Scott W.

Searle, CFA, (646) 616-2782

ssearle@roth.com
Sales (800) 933-6830, Trading (800) 933-6820

COMPANY NOTE | EQUITY RESEARCH | September 30, 2018

Technology: Communications, Wireless & IoT

Smith Micro Software, Inc | SMSI - $2.52 - NASDAQ | Buy

Initiation of Coverage

Stock Data SMSI: Smith 3.0 - Location, Location,

52-Week Low - High $1.09 - $3.41 Location
Shares Out. (mil) 25.03
Mkt. Cap.(mil) $63.1 Over the past 18 months Smith Micro has undergone a significant overhaul
3-Mo. Avg. Vol. 196,159 in cost structure, focus, and growth vectors. More specifically, SMSI has
12-Mo.Price Target 4.00 engineered a product turnaround in its visual voicemail business (CommSuite),
Cash (mil) $8.7 while investing in location-based services (SafePath). Overall, we believe that
Tot. Debt (mil) 2.9 location represents a $1B+ TAM in the US. However, key to unlocking this
Revenue ($ millions) value will be expanding its platform offerings and its carrier customer base.
We initiate coverage of SMSI with a Buy rating and $4PT.
Yr Dec —2017— —2018E— —2019E—
Curr Curr
Rightsized and refocused: Smith Micro has taken significant steps to
1Q 5.6A 5.5A 6.7E
rightsize the organization since 2016, with op-ex declining 35% (~$3M to
2Q 5.9A 6.9A 6.9E
3Q 5.8A 6.1E 7.3E
$5.5M). This is the result of de-emphasizing legacy product lines, moving
4Q 5.7A 6.6E 7.6E development resources overseas, and general tighter budgeting practices.
YEAR 23.0A 25.1E 28.4E This also includes more strategic focus around visual voicemail, location-
based initiatives (SafePath) and, to a lesser extent, graphics. The result has
EPS $
been a return to profitability in 2Q18 well ahead of expectations.
Yr Dec —2017— —2018E— —2019E— Location equals a $1+B TAM: Under the SafePath brand, Smith Micro is
Curr Curr
commercializating a broad-based location and safety platform that begins
1Q (0.11)A (0.10)A 0.01E
with family location tools (“Safe and Found” with Sprint), and will ultimately
2Q (0.11)A 0.01A 0.01E
3Q (0.09)A (0.01)E 0.02E
extend to other devices (wearables), people (elderly/Alzheimer’s), pets and
4Q (0.04)A 0.01E 0.03E other things. The Sprint contract (signed October 2017) remains early in its
YEAR (0.35)A (0.09)E 0.07E conversion cycle but note that each 1% penetration translates to $0.08+ EPS.
P/E NM NM 36.6x Longer-term, we believe the location market represents a $1B+ opportunity
Note: EPS are adjusted pro forma in the US. We believe that SafePath success will be driven by expansion of
the platform (tracking people, pets and things), customer base (beyond Sprint)
SMSI One-Year Price and Volume History and general subscriber penetration.
1.4 4.00
1.2 3.50 A return to growth in visual voicemail: Historically, visual voicemail has
1.0 3.00 been a key product line for Smith Micro. However, in recent years, growth
0.8 2.50 stagnated and revenue remain concentrated in a single customer; Sprint. Now,
0.6 2.00
0.4 1.50
new product features and backend billing improvements to address enterprise
0.2 1.00 and prepaid provisioning have resulted in sequential growth while extending
0.0 0.50 CommSuite into voice assistant devices such as Amazon’s Alexa and Google
Home. “Alexa, read me my e-mail”. Commsuite is repositioned for growth and
May-18
Nov-17

Dec-17

Aug-18

Sep-18
Feb-18
Mar-18
Jan-18

Jun-18
Oct-17

Apr-18

Jul-18

Vol (m) Price

to redefine modern voicemail.
Smith 3.0: Cost optimized for growth and profitability; Buy: We believe the
actions undertaken over the last several quarters have yielded demonstrable
benefits with a lower cost structure, improved product focus and accelerating
growth and sustainable profitability. While it remains early, and the stock has
moved with early CommSuite and SafePath returns, we initiative coverage with
a Buy rating and see upside to the $4 level, or ~3.5x CY19E EV/Sales.

