Earnings call transcript: Smith Micro Q2 2025 sees revenue dip, stock rises

Smith Micro Software Inc. (SMSI), with a market capitalization of $16.14 million, reported its Q2 2025 earnings, revealing a 14% year-over-year decline in revenue to $4.4 million. Despite the revenue drop, the company’s stock rose by 6.07% in aftermarket trading, closing at $0.769, continuing its recent momentum with a 12.26% gain over the past week according to InvestingPro data. The company highlighted its strategic focus on its SafePath platform, aiming for growth in the family and senior safety markets.

Key Takeaways

• Smith Micro’s Q2 2025 revenue decreased by 14% year-over-year.
• Gross margin improved to 74%, up from 69% in the previous year.
• The company launched SafePath OS for Kids Phone and plans to introduce SafePath Eight.
• Stock price increased by 6.07% in aftermarket trading.

Company Performance

Smith Micro’s performance in Q2 2025 was marked by a significant revenue decline compared to the same quarter last year, with InvestingPro data showing a concerning 45.77% decline in trailing twelve-month revenue. The company managed to enhance its gross margin to 74%, close to its trailing twelve-month margin of 72.15%, reflecting improved cost efficiencies despite lower sales. The focus on innovation, particularly in the SafePath platform, is expected to drive future growth, with new product launches aimed at expanding its market presence. InvestingPro analysis indicates the stock is currently undervalued, though investors should note the company’s weak financial health score of 1.08 out of 5.

Financial Highlights

• Revenue: $4.4 million, a 14% decrease from Q2 2024.
• Year-to-date revenue: $9 million, down 17% from the previous year.
• Gross Margin: 74%, up from 69% in 2024.
• GAAP Net Loss: $15.1 million, or $0.78 per share.
• Non-GAAP Net Loss: $2.8 million, or $0.14 per share.
• Cash and Cash Equivalents: $1.4 million.

Outlook & Guidance

Smith Micro anticipates Q3 consolidated revenues between $4.5 million and $4.8 million, suggesting a sequential improvement. With a beta of 0.72, the stock shows lower volatility than the broader market. The company aims to continue expanding its SafePath platform, with a focus on securing partnerships with carriers in the family and senior safety markets. InvestingPro’s exclusive analysis reveals crucial insights about the company’s growth trajectory and market positioning, available in their detailed Pro Research Report.

Executive Commentary

CEO Bill Smith expressed optimism about reversing the company’s previous trend of decline, stating, "We believe we are embarking on a reversal of the prior trend of decline to a new trend of consistent growth and expansion." He also highlighted the potential of the senior market, noting, "Many carriers have told us they actually believe the senior market could be even larger than the kids’ market."

Risks and Challenges

• Market competition in the family safety solutions sector.
• Dependence on carrier partnerships for growth.
• Potential delays in product launches impacting revenue.
• Economic uncertainties affecting consumer spending.
• Managing cash flow with limited cash reserves.

Q&A

During the earnings call, analysts inquired about the market size and in-house development strategies. CEO Bill Smith emphasized the company’s focus on the family and senior markets and its leadership in AI-driven safety solutions.

Smith Micro’s strategic initiatives and product innovations position it for potential growth, despite current financial challenges. The company’s ability to capitalize on its SafePath platform and secure carrier partnerships will be crucial in achieving its growth objectives.

Full transcript - Smith Micro Software Inc (SMSI) Q2 2025:

Conference Operator: Good day, and welcome to the Smith Micro Second Quarter twenty twenty five Earnings Conference Call. All participants will be in listen only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Charles Messman, Vice President, Marketing.

Please go ahead.

Charles Messman, Vice President, Marketing, Smith Micro: Thank you, operator, and good afternoon to everyone. We appreciate your interest in joining the Smith Micro software financial results for the second quarter ended 06/30/2025 conference call. By now, you should have received a copy of our press release with financial results. If you do not have a copy and would like one, please visit the Investor Relations section of our website at www.smithmicro.com. On today’s call, we have Bill Smith, our Chairman of the Board, President and Chief Executive Officer and Tim Huffmeier, our Chief Operating Officer and Chief Financial Officer.

