Going LIVE @ 8PM ET Tonight to Recap SMSI’s Q3 Earnings Results

SMSI beat the Street’s revenue and EPS estimates. I’m going LIVE at 8PM ET to review Q3 (pros/cons and outlook).


If you missed the live broadcast, be sure to check it out later. Cheers!

p.s. Since SMSI’s IoT product release appears to be imminent, here are a few IoT industry notes I’ve gathered from a few sources…

* There are an estimated 82M families in the US, including 73M children and 46M elderly. We estimate that roughly 20% penetration would translate to a nearly $2B TAM.

* Pets represent a growing opportunity enabled by LPWA and Cat M1 technologies. There are an estimated 70M dogs and 74M cats in the US. With power optimized connectivity solutions permitting lengthy field operation, it makes these applications increasingly likely to be adopted. We believe the Pet tracking opportunity could conservatively approach $250M by 2021.

* Safety monitoring for chronic conditions such as Alzheimer’s and other special needs (nursing homes, parolees, etc.) also represent an emerging opportunity.

* By 2020, SNS Research estimates that more than 35% of all LPWA profile IoT devices will be served by NB-IoT, LTE Cat-M1 and EC-GSM-IoT networks. As of Q4’2015, SNS Research estimates the cost of a typical LPWA module to be $5-20. As of Q4’2016, SNS Research estimates the cost of a typical LPWA module to be $4-18, depending on the specific technology. As LPWA network deployments mature, we expect that the cost per module can drop down to as low as $1-2 in volume quantities.

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133 thoughts on “Going LIVE @ 8PM ET Tonight to Recap SMSI’s Q3 Earnings Results

    1. So was I initially, but after going through the operating model and the earnings call my mind was changed. My research partners all feel the same way.

      Nobody likes to wait for the BIG payday but it’s very clear with each earnings call that the payday is getting closer and looking even bigger than we thought.

      What’s nice is that we’re going to have a nice steady flow news coming with new products being announced this quarter and next.

      But I discussed all of this in the video…

      Have a great night. Go Sox !

      Liked by 1 person

  1. Hi Mark, with regards to the consumer IoT device, which surely does look like sprint like you and others think, there has to be a manufacturer in this too no? Samsung? LG? Part of me thinks so that a major device manufacturer is involved in the project too since this is Sprint we are talking about, and if its a known one, clear skies above 🙂

    I like the part where I am excited as well:
    “We have already begun building partnerships and expanding this ecosystem with leading consumer IoT providers” Bill Smith


  2. I think we need to reevaluate the risk we had taken into the valuation before. I believe that with Sprint picking up IOT will pretty much solidify Sprint as an extremley customer, taking the risk off that they will leave Smith anytime in the near future and solidifies they are staying for 4+ years.

    With the merger still on the horizon and things we’ve heard from management its also easy to piece together that T-Mobile is the next t1 carrier. With Sprint adopting IOT, do you think T-Mobile would not follow suit in the event of a merger (or maybe even without the merger!) — IOT will be picked up by both carriers eventually.

    IOT adds to the stickyness of Smith’s partnerships with both these carriers. In all, everything is looking extremely bullish if they execute on IOT. We’re looking at 4-5+ years with AT LEAST T-Mobile + Sprint.

    Liked by 1 person

      1. Sprint +6.3% on Q3 beats on revenue, profit, and subscriber adds.

        The resurgence continues. I’m thinking about buying some Sprint shares. Them, plus T-Mobile, plus their customer lock-in strategy could really make a dent in AT&T/Verizon’s dominance.

        Of course, what’s good for them should be good for SMSI, but I’m not averse to owning multiple companies for similar reasons.


      1. I’m only following it speculatively. I tried to do a fundamental analysis, but found that I don’t have the needed expertise to do a proper job. I will say that the bull/bear debate on XXII has been ongoing for years. It’s nothing new.

        I’m still short a small number of XXII puts (a bullish position, but one that collects premium over time) and I’m down 12% on that (consolation = that’s better than the stock has performed)… but as you know, that’s one long against several pott-stock shorts (like TLRY, NBEV, and HMMJ), which have paid off nicely.

