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SMITH MICRO SOFTWARE, INC. (SMSI)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $4.97M, up ~7% sequentially from Q3 ($4.65M), but down 42% year over year; gross margin improved to 75.6% (CFO referenced ~76% on the call) .
  • GAAP EPS was a loss of $0.25; non-GAAP EPS was a loss of $0.11, reflecting adjustments for intangible amortization, stock comp, depreciation, and warrant fair value .
  • Segment mix: Family Safety $3.8M (down $0.1M q/q; down ~$3.7M y/y), CommSuite $1.1M (up $0.5M q/q; up ~$0.6M y/y), ViewSpot nominal and down ~$0.5M y/y, as product contract ended earlier in 2024 .
  • Near-term guidance: Q1 2025 revenue $4.6–$5.0M, gross margin 72–75%, and non-GAAP OpEx to rise 4–7% vs Q4 (trade show timing, payroll resets), with management targeting sequential growth and profitability/free cash flow in H2 2025 as new SafePath OS deployments ramp .

What Went Well and What Went Wrong

What Went Well

  • CommSuite momentum: CommSuite revenue rose ~$0.5M q/q and ~$0.6M y/y, benefiting from a favorable revenue adjustment and subscriber growth on Boost premium visual voicemail .
  • Margin and cost discipline: Q4 gross margin rose to 75.6% (CFO cited ~76%); non-GAAP OpEx fell to $5.8M, down ~$2.2M y/y and ~$1.0M q/q; total quarterly non-GAAP costs (OpEx + COGS) down $3.1M vs Q1’s run-rate, aided by ~$0.1M one-time occupancy benefit .
  • Strategic progress with Orange Spain’s TúYo and SafePath pivot: “We are bringing an enhanced and powerful new portfolio… align[ed] to mobile operators' core strengths” and the TuYo launch “was our first deployment under this renewed focus” . Management noted strong interest across carriers and OEMs for SafePath OS (kids and seniors) .

What Went Wrong

  • Family Safety decline from legacy exposure: Family Safety revenue fell ~$3.7M y/y and ~$0.1M q/q due to Verizon contract conclusion in Q4’23 and continued Sprint attrition under T-Mobile; total Q4 revenue was down 42% y/y .
  • Ongoing GAAP losses and low cash: Q4 GAAP net loss was $4.4M; year-end cash and equivalents were $2.8M, though ~$2.5M receivables collected in January due to a customer payment platform transition .
  • ViewSpot headwinds: ViewSpot revenue was nominal and ~$0.5M lower y/y after a contract ended earlier in 2024 .

Financial Results

Consolidated Performance (Q2 → Q3 → Q4 2024)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$5.1 $4.6 $4.97
Gross Profit ($USD Millions)$3.5 $3.3 $3.76
Gross Margin (%)68.7% 71.6% 75.6% (CFO referenced ~76%)
GAAP Diluted EPS ($)$(0.66) $(0.54) $(0.25)
Non-GAAP Diluted EPS ($)$(0.38) $(0.30) $(0.11)

Notes: Gross margin discrepancy reflects rounding between the press release (75.6%) and CFO commentary (~76%) .

Operating Expenses (GAAP vs Non-GAAP)

MetricQ3 2024Q4 2024
GAAP Operating Expenses ($USD Millions)$9.83 $8.22
Non-GAAP Operating Expenses ($USD Millions)$6.82 $5.82

Segment Breakdown (Q4 2024)

SegmentRevenue ($USD Millions)QoQ Change ($)YoY Change ($)
Family Safety$3.8 $(0.1) $(3.7)
CommSuite$1.1 +$0.5 +$0.6
ViewSpotNominal Nominal $(0.5)

Key Performance Indicators

KPIQ2 2024Q3 2024Q4 2024
Cash and Cash Equivalents ($USD Millions)$5.63 $1.51 $2.81
Accounts Receivable ($USD Millions)$3.82 $3.41 $5.72
Weighted Avg Shares (Millions)10.57 11.83 17.55
GAAP Net Loss ($USD Millions)$(6.93) $(6.37) $(4.39)
Non-GAAP Net Loss ($USD Millions)$(3.98) $(3.57) $(1.92)

Non-GAAP Adjustments Detail (Q4 2024)

  • Q4 adjustments included: intangible amortization $1.334M, stock compensation ~$1.0M, depreciation ~$0.08M, and warrant fair value ~$0.075M; full-year adjustments also included goodwill impairment of $23.989M and other non-recurring items .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q1 2025N/A$4.6 – $5.0 New
Gross Margin (%)Q1 2025N/A72% – 75% New
Non-GAAP Operating ExpensesQ1 2025N/A+4% to +7% vs Q4 (trade shows, payroll resets; Q4 included ~$0.1M occupancy benefit) Increased