Please note that some of the information you will hear during today’s discussion consist 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. 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. For more information, please refer to the risk factors included in our most recently filed Form 10 ks. Smith Micro assumes no obligation to update any forward looking statements, which speaks to management’s beliefs and assumptions only as of the date they are made. I’d like to point out that in 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. With that said, I’ll turn the call over to Bill. Bill?

Bill Smith, Chairman, President and Chief Executive Officer, Smith Micro: Thanks, Charlie. Good afternoon and thank you for joining us today for our second quarter twenty twenty five conference call. We appreciate your interest. Before I update everyone on the progress made during the second quarter, let’s start by welcoming Tim Huffmeier back to Smith Micro, previously CFO at Smith Micro from June 2017 through September 2021. Tim returns in the dual role of Chief Operating Officer and Chief Financial Officer.

I am, along with the rest of the company, very excited to have him back helping us build a growth story for Smith Micro. Sales activities are proceeding at a brisk pace. We are actively in discussions on several fronts, both in North America and Europe. The reception we are getting to the SafePath Kids phone and SafePath Senior phone powered by SafePath OS and now the AI enabled SafePath eight has brought an additional momentum to our carrier discussions. Our solutions and go to market approach continue to align closely with the strategic priorities of our existing partners and new prospects, strengthening our position in the market.

As we will discuss during the call, I believe that our future is bright and we are on the cusp of a meaningful turnaround. My wife and I continue to be proud long term shareholders of the company. We invested significantly last year in support of the company’s vision and look forward to the opportunity to make further investments in the future as the company makes progress towards that turnaround. Now, let’s turn the call over to Tim for a deeper dive into our financials. I’ll follow-up with more updates later in the call.

Tim?

Tim Huffmeier, Chief Operating Officer and Chief Financial Officer, Smith Micro: Thanks a lot, Bill, and good afternoon, everyone. I’m excited to have returned and be working again with the Smith Micro team. We have many exciting work streams, and I can’t wait to see what we accomplish over the next few quarters. Let me start by covering a few transactions since our last earnings conference call. First, on June 3, we sold the ViewSpot product line for 1,300,000.0 This sale allows us to further focus our management and technical resources on the SafePath platform and monetize the asset one final time.

We did retain a limited royalty free license to this product for our internal use. Next, on July 18, we closed a follow on offering of approximately 1,600,000.0 shares at a price of zero nine three dollars per share, resulting in proceeds of approximately $1,500,000 prior to fees and expenses. Now let’s cover the financial results of the 2025. For the second quarter, we posted revenue of $4,400,000 compared to 5,100,000 for the same quarter of 2024, a decrease of 14%. When compared to the 2025, revenue decreased by $201,000 or 4%.

Year to date revenue through 06/30/2025 were $9,000,000 versus $10,900,000 through the second quarter of last year, a decrease of 17%. During the 2025, Family Safety revenue was $3,600,000 which decreased by $595,000 or 14 percent compared to the second quarter of the prior year. Family Safety revenues decreased by $162,000 or 4% compared to the 2025, primarily driven by the decline in the legacy Sprint Safe and Found revenue. During the 2025, CommSuite revenue was $777,000 which increased by $246,000 compared to the 2024. Revenue from CommSuite increased by $43,000 compared to the 2025.

Revenue was nominal for the 2025, which declined by $371,000 compared to the second quarter of the prior year. ViewSpot revenue decreased by $82,000 compared to the 2025. As previously mentioned, we sold our ViewSpot product for $1,300,000 on June 3, and as such, other than transition services fees, we will have no future revenue from this product. In the 2025, we are expecting consolidated revenues to be in the range of approximately $4,500,000 to $4,800,000 This guidance includes revenue related to the launch of a new feature at an existing carrier customer. Although a modest increase over the second quarter, we do expect this launch to result in sequential quarterly revenue growth in the fourth quarter too.

For the 2025, gross profit was $3,200,000 compared to $3,500,000 during the same period of the prior year, a decrease of $284,000 primarily due to the period over period revenue decline. Gross margin was 74% for the quarter compared to 69% realized in the 2024. The gross profit of $3,200,000 in the 2025 decreased sequentially by 114,000 compared to the gross profit produced in the 2025, driven primarily by the sequential decline in revenue quarter over quarter. In the 2025, we expect gross margins to be in the range of 72 to 75%. For the year to date period ended 06/30/2025, gross profit was $6,600,000 compared to $7,300,000 during the corresponding period last year.