        With all of them now lower (all profitable except XXII), I’m inclined to exit all pott-stock positions (long and short) and watch for a new obvious moment to get involved. I don’t see an obvious play at this moment in time.



  3. From Seeking Alpha: “T-Mobile has landed shareholder approval for its buyout of Sprint (NYSE:S) and expects to close the deal in the first half of 2019 after receiving regulatory approvals. “This is another step forward in creating the New T-Mobile, so we can deliver on our promise to bring robust competition to the 5G era, giving consumers more for less and creating jobs,” T-Mobile (NASDAQ:TMUS) CEO John Legere declared.”

    Liked by 1 person

  4. Thanks Mark, although I was more interested in your thoughts specifically regarding FOIA’s in this short thesis and in general.

    Given that SA’s John H Ford is part of an ongoing SEC investigation for alleged stock promotion – I thought it may be possible for the SEC to check all other companies he wrote bullish articles on (including XXII). Was planning on verifying this with some FOIA requests, however, this may take months and XXII’s ER is next week…


    1. Ah. Well, as I’ve said many times before, I focus on researching companies, not other people’s opinions of them, regardless of their reputation (good or bad).

      That’s a the way I was taught and it has served me well to heed that lesson 😇


      1. Indeed, opinions rarely matter – and in some cases, the wrong opinions create opportunities – especially when opinions move the SP. The question is whether XXII is being investigated for stock promotion or not, as opposed to the SEC investigating the history of another individual (Ford). If the latter is valid then it may suggest that XXII is therefore indirectly investigated.


  5. Mark, I’m trying to figure out a model to estimate SMSI’s revenue from SafePath going forward using several different data points. You have it in 4Q at $1.3 million in your model. How do you arrive at that number? According to Roth, SafePath has approximately 140,000 subscribers at end of 3Q. That alone in 4Q should lead to $1.4 million, shouldn’t it? Not even counting new subscribers.

    Speaking of new subscribers, October was a good month on AppAnnie rankings and they’ve especially climbed since the October 22 update. So I think they could be closer to $1.5 million or more for the quarter based on all this data (also considering the first month free leads to reduced income that month for them). Thoughts or insights on this speculation?


    1. Those are all fair points. Pinning it down to an exact number isn’t super critical to me. I just focus on being close (but, to your point, the data may be telling me to raise my number – I’ll investigate and consider that).

      Bottom Line — If we’re picking good stocks (namely, the kind that have a ton of potential vs. relatively low risk), merely being in the ballpark (+ or -) gets us a good result 👍🏼

      Liked by 2 people

      1. Thanks, Mark. I agree pinning it down to an exact number isn’t super critical in the long run. For the most part, I just wanted to make sure I’m not off base in my calculations. I appreciate your work and your willingness to engage with your followers.


          1. One other thing I forgot to mention. I’m wondering if S&F has a fairly high churn rate with customers who sign up for the free trial. The reason I wonder: if Roth is anywhere near accurate, and S&F had 90,000 subscribers after 2Q, then that alone should have been $900,000 in revenue. It seems strange that 50,000 subscribers added during 3Q would have only added another $60,000 in revenue. Something seems off there. I’m not sure if it’s Roth’s numbers or something I’m missing. Or if somehow most of those subscribers were skewed towards September sign ups (and had a free trial in September). That seems hard to believe based on the App Annie data.

            Another possibility would be if SMSI is only paid quarterly by Sprint. That could throw my calculations off a little. Of course, there’s the distinct possibility I’m just missing something entirely and I’m off! :)-

            Any insight you have on that would be appreciated.


          2. Plus I think if they were getting paid quarterly they would still be recognizing the revenue in accounts receivable. If my I recall from my finance classes correctly. 🙂


    1. I’m gonna steal a friend’s comment from ST but I believe they are in one in the same. Just check the PR dates from both Sprint and Smith:



      Curiosity IOT = Smith’s product (or at least is connected to it in some way shape or form)


      1. Actually i wouldn’t say Curiosity is the same as Smith’s product. Curiosity from what i’ve read is more like an operating system which all IOT devices will use/connect to. My guess is that Smith’s product will just be another device that uses the Curiosity platform.


