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PITTSBURGH--(BUSINESS WIRE)--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, compared to GAAP net income available to common stockholders of $3.5 million, or $0.09 diluted 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 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. ET, to discuss the Companys 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 todays 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. 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, 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, 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, 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, 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

Answer: Smith Micro Reports Third Quarter 2020 Financial Results