Gross margin was 73% for the 06/30/2025 to date period. GAAP operating expenses for the 2025 were $18,200,000 an increase of $7,700,000 or 73% compared to the 2024. This was primarily driven by an 11,100,000 goodwill impairment charge, offset by the gain on the sale of ViewSpot for $1,300,000 and the remainder of the difference was a result of the effect of cost reduction activities. GAAP operating expenses for the year to date period ended 06/30/2025, were $26,800,000 compared to $45,800,000 in the prior year to date period, a decrease of $19,000,000 compared to last year. This period over period decrease was primarily attributable to the goodwill impairment charge of twenty four million dollars recorded in the 2024 as compared to the goodwill impairment charge of $11,100,000 in the 2025.

Coupled with the gain on the sale of ViewSpot for 1,300,000.0 the cost reduction activities that we have executed along with a decrease in amortization costs associated with our intangible assets. Non GAAP operating expenses for the 2025 were $5,900,000 compared to $7,500,000 in the 2024, a decrease of approximately $1,600,000 or 22%. Sequentially, non GAAP operating expenses decreased by $222,000 or 4% from the 2025. We anticipate a modest decline in non GAAP operating expenses in the 2025 as compared to the 2025. We will continue to evaluate our existing cost structure compared to the expected revenues in the next several quarters.

Non GAAP operating expenses for the year to date period through 06/30/2025 were $12,100,000 compared to $15,600,000 for the year to date period ended 06/30/2024, a decrease of approximately $3,600,000 or 23% compared to last year. The GAAP net loss for the second quarter of twenty twenty five was 15,100,000.0 or $0.78 loss per share compared to a GAAP net loss of $6,900,000 or $0.66 loss per share in the 2024. GAAP net loss for the six months ended 06/30/2025 was $20,200,000 or $1.08 loss per share compared to GAAP net loss of $37,900,000 or $3.79 loss per share for the six months ended 06/30/2024. The non GAAP net loss for the 2025 was $2,800,000 or $0.14 loss per share compared to a non GAAP net loss of approximately $4,000,000 or a $0.38 loss per share in the 2024. Non GAAP net loss for the six months ended 06/30/2025 was $5,600,000 or $0.30 loss per share compared to non GAAP net loss of $8,200,000 or $0.82 loss per share for the six months ended 06/30/2024.

Within today’s press release, we have provided a reconciliation of our non comparable GAAP metric. For the 2025, the reconciliation includes adjustments for intangible asset amortization of $1,300,000 stock compensation expense of $1,100,000 a goodwill impairment of $11,100,000 executive transition costs of $78,000 depreciation expense of $73,000 nominal changes to fair value of warrants, partially offset by the ViewSpot sale of $1,300,000 For the year to date period, the non GAAP reconciliation includes adjustments for intangible asset amortization of 2,600,000.0 stock compensation expense of $2,200,000 goodwill impairment of $11,100,000 executive transition costs of $78,000 depreciation of $146,000 changes to fair value of warrants of $103,000 partially offset by the ViewSpot sale of $1,300,000 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, we utilize a 0% tax rate for the 2025 and 2024. The resulting non GAAP tax expense reflects the actual income taxes expense during each period. From a balance sheet perspective, we reported $1,400,000 of cash and cash equivalents as of 06/30/2025.

And as previously mentioned, we completed the follow on transaction resulting in proceeds of approximately $1,500,000 before fees and expenses. This concludes my financial review. Now back to you, Bill.

Bill Smith, Chairman, President and Chief Executive Officer, Smith Micro: Thanks, Tib. And again, welcome back. We remain focused on the expansion of our portfolio with significant upgrades and features for the SafePath platform, especially delivering the next generation AI enabled SafePath eight. This has been a major undertaking, and I am very pleased with our progress. We also continue to push forward with extensive discussions across the board with our mobile operator partners as well as with new prospects with a keen focus on our SafePath OS for kids and senior phones.

As previously discussed, SafePath OS for kids phone opens a significant new market opportunity, fully aligned with our carrier partners’ long term strategies in family safety. This solution expands our competitive reach beyond today’s subscription app model, positioning us for far greater growth. Designed through extensive research, our SafePath OS gives families peace of mind with online protection and delivers flexible options to meet each family’s unique needs and preferences. As we announced earlier today, we have further enhanced our SafePath OS for Kids Phone offering based on feedback and made two marquee updates. First, we have enhanced our no inventory required capability.