    2. Major positive. The announcement makes it clear that SoftBank / Sprint (and almost certainly Deutsche Telekom and TMUS) realize that IoT can give the carriers more invaluable data than ever before.
      Smith’s development efforts are completely aligned with that vision. So, it’s no wonder they’ve been sounding so confident and doing more and more investor conferences, despite not needing any cash. The excitement (and data points) just keep building.

      Liked by 1 person

  6. I always had a sneaky suspicion that the arbs would drive down the price. It could go lower at they were shorting heavily below $2. I guess their logic is to sacrifice a few hundred thousand shares to drive down the price and cover their shorts. Then after covering their shorts, they will the bulk of their shares into any rallies above their strike price. Hopefully they will hold onto them for much higher prices.


    1. Wrong IMHO. The arbs were done arbbing their positions long ago. This is panic selling due to the stock dipping below the 200 DMA.
      Silly, especially with the recent news flow, but that’s retail investors for you.

      Liked by 1 person

  7. Just a weird coincidence then but is it also a coincidence that the cost of the warrants are in the $2.16 to $2.21 range? And……..that is about the exact low of the day?


    1. Yes. No offense, but that’s not even worthy of calling a coincidence. Warrant holders can NOT make money at the strike price.

      Once again, they use “delta” (look it up in investopedia as it pertains to options) to determine how much stock to short to hedge a derivatives position.

      In fact, a lower stock price LOWERS how much they need to be short to hedge the position. If I was them, I’d more likely be taking some profits.

      Retail and professional investors often act in the opposite direction. I see today’s action as being a perfect example. Just nibbled a few shares. Looking to see if we go lower. I’ll happily buy a bargain if the retail investors capitulate.

      Liked by 1 person

    1. We shall see. After all the selling, a “solid” report is all that’s needed. Even a slightly weak quarter with a good call saying that the recent disruptions have been handled should be enough to spur some relief buying (it will be for me).


      1. Didn’t hear the call, but like the add of 15,000 new paying subscribers in just 2 weeks at end of quarter after crossing 500,000 9/13, shows power of the marketing dollars which came in high, but appears it should pay off at that rate.


          1. It broke the 200 day. I got messages stated early AM. The company is attending investor conferences, signing up for more, and speaking openly (I’ll have a call with them soon).

            Doesn’t guarantee long term success, but I see this as a purely technical move.


  8. Mark,
    I read the GAIA call transcript and am not sure what I am missing. What is so negative that accounts for the price action today? Thanks.



      B.Riley FBR analyst Eric Wold reiterated a Buy rating on Gaia Inc (GAIA – Research Report) today and set a price target of $26. The company’s shares closed yesterday at $15.67.

      Wold noted:

      “After the close on Monday (11/5), Gaia (GAIA) reported 3Q18 results that admittedly could be read one of two ways by bulls and bears looking at the company and its shares. Although subscriber growth and revenues came in ahead of expectations, the elevated spend in the quarter could be taken negatively without understanding the shift in focus towards the type of subscriber being targeted as well as the incremental cost of a handful of new initiatives (which will subside in early 2019). With management confirming the launch of a premium subscription offering and an expectation that customer acquisition spend will wane materially beginning in 2Q19, we are increasingly comfortable with our projection for 1H20 profitability— with management actually guiding to sustained profitability and positive FCF beginning in 1Q20.”

      According to TipRanks.com, Wold is a 5-star analyst with an average return of 8.4% and a 51.6% success rate. Wold covers the Services sector, focusing on stocks such as Reading International Inc, Cinemark Holdings Inc, and National Cinemedia.

      The word on The Street in general, suggests a Strong Buy analyst consensus rating for Gaia Inc with a $26.33 average price target, which is a 68.0% upside from current levels. In a report issued on October 29, Roth Capital also assigned a Buy rating to the stock with a $25 price target.


    2. Retail investors pay attention to make/miss on the surface (which, on many occasions, I’ve taught can be very shortsighted), along with things like technical analysis.

