash and cash equivalents		2,258			17,259			(2,396	)		11,711
Cash and cash equivalents, beginning of period		23,614			6,611			28,268			12,159
Cash and cash equivalents, end of period	$	25,872		$	23,870		$	25,872		$	23,870
Free cash flow:
Net cash provided by operating activities	$	3,941		$	6,389		$	8,276		$	4,828
Capital expenditures		(360	)		(537	)		(1,212	)		(824	)
Free cash flow	$	3,581		$	5,852		$	7,064		$	4,004

XML

Document and Entity Information	Nov. 04, 2020
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Nov. 04, 2020
Entity Registrant Name	Smith Micro Software, Inc.
Entity Central Index Key	0000948708
Entity Emerging Growth Company	false
Entity File Number	001-35525
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	33-0029027
Entity Address, Address Line One	5800 Corporate Drive
Entity Address, City or Town	Pittsburgh
Entity Address, State or Province	PA
Entity Address, Postal Zip Code	15237
City Area Code	412
Local Phone Number	837-5300
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, par value $0.001 per share
Trading Symbol	SMSI
Security Exchange Name	NASDAQ