Smith Micro Software Reports 2007 Third Quarter Results

Smith Micro Software, Inc. (NASDAQ: SMSI), a developer and marketer of a wide range of software solutions for the wireless market, today reported its fiscal 2007 third quarter financial results ending September 30, 2007. Third Quarter 2007 Key Financial Results: Net revenues increased to $20.4 million, up 38% year-over-year. GAAP net income of $0.5 million, or $0.02 per diluted share, compared to GAAP net income of $2.5 million, or $0.09 per diluted share, for the same quarter last year. Non-GAAP net income of $6.7 million, or $0.21 per diluted share compared to Non-GAAP net income of $4.3 million, or $0.17 per diluted share for the same quarter last year. Non-GAAP net income excludes expenses for stock-based compensation, amortization of intangibles from acquisitions and non-cash tax expense. Cash and cash equivalents were $83.0 million, compared to $34.9 million at September 30, 2006. Nine Months Ended September 30, 2007 Key Financial Results: Net revenues increased to $53.4 million, up 43% year-over-year. GAAP net income of $2.5 million, or $0.08 per diluted share, compared to GAAP net income of $5.3 million, or $0.21 per diluted share, for the same period last year. Non-GAAP net income of $18.1 million, or $0.58 per diluted share, compared to Non-GAAP net income of $10.4 million, or $0.42 per diluted share, for the same period last year. "We are very pleased with the overall results for the third quarter, including record revenues,” said William W. Smith Jr., President and CEO of Smith Micro Software, Inc. "As expected, our Multimedia division, which was slightly impacted in Q2, bounced back with a strong performance for the quarter.” Mr. Smith continued, "We are also pleased with the continued progress that we have made with our growth strategies for our Connectivity & Security product solution, where we added two new wireless carriers recently, giving us a strong indicator of a healthy data connectivity market as more wireless carriers seek to introduce wireless data connectivity services for their customers in the United States. In addition, contributions from the Compression & Consumer business unit remain strong and the demand for our exclusive republishing products, especially the launch of VMware Fusion contributed to our record Q3 performance. As we announced at the beginning of Q3, we have expanded our multimedia product line with the development of Revue, our newest multimedia product designed for Smartphones running Windows Mobile, one of the fastest growing segments of the Smartphone marketplace. We view this new Smith Micro branded product as an exciting opportunity to reach and significantly expand our customer base in our consumer and OEM segments.” Mr. Smith concluded, "Continued strong performance from our diversified business units led to our record quarter results, and we believe that Smith Micro is uniquely positioned to continue to build upon our leadership role in the fast growing wireless software marketplace, leveraging the strength of our technological capability, and capitalize on our retail marketing expertise.” Financial Discussion: Smith Micro reported net revenues of $20.4 million for the third quarter ended September 30, 2007, a 38% increase when compared to the $14.8 million reported in the third quarter of 2006. On a GAAP basis, the Company earned $0.02 per diluted share for the third quarter of 2007, compared to $0.09 per diluted share for the third quarter of 2006. Non-GAAP net income (which excludes amortization of intangible assets from acquisitions, stock-based compensation expenses and non-cash tax expense) for the third quarter was $6.7 million, or $0.21 per diluted share, compared net income of $4.3 million or $0.17 per diluted share for the third quarter of 2006. Diluted shares outstanding as of September 30, 2007 increased to 31.4 million as compared to 25.8 million shares outstanding as of September 30, 2006. For the nine months ended September 30, 2007, the Company