After the point of sale integration, we can configure the device with SafePath OS automatically. This helps carrier partners as they do not have to carry and manage separate inventory. Second, SafePath OS powered phones can now work with the default configuration right out of the box, eliminating the need for parents to do any configuration. Parents can change default settings at any time if they want, but it is optional and not a requirement. We know families all share the same goal, keeping kids safe.

But our experience as well as our research validates that not all parents approach parental control the same. SafePath is designed to meet these various needs with a flexible AI driven platform. For parents who want a more hands on customized experience, our free parent app on Android and iOS provides complete control and customization from safety zones and alerts to managing screen time, all with the flexibility to adapt as children grow. Those parents who want to benefit from a simple setup with expert guided age based settings for their kids will find our AI powered dynamic age awareness engine makes setup easy. They simply enter the child’s age and SafePath automatically applies expert recommended protections, which can be adjusted at any time.

And for parents who prefer a set it and forget it approach, SafePath works right out of the box, quietly handling safety and monitoring in the background. What’s more, there is no need for these parents to add the parent app to their phone. The dynamic age awareness engine will automatically add expanded privileges as the child ages. With each of these three tailored experiences, SafePath ensures every parent can confidently protect their child in a way that fits their lifestyle. This journey has only begun.

However, we continue to challenge ourselves to adapt and grow with families throughout a longer life cycle. Our mission continues with SafePath eight launching later this month, which will introduce a wave of powerful AI solutions, empowering parents with smarter, more intuitive tools designed to bring intelligent safety to every family. These new upgrades will include social media intelligence, a feature that will help parents monitor and manage their child’s activity on social platforms. This feature is powered by advanced AI, which both identify potential concerns and notify the parent of the activity, so they can react quickly with the goal of keeping their kids safe. Beyond this month’s upcoming launch, our roadmap includes additional intelligent features.

For example, we will also roll out our new AI blocking functionality that will restrict the ability to use chatbots and other AI capabilities on the child’s device. With the explosive growth of AI around the world, we believe this will be an important tool for parents as they manage the safety of their kids. Lastly, we expect to introduce an AI assistant that leverages large language models and SafePath data to let parents query online activity and location and receive activity summaries. This tool can expand in several different data sets. The next big milestone for the company will be the launch of SafePath OS for seniors using the same base technology, but with a different feature set that better fits the senior market.

We see this as a great opportunity for our carrier partners in what we see as an underserved market today. We are working to support the launch of this first shippable version of SafePath OS for seniors by the end of this quarter. We see a lot of different opportunities ahead within a broad ecosystem of solutions for the family safety market. Now, let me provide a quick update on our current customers. We’re excited about the continued rollout of our SafeMath Kids solution with Orange Spain, which supports the 2U rate plan.

We’ve been working closely with the Orange Spain team on the next wave of marketing initiatives, which are strategically aligned with the upcoming back to school season. In parallel, we are developing the next phase of the product set to launch later this year, which will introduce enhanced functionality. We believe these enhancements will be well received by the market. As I mentioned in our last call, we’re also actively engaged in several promising conversations across other Orange properties throughout Europe. Orange Spain has been helpful in facilitating introductions and promoting both Smith Micro and the 2U offering, helping us to expand our footprint within the Orange family of operators, which has also caught the attention of Orange’s competitors and is creating more opportunity for our products.

With AT and T, we’re continuing to work on several new marketing initiatives, many of which are tied to new product updates, which will expand Secure Families’ market reach, enable larger scale marketing activities and drive greater awareness of the application. AT and T has increased its marketing efforts through new cross promotion activities with other value added services across AT and T, which is very promising. We will, of course, keep you up to date as we anticipate positive results coming to fruition soon. Our relationship with the AT and T teams has never been stronger, and we are engaged with various parts of the organization. Looking at Boost overall, I am pleased with the progress we are making on new opportunities with our expanded SafePath solutions.

