Q3 2025 Smith Micro Software Inc Earnings Call
Speaker #3: Good day and welcome to SMITH MICRO SOFTWARE, INC. financial results for the third quarter ended September 30th , 2025 . Today , all participants will be in a listen only mode .
Speaker #3: Should you need assistance during today's call , please signal for a conference specialist by pressing the star . Then zero key on your telephone keypad .
Speaker #3: After today's presentation , there will be an opportunity to ask questions , to ask a question , you may press star , then one on your telephone keypad .
Speaker #3: To withdraw your question , please press star . Then two . Please note that today's event is being recorded . I would now like to turn the conference over to Charles Messman , Vice President of Marketing .
Speaker #3: Please go ahead , sir .
Speaker #4: Thank you . Operator . We appreciate you joining us today to discuss SMITH MICRO SOFTWARE, INC. financial results for the third quarter ended September 30th , 2025 .
Speaker #4: By now , you should have received a copy of our press release with the financial results . If you do not have a copy and would like one , please visit the Investor Relations section of our website at SMITH MICRO SOFTWARE, INC. .
Speaker #4: On today's call , we have Bill Smith , our chairman of the board , President and Chief Executive Officer and Timothy Huffmyer , our chief Operating Officer and Chief Financial Officer .
Speaker #4: Please note that some of the information you will hear during today's discussion consists of forward looking statements , including , without limitation , those regarding the company's future revenue and profitability , our plans and expectations , new product development and availability , new and expanded market opportunities , future product deployments , growth by new and existing customers , operating expenses and the company's cash reserves .
Speaker #4: Forward looking statements involve risks and uncertainties which could cause actual results or trends to differ materially from those expressed or implied by our forward looking statements .
Speaker #4: For more information , please refer to the Risk factors included in our most recently filed form 10-K , Rhythmic no obligation to update any forward looking statements which speak to the management's belief and assumptions only as of day they are made .
Speaker #4: I want to point out that in our forthcoming prepared remarks , we will refer to specific non-GAAP financial measures . Please refer to our press release disseminated earlier today for a reconciliation of these non-GAAP financial measures .
Speaker #4: With that said , I'll turn the call over to Bill . Bill .
Speaker #5: Thanks , Charlie , and thank you for joining us today for our third quarter 2025 conference call . I am pleased with the progress we have made overall , as we continue to advance our discussions around key customer initiatives and identified new opportunities aimed at broadening the reach of our products , setting the stage for future growth .
Speaker #5: More recently , we implemented some strategic changes across our organization as part of a broader effort to realign our cost structure in line with our long term business goals , strengthen our financial foundation and accelerate our path to profitability .
Speaker #5: These cost reduction measures will save the company approximately $7.2 million in annualized costs . This strategic organizational changes we made affected approximately 30% of the overall workforce and were in part enabled by the completion of certain key development efforts .
Speaker #5: While difficult , these changes were a necessary and meaningful step forward toward enhancing organizational efficiencies and accelerating the company's path to profitability . We are building a culture of continuous improvement and operational efficiency , and will continue to assess and optimize our spending in the coming quarters .
Speaker #5: While we continue to invest in strategic areas that support innovation and to deliver exceptional value to our customers and stakeholders . We have also made several structural changes to streamline operations and enhance agility , which will enable us to accelerate the delivery of our solutions to market .
Speaker #5: The timing of these adjustments has been carefully planned and aligns with the completion of our core safe Path eight platform development efforts . With these initial changes complete , we believe we will be very close to break even and expect to be profitable in mid 2026 .
Speaker #5: Additionally , the further support our financial position and business objectives . We also announced a strategic round of financing , which ten will cover in greater detail a little later in the call with the opportunities that are in front of us and the efficiencies we have achieved , I truly believe we are entering a new phase of our journey as we progress to return the company back to growth and profitability .
Speaker #5: Regarding these opportunities , I am pleased to report that our pipeline remains strong and continues to grow . We are engaged in ongoing activities and customer trials in both North America and Europe .
Speaker #5: We are witnessing a meaningful shift in the carrier market that includes a renewed focus family subscribers as 5G growth begins to plateau . Carriers are actively seeking new avenues for expansion , and families represent a high value opportunity .
Speaker #5: They consistently demonstrate lower churn rates , higher lifetime value , and increased spending across devices . Data plans and services . Our expanded safe path platform now offers a more comprehensive ecosystem of tools and flexible delivery mechanisms tailored to family needs .
