Smith Micro Software Inc 2026 Q2 Earnings Call
Review the key takeaways and the transcript of this earnings call.
- Smith Micro Software Inc reported sequential revenue growth for the second quarter of 2026, with revenue of $4.3 million, a 3% increase from the first quarter of 2026 but a 2% decrease compared to the second quarter of 2025.
- Gross profit for Q2 2026 was $3.5 million, up 9% from the prior year period, with gross margin improving to 81.3%, the highest in five years.
- GAAP operating expenses for Q2 2026 decreased 68% compared to Q2 2025, excluding one-time events, and non-GAAP operating expenses declined 26% year over year.
- GAAP net loss attributable to common stockholders for Q2 2026 was $2.7 million or $0.52 per share, improved from $15.1 million loss in Q1 2026.
- Year-to-date revenue through June 30, 2026 was $8.6 million, down 5% from the prior year period.
- Smith Micro completed a warrant inducement transaction in June 2026, raising $1.6 million in proceeds.
- The company expects Q3 2026 revenue between $5.0 million and $5.4 million and gross margin in the range of 81% to 83%.
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Transcript
Preview the first fifteen paragraphs, organized by speaker.
Also, please be aware that today's call is being recorded. I would now like to turn the call over to Charles Messman, Vice President.
Please go ahead. Thank you, operator.
We appreciate you joining us today to discuss Smith Micro Software financial results for the second quarter of 2026. By now, you should have received a copy of the 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 www.smithmicro.com. On today's call, we have Bill Smith, Executive Chairman of the Board, Tim Huffmyer, our President and CEO, and Bethany Braund, our Chief Financial Officer. 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 expectation, 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 reserve.
Forward-looking statements involve risk and uncertainty, 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-K. Smith Micro assumes no obligation to update any forward-looking statements which speak to the management's beliefs and assumptions only as of the date they are made. 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. With that said, I will turn the call over to Tim.
Tim? Thanks, Charlie, and thank you for joining us today for our second quarter 2026 conference call.
I see our second quarter performance as a significant step forward on our journey of returning Smith Micro to growth and future profitability. We delivered sequential revenue growth in the second quarter, consistent with the guidance provided on our last call. In fact, we have now delivered sequential revenue growth over two consecutive quarters for the first time in approximately five years. We expect to announce the launch of two new customers by the end of this month. Contracts with both customers are fully executed, and launch plans and products are ready to go. Additionally, we are within days of signing a significant multi-year contract extension with an existing tier 1 customer. We believe this contract extension will generate significant revenue growth beginning in the third quarter.
Both the new customer launches and the contract extension were planned to happen in the second quarter, and their delay has resulted in some of our forecasted second quarter revenue being pushed to the third quarter. We continue to execute on our strategic priorities, and we are encouraged with all of the positive pipeline activity of the last few quarters, which is the strongest we've seen in years. This robust pipeline, along with the new revenue opportunities, is driven by expanded interest from current and prospective new customers and aligns with our strategy to expand our SafePath platform. We are offering more flexibility to the market with our new deployment options, including our new SafePath SDKs and APIs, which are opening new channels, aligning Smith Micro with current market trends, and increasing the overall addressable market.
We believe this activity will drive new revenue streams in the coming quarters as we are in meaningful deployment discussions with multiple parties, both current and new customers and prospects. As we look to the second half of the year, we do so with a high level of confidence. We believe we are building on significant upside potential for a new and exciting phase of financial growth. We will discuss more later in the call, but for now, let's hear from Bethany to review our second quarter financial performance.
Bethany? Thanks, Tim, and good afternoon, everyone.
Initially, I'll note that all of my comments today regarding per share metrics reflect the impact of the 1-for-5 reverse stock split that was approved by our shareholders at our annual meeting in May and was effectuated in June 2026. I'd also like to cover the transaction we completed during the quarter. In June 2026, to help fund working capital requirements, we completed a warrant inducement transaction with certain holders of existing common stock purchase warrants, whereby warrants for 487,349 shares were exercised at $3.35 per share, with proceeds to the company totaling $1.6 million. As part of that transaction, we issued new 5-year warrants for the same number of shares.
As I stated on our last earnings call, we are continuing to see benefits from the strategic cost reductions we announced last October. We are still executing on these changes and will see their longer-term benefits as certain remaining costs will end after the third quarter. Our focus now is to ensure that we have the resources necessary to meet the revenue growth we are targeting. Now let's cover the financial results of the second quarter of 2026.
For this second quarter, we achieved our second consecutive quarter of sequential revenue growth. The last time that was achieved was back in 2021. For the second quarter of 2026, we recognized revenue of $4.3 million, compared to $4.4 million for the same quarter of 2025, a decrease of 2%. When compared to the first quarter of 2026, revenue increased by $120,000, or 3%. Year-to-date revenue through June 30, 2026, was $8.6 million versus $9.0 million through the second quarter of last year, a decrease of 5%. During the second quarter of 2026, SafePath revenue was $3.5 million, which decreased by $111,000, or 3%, compared to the second quarter of last year. SafePath revenue increased by $94,000, or 3%, compared to the first quarter of 2026. During the second quarter of 2026, CommSuite revenue was $826,000, which increased by $49,000 compared to the second quarter of 2025.
Revenue from CommSuite grew by $26,000, or 3%, as compared to the first quarter of 2026. For the third quarter of 2026, we expect to build on our second quarter revenue, and given our near-term view of additional opportunities and progress, we expect total revenue of $5.0 million-$5.4 million for the third quarter. For the second quarter of 2026, gross profit was $3.5 million, compared to $3.2 million during the same period of the prior year, an increase of $281,000, or 9%, due to the period-over-period increase in revenue and the decline in cost of revenues resulting from the strategic cost reduction efforts undertaken. Further, gross margin was at 81.3% for the quarter, in line with prior quarter guidance and at a significant improvement as compared to the 73.5% realized in the second quarter of 2025.
We are pleased to see our gross margin back over 80% for the first time in five years. Our gross profit of $3.5 million in the second quarter of 2026 increased by $219,000 compared to the gross profit realized in the first quarter of 2026. In the third quarter of 2026, we expect gross margin to be in the range of 81%-83%. We believe we are making our way toward our longer-term goal for gross margin at 85%. For the year-to-date period ended June 30, 2026, gross profit was $6.8 million, compared to $6.6 million during the corresponding period last year. Gross margin was 80% for the June 30, 2026, year-to-date period. GAAP operating expenses for the second quarter of 2026 were $5.9 million, a decrease of $12.3 million, or a 68% decline as compared to the second quarter of 2025.
Excluding the second quarter 2025 one-time events, including goodwill impairment of $11.1 million and the gain on sale of ViewSpot of $1.3 million, GAAP operating expenses quarter-over-quarter decreased by $2.5 million, or 30%. This reduction was a result of our cost optimization activities that we have executed and continue to see the impacts thereof. GAAP operating expenses for the year-to-date period ended June 30, 2026, were $12.6 million compared to $26.8 million in the prior year-to-date period, a decrease of $14.2 million. non-GAAP operating expenses for the second quarter of 2026 were $4.4 million, compared to $5.9 million in the second quarter of 2025, a decrease of approximately $1.6 million, or 26%. Sequentially, non-GAAP operating expenses declined by approximately $377,000, or 8%, compared to the first quarter of 2026.
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