Important Disclosures & Regulation AC Certification(s) are located on page 22 to 25 of this report.
Roth Capital Partners, LLC | 888 San Clemente Drive | Newport Beach CA 92660 | 949 720 5700 | Member FINRA/SIPC
SMITH MICRO SOFTWARE, INC Company Note - September 30, 2018

Investment Summary: Location Location, Location

Smith Micro 3.0 features a
lower cost structure,
improved product focus Smith 3.0: Cost Optimized with New Growth Vectors
(CommSuite and
SafePath) and a return to Over the past 18 months Smith Micro has undergone a significant overhaul in cost structure, focus, and
growth and sustainable growth vectors. More specifically, SMSI has engineered a product turnaround in its visual voicemail
profitability business (CommSuite), now returning to growth, while investing attention and focus in location-based
services under the SafePath platform. Overall, we believe that location represents a $1B+ TAM in the US.
In combination with corporate cost optimization, CommSuite and SafePath have driven SMSI back to
profitability in the most recent quarter (2Q18). Going forward, we see opportunities to extend CommSuite
into Alexa and Google Home and SafePath as a location platform for safety and security tracking for
people, pets and things. We initiate coverage of SMSI with a Buy rating and $4PT.

Rightsized: Smith Micro has taken significant steps to rightsize the organization since 2016, with op-
ex declining 35% (~$3M to $5.5M). This is the result of de-emphasizing legacy product lines, moving
development resources overseas, and general tighter budgeting practices. The result has been a
return to profitability in 2Q18, well ahead of expectations.

Refocused - Visual voicemail, location and graphics: While the company has historically supported
multiple development initiatives, Smith Micro’s core skillset over the past decade has revolved around
mobility. Under its new cost optimization plan, the company has focused on three key areas including
visual voicemail, location-based initiatives and, to a lesser extent, graphics.

o Visual Voicemail (CommSuite): Visual voicemail has been a key product line for Smith
Micro over the past decade. However, in recent years, growth stagnated, and revenue
remains concentrated in a single customer; Sprint. Now, new product features and
backend billing improvements focused on addressing enterprise and prepaid provisioning
have resulted in sequential growth over the past three quarters. Additionally, SMSI
continues to pursue new carrier wins while extending CommSuite into voice assistant
devices such as Amazon’s Alexa and Google Home. “Alexa, read my e-mail”.

o Location-based services (SafePath): Under the SafePath brand, Smith Micro is

commercializing? a broad-based location and safety platform that begins with family
location tools (“Safe and Found” with Sprint), and will ultimately extend to other devices
(wearables), people (elderly/Alzheimer’s), pets and other things. The Sprint contract
(signed Oct ’17) expected to convert an existing legacy base that translates to quarterly
sales of ~$3.5M from a current $700k run rate. Note: We estimate full conversion
represents approximately 3% penetration at Sprint with each 1% penetration translating
to $0.08+ EPS. Longer-term, we believe the location market represents a $1B+
opportunity in the US.

o Graphics: While less exciting than CommSuite and SafePath, graphics offers a unique
niche opportunity to build scale and cash flow. Recent cost and channel optimization
actions have reduced quarterly sales from in excess of $1M to ~$400k. However, new
product initiatives and possibly inorganic activity are expected to drive a return to
sustained profitability with scale into 2019.

o Other: Managing connectivity (NetWise) and IoT device management (QuickLink) are
historic core skillsets of Smith Micro. While these areas provide key enabling capabilities
they have historically proven difficult to monetize as standalone technology offerings. We
believe that Smith Micro will better monetize these assets via integration will other
subscription based services or divestiture over the next several quarters.

Smith 3.0: Cost optimized with growth and profitability; Buy: We believe the actions undertaken
over the last several quarters have begun yield demonstrable benefits with a lower cost structure,
improved product focus and accelerating growth and profitability. While it remains early, and the stock
has moved with early CommSuite and SafePath returns, we initiative coverage with a Buy rating and
see upside to the $4 level, or ~3.5x CY19E EV/Sales.
Page 2 of 25
SMITH MICRO SOFTWARE, INC Company Note - September 30, 2018

Figure 1: Smith Micro Valuation Comps

9/28/18 CY2017
CY2018
CY2019CY2017
CY2018
CY2019 % O ff
Share Market Ent EV / Sale s P/E Sale s % Chg 52 Wk
Rating Price Cap Value 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E High