      This is why it’s a proven fact that the average retail investor underperforms. Meanwhile, pro investors sit back, wait for the carnage to abate, and then pick up the pieces on the cheap.

      I plan go live tomorrow afternoon to discuss.

      Liked by 2 people

  9. Smith Micro just announced ANOTHER above mkt equity offering at $2.32. If they didn’t need the money why did they do the last one let alone this one? They better damn well have something big going on or……


    1. The thinking among my institutional contacts is that 1) they are making an acquisition and/or 2) T-Mobile asked SMSI to have enough cash to meet their qualification for moving forward with a vendor relationship.

      Paying off debt and reclassifying warrants as equity is viewed positively. The raise itself will be judged based on the reason behind it.

      Liked by 1 person

    1. The key is to work through the possible reasons calmly. Not thinking about how much I’m down today (or this month). The fact of the matter is that Bill Smith pretty much sacrificed millions of his own net worth to do this.

      Gotta think he had a good reason.

      Sticking to the rules of bullish versus bearish offerings, they WANTED this money — as opposed to NEEDING it — so that classifies the round as bullish… Even though we don’t yet know exactly why they did it.

      Add it up and it increases the odds that they did it for the reasons I’ve stated a few minutes ago.

      Liked by 2 people

      1. It makes sense to secure these large telecom deals, the carriers may want more cash on BS. Why wouldn’t they have offered you the opportunity to invest more and get a free warrant? Also, they have always mentioned looking at opportunities for acquisitions.


        1. Correct.

          As for offering me or anyone else the opportunity, that’s not how it works. The investment banker is the one in charge of raising the money and they favor they own large institutional customers. Cheers.

          p.s. I have to laugh that BS is an abbreviation for balance sheet.


  10. Bill needs to start being HONEST with his shareholders. The last raise he alluded that it may be for an acquisition. No acquisition happened and now they are raising even more cash. Communication is needed or people will sell first and ask questions later. Repeated equity raises are the #1 thorn in the side of SH’s and what makes it worse is when we get generalized watered down reasons for it like “proceeds will be used for general corp purposes.


    1. To be honest, if it’s for T-Mobile, he CAN’T be honest about it. 💯

      He crushed his own net worth more than anyone else to do this round. To figure this out, we have to put ourselves in his place and ask ourselves why we would do that. 🤔

      Liked by 1 person

      1. Yes but no. How many of his shares did he pay for with his own money. We all know how execs drown themselves with options. Most lottery winners go broke because the money fell into their lap as opposed to busting their ass to earn it. It would still hurt but it would hurt me a lot less if my stock dropped when it didn’t cost me anything. Now, I’m not sure of Bill’s situation so I am just making general observations.


        1. Actually, he paid for a lot, but that’s not the point. He’s not a financially devoid lottery winner… nor would most lottery winners literally burn their money.

          We’d all like to think ill of this (especially considering the last couple of raises), but there is zero evidence of anything nefarious here.

          More later…


  11. When I did the last private placement they said they would not raise any more money into the stock was up at five dollars a share so GOES credibility


  12. Would really like to hear back when you talk with management on the offering later today. Would never thought I would see an offering PR at this juncture


      1. Even if they did say they did not need anymore money a while back, circumstances change, especially if they need the money to satisfy the BS (balance sheet :)) needs to help close deal(s), a big positive, or an acquisition.


  13. I quickly tried to look through some of the old announcements but I am 100% sure it was there somewhere where they mentioned it because I do remember on one of your conference calls you saying something about it.


    1. Honestly, I’d be surprised. I honestly don’t think I’ve ever seen a company say anything like that in a public release. Maybe in a private conversation. Either way, situations change. If TMUS required this as a final negotiation point, it wasn’t something they could have known before.


      1. I have been adding this morning as well. Time will tell if this was a bad move or smart move. I don’t see any logical reason they would do this other than for something bullish. If it turns out bad then I need to re-think my investment with this company.


    1. Depends on how much I can gather. If so, likely after the market closes. Stay tuned. I’ve been sharing some insight here, so we’ll see if it makes more sense to do it after the bell or tomorrow at lunchtime to give everybody enough notice.


