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Smith Micro Software Reports First Quarter 2007 Results

May 02, 2007
First Quarter Y-O-Y Revenues Increased 79% to $17.7 millionPro Forma Y-O-Y Net Income Increased 113% to $6.2 million, or $0.20 per share

Aliso Viejo, CA -- Smith Micro Software, Inc. (NASDAQ: SMSI), a developer and marketer of a wide range of software solutions for the wireless market, today reported its 2007 first quarter financial results.

First Quarter 2007 Key Financial Results:

  • Revenue increased to $17.7 million, up 79% year-over-year.
  • Pro forma net income was $6.2 million, up 113% over the same period last year.
  • Pro forma earnings of $0.20 per diluted shares on 30.7 million shares, compared to $0.12 per diluted share on 24.3 million shares for the first quarter of 2006
  • Cash and cash equivalents were $94.0 million, up from $92.6 million reported at December 31, 2006

Financial Discussion:

"The first quarter was marked by continued execution on many key objectives for the Company," said William W. Smith, Jr., President and CEO of Smith Micro Software, Inc. "We made significant progress with our business case within our Multimedia business segment by signing both IUSACELL, one of Mexico's leading technology mobile operators, and one of the largest domestic wireless carriers, Sprint, for our solution to drive its new music data plan. We see these new relationships as a significant step in the Company's commitment to broaden and diversify our customer base.

Within our Multimedia business segment, we also launched our upgraded QuickLink Media solution, an intuitive, all-in-one solution that significantly expands our market reach. Our Sales pipeline remains strong and we continue to expect to sign on other new wireless carriers in 2007."

Mr. Smith continued, "We also reached a milestone for the company in announcing joint development with Kyocera Wireless in evaluating Smith Micro's Stuffit® Wireless resource compression solution for selected Kyocera mobile phones slated for release in 2008. We believe our solution is uniquely attractive as it provides the handset manufacturer a strong return on investment, while providing the end users an enhanced experience. We continue to have discussions with several other large handset manufacturers and look to announce additional wins in the future."

Mr. Smith concluded, "We are pleased that our QuickLink Mobile solution had another strong quarter, and we see market trends favoring continued growth in this area as the CDMA carriers roll out the EVDO-REV A service, and the GSM carriers move to HSDPA. Overall, we are exited about the progress Smith Micro has made at the start of a new year and we look forward to a successful 2007 as we continue to expand our portfolio of solutions through acquisitions and new organic technology developments. We expect to expand and diversify our customer base, pursue new markets opportunities, and continue to build upon our leadership position in the wireless software space."

Smith Micro reported record net revenue of $17.7 million for the first quarter ended March 31, 2007, a 79% increase when compared to the $9.9 million reported in the first quarter of 2006.

Pro forma net income (which excludes amortization of intangible assets associated with acquisitions, stock compensation related expenses and non-cash tax expense) for the first quarter was $6.2 million, or $0.20 per diluted share, compared to pro forma net income of $2.9 million or $0.12 per diluted share for the first quarter of 2006. Fully diluted shares outstanding as of March 31, 2007 increased to 30.7 million as compared to 24.3 million shares outstanding as of March 31, 2006.

On a GAAP basis, which includes amortization of acquisition intangibles, stock compensation and non-cash tax expense, the company earned $0.06 per diluted share for the first quarter of 2007, compared to $0.07 per diluted share in the first quarter of 2006.

Total cash and equivalents at March 31, 2007 increased to $94 million, compared to $92.6 million at December 31, 2006.

The Company uses pro forma reconciliation of its condensed consolidated statements of income in the presentation of financial results in this press release. Management believes that this presentation may be more meaningful in analyzing our results of operations and income generation, since amortization of intangibles from acquisitions, amortization of deferred stock-based compensation and impairment gains and losses on investments, and non-cash tax expense are excluded from the pro forma earnings calculation. This presentation may be considered more indicative of our ongoing operational performance. The tables below present the differences between pro forma earnings and net income on an absolute and per share basis.

Investor Conference Call

Smith Micro will hold an investor conference call to discuss the company's first quarter results at 4:30 p.m. Eastern time today, May 2, 2007. The call can be accessed by dialing (800) 218-0204 and giving the pass code "SMSI." Participants are asked to call the assigned number approximately 10 minutes before the conference call begins. In addition, the conference call will be available over the Internet at www.smithmicro.com in the Investor Relations section.

About Smith Micro Software:

Smith Micro Software, Inc., headquartered in Aliso Viejo, CA, is a developer and marketer of wireless communications and utility software products for multiple OS platforms. The company designs easy-to-use software for personal computing and business solutions around the world. With a focus on wireless and broadband technologies and the Internet, the company's products and services enable wireless communications, file and image compression, and digital image and music management. In addition, Smith Micro develops and publishes award-winning software solutions for Windows and Macintosh, empowering users in the areas of information access, removal, recovery, security, and Internet distribution. Smith Micro's leading brands are QuickLink®, StuffIt®, CheckIt®, Internet Cleanup(TM) and Spring Cleaning®. Smith Micro's complete line of products is available through retail stores, Value-Added Resellers (VARs), Smith Micro's consumer, enterprise, wireless OEM sales groups and the company's websites. Smith Micro's common stock trades on the NASDAQ Global Market® under the symbol SMSI.

