Smith Micro Software Inc. (SMSI, Financial) filed Quarterly Report for the period ended 2009-09-30.
Smith Micro Software Inc. develops and sells communications softwarefor personal and business use. The company's objective is to enhance human interaction by giving users the ability to communicate through multimedia technologies over analog and digital platforms. Smith Micro's products enable personal communication through telephony fax multimedia email data paging video security and video conferencing. Smith Micro Software Inc. has a market cap of $293.9 million; its shares were traded at around $9.07 with a P/E ratio of 31.3 and P/S ratio of 3.
Cost of revenues. Cost of revenues were $12.0 million and $15.8 million for the nine months ended September 30, 2009 and 2008, respectively, representing a decrease of $3.8 million, or 24.0%. Direct product costs decreased $4.4 million primarily due to a shift in product mix and overhead cost reductions. The product mix was due to a decrease in sales of lower margin multimedia and productivity and graphics products and an increase of sales of higher margin OEM license products. Amortization of intangibles increased from $2.7 million to $3.5 million, or $0.8 million, due to several small acquisitions made in the fourth quarter of 2008. Stock-based compensation expense decreased from $0.3 million to $0.1 million, or $0.2 million.
Selling and marketing. Selling and marketing expenses were $18.4 million and $18.8 million for the nine months ended September 30, 2009 and 2008, respectively, representing a decrease of $0.4 million, or 2.4%. This decrease was primarily due to a lower stock-based compensation expense of $0.8 million, decreasing from $2.9 million to $2.1 million. This decrease was also due to reduced spending in areas such as travel and trade shows of $0.2 million. These decreases were partially offset by costs associated with headcount increases of $0.5 million and higher amortization of intangibles of $0.1 million, which increased from $1.8 million to $1.9 million.
Research and development. Research and development expenses were $26.1 million and $23.1 million for the nine months ended September 30, 2009 and 2008, respectively, representing an increase of $3.0 million, or 12.7%. This increase was primarily due to increased personnel, recruiting, and overhead costs associated with increased headcount of $4.3 million to support our product initiatives and contract wins. This increase was partially offset by lower consulting costs of $0.6 million as these temporary resources were replaced by full-time employees, lower stock-based compensation expense which decreased from $2.6 million to $2.0 million, or $0.6 million, and lower amortization of purchased technologies which decreased from $1.1 million to $1.0 million, or $0.1 million.
General and administrative. General and administrative expenses were $14.0 million and $14.6 million for the nine months ended September 30, 2009 and 2008, respectively, representing a decrease of $0.6 million, or 4.1%. Expense decreases were primarily due to lower stock-based compensation expense which decreased from $4.2 million to $3.2 million, or $1.0 million, and overall reduced spending in other areas of $0.4 million. These expense decreases were partially offset by increased space and occupancy and infrastructure costs of $0.7 million and legal and accounting fees incurred with our acquisition of Core Mobility of $0.1 million.
Net cash provided by operating activities was $13.6 million for the nine months ended September 30, 2009. Our net cash provided by operating activities resulted from net income of $3.5 million adjusted for non-cash expenses including depreciation and amortization of $7.6 million, stock-based compensation of $6.5 million, other non-cash expenses of $1.4 million, and increases of current liabilities net of other assets of $0.8 million. The primary use of cash affecting operating cash flow was an increase in accounts receivable of $6.0 million and an increase of inventory net of other assets of $0.2 million. Net cash provided by operating activities was $8.5 million in the nine months ended September 30, 2008. The primary sources of operating cash were adjustments for non-cash expenses including stock-based compensation of $9.1 million, depreciation and amortization of $6.5 million, other non-cash expenses of $0.9 million, a decrease in deferred income taxes of $1.4 million, and a decrease in other net current assets of $0.7 million. The primary use of cash affecting operating cash flow was an increase in accounts receivable of $8.0 million and the net loss of $2.1 million. The increase in accounts receivable was due to the timing of invoicing during the period and an increase in revenue from the prior quarter.