S MS I Buy $2.52 $60 $55 2.4x 2.2x 1.9x NM NM 36.6x (19%) 9% 13% 26%

S oftware
ALRM Buy* $57.40 $2,738 $2,701 8.1x 6.9x 6.2x 65.4x 47.7x 41.6x 31% 17% 12% 3%
BB NC $11.38 $6,120 $4,630 4.6x 5.1x 4.9x 148.2x 105.4x 69.0x (33%) (11%) 4% 22%
M OBL Buy $5.30 $545 $446 2.6x 2.3x 2.1x NM NM NM 7% 11% 9% 7%
SNCR NC $6.60 $282 $253 0.5x 0.8x 0.8x 9.3x NM NM (26%) (30%) (2%) 58%
SSTI Buy** $61.29 $660 $645 27.8x 19.0x 14.1x NM NM 306.5x NA 46% 35% 7%

Group Average 8.7x 6.8x 5.6x NA 76.6x 139.0x (6%) 7% 12% 19%

Location/Telematics
GRM N NC $70.05 $13,875 $11,453 3.7x 3.5x 3.4x 24.1x 21.2x 20.7x 4% 7% 3% 1%
TNAV NC $5.05 $227 $142 1.0x 0.9x 0.6x NM NM NM (21%) 19% 50% 26%
CAM P Buy $23.96 $833 $797 2.2x 2.1x 1.9x 21.0x 19.6x 17.3x 7% 6% 7% 6%
DGII Buy $13.45 $366 $312 1.6x 1.3x 1.2x 67.5x 191.0x 36.0x (3%) 20% 10% 9%
ORBC Buy $10.86 $853 $1,061 4.2x 3.6x 3.3x NM NM 280.3x 32% 18% 10% 9%

Group Average 2.6x 2.3x 2.1x 37.5x 77.3x 88.6x 4% 14% 16% 10%
* Covered by Darren Aftahi
** Covered by Richard Baldry

Source: ThomsonReuters Eikon, SEC filings, company reports and ROTH Capital

History
Over 30 years of
communications and
mobile software lineage Over 30 years in Communications and Mobile Software

Founded in 1982, Smith Micro has a long rich history in communications and mobility-focused software.
Early development in fax modem software ultimately gave way to mobility in the late 1990’s. In the early
2000’s time period, the initial mobile foray included support for multimedia (including music playlists) for
early smartphones before developing core expertise in managing and optimizing network connectivity
between cellular and WiFi for mobile devices (today’s NetWise). This would ultimately be the foundation
that has driven the company’s mobile DNA over the past decade for mobile connectivity, security and
device and content management. Ultimately, this propelled Smith Micro to $130M in sales in 2010.
However, over time marketplace demands changed which eliminated these products as standalone
solutions. For example, the QuickLink connectivity manager peaked at over $100M in sales in 2010, before
a decline in hotspot devices, ubquitous 3G coverage and connectivity software integration reduced the
addressable market. Today, the company has refocused its product efforts around a three pronged strategy
for:

Visual voice-mail (CommSuite): Transcription of voice to text along with integration into next-
generation voice assistant platforms (Amazon’s Alexa and Google Home).

Location-based services (SafePath): A complete platform that starts with family services around
location, security and parental controls and extends to tracking other People (elderly), pets and things.

Page 3 of 25
SMITH MICRO SOFTWARE, INC Company Note - September 30, 2018

Graphics: Suite of solutions for high end effects (water color), animation, and interaction.

Figure 2: The Smith Micro Mobile Suite of Solutions

Source: Smith Micro Investor Presentation, June 2018 and ROTH Capital. Note: sales estimates for 2018E.

We note that Smith Micro has been highly acquisitive over the past dozen years, albeit less aggressive in
the past decade as macro conditions and balance sheet constraints limited financial flexibility. Of note,
iMobileMagic and Core Mobility are the core, no pun intended, elements for the current SafePath and
CommSuite solutions, respectively. Meanwhile, the current graphics portfolio has been comprised of
several acquisitions including e frontier America, Insignia Solutions and Pho Tags, Inc. We believe the
company will be opportunistically acquisitive in the future, but remains refocused on developing internal
core capabilities around Location and visual voice-mail.