reported record net revenues of $53.4 million; a 43% increase over the $37.2 million reported for the nine months ended September 30, 2006. GAAP net income for the nine months ended was $2.5 million, or $0.08 per diluted share, compared to $5.3 million or $0.21 per diluted share. Non-GAAP net income for the nine months ended September 30, 2007 was $18.1 million, an increase of 73% when compared to the Non-GAAP net income of $10.4 million, or $0.42 per share, reported for the nine months ended September 30, 2006. Total cash and cash equivalents at September 30, 2007 increased to $83.0 million, compared to $34.9 million for the 2006 third quarter ended September 30, 2006. 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. Investor Conference Call Smith Micro will hold an investor conference call to discuss the Company’s third quarter results at 4:30 p.m. Eastern time today, October 31, 2007. The call can be accessed by dialing (800) 366-7449 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 communications 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, Channel and OEM Sales Groups, and direct from our websites, retail and value-added resellers (VARs). 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. Smith Micro Software, Inc. Reconciliation of GAAP to Non-GAAP Results     Stock       Non- GAAP   Comp.   Amort.   Taxes   GAAP   Three Months Ended 09/30/07: Net Income (in thousands) $ 472 $ 3,921 $ 858 $ 1,433 $ 6,684 EPS $ 0.02 $ 0.12 $ 0.03 $ 0.05 $ 0.21   Three Months Ended 09/30/06: Net Income (in thousands) $ 2,450 $ 1,495 $ 369 $ - $ 4,314 EPS $ 0.09 $ 0.06 $ 0.01 $ - $ 0.17   Nine Months Ended 09/30/07: Net Income (in thousands) $ 2,508 $ 10,588 $ 1,950 $ 3,009 $ 18,055 EPS $ 0.08 $ 0.34 $ 0.06 $ 0.10 $ 0.58   Nine Months Ended 09/30/06: Net Income (in thousands) $ 5,346 $ 3,908 $ 1,202 $ - $ 10,456 EPS $ 0.21 $ 0.16 $ 0.05 $ - $ 0.42 Smith Micro Software, Inc. Statement of Operations for the Three and Nine Months Ended September 30, 2007 and 2006 (in thousands, except per share amounts)   For the Three Months   For the Nine Months Ended September 30, Ended September 30, 2007   2006 2007   2006 (unaudited) (unaudited) (unaudited) (unaudited)   Net Revenues $ 20,393 $ 14,801 $ 53,406 $ 37,241   Cost of Revenues   6,385   6,090   16,045   14,695   Gross Profit 14,008 8,711 37,361 22,546 OPERATING EXPENSES Selling & Marketing 4,947 2,374 12,843 6,540 Research & Development 4,062 1,871 10,268 5,625 General & Administrative   3,729   2,329   11,026   5,766 Total Operating Expenses   12,738   6,574   34,137   17,931 Operating Income 1,270 2,137 3,224 4,615 Interest Income   987   381   3,255   871 Income Before Income Taxes 2,257 2,518 6,479 5,486 Income Tax Expense   1,785   68   3,971   140 Net Income $ 472 $ 2,450 $ 2,508 $ 5,346   Income Per Share, Basic $ 0.02 $ 0.10 $ 0.08 $ 0.23   Weighted Average Shares Outstanding, Basic   30,031   24,123   29,611   23,360     Income Per Share, Diluted $ 0.02 $ 0.09 $ 0.08 $ 0.21   Weighted Average Shares Outstanding, Diluted   31,429   25,794   30,959   25,184 Smith Micro Software, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)     September 30,   December 31, 2007 2006 (unaudited) ASSETS Current Assets: Cash & Cash Equivalents $ 83,057 $ 92,564 Accounts Receivable, (Net) 16,893 9,828 Income Taxes Receivable 122 122 Deferred Tax Asset 90 90 Inventory 1,179 857 Prepaid & Other Assets   758     308   Total Current Assets 102,099 103,769 Equipment & Improvements, Net 698 417 Deferred Tax Asset 7,868 7,786 Goodwill 31,877 15,266 Intangible Assets, Net   15,683     3,788   TOTAL ASSETS $ 158,225   $ 131,026     LIABILITIES & STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 3,284 $ $ 2,941 Deferred Revenue 710 78 Accrued Liabilities   3,696     1,950   Total Current Liabilities   7,690     4,969     Common Stock 30 28 Additional Paid In Capital 150,986 129,018 Accumulated Deficit   (481 )   (2,989 ) Total Stockholders' Equity   150,535     126,057   TOTAL LIABILITIES & EQUITY $ 158,225   $ 131,026