Safe Harbor Statement: This release may contain forward-looking statements that involve risks and uncertainties including, without limitation, forward-looking statements relating to the company's financial prospects and projections, the company's ability to increase its business, and the anticipated timing and financial performance of new products and potential acquisitions. Among the important factors that could cause actual results to differ materially from those in the forward-looking statements are new and changing technologies, customer acceptance of those technologies, fluctuations or cancellations in orders from customers, new and continuing adverse economic conditions, and the company's ability to compete effectively with other software companies. These and other factors discussed in the company's filings with the Securities and Exchange Commission, including its filings on Forms 10-K and 10-Q, could cause actual results to differ materially from those presented in any forward-looking statements. Smith Micro assumes no obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of this press release.

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

Note: Financial Schedules follow



Smith Micro Software, Inc.
Pro-forma Statement of Operations for the Three Months Ended March 31, 2007
(results exclude amortization of intangibles associated with the acquisitions of
Allume Systems, Inc. PhoTags, Inc., and Ecutel Systems, Inc. as well as
stock based compensation and non-cash income tax expenses)

(in thousands, except per share amounts)

 Unaudited
 Per GAAPAdjustmentsProforma
 
Net Revenues17,667 -17,667
 
Cost of Revenues5,679 (312)5,367
 
Gross Profit11,988 31212,300
 
Operating Expenses:
   Selling & Marketing3,459(1,129)2,330
   Research & Development2,723(454)2,269
   General & Administrative3,595(1,199)2,396
 
Total Operating Expenses9,777(2,782)6,995
 
Operating Income2,2113,0945,305
Interest Income1,226 1,226
 
Income Before Income Taxes3,4373,0946,531
Income Tax Expense1,595(1,269)326
 
Net Income$1,842$4,363$6,205
 
Income Per Share, Basic$0.06 $0.21
 
Weighted Average Shares Outstanding, Basic29,051 29,051
 
Income Per Share, Diluted$0.06 $0.20
 
Weighted Average Shares Outstanding, Diluted30,684 30,684
 



Smith Micro Software, Inc.
Pro-forma Statement of Operations for the Three Months Ended March 31, 2006
(results exclude amortization of intangibles associated with the acquisition of
Allume Systems, Inc. and stock based compensation expenses)

(in thousands, except per share amounts)

 Unaudited
 Per GAAPAdjustmentsProforma
 
Net Revenues9,885 -9,885
 
Cost of Revenues3,299 (273)3,026
 
Gross Profit6,586 2736,859
 
Operating Expenses:
   Selling & Marketing1,873(349)1,524
   Research & Development1,677(251)1,426
   General & Administrative1,409(224)1,185
 
Total Operating Expenses4,959(824)4,135
 
Operating Income1,6271,0972,724
Interest Income224 224
 
Income Before Income Taxes1,8511,0972,948
Income Tax Expense39 39
 
Net Income$1,812$1,097$2,909
 
Income Per Share, Basic$0.08 $0.13
 
Weighted Average Shares Outstanding, Basic22,303 22,303
 
Income Per Share, Diluted$0.07 $0.12
 
Weighted Average Shares Outstanding, Diluted24,284 24,284
 


Smith Micro Software, Inc.
Statement of Operations for the Three Months Ended March 31, 2007 and 2006

(in thousands, except per share amounts)

 Unaudited    
 20072006
 
Net Revenues17,6679,885
 
Cost of Revenues5,6793,299
 
Gross Profit11,9886,586
 
Operating Expenses:
   Selling & Marketing3,4591,873
   Research & Development2,7231,677
   General & Administrative3,5951,409
 
Total Operating Expenses9,7774,959
 
Operating Income2,2111,627
Interest Income1,226224
 
Income Before Income Taxes3,4371,851
Income Tax Expense1,59539
 
Net Income1,8421,812
 
Income Per Share, Basic$0.06$0.08
 
Weighted Average Shares Outstanding, Basic29,05122,303
 
Income Per Share, Diluted$0.06$0.07
 
Weighted Average Shares Outstanding, Diluted30,68424,284
 



Smith Micro Software, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 March 31,
2007
(unaudited)
December 31,
2006
ASSETS
Current Assets:
Cash & Cash Equivalents$94,046$92,564
Accounts Receivable, (Net)9,0959,828
Income Taxes Receivable122122
Deferred Tax Asset9090
Inventory622857
Prepaid & Other Assets640308
 
   Total Current Assets104,615103,769
Equipment and Improvements, Net505417
Deferred Tax Asset6,1917,786
Goodwill24,50115,266
Intangible Assets, Net6,1493,788
 
TOTAL ASSETS$141,961$131,026
 
 
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable$2,294$2,941
Accrued Liabilities2,9902,028
 
   Total Current Liabilities5,2844,969
 
Common Stock30 28 
Additional Paid In Capital137,794 129,018 
Accumulated Deficit(1,147)(2,989)
 
   Total Stockholders' Equity136,677126,057
 
TOTAL LIABILITIES & EQUITY$141,961$131,026
 
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