Figure 3: Historic Smith Micro Acquisitions

Company Date Amt Comments

iMobileMagic 7/19/2016 $2.3M SafePath solution
Birdstep Technology AB 4/7/2016 $2.0M European presence for Connectivity Manager
Avot Media 2010 Mobile video delivery
Core Mobility 2009 CommSuite
MxPlay 2008 Web browsers
PCTel Inc. (Mobility 2008 $59.7M Consolidated US Connectivity Manager market
Solutions)
e frontier America 2007 3D graphics programs
Insignia Solutions 2007 Mobile software
Ecutel Systems 2007 Mobile VPN
Pho Tags, Inc. 2006 Portable info imaging solutions
Allume Systems 2005 Compression and security and software
QuickStart Inter 2000 eBusiness consulting
Source: SEC filings and company reports

Page 4 of 25
SMITH MICRO SOFTWARE, INC Company Note - September 30, 2018

Core Strength in Mobility and Carrier Relationships

Legacy carrier
relationships (all four US
carriers) provides an Carrier’s Provide an Attractive Cross Selling Opportunity
attractive sales channel
Smith Micro’s key value reflects a core skillset in the following: 1) Mobility, particularly around optimizing
connectivity and device management, as well as 2) Strong pre-existing carrier relationships. Dating back to
early NetWise and QuickLink solutions, Smith Micro has helped to define the market for managing
connectivity between traditional cellular and WiFi networks. In fact, the company maintains early essential
patents in this area. Additionally, historic relationships with baseband suppliers and mobile operators has
led to deep understanding of device management to enable a multitude of tasks including over the air
(OTA) updates, security and device performance. Perhaps as important as its technical capabilities has
been the development of longstanding carrier relationships, particularly in the US and Europe. In the US,
Verizon and Sprint have each been meaningful customers over the past decade (over 30% of sales for
periods of time) and included multiple products (Verizon: NetWise and QuickLink Music, Sprint: NetWise,
CommSuite, SafePath). This provides a powerful channel as the company looks to expand the footprint of
its CommSuite and SafePath platform.

Carrier’s Need More Value

Carriers need new
revenue streams and
churn reduction tools Smartphones are saturated; Carriers need value added services
offered by Smith Micro
With ~280M smartphones in the US (Source: CTIA), the market is effectively saturated at ~85% penetration
(penetration of all mobile phones (smartphones and feature phones) is greater than 100% according to
Ericsson’s Mobility Report (June 2018)). Global penetration offers a similar picture with over 5.1B uniques
subs, translating to is almost 70% penetration. Consequently, there are limited opportunities to drive mobile
penetration for voice and basic data capabilities. Growth resides in value added services and the addition of
other connected devices. Case in point: In the most recent quarter (June 2018) US carriers Verizon and
AT&T posted net additions of 531k and 3.1M, respectively. These were both largely driven by wearables
and other connected devices: 369k (~70%) at Verizon and 3.0M (over 95%) at AT&T. In this environment,
carriers are looking for churn reduction tools and new connected device opportunities. Smith Micro can
satisfy both of these needs with products such as CommSuite and SafePath offering incremental value
added services and revenue streams. Typical churn at a mobile carrier runs from ~1.0% to 2.5% (based on
US carriers over the past decade). However, churn improves with the adoption of one value added service
and increases even further with the adoption of family plans. In our view, SafePath is an attractive platform
to satisfy both metrics with the opportunity for additional connected devices to track people (kids and elderly
with smartwatches or other wearables), pets, or other assets.

Figure 4: US Carrier Relationships and Smith Micro Services

Connected
Carrier Subs* Devices CommSuite SafePath Other
AT&T 149.9M 44.7M - - NetWise
Sprint 54.6M 5.3M**** Free to Safe & Found NetWise
$2.50/month $6.99/month
T-Mobile 74.0M*** NA - -
Verizon 113.7M ~15M** - - NetWise
Source: Company reports, SEC filings, and ROTH Capital. * 2Q18 (includes connected devices). ** ROTH Capital
estimate. *** 1Q18. **** Postpaid connected devices.

