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Smith Micro Software Reports 2008 First Quarter Financial Results

May 07, 2008
Net Revenues Increase to a Company Record $21.9 Million

Aliso Viejo, CA -- Smith Micro Software, Inc. (NASDAQ: SMSI), a leading developer and marketer of software solutions and services for the wireless market, today reported its 2008 first quarter financial results ending March 31, 2008.

"Smith Micro Software had a solid first quarter that represented a company record for the highest quarterly revenue in our history coming in at $21.9 million, an increase of 23.9% over last year's first quarter results," said William W. Smith Jr., President and CEO of Smith Micro Software, Inc. "During the quarter we concentrated heavily on integration of our prior acquisitions, and on new product development that will position us for continued growth throughout the year."

Mr. Smith continued, "I am very pleased that all of our operating units continued to contribute to our overall financial results, especially the strong performance from our Connectivity & Security business segment that showed tremendous growth of nearly 80% year over year and our Consumer segment that grew nearly 98% year over year. Our product strategies resonate well with our customers and our ability to deliver products that help our customers reach their visions sets us apart from other software companies."

Mr. Smith concluded, "We remain very optimistic and confident in our business case as we build our leadership position in the wireless software marketplace and expect 2008 to be a very successful year for the company."

Smith Micro reported record net revenue of $21.9 million for the first quarter ended March 31, 2008, a 23.9% increase year over year and a 10% increase when compared to $20.0 million reported in the fourth quarter of 2007.

GAAP gross margin of $16.8 million increased $4.8 million or approximately 40% from the same period last year. On a non-GAAP basis (which excludes amortization of intangibles, stock compensation and non-cash tax expense), gross margin of $17.8 million increased $5.5 million or 45% from the same period last year.

Of key significance, while the Company's revenue increased 23.9% year over year, gross margin dollars increased 40% from the same period last year on a GAAP basis and 45% on a non-GAAP basis, reflecting increasing leverage in Smith Micro's financial model.

As follows, GAAP gross margin as a percentage of revenue was 76.6% for the first quarter of 2008 as compared with 67.9% for the same period last year and non GAAP gross margin as a percentage of revenue was approximately 81.4% for Q1 2008 compared to 69.6% for Q1 2007.

GAAP net loss for the period was approximately $317,000 or $0.01 per diluted share for Q1 2008 primarily due to non-cash charges for amortization related to acquisitions, stock compensation expense and non-recurring integration expenses related to the PCTEL MSG group acquisition which closed on January 4, 2008. Non GAAP net income for the first quarter of 2008 was $3.1 million or $0.10 per diluted share, or $3.8 million or $0.12 per diluted share taking into account non-recurring acquisition costs, as compared to $6.2 million or $0.20 per diluted share last year.

Fully diluted shares outstanding as of March 31, 2008 were 30.4 million as compared to 30.7 million shares outstanding as of March 31, 2007.

Total cash and equivalents at March 31, 2008 were $26.2 million, compared to $87.5 million at December 31, 2007. The reduction in cash is attributed to the January 4, 2008 acquisition of the PCTEL MSG group.

The Company uses a non-GAAP reconciliation of net income and earnings per share in the presentation of financial results in this press release. Management believes that this presentation may be more meaningful in analyzing our income generation, since amortization of intangibles from acquisitions, stock-based compensation, and non-cash tax expense are excluded from the non-GAAP earnings calculation. This presentation may be considered more indicative of our ongoing operational performance. The tables below present the differences between non-GAAP earnings 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 Software may not be comparable to similarly titled amounts reported by other companies.

Financial Guidance:

Smith Micro is providing fiscal year 2008 net revenue guidance of $95 million to $105 million.

Investor Conference Call

Smith Micro Software will hold an investor conference call to discuss the Company's first quarter results at 4:30 p.m. Eastern time today, May 7, 2008. The call can be accessed by dialing (800) 257-1836 and providing 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, California, with offices in Europe and Asia, develops and markets wireless multimedia and communication solutions, mobile device management products, image and data compression solutions and many award-winning software products. Smith Micro's complete line of products is available through Smith Micro's Enterprise, OEM Sales Groups, and direct from our websites, retail and value-added resellers (VARs) partners. 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 net revenues guidance for fiscal 2008, our financial prospects and other projections of our performance, the company's ability to increase its business and the anticipated timing and financial performance of our new products and potential acquisitions. Among the important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements are changes in demand for our products from our customers and their end-users, new and changing technologies, customer acceptance of those technologies, 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 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 regarding future events and business performance as of the date of this release, and the company does not undertake any obligation to update these statements to reflect events or circumstances occurring after the date of this release.

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 companies

Note: Financial Schedules Attached



Smith Micro Software, Inc.
Reconciliation of GAAP to Non-GAAP Results

 GAAPStock
Comp.
Amort.TaxesNon-
GAAP
 
Three Months Ended 03/31/08: 
  Net Income (in thousands)$(317)$3,642$1,877$(2,077)$3,125
  EPS$(0.01)$0.12$0.06$(0.07)$0.10
 
Three Months Ended 03/31/07: 
  Net Income (in thousands)$1,842$2,646$448$1,269$6,205
  EPS$0.06$0.09$0.01$0.04$0.20
 



Smith Micro Software, Inc.
Statement of Operations for the Three Months Ended March 31, 2008 and 2007

(in thousands, except per share amounts)

 For the Three Months
Ended March 31,
 20082007
 
 (unaudited)(unaudited)
 
Net Revenues$21,880$17,667
 
Cost of Revenues5,1165,679
 
Gross Profit16,76411,988
 
Operating Expenses:
   Selling & Marketing6,7353,459
   Research & Development7,0692,723
   General & Administrative4,8483,595
 
Total Operating Expenses18,6529,777
 
Operating (Loss) Income(1,888)2,211
Interest Income2751,226
 
(Loss) Income Before Income Taxes(1,613)3,437
Income Tax (Benefit) Expense(1,296)1,595
 
Net (Loss) Income$(317)$1,842
 
(Loss) Income Per Share, Basic$(0.01)$0.06
 
Weighted Average Shares Outstanding, Basic30,40629,051
 
(Loss) Income Per Share, Diluted$(0.01)$0.06
 
Weighted Average Shares Outstanding, Diluted30,40630,684
 



Smith Micro Software, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 March 31,
2008
December 31,
2007
 
 (unaudited) 
ASSETS
Current Assets:
Cash & Cash Equivalents$26,209$87,549
Accounts Receivable, (Net)16,85413,157
Income Taxes Receivable186180
Deferred Tax Asset447660
Inventory, (Net)1,7731,993
Prepaid & Other Assets1,5751,001
 
   Total Current Assets47,044104,540
Equipment and Improvements, Net1,7561,079
Deferred Tax Asset7,6556,351
Goodwill82,20432,505
Intangible Assets, Net29,32917,946
 
TOTAL ASSETS$167,988$162,421
 
 
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable$2,776$3,401
Deferred Revenue3,449584
Accrued Liabilities4,4243,922
 
   Total Current Liabilities10,6497,907
 
Common Stock30 30 
Additional Paid In Capital157,454 154,312 
Accumulated (Deficit) Earnings(145)172
 
   Total Stockholders' Equity157,339154,514
 
TOTAL LIABILITIES & EQUITY$167,988$162,421
 
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