Note 12 - Revenues

12 Months Ended

Dec. 31, 2025

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

12. Revenues

Performance Obligations

Family Safety Cloud Based Services

Smith Micro’s Family Safety solutions, which includes the SafePath family of products, are a hybrid software as a service (“SaaS”) offering. The Company considers the provision of the perpetual license and the cloud-based platform as a single performance obligation. The Company provides the perpetual license on a royalty free basis and earns revenue on a revenue share arrangement. Smith Micro recognizes the revenue share fees when it is entitled to the consideration earned for the distinct service period based on its customer’s usage of its cloud-based services.

ViewSpot Cloud Based Services

The Company's ViewSpot product was a cloud-based platform that Smith Micro's customers used to display their promotional content on mobile devices in their retail outlets. Smith Micro sold a royalty free license and cloud-based services to serve the promotional content and capture consumer interaction with the in-store display mobile device. ViewSpot services depended on a significant level of integration, interdependency, and interrelation between the on-premise applications and the cloud services, and were accounted for together as a single performance obligation. ViewSpot services were sold on a fixed fee basis to Smith Micro’s customers based on pre-defined purchase orders. Since Smith Micro was obligated to provide the required services over the contract period, the revenue was recognized over time. 

From time to time, the Company also provided services to either to configure ad hoc targeted promotional content for Smith Micro’s customers or to set up new devices for optimization on the ViewSpot platform upon request. These requests were driven by the customers’ marketing initiatives and tended to be short term “bursts” of activity. Smith Micro recognized revenues from these ad hoc services at a point in time which is upon delivery of the configured promotional content to the cloud platform or upon certification of the new device.

Smith Micro divested its ViewSpot product in June 2025.

CommSuite® Revenue

For the CommSuite product, the Company may provide integration services for a fee to ensure the Company’s software solution can operate on the customer’s operating platforms and the operating platform of the mobile devices of Smith Micro’s customer’s end users. In addition, since the mobile device OEMs change their operating systems regularly, Smith Micro provides maintenance services to ensure utility of the software license is not diminished for the Company’s customers. Smith Micro considers the integration services, the software license, and maintenance services to maintain the utility of the software license for its customers as a single performance obligation. The Company provides the perpetual license on a royalty free basis. Revenue related to integration services, if charged, is recognized at a point in time upon delivery and acceptance of the licensed software by the customer.

To support the CommSuite solution, Smith Micro also provides customers with its hosted environment and Application Service Provider (“ASP”) services for the duration of the license term. The Company considers the provision of these services to be a separate performance obligation. In these transactions, the total consideration expected is variable. The Company does not estimate when the variable consideration will be recognized because the License Usage Based Fees, Hosting Service Fees and ASP Advertising Fees relate specifically to the Company’s efforts to transfer the services for a specified period (month or quarter) which are distinct from the services provided in other specified periods. Smith Micro’s customer’s or the customer’s end customer’s usage occurs within the defined period, and the variability of Smith Micro’s license, hosting and ASP fees is resolved in the specified period, and such fees earned are not subject to adjustment based on the activity in other periods.

Smith Micro earns revenue from these services and for advertisements placed by its customers on the Company’s platform on a revenue share arrangement.

Consulting Services and Other

Smith Micro has developed a roadmap for adding new functionality to its wireless products to extend the product lifecycle and expand its customer’s use of the product on their networks. From time to time, the Company enters into consulting services arrangements with its customers to develop incremental functionality not included on the developmental roadmap. The Company earns revenue from these consulting services that is recognized at the time of delivery of the software when the services have been completed and control has been transferred to the customers, or in certain circumstances when the Company is customizing functionality specific to customers' requirements and when the Company has an enforceable right to payment for work completed to date, revenue is recognized as the work progresses.

The Company also may enter into arrangements with certain customers to provide technology support services beyond the initial warranty period. Technology support services include e-mail and telephone support and unspecified rights to bug fixes available on a when-and-if available basis. Smith Micro considers the provision of such technology support services to be a separate performance obligation which is generally billed in advance for a fixed term and recognized as revenue ratably over the contractual term as the Company performs its services.

Deferred Revenue

Deferred revenue represents amounts billed to customers for which revenue has not been recognized. Deferred revenue primarily consists of the unearned portion of monthly, quarterly, and annually billed service fees and prepayments made by customers for a future period. Smith Micro recognizes revenue upon transfer of control. As of  December 31, 2025 and 2024, the Company’s total deferred revenue balances were nominal.

Costs to Obtain a Customer Contract

The Company generally pays sales commissions to its sales force, which are incremental and recoverable costs of acquiring contracts. In most instances, sales commissions are only paid when the Company earns usage-based fees on the contracts. The commission obligation is established each quarter based on the usage-based fees earned. The commission obligation is not adjusted by future usage-based fees earned, meaning each period is discrete from the other. As a result of the structure of the commission plan, Smith Micro records the commission expense when the commission obligation is determined, which is generally quarterly.

Certain provisions of the sales commission plan incentivize and recognize the efforts of eligible participants to earn bonuses on future revenue generated on new contracts, sale of a new product to an existing customer, or revision of contract terms with an existing customer expected to result in an increase in revenues. The sales bonuses are tiered based on the opportunity size. Sales bonuses paid under these provisions of the sales commission plan are incremental contract acquisition costs, and accordingly are recorded as a deferred contract asset that is amortized on a straight-line basis over the average contract life of the new, renewed, and modified contract.

Costs to Fulfill a Customer Contract

The Company incurs costs to fulfill obligations under a contract which are recognized as the Company fulfills its performance obligation and recognizes revenue. Where the Company provides services and earns revenue over the contract term based on usage of Smith Micro’s platforms, the associated fulfillment costs are recognized as they are incurred and as usage-based revenue is recognized.

Disaggregation of Revenues

Revenues on a disaggregated basis are as follows (in thousands):

	Year Ended December 31,
	2025		2024
License and service fees (Over time)	$	3,168	$	3,122
Hosted environment usage fees (Over time)		3,110		2,956
Cloud based usage fees (Over time)		11,029		13,923
Consulting services and other (Point in time)		56		554
Total revenues	$	17,363	$	20,555

The opening balance of accounts receivable as of January 1, 2024 was $7.9 million.