Smith Micro Software (SMSI) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue was $5.1M, down 50% year-over-year, mainly due to the loss of a Family Safety contract with a Tier 1 carrier and lower ViewSpot revenues.

• Achieved a rapid six-week deployment of Boost Family Guard (SafePath Global) at Dish and advanced a SafePath-based solution with a European Tier 1 carrier, both expected to drive future growth.

• Implemented two rounds of cost reductions totaling $2M–$2.5M per quarter to align resources and accelerate return to profitability and free cash flow.

• New Family Safety agreements were executed with a Tier 1 European carrier and a U.S.-based carrier, with launches expected in 2024.

• Introduced plans for SafePath Live, a new premium family location control product, to further expand market reach.

Financial highlights

• Q2 2024 gross profit was $3.5M (68.7% margin), down from $7.7M (75.0% margin) in Q2 2023.

• GAAP net loss for Q2 2024 was $6.9M ($0.66/share); non-GAAP net loss was $4M ($0.38/share).

• Six-month 2024 revenue was $10.9M, down from $21.3M in the same period last year; GAAP net loss for the period was $37.9M, including a $24M goodwill impairment.

• Cash and cash equivalents as of June 30, 2024, were $5.6M.

• Operating expenses decreased year-over-year, with non-GAAP operating expenses for the first half of 2024 at $15.6M (down 20% YoY).

Outlook and guidance

• Q3 2024 revenue expected to be $4.5M–$5M, with further declines in ViewSpot revenue anticipated.

• Gross margins projected at 70%–73% for Q3.

• Non-GAAP operating expenses and cost of sales expected to decrease by $1M–$1.3M in Q3 versus Q1, with additional reductions to be fully realized in Q4.

• Management anticipates revenue growth from new Family Safety product launches with U.S. and European Tier 1 carriers, but timing is uncertain.

• Substantial doubt remains about the company’s ability to continue as a going concern within one year without additional capital or improved cash generation.