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SMITH MICRO SOFTWARE, INC. (SMSI)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue was $4.42M (-14% YoY; -4% QoQ), GAAP EPS was -$0.78 (driven by an $11.1M goodwill impairment), and non-GAAP EPS improved to -$0.14; gross margin expanded to 73.5% .
  • Versus S&P Global consensus, revenue missed ($4.68M* vs $4.42M) while EPS Normalized was slightly below (-$0.13* vs -$0.14); EBITDA underperformed (-$1.70M* est vs -$3.84M* actual). Bold miss on EBITDA and slight misses on revenue/EPS Normalized*.
  • Management guided Q3 revenue to $4.5–$4.8M and expects sequential quarterly revenue growth in Q3 and Q4; gross margin guided to 72–75% for Q3 .
  • Product catalysts: imminent launch of AI-enabled SafePath 8 and enhanced SafePath OS for Kids Phone (no-inventory deployment; default protection out of the box), plus a first shippable SafePath OS for seniors by quarter-end .

What Went Well and What Went Wrong

What Went Well

  • Gross margin expanded to 73.5% (vs 68.7% YoY; 72.8% in Q1), reflecting mix and cost actions .
  • CommSuite revenue grew YoY by $246K and QoQ by $43K, helping offset declines elsewhere .
  • Strategic focus sharpened: ViewSpot divested on June 3 (proceeds $1.3M) to prioritize SafePath; enhancements to SafePath OS simplify carrier deployment and parent setup .
    • “SafePath 8 will introduce powerful AI-driven features... broadening our reach across carrier partners and prospects.” — CEO William W. Smith Jr. .

What Went Wrong

  • Revenue fell to $4.42M (-14% YoY) as legacy Sprint Safe & Found continued to decline; Family Safety segment down 14% YoY .
  • GAAP net loss widened to -$15.1M from -$6.9M YoY due to the $11.1M goodwill impairment .
  • Liquidity compressed: cash fell to $1.4M at quarter-end, necessitating a $1.5M follow-on offering in July .

Financial Results

Quarterly progression

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$4.969 $4.621 $4.420
Gross Profit ($USD Millions)$3.759 $3.363 $3.249
Gross Margin %75.6% 72.8% 73.5%
GAAP EPS ($USD)-$0.25 -$0.28 -$0.78
Non-GAAP EPS ($USD)-$0.11 -$0.16 -$0.14
GAAP Operating Expenses ($USD Millions)$8.215 $8.573 $18.202
Non-GAAP Operating Expenses ($USD Millions)$5.818 $6.136 $5.914

Q2 2025 YoY comparison

MetricQ2 2024Q2 2025
Revenue ($USD Millions)$5.140 $4.420
Gross Profit ($USD Millions)$3.533 $3.249
Gross Margin %68.7% 73.5%
GAAP EPS ($USD)-$0.66 -$0.78
Non-GAAP EPS ($USD)-$0.38 -$0.14

Q2 2025 Actual vs Wall Street Consensus (S&P Global)

MetricQ2 2025 ConsensusQ2 2025 ActualSurprise
Revenue ($USD Millions)$4.68*$4.42 -$0.26M (miss)*
EPS Normalized ($USD)-$0.13*-$0.14 -$0.01 (slight miss)*
EBITDA ($USD Millions)-$1.70*-$3.84*-$2.14M (miss)*

Values retrieved from S&P Global.*

Segment breakdown (revenue)

SegmentQ1 2025 ($USD Millions)Q2 2025 ($USD Millions)
Family Safety$3.8 $3.6
CommSuite~$0.7 $0.777
ViewSpot~$0.1 Nominal (post-divestiture)

KPIs and Balance Sheet Highlights

MetricDec 31, 2024Mar 31, 2025Jun 30, 2025
Cash and Cash Equivalents ($USD Millions)$2.808 $2.288 $1.401
Weighted Avg Shares (Basic & Diluted, Millions)17.550 18.216 19.417
Goodwill Impairment ($USD Millions)$23.989 (FY24) —$11.052

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ2 2025$4.4–$4.8M (Q1 call) Actual $4.42M Achieved near low end
Gross Margin %Q2 202572–75% (Q1 call) Actual 73.5% Maintained
RevenueQ3 2025—$4.5–$4.8M New
Gross Margin %Q3 2025—72–75% New
Non-GAAP OpExQ3 2025—Modest decline vs Q2 Lowered
Revenue TrajectoryQ4 2025—Sequential revenue growth expected New/Positive