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Smith Micro Software Inc. develops and sells communications softwarefor personal and business use. The company's objective is to enhance human interaction by giving users the ability to communicate through multimedia technologies over analog and digital platforms. Smith Micro's products enable personal communication through telephony fax multimedia email data paging video security and video conferencing. Smith Micro Software Inc. has a market cap of $293.9 million; its shares were traded at around $9.07 with a P/E ratio of 31.3 and P/S ratio of 3.
Highlight of Business Operations:
Research and development. Research and development expenses were $9.2 million and $8.2 million for the three months ended September 30, 2009 and 2008, respectively, representing an increase of $1.0 million, or 12.6%. This increase was primarily due to increased personnel and recruiting costs associated with new hired headcount of $1.4 million to support our product initiatives and contract wins. This increase was partially offset by lower stock-based compensation expense which decreased by $0.2 million, from $0.9 million to $0.7 million. Amortization of purchased technologies decreased by $0.2 million, from $0.5 million to $0.3 million.Cost of revenues. Cost of revenues were $12.0 million and $15.8 million for the nine months ended September 30, 2009 and 2008, respectively, representing a decrease of $3.8 million, or 24.0%. Direct product costs decreased $4.4 million primarily due to a shift in product mix and overhead cost reductions. The product mix was due to a decrease in sales of lower margin multimedia and productivity and graphics products and an increase of sales of higher margin OEM license products. Amortization of intangibles increased from $2.7 million to $3.5 million, or $0.8 million, due to several small acquisitions made in the fourth quarter of 2008. Stock-based compensation expense decreased from $0.3 million to $0.1 million, or $0.2 million.
Selling and marketing. Selling and marketing expenses were $18.4 million and $18.8 million for the nine months ended September 30, 2009 and 2008, respectively, representing a decrease of $0.4 million, or 2.4%. This decrease was primarily due to a lower stock-based compensation expense of $0.8 million, decreasing from $2.9 million to $2.1 million. This decrease was also due to reduced spending in areas such as travel and trade shows of $0.2 million. These decreases were partially offset by costs associated with headcount increases of $0.5 million and higher amortization of intangibles of $0.1 million, which increased from $1.8 million to $1.9 million.
Research and development. Research and development expenses were $26.1 million and $23.1 million for the nine months ended September 30, 2009 and 2008, respectively, representing an increase of $3.0 million, or 12.7%. This increase was primarily due to increased personnel, recruiting, and overhead costs associated with increased headcount of $4.3 million to support our product initiatives and contract wins. This increase was partially offset by lower consulting costs of $0.6 million as these temporary resources were replaced by full-time employees, lower stock-based compensation expense which decreased from $2.6 million to $2.0 million, or $0.6 million, and lower amortization of purchased technologies which decreased from $1.1 million to $1.0 million, or $0.1 million.
General and administrative. General and administrative expenses were $14.0 million and $14.6 million for the nine months ended September 30, 2009 and 2008, respectively, representing a decrease of $0.6 million, or 4.1%. Expense decreases were primarily due to lower stock-based compensation expense which decreased from $4.2 million to $3.2 million, or $1.0 million, and overall reduced spending in other areas of $0.4 million. These expense decreases were partially offset by increased space and occupancy and infrastructure costs of $0.7 million and legal and accounting fees incurred with our acquisition of Core Mobility of $0.1 million.
Net cash provided by operating activities was $13.6 million for the nine months ended September 30, 2009. Our net cash provided by operating activities resulted from net income of $3.5 million adjusted for non-cash expenses including depreciation and amortization of $7.6 million, stock-based compensation of $6.5 million, other non-cash expenses of $1.4 million, and increases of current liabilities net of other assets of $0.8 million. The primary use of cash affecting operating cash flow was an increase in accounts receivable of $6.0 million and an increase of inventory net of other assets of $0.2 million. Net cash provided by operating activities was $8.5 million in the nine months ended September 30, 2008. The primary sources of operating cash were adjustments for non-cash expenses including stock-based compensation of $9.1 million, depreciation and amortization of $6.5 million, other non-cash expenses of $0.9 million, a decrease in deferred income taxes of $1.4 million, and a decrease in other net current assets of $0.7 million. The primary use of cash affecting operating cash flow was an increase in accounts receivable of $8.0 million and the net loss of $2.1 million. The increase in accounts receivable was due to the timing of invoicing during the period and an increase in revenue from the prior quarter.
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