  14. Nice Release on HEAR. Selling a bit on news and the mis perception of the Q4 guidance. Still long and strong naked $17.50’s for 11/16/18. All should read the transcript. The balance sheet improvements are dramatic and Q4 should be big. This comment below from the transcript does a good job at explaining the guidance. Playing this like Mark with short-med dated naked puts as this story has a shelf life of some kind.

    “Mark Nicholas Argento, Lake Street Capital Markets, LLC, Research Division – Head of Capital Markets & Senior Research Analyst [2]


    I had a couple of questions around — so if you look at the sales trends through the first 9 months of the year, Q1, you guys are up 184%, I believe, Q2, up 219%, Q3, 107%. If you look at the Q4 guide and you’re up 18%, could you just talk a little bit about how you’re thinking about the holidays? I know it’s a little bit of a wildcard, but what are you hearing from retailers to think that the growth rate would decelerate to 18% when it’s been at such a high clip going in?


    Juergen Stark, Turtle Beach Corporation – CEO, President & Director [3]


    Yes. Sure, Mark. Glad you asked, actually. There — I’ve mentioned this in the past, there is a dynamic to this year, where we’ve got new gamers entering the market based on these new games like Fortnite and PUBG. That — you can look at that as like a number of millions of gamers or a set amount of rough revenue for us. The key thing with Q4 is that the core underlying market is much, much larger in Q4 than other quarters during the year. It’s larger in Q3 than Q2 and Q1. So that kind of that new installed base as a percent of the total market is much smaller in Q4. So that’s what drives the numbers. Remember that in typical Q4, we — the market does about 50% of all the revenues for the year in that market. So it’s basically, your denominator is much, much higher in Q4 than it is even in Q3 and particularly than in Q1 or Q2. That’s the driver. But you asked me also, by the way, about retail expectations. Everybody is super excited. The new games are getting good reviews. There is a lot of excitement from retail, and we see upgrade trends from consumers already who’ve entered the market earlier this year that all are contributing to, what we view, as a very strong Q4. The other thing I’ll mention and just reinforce from the comments is that we secured — now fully secure inventory, including long-lead components for our forecast plus, as we’ve commented in the past prior quarters, an upside scenario in case the market is stronger than our guidance would forecast that we would be able to provide inventory to hit an upside revenue scenario.”


    1. Yup. Totally agree… and remember, my thesis ALL ALONG had been that writing (shorting) the put options looked better than buying the stock.

      Well, the stock is up only modestly since June, but those puts have dropped like 50%, delivering a 50% profit to those who wrote (shorted) them. 😎


  15. So, some quick back of napkin math.. If the March and May warrants converted along with the offering today, they added roughly $20 million to the current $8.3 million cash from 9/30, for around $28.3 million in cash. Along with that they increased the float to roughly 35.5 million shares, not including the current offering’s warrants. That would give $.81 per share in cash..


    1. Nicely done. That’s how a pro conducts business when an offering is announced.

      Also remember that the investors in this round are pretty much the same as in the previous rounds… so, the value of their warrants have fallen, as has the number of shares needed to hedge those older positions.

      As in March and May, this is not as bad as it “feels”. Analysis trumps emotion.


          1. With around 35 million shares outstanding now (with warrants). The upside is no longer as high as we originally expected. $18 will be much harder to achieve (requiring a 650 million market).

            Unless we see a tier 1 signing, not sure how the offering is justified.


          2. Agree 100%, but the downside risk is also lowered and (more importantly) they clearly needed to do this for some good reason because they didn’t need the cash.

            The CEO wouldn’t crush his own net worth for no reason. He has MILLIONS of shares.

            To me, that’s the #1 thing to keep in mind here. His vested interest is in his personal net worth and nobody has more to gain or lose on this than he does.

            Liked by 1 person

          3. We can talk and discuss about all sorts of scenarios of why they have done this. The fact is that no one in their right mind would dilute themselves even more without a good reasons or having a belief that it will increase value later. Even with that in mind it’s not a guarantee that it will work out that way.

            Liked by 3 people

          4. I wished the one i added on two days @2.17, should have waited but no one saw this coming. But oh well like what i learned from you. Dont panic and there are bullish raises and this is one of them. I was too slow for that dip this morning too.