Earnings Call Themes & Trends

TopicQ4 2024Q1 2025Q2 2025Trend
AI/Technology InitiativesPivot to SafePath OS & Kids rate plan; set stage for growth Detailed SafePath 8 AI roadmap (social media intelligence; age-aware; AI assistant; chatbot blocking) SafePath 8 imminent; enhanced SafePath OS for Kids; AI-powered features reiterated Building momentum; launch readiness
Product PerformanceOrange Spain TúYo launch highlighted Back-to-school initiatives planned; trials with EU operators Orange Spain next wave marketing; broader EU engagement Expanding European traction
Carrier Relationships (US)—AT&T marketing updates; Boost bundling; broader T-Mobile engagement AT&T cross-promo; Boost VVM marketing; T-Mobile interest in full solution Strengthening
R&D/Execution & Cost Structure—Non-GAAP OpEx down YoY; 0% tax rate for non-GAAP Non-GAAP OpEx down YoY/QoQ; Q3 modest OpEx decline expected Opex discipline improving
Capital Markets/Filings—New shelf registration (replacement) S-8 filings, S-1 for warrant shares; 10-Q timing Active housekeeping

Management Commentary

  • “SafePath 8 will introduce powerful AI-driven features… our vision of the digital family lifestyle is stronger than ever” — CEO William W. Smith Jr. .
  • “We are expecting consolidated revenues… approximately $4.5M to $4.8M… expect this launch to result in sequential quarterly revenue growth in the fourth quarter too” — COO & CFO Timothy Huffmyer .
  • “SafePath OS powered phones can now work with the default configuration right out of the box… no separate inventory required” — CEO on SafePath OS enhancements .
  • “We’re working to support the launch of… SafePath OS for seniors by the end of this quarter” — CEO .

Q&A Highlights

  • TAM and competition dynamics: Management sees carriers prioritizing family subs (low churn, higher spend) and believes in-house builds are increasingly daunting versus Smith’s carrier-grade AI platform; senior market could be larger than kids .
  • Device scope: Solution extends to tablets; SafePath OS leverages widely-sold Android devices, easing adoption .
  • Capital markets clarity: Near-term S-8 and S-1 filings; 10-Q to follow .
  • Orange Spain momentum and broader EU interest reinforce back-to-school push and future enhancements .

Estimates Context

  • Revenue: Actual $4.42M vs consensus $4.68M — miss*; EPS Normalized: Actual -$0.14 vs consensus -$0.13 — slight miss*.
  • EBITDA: Actual -$3.84M vs consensus -$1.70M — miss*.
  • Forward quarters: Consensus implies ~$4.60M revenue and -$0.23 EPS in Q3 2025; $4.30M revenue and -$0.19 EPS in Q4 2025 (low estimate count).
    Values retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term setup: Q3 revenue guided to $4.5–$4.8M with gross margin 72–75%; management expects sequential revenue growth again in Q4 — watch for execution on the new feature launch and SafePath 8 roll-out .
  • Mix-driven margin resilience: Despite lower revenue, gross margin improved to 73.5%; continued 72–75% guidance suggests stability even as Family Safety transitions .
  • Liquidity watch: Cash at $1.4M post-quarter end improved by $1.5M offering; monitor additional capital needs and operating cash trends .
  • Product catalysts: SafePath 8 AI features (social media intelligence, age-aware configuration, AI assistant), enhanced SafePath OS for Kids (no-inventory, default protection) and first seniors OS shipping — potential for carrier adoption and ARPU uplift .
  • Segment dynamics: Family Safety down due to legacy Sprint attrition; CommSuite growing — follow marketing upgrades at AT&T and Boost, and traction at Orange Spain .
  • Non-GAAP OpEx discipline: Sequential and YoY declines; Q3 targeted modest further reduction — supports path toward improved non-GAAP losses .
  • Stock drivers: Confirmation of SafePath 8 deployments, seniors OS launch timing, and evidence of sequential revenue inflection at carriers are likely catalysts; any slippage in launches or further capital raises could weigh on sentiment .