SMSI

• Overall Performance & Strategic Progress

  • Delivered two consecutive quarters of sequential revenue growth for the first time in approximately five years, marking a key milestone on the path to returning to growth and profitability.
  • Continues to realize benefits from October 2025 strategic cost reduction initiatives, with all remaining residual costs expected to exit after Q3 2026.
  • Completed a warrant inducement transaction in June 2026, generating $1.6 million in gross proceeds to fund working capital requirements, with new 5-year warrants issued for the same number of shares.
  • Effectuated a one-for-five reverse stock split in June 2026 following shareholder approval at the May 2026 annual meeting.

• Customer & Product Milestones

  • Two new fully executed customer contracts are scheduled to launch by the end of July 2026 (delayed from Q2 2026, pushing expected Q2 revenue to Q3 2026): one for the first ever SafePath OS deployment with a U.S. carrier, and one for SafePath Connect with a European customer.
  • A significant multi-year contract extension with an existing Tier 1 customer is in the final days of signing, with revenue growth from the extension expected to begin in Q3 2026.
  • Announced the launch of SafePath Connect, a new Smith Micro-branded family safety offering that enables faster deployment for partner organizations compared to traditional white-label solutions, expanding the company's addressable market.
  • Expanded deployment options including new SafePath SDKs and APIs, which open non-carrier channels and align with current market trends for integration into partners' core super app offerings.
  • In advanced development for an expanded iOS-compatible family safety application for an existing European customer, which will significantly increase the company's reach with this partner once deployed.
  • Expanding beyond traditional carrier markets, with active engagement from large membership organizations and other non-carrier entities seeking to add family safety services to increase customer retention.

• Financial Performance Highlights

  • Achieved a gross margin of 81.3% in Q2 2026, the first time gross margin has exceeded 80% in five years, up from 73.5% in Q2 2025, driven by cost reductions and improved revenue mix.
  • GAAP operating expenses decreased 68% year-over-year to $5.9 million, with a 30% reduction after excluding one-time 2025 items (goodwill impairment and gain on asset sale).
  • Non-GAAP operating expenses decreased 26% year-over-year and 8% sequentially compared to Q1 2026.

• Total revenue for Q3 2026 is projected to be between $5.0 million and $5.4 million, representing a meaningful increase from Q2 2026's $4.3 million total revenue.
• Gross margin for Q3 2026 is expected to fall between 81% and 83%, continuing the improvement trend toward the company's long-term target of 85%.
• Non-GAAP operating expenses are expected to increase by up to 6% in Q3 2026 compared to Q2 2026, as the company adds new capacity to support its growing sales pipeline; most of this increased spend is targeted at engineering resources.
• Management expects the trend of sequential revenue growth to continue into both Q3 2026 and Q4 2026, driven by the new customer launches and contract extension scheduled for the near term.

Smith Micro reports two core product segments for Q2 2026:

1. Family Safety: Revenue of $3.5 million, representing an 3% year-over-year decrease (down $111,000 from Q2 2025) and a 3% sequential increase (up $94,000 from Q1 2026). This segment contributes 81.4% of total Q2 2026 revenue.
2. ComSuite: Revenue of $826,000, representing a $49,000 year-over-year increase from Q2 2025 and a 3% sequential increase (up $26,000 from Q1 2026). This segment contributes 19.2% of total Q2 2026 revenue. Total Q2 2026 revenue across both segments is $4.326 million, consistent with the reported total revenue of $4.3 million.

• All forward-looking statements regarding future revenue, profitability, product launches, and growth are subject to inherent risks and uncertainties that could cause actual results to differ materially from expectations, as detailed in the company's most recently filed Form 10-K.
• The company has accumulated cumulative net losses over the past several years, and has not yet achieved profitability or breakeven operations as of Q2 2026.
• Competitor offerings exist in the family safety and connected device solution market, and competition could pressure pricing or market share despite the company's broader feature set and carrier-grade quality.

Q: Can you clarify the timing and product types for the two new customer launches, and when revenue from the Tier 1 customer expansion will begin? / A: Both new customers will launch within the next month: one is the first ever SafePath OS deployment, and the other is the new SafePath Connect offering for a European customer. The company will wait for customers to complete their planned marketing activity before releasing full details. Revenue from the Tier 1 customer expansion is expected to begin in Q3 2026, in line with management's Q3 guidance.

Q: Should we expect continued sequential revenue growth into Q4 2026, and when do you expect to reach breakeven? Can you also share more detail on the market opportunity for the new SafePath SDK and API offerings? / A: Management expects sequential revenue growth will continue into Q3 and Q4 2026, backed by a firmly scheduled delivery pipeline. The small planned Q3 operating expense increase is for adding headcount to support this growing pipeline. SDK and API offerings have seen strong early market traction, opening large opportunities outside traditional carrier markets, especially for integration into tier 1 and MBNO super apps that serve tens of millions of subscribers. This is a high-margin, large-scale opportunity that the company has not been able to access in prior years, with multiple strong opportunities already in the pipeline behind the near-term contract nearing signing.

Q: What is the pricing model for the SDK offerings, compared to the company's historical carrier revenue share model? / A: SDK offerings follow a SaaS model, with volume-based pricing that gives lower per-subscriber rates for carriers with multi-million subscriber bases. Because subscriber volumes are much larger for these SDK opportunities, the overall net revenue generated is very large with the company's characteristic high margins. Carriers are highly motivated to offer family safety to attract high-value family subscribers, making this a high-demand market for the new offering.

Q: How does the company position itself against competition in the SDK and super app market, and is senior safety still a large opportunity alongside youth safety? / A: Smith Micro has an unparalleled, broad feature set built from decades of development and prior acquisitions of major competitors, putting the company far ahead of competing offerings. The company competes on high-quality, carrier-grade service rather than lowest pricing. Senior safety opportunities are currently stronger than youth-focused OS opportunities, and remain a large, active segment of the company's growing sales pipeline.