            Liked by 1 person

          5. There are some folks that do dilute themselves to oblivion (Ted) — I don’t like making the comparison between Bill and Ted because its not warranted at all but it does happen. I also believe that Bill would not be so foolish to dilute himself this much knowing the potential he had going already.


  16. Agree, Bill did not need it. Which bars the question why was the offering needed? Obviously Bill knows it cuts his own potential by a lot. Has to be something lined up that Bill believes is pretty significant. Again the only thing that I think that could be is a t1 signing on the horizon. All the signs are there and previous history has shown similar results.


  17. If I’m doing the conservative linear revenue growth with the new share count, valuation in the model is $5.79 a share. Of course, as we’re saying one would hope that this is to sign another carrier or acquisition.

    Liked by 1 person

  18. Mark – How much information are the investor’s participating in the private placement given? Just asking out of curiosity and because most professionals aren’t the open window that you are. Would a NDA include a contract with TMUS, acquisition, etc or would it be more general such as – we’re trying to reel in a T1 customer that was discussed during the cc, wanna ride?

    Doesn’t matter, just curious. thanks.


  19. from the Securities Purchase Agreement, dated May 3, 2018:

    4.12 Subsequent Equity Sales.

    (a)From the date hereof until twenty-four (24) months after the Effective Date of the initial Registration Statement, neither the Company nor any Subsidiary shall issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents at an effective per share purchase price of less than $2.17 (as adjusted for forward and reverse stock splits) without first obtaining written approval to do so from Purchasers holding a majority of the Shares acquired pursuant to the transaction contemplated by this Agreement. In addition to the foregoing, neither the Company nor any Subsidiary shall issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents at an effective per share purchase price of less than $5.00 until 120 Trading Days following the Effective Date of the initial Registration Statement without first obtaining written approval to do so from Purchasers holding a majority of the Shares acquired pursuant to the transaction contemplated by this Agreement.

    aaaand its been 133 trading days since last raise.


    1. Yes. The same $5 / 120 day clause is in the new agreement. This is also from the new agreement…

      “From the date hereof until eighteen (18) months after the Effective Date of the initial Registration Statement, neither the Company nor any Subsidiary shall issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents at an effective per share purchase price of less than $2.20”


        1. I spoke to a lot of professionals yesterday and none could think of a reason the CEO would dilute / devalue his 5M+ shares without there being something bullish behind it.

          Further, I have trust in CFO Huffmyer. They have something up their sleeves.


  20. I bought more yesterday morning and spent the rest of the day trying to figure out how that was NOT a good move. Even if they did $0.25 in 2019 and $0.50 in 2020. How was this not a 5 to 10 dollar stock???


  21. I’m sure many readers here bought yesterday. I hope we’re not the suckers holding the bag, since clearly someone knew this was coming and sold shares to bring down the price during the past few trading sessions (post earnings announcement).


    1. That’s the hard part of not being on the inside, but I’ll say it AGAIN — the CEO gets hurt more from stock-price declines than anyone. So if anyone’s pissed about the stock’s action ahead of the financing, it’s him.

      That does diminish from our losses, but it tells us something to assist in accepting what they’re working to accomplish.

      His position in SMSI is about as big as all of ours combined.


    1. Correct. I make periodic tweaks, but that model is primarily for 1) my reference and 2) anyone who wants to use it as a template to input their own numbers.

      FYI, I also update it when I get feedback from readers re: logic, glaring errors, etc.

      Liked by 1 person

  22. Here is another angle i was thinking about that, I believe they have already signed a tier 1 or more. But their business model is where the little detail is, there is NO cost for a tier 1 to sign with them, because of the shared revenue business model which is a beautiful leverage. Now where I am getting at is I dont think the raise was for a signee, but rather they might be targeting a bigger acquisition or SMSI might be getting acquired hence cleaning up the balance sheet.


    1. Tier 1s like strong balance sheets. I saw this when first hand was working at IDC and AMR.

      Acquirers generally don’t care. It’s most likely an new account, them buying someone, or both.


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