Speaker #5: This not only opens new revenue streams , but more closely aligns with carriers core business strategies , such as selling devices and rate plans , rather than relying on traditional secondary sales of value added services , which have become less of a priority .
Speaker #5: I believe we are very well positioned to capitalize on these changes . Now let's turn the call over to Tim for a deeper dive into our financials .
Speaker #5: I'll follow up with more updates later in the call . Tim .
Speaker #6: Thanks , Bill . Let me start by covering a few recent transactions . As previously announced in July , we closed a follow on offering of approximately 1.5 million .
Speaker #6: Prior to fees and expenses . In September , we closed on a few notes purchase agreements , which provided approximately 1.2 million of cash to the company in exchange for short term notes and warrants .
Speaker #6: In October , we announced a strategic cost reduction in our organization as Bill indicated , this was primarily comprised of our workforce reorganization .
Speaker #6: It will result in a cost savings of 1.8 million per quarter as compared to the second quarter of 2025 , or 7.2 million .
Speaker #6: Reduction in costs for 2026 . This excludes payment of employee separation costs as bill indicated , these efforts are part of our broader initiative to realign the company's cost structure with long term business goals , strengthen the financial foundation and accelerate our path to profitability .
Speaker #6: And finally , yesterday , we announced the completion of a private placement and follow on offering both offerings have been priced based on the market value of the offered securities .
Speaker #6: As of the time of signing the purchase agreements and the company will issue approximately 4 million shares and an equivalent amount of warrants exercisable for one share of the company's common stock at an exercise price of $0.67 per share .
Speaker #6: The aggregate gross proceeds of the two offerings are expected to be approximately $2.7 million , which includes a committed investment of 1.5 million from bill and diva Smith .
Speaker #6: We are excited about this additional funding round as the company pushes to expected break-even in 2026. Now let's cover the financial results for the third quarter of 2025.
Speaker #6: For the third quarter , we posted revenue of 4.3 million compared to 4.6 million for the same quarter of 2020 . For a decrease of approximately 6% when compared to the second quarter of 2025 .
Speaker #6: Revenue decreased by 73,000 , or 2% . Last quarter , we had guided to a revenue range of 4.4 million to 4.8 million , and we slightly missed that guidance .
Speaker #6: The reason for the lower than expected revenue is directly related to the company's expectation of launching an additional safe path feature , with an existing carrier customer .
Speaker #6: The contract for that feature did not get finalized as expected . Therefore , the revenue was not recognized . The company has completed the development effort related to this feature , and we will wait on prioritization from the carrier customer .
Speaker #6: Year to date revenues through September 30th , 2025 were 13.4 million versus 15.6 million through the third quarter of last year , a decrease of approximately 14% .
Speaker #6: During the third quarter of 2025 . Family safety revenue was 3.5 million , which decreased by approximately 410,000 , or 10% , compared to the third quarter of the prior year .
Speaker #6: Family safety revenues decreased by approximately 97,000 , or 3% , compared to the second quarter of 2025 , primarily driven by the decline in the legacy sprint .
Speaker #6: Safe and found revenue . During the third quarter of 2025 . Com suite revenue was 792,000 , which increased by approximately 148,000 compared to the third quarter of 2024 .
Speaker #6: Revenue from Com suite increased by approximately 15,000 compared to the second quarter of 2025 . As previously mentioned , we sold our view Spot product for 1.3 million on June 3rd , and as such , other than transition services fees , we will no longer have any future revenue from this product .
Speaker #6: Vspot revenue was 26,060 5000 for the third quarter of 2025 and 2024 , respectively . In the fourth quarter of 2025 , we are expecting consolidated revenues to be in the range of approximately 4.2 million to 4.5 million .
Speaker #6: The upper end of this guidance range includes some initial revenue related to the launch of the previously referenced new feature at the existing carrier customer , which we previously anticipated would have occurred in the third quarter .
Speaker #6: For the third quarter of 2025 , gross profit was 3.2 million , compared to 3.3 million during the same prior year , a decrease of 116,000 , primarily due to the period over period decline in revenues .
Speaker #6: Gross margin was at 74% for the quarter , compared to 72% realized in the third quarter of 2020 . For the gross profit of 3.2 million in the third quarter of 2025 matched sequentially , the period of the 3.2 million of gross profit realized in the second quarter of 2025 .
Speaker #6: In the fourth quarter of 2025 , we expect gross margin to be in the range of 74% to 76% . The increased margin percentage is directly related to lower costs from the cost reductions completed in October .