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
Product strategy (SafePath OS, Kids, seniors)Q2: emphasis on SafePath market expansion and legislation momentum ; Q3: European Tier One launch pending, innovation aligning with carrier strengths Pivot from VAS to core-rate-plan integration; TuYo (Orange Spain) launched; strong global carrier interest; seniors OS roadmap Accelerating execution and pipeline breadth
Regional traction (Europe/Orange Spain)Build-up to Tier One EU launch TuYo launched; marketing campaigns underway; demos at MWC drove interest across Orange properties and other operators Momentum building in EU
Customer mix and legacy headwindsVerizon exit and Sprint attrition impacting y/y comps Continued legacy pressure on Family Safety; CommSuite offsetting with Boost growth Mix shifting; legacy drag persists
Cost structure and OpEx disciplineTargeting ≥$2M quarterly expense reductions by Q4; achieved $1.9M by Q3 Non-GAAP OpEx down to $5.8M; total quarterly non-GAAP cost savings ~$3.1M vs Q1 Exceeded savings target
Profitability outlookQ2: pathway to non-GAAP profitability and FCF in 2025 ; Q3: return to profitability/free cash flow in 2025 H2 2025 targeted for profitability and free cash flow with launches; sequential growth expected Confidence sustained; timing clarified (H2)
CommSuite performanceOngoing growth at Boost (Q2/Q3 mentions) Boost premium VVM growth plus favorable revenue adjustment in Q4 Improving

Management Commentary

  • CEO framing the pivot: “We are bringing an enhanced and powerful new portfolio of our family safety solutions to market… align to mobile operators' core strengths… [TuYo] was our first deployment under this renewed focus” .
  • Pipeline breadth and urgency: “If you use the fingers on both your hands, you wouldn’t have enough [carriers];… strong interest to launch for back-to-school… our goal is… launches can happen this summer” .
  • Senior safety opportunity: “Over the coming months, we plan on launching SafePath OS for seniors… one of the fastest-growing segments… received meaningful interest from carriers in North America and Europe” .

Q&A Highlights

  • Orange Spain TúYo traction: Early data shows ~half of sign-ups coming from competitors, indicating share capture potential; numerous carriers are watching Spain’s results .
  • Carrier pipeline and timing: Active discussions exceed “two hands”; target back-to-school launches (summer) after completing requested product enhancements .
  • Seniors TAM and offering: SafePath OS tailored for seniors (remove parental controls; add drive/crash detection, SOS, geofence), with interest across senior-focused and large carriers lacking offerings today .
  • Forecast cadence: Sequential growth planned; H2 2025 expected to show “return to profitability and the generation of free cash flow,” with Q1 reflecting timing of ramp and absence of Q4 one-time benefits .

Estimates Context

  • Wall Street consensus (S&P Global) was unavailable at the time of this analysis; comparisons to estimates are therefore not provided. Values retrieved from S&P Global are unavailable due to data access constraints.

Where estimates may need to adjust: Management’s Q1 revenue range ($4.6–$5.0M), gross margin (72–75%), and H2 profitability/FCF commentary may prompt upward revisions to H2 revenue and margin assumptions contingent on SafePath OS deployments and senior phone launch timing .

Key Takeaways for Investors

  • Mix shift underway: CommSuite growth and EU rate-plan integration (TuYo) partially offset legacy Family Safety declines from Verizon exit/Sprint attrition; watch for new operator wins and summer launch timing .
  • Margin resilience with cost actions: Gross margin improved to 75.6% and non-GAAP OpEx fell to $5.8M; Q1 OpEx will seasonally rise but cost discipline remains intact .
  • Near-term guide implies stable run-rate: Q1 revenue $4.6–$5.0M and 72–75% GM reflect ramp timing; monitor sequential growth path into Q2/Q3 .
  • H2 2025 is pivotal: Management targets profitability/FCF in the back half as SafePath OS (kids/seniors) moves from pilots to launch; pipeline breadth (multi-operator) increases probability, but timing risk remains inherent in carrier processes .
  • Liquidity watch: YE cash $2.8M, with $2.5M collected in January from AR; continued financing flexibility and disciplined OpEx are critical until launches convert to revenue .
  • Stock catalysts: Additional carrier announcements, confirmation of back-to-school launches, and seniors OS commercialization could drive estimate revisions and re-rate sentiment .
  • Non-GAAP lens matters: Q4 non-GAAP loss narrowed to $1.9M vs GAAP $4.4M due to amortization/stock comp/one-time items; sustained margin + OpEx control will accelerate path to non-GAAP profitability .