There are also several new marketing activities underway with Visual Voicemail as well as some new functionality in the app that we believe will help bring new subscribers to the platform. I remain excited with T Mobile and the continued discussion around the expansion of the SafePath platform. We have recently seen some new additions to our working group who are very interested and engaged in our full solution. As our relationships broaden across the organization, we see strong interest, particularly with SafePath eight and its new functionality, as well as with the expanded SafePath OS designed for kids and senior phone solutions. I remain bullish and excited about the opportunities ahead with T Mobile.

I am very pleased with the momentum building in the market. The next generation of our solution in SafePath eight is opening many channels for us to tackle as we broaden our reach across carrier partners as well as our prospects. Our Connected Life vision of the family digital lifestyle is stronger than ever, offering customers a full SafePath ecosystem that spans all the digital family safety solutions. And this is only available from one company, Smith Micro. I believe it is the most unique and powerful offering in the world today and remain as confident as ever in the opportunity ahead.

Additionally, we are excited about launching a new feature, as Tim mentioned, with a current customer, resulting in our increased confidence to achieve sequential quarterly revenue growth, not only this quarter, but in the fourth quarter as well. We believe we are embarking on a reversal of the prior trend of decline to a new trend of consistent growth and expansion. With that, let me turn it back over to the operator for any questions. Operator?

Conference Operator: We will now begin the question and answer session.

Tim Huffmeier, Chief Operating Officer and Chief Financial Officer, Smith Micro: Thanks, Mike. While Mike assembles the queue for questions, I wanted to take a moment to provide an overview of some filings we’re going to be making over the next couple of days. First, we’ll be filing two routine Form S-eight filings for the shares that our stockholders approved to be added to our equity and employee stock purchase plans at this year’s annual meeting that happened in June. We’ll also file a Form S-one registration statement for the warrant shares associated with the follow on offering that we completed and announced in July. Our Form 10 Q for the quarter will then follow after these filings.

We hope this explanation helps to provide context as these filings are made over the next couple of days. I’ll now kick the call back over to Mike to start the Q and A process. Thank you.

Conference Operator: Certainly. Your first question comes from Matthew Harrigan with Benchmark. Please go ahead.

Matthew Harrigan, Analyst, Benchmark: Thank you. Given the considerable TAM for the family safety market, literally even for the individual M and Os in the context of your market cap, both in U. S. And Europe. Can you comment on any change in the size of that market you sense?

And given the size of the opportunity, what are you seeing in terms of in house development at the MNOs, Verizon and smaller competitors? Because I mean, clearly, you’ve got a great opportunity, but it feels like the competition isn’t as visible maybe as one would expect it to be. Thank you.

Bill Smith, Chairman, President and Chief Executive Officer, Smith Micro: Matt, that’s a great question. So let me start this way by saying that we have watched the MNOs all launch their five gs offerings and they have been very focused on that. They followed the satellite offerings, and now they’re looking for other opportunities to expand the size of their sub base. One of the best subs that a carrier can attract is a family sub. And that has been proven over and over the years.

They churn less and typically are willing to spend added funds. That said, we think family safety market is entering a new time of relevance where we can see the opportunity for growth for family safety as carriers want to reach out to this family market in general. That said, we think we’ve pushed the envelope. We are leading now in the with new offerings in the AI side of the business. We are without a doubt leading the way for how carriers can launch both kids phones and now by the end of the quarter, we’ll be able to start talking about launching senior phones.

We think that is a huge untapped market. Many carriers have told us they actually believe the senior market could be even larger than the kids’ market. And that’s not demeaning to the kids’ market. That’s just saying how big they think the senior market could be. All that said, says that we think we are entering a period of renewed growth.

We’ve had some difficult years, but I think we have a clear vision as to how to lead ourselves back to the relevance that we have always enjoyed over our history. So that said, hopefully that answered your question. Come back if it didn’t.

Matthew Harrigan, Analyst, Benchmark: Great. Thanks, Bill.

Conference Operator: Seeing no further questions, this concludes our question and answer session. I would like to turn the conference back over to Charles Messman for any closing remarks.

Charles Messman, Vice President, Marketing, Smith Micro: Thanks everybody for joining us today. Know today is a very busy day with conference calls and we appreciate you taking the time out of day for us. If you have any further questions, please feel free to reach out to us directly, and look forward to speaking to you on our third quarter call. Thanks, everybody.

Conference Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.