Speaker #6: For the year to date period ended September 30th , 2025 , gross profit was 9.8 million , compared to 10.7 million during the corresponding period last year .
Speaker #6: Gross margin was 73% for the September 30th , 2025 year to date period as compared to the 68% in the same period last year .
Speaker #6: Once we realize a full quarter of the cost benefits in 2026 , we expect our margin percentages to be between 78% to 80% .
Speaker #6: Our longer term gross margin target is 85% , which we will continue to work towards . GAAP operating expenses for the third quarter of 2025 were 7.7 million , a decrease of 2.1 million , or 22% , compared to the third quarter of 2020 .
Speaker #6: For the difference was a result of changes in personnel , stock compensation costs and other cost reduction activities . GAAP operating expenses for the year to date period ended September 30th , 2025 were 34.5 million , compared to 55.6 million in the prior year to date period , a decrease of 21.1 million , or 38% , compared to last year .
Speaker #6: This period over period decrease was primarily attributable to the goodwill impairment charge of 24 million recorded in the first quarter of 2024 , as compared to the goodwill impairment charge of 11.1 million in the second quarter of 2025 , coupled with the cost reduction activities that we have executed , along with a decrease in amortization expense associated with our intangible assets , non-GAAP operating expenses for the third quarter of 2025 were 5.7 million , compared to 6.8 million in the third quarter of 2020 .
Speaker #6: For a decrease of approximately 1.1 million , or 16% , sequentially . non-GAAP operating expenses decreased by approximately 200,000 , or 3% , from the second quarter of 2025 .
Speaker #6: We expect an approximate 15% decline in non-GAAP operating expenses in the fourth quarter of 2025 , as compared to the third quarter of 2025 .
Speaker #6: As we begin to see some of the impact of our most recent reorganization , non-GAAP operating expenses for the year to date period through September 30th , 2025 , were 17.8 million , compared to 22.4 million for the year to date period ended September 30th , 2020 .
Speaker #6: Four , a decrease of 4.7 million , or 21% , compared to last year . As previously mentioned , we expect our 2026 non-GAAP operating expenses to be reduced by approximately 7.2 million .
Speaker #6: As we realize the full benefit of the recent reorganization , the GAAP net loss attributable to common stockholders for the third quarter of 2025 was 5.2 million , or $0.25 loss per share , compared to a GAAP net loss of 6.4 million , or $0.54 .
Speaker #6: Loss per share , in the third quarter of 2020 . For GAAP net loss attributable to common stockholders for the nine months ended September 30th , 2025 was 25.4 million , or $1.30 loss per share , compared to GAAP , net loss attributable to common stockholders of 44.3 million , or $4.17 loss per share , for the nine months ended September 30th , 2024 .
Speaker #6: The non-GAAP net loss attributable to common stockholders for the third quarter of 2025 was 2.6 million , or $0.12 loss per share , compared to a non-GAAP net loss attributable to common stockholders of approximately 3.6 million , or a $0.30 loss per share , in the third quarter of 2020 .
Speaker #6: For non-GAAP net loss attributable to common stockholders for the nine months ended September 30th , 2025 , was 8.2 million , or $0.42 loss per share , compared to non-GAAP net loss attributable to common stockholders of 11.8 million , or $1.11 loss per share , for the nine months ended September 30th , 2024 .
Speaker #6: Within today's press release , we have provided a reconciliation of our non-GAAP metrics to the most comparable GAAP metric for the third quarter of 2025 .
Speaker #6: The reconciliation includes adjustments for intangible asset amortization of 1.3 million stock compensation , expense of 600,000 , depreciation expense of 71,000 , changes to the fair value of warrants of 34,000 , and a deemed dividend of 635,000 for the year to date period .
Speaker #6: The non-GAAP reconciliation includes adjustments for intangible asset amortization of 3.8 million stock compensation expense of 2.8 million , goodwill impairment charge of 11.1 million , executive transition costs of 78,000 , depreciation of 217,000 .
Speaker #6: Changes to the fair value of warrants of 137,000 . A deemed dividend of 635,000 , partially offset by the view spot sale of 1.3 million .
Speaker #6: Due to our cumulative net losses over the past few years , our GAAP tax expense is primarily due to certain state and foreign income taxes for non-GAAP purposes .
Speaker #6: We utilize a 0% tax rate for the third quarter of 2025 and 2020 for the resulting non-GAAP tax expense reflects the actual income tax expense during the period .