Page 5 of 25
SMITH MICRO SOFTWARE, INC Company Note - September 30, 2018

The Location Market

Location-based services
for people, pets and
assets represents a $1B+ A multi-billion dollar market opportunity
market in the US by
2021E Location-based services are broadly defined as using real-time geo-location data to provide additional
services. This can entail horizontal services offered through the mobile operator or direct to the consumer,
including app based solutions such as directions, tracking (people, pets, assets), entertainment,
advertising, etc. It also includes enterprise-focused applications for tracking and managing assets such as
Telematics services which is estimated at $30B TAM (source: Global Industry Analysts, Inc. The Global
Vehicle Telematics Market). The basics of the location solution take geo-positional data and apply it to a
map for use in an application. The geo-positional data can be acquired from GPS (or assisted GPS)
capabilities in a device, or using other methods such as Cell-ID, Bluetooth or WiFi (typically for indoor use),
or other handset or device based technologies such as AoA (Angle of arrival) or TDOA (Time differential of
arrival) to determine location. Note: GPS is a battery-intensive technology, and consequently device
(smartwatches, trackers, etc.) and location solutions providers are exploring non-GPS based solutions for
battery-constrained environments such as wearables. Location data is then combined with mapping
capabilities in various applications that derive value from location such as directions, tracking people, pets
and things, as well as enterprise or vertical market applications. Smith Micro is focused on penetrating
carrier-driven consumer channels with some potential applicability into enterprise or vertical focused asset
tracking.

Figure 5: The Smith Micro Mobile Suite of Solutions

Source: American Veterinary Assoc. PRB Factsheet aging in the US. Bureau of Justice Statistics Probation and Parole in
the United States, 2016 IHS Markit, IHS Automotive, US Census Bureau. ROTH Capital Partners.

Enterprise or vertical markets: We estimate the market for enterprise and vertical location driven
applications to be a $25 billion to $30 billion market today growing to $50+ billion by 2020-22. This
encompasses Asset Tracking and Monitoring ($5 billion to $10 billion today, MarketsandMarkets) and
Telematics ($20+ billion, Source: CalAmp) opportunities for hardware and software.

o Telematics is a catch-all category that encompasses the transmission of mobile vehicle

information (commercial and consumer) including tracking and fleet applications. It also
captures nascent connected vehicle markets as well as the more banal applications of
dynamically-connected vehicle maintenance, diagnostic and insurance applications.

Page 6 of 25
SMITH MICRO SOFTWARE, INC Company Note - September 30, 2018

o Asset Tracking and Monitoring reflect the tracking of physical assets (outside of
vehicles) in mobile environments for local, regional or global applications. This broadly
entails trailer, trucks, rail cars and cargo container tracking (maritime and terrestrial) with
a focus on improving operational and logistical efficiency and security. Asset tracking also
reflects other sub-verticals such as the $3B TAM “cold chain” management, which tracks
and measures temperature in a controlled supply chain (i.e. perishables for retail, tissue
samples for medical, etc.) which are being driven by industry mandates (FDA Food
Safety Modernization Act (FSMA)) and initiatives (fresh food with “Farm to Fork”).

Consumer markets: Consumer markets are broad-based and growing, encompassing channels that
are direct to the consumer through app stores (Google Play, App Store) and via mobile operator. This
entails tracking applications for people (family, kids, elderly), pets and other things or assets, such as
autos. Collectively, we estimate this opportunity to conservatively exceed over $1.1B in the US alone
by 2021 for tracking families (children, elderly), medically monitored people (Alzheimer’s), pets and
other. Auto and other asset tracking could easily double that figure when considering the installed base
of ~250M vehicles in the US. Some summary bullets are as follows:

o Families: There are an estimated 82M families in the US, including 73M children and
46M elderly (US Census Bureau). We believe this opportunity expands with LPWA (Low
Power Wide Area) technologies such as LTE Cat M1 embedded in devices such as
smartwatches, fitness trackers, and other wearables. We estimate that roughly 20%
penetration would translate to a nearly $2B TAM.

o Other people: Safety monitoring for chronic conditions such as Alzheimer’s and other
special needs (nursing home, parolee, etc.)

o Pets: Pets represent a growing opportunity enabled by LPWA and Cat M1 referenced
above. There are an estimated 70M dogs and 74M cats in the US (Source: American
Veterinary Assoc). With power optimized connectivity solutions permitting lengthy field
operation (a week plus) it makes these applications increasingly likely to be adopted. We
believe the Pet tracking opportunity could conservatively approach $250M by 2021.

o Other Assets (Autos): There are an estimated 250 vehicles still in operation in the US
with approx. one-third of new vehicles shipping with factory-ready connectivity (Source:
IHS Markit). We expect this figure to increase to 70%+ over the next five years creating a
large base to provide tracking (including SVR – Stolen-vehicle-recovery), diagnostics and
other applications.