Speaker #6: From a balance sheet perspective , we reported 1.4 million of cash and cash equivalents as of September 30th , 2025 . This concludes my financial review .
Speaker #6: Now back to you , Bill .
Speaker #5: Thanks , Tim . As I mentioned at the beginning of the call , our safe path platform is tailored for families and includes safe Path OS for kids , phones and safe Path OS for senior phones .
Speaker #5: Carriers can deploy our Safe Path OS software solution to offer devices from existing inventory that are tailored to meet the needs of kids and seniors and their families .
Speaker #5: This expansion has generated meaningful interest and opened several new conversations with our current and prospective carrier partners , and we have trials currently underway with mobile operators around the world .
Speaker #5: We remain focused on delivering and expect to get them to the finish line in the next few quarters. Now let me provide a quick update on our current customers.
Speaker #5: We remain enthusiastic with the continued rollout of our safe Path kids solution with Orange Spain , which supports the Tuyo rate plan for kids .
Speaker #5: We've maintained a strong partnership with the Orange Spain team , collaborating closely on new go to market opportunities . Concurrently , we are advancing the next phase of the product roadmap with a planned launch later this year .
Speaker #5: That introduces new functionality designed to broaden our market reach . These enhancements have been strategically developed to meet the customer needs and are expected to be well received , strengthening our position in the region .
Speaker #5: We're also making solid progress with the expansion of our footprint beyond Spain , with ongoing conversations across other orange entities . These discussions are gaining traction and reflect growing interest in our solutions more broadly .
Speaker #5: We have active trials and engagements across Europe , and I remain highly encouraged by the momentum of our current pipeline with AT&T . We're actively collaborating on new marketing initiatives as we gear up for the upcoming holiday season .
Speaker #5: Many of these efforts are tied to a recent product update that significantly expands our market potential . Secure family is now available to any family , regardless of their mobile carrier , that they use .
Speaker #5: It's no longer limited to AT&T wireless customers . This expansion not only broadens our addressable market , but also unlocks new cross promotion opportunities .
Speaker #5: I am optimistic about the road ahead as we continue to build on our strong and trusted partnership with AT&T . I remain optimistic about our progress with boost , especially as we explore new opportunities following the announcement of our expanded Safe Path platform capabilities .
Speaker #5: These expanded offerings have sparked fresh conversations and opened the door to broader engagement . Additionally , we are seeing continued momentum through targeted holiday marketing campaigns and ongoing monthly messages .
Speaker #5: Most notably around visual voicemail . These messages are set to run through the end of the year and further support our growth efforts .
Speaker #5: With T-Mobile . We remain energized by our continued discussion around the expansion of the safe Path platform and the new opportunities that it can deliver .
Speaker #5: As I discussed on our last call , T-Mobile has added additional team members to our working group who are very interested and engaged in our current solution , as well as our portfolio expansion with relationships continuing to strengthen across the organization .
Speaker #5: I believe there remains substantial growth potential ahead with T-Mobile in conclusion , we believe we have taken key steps to strengthen the company's financial position , establishing a firm foundation from which we can grow .
Speaker #5: I truly believe the renewed family focus occurring in the carrier market worldwide opens an enormous new opportunity for SMITH MICRO SOFTWARE, INC. , with a core development of our safe path .
Speaker #5: Eight platform complete , coupled with a new , faster and more agile delivery organization . Going forward , we are aligned well with the market today .
Speaker #5: Our connected life vision brings what I believe is the most expansive and powerful offering in the market today . Our family , digital lifestyle ecosystem spans the entire family digital safety journey for families from kids to seniors and every family member in between .
Speaker #5: We are confident we are on a path to profitability . Our mission is not yet complete , but we have implemented the necessary steps to get us there .
Speaker #5: I am extremely confident in our plan and our team's ability to execute with that , let me turn the call back to the operator for questions .
Speaker #5: Operator .
Speaker #3: Thank you . We will now begin the question and answer session . As a reminder to ask a question , you may press star , then one on your telephone keypad .
Speaker #3: If you are using a speakerphone , please pick up your handset before pressing the keys . To withdraw your question , please press star then two .
Speaker #3: At this time , we will pause momentarily to assemble our roster . And at this time we are showing no questions in the queue .
Speaker #3: So I would like to turn the conference call back over to Charles Messman for any closing remarks .
Speaker #4: I want to thank everybody for joining today . Should you have further questions , please feel free to call us . Thank you guys and have an awesome day .