Figure 6: Tracking Opportunity in the US

Annual Target
Carrier Units TAM penetration Other
People
Families**** 82.2M HH $500M+ <20% Location Labs has built a $50M+
Children**** 73.7M 10-20%
Elderly**** 46M ~$200M ~10% Life Alert types of applications
Alzheimer’s 5M ~50M <20% 2013
Nursing Home 1.3M $25-50M <20% 2010
Parolees** 4.5M ~$100M ~15%
Pets
Dogs* 70.0M ~$200M <10% 43.4M HH, 1.6 per
Cats* 74.1M ~$50M ~2% 36.1M HH, 2.1 per
Assets
Autos*** 17.2M** $2.5B+ ~70% Installed base of 253M US Vehicle
Other
Source: * American Veterinary Assoc. PRB Factsheet aging in the US. Bureau of Justice Statistics Probation and Parole
in the United States, 2016 ** IHS Markit *** IHS Automotive **** US Census Bureau. HH = Households. 70% of new
vehicles. ROTH Capital Partners.

Page 7 of 25
SMITH MICRO SOFTWARE, INC Company Note - September 30, 2018
Figure 7: Location Technology Elements Figure 8: Tracking Market in the US (2016-2021E)

Source: Qualcomm Source: ROTH Capital Partners

Figure 9: Smith Micro’s SafePath platform Figure 10: Asset Tracking IoT Device Market (2015-22E)

Source: Smith Micro Software Source: Mobile Experts Inc: Asset Tracking and IoT Devices (2017)

Page 8 of 25
SMITH MICRO SOFTWARE, INC
Subscription-based
models are driving
operator traction
Figure 11: Product Portfolio Overview
Products
CommSuite
NetWise
QuickLink IoT
SafePath
After several years of
attrition, new features and
billing upgrades have
returned CommSuite to
growth
Company Note - September 30, 2018
Portfolio Optimization Underway
Key Initiatives are moving along
Smith Micro has taken aggressive steps to curtail costs and focus development efforts in key areas across
all product lines. We believe that defensible solutions with subscription based models have proven more
successful for the company. Specifically, new features and updates for CommSuite visual voice-mail and
the SafePath location-based services platform offer multiple opportunities for subscription based services.
Success in these product areas will also be measure by subscriber net additions and expansion of mobile
operator relationships, i.e. adding more meaningful accounts beyond Sprint. Elsewhere, a consumer
graphics suite of solutions (Rebelle, Moho, Poser) has historically offered a niche opportunity with positive
cash flow. A recent retooling of the distribution channel and a lack of updated solutions has impacted near-
term graphics results. That said, the segment maintains an interesting opportunity despite lacking scale.
Consistent with the company’s mobile DNA, Smith has core technology capabilities in managing
connectivity, device management (DM) and performance, and mobile analytics. While leading technologies,
NetWise (connectivity) and QuickLink IoT (DM, or device management) have lacked a full “productized”
solution. This has ultimately resulted in a more difficult model to monetize, where the company has pursued
a one-time per unit device license fees versus subscription based models (CommSuite, SafePath).
Essentially this is a technology or middleware sale which has historically proven difficult to sustain, in our
opinion.
Going forward, we believe near-term growth will be driven by CommSuite and SafePath, but remain
intrigued about scale around a niche graphics strategy and the baseline technology value around support
IoT deployments (QuickLink). Ultimately, we believe the company could look to further invest or divest of
some of these non-core properties while looking to put a third leg on the mobile suite stool.
Description Model Customers Other
Visual voice-mail Monthly sub Sprint Recent updates and backend changes have led to growth
Connectivity Per unit Comcast, Charter Integration and commoditization have restricted growth
Manager one-time fee
IoT device Per unit NA Remains in the early stages of commercialization
management one-time fee
Location Monthly sub Sprint Sprint offers initial scale for SafePath platform
Source: ThomsonReuters Eikon, SEC filings, company reports and ROTH Capital
Visual Voice-Mail: CommSuite
New features and backend improvements drive recovery
Visual voice-mail is a premium messaging service that provides transcription voice messages into text or
other formats. CommSuite is a carrier grade platform that supports millions of users on Android devices.
Recent development has also extended the platform to voice activated smart assistants like Amazon’s
Alexa and Google Home (“Alexa, read my voicemail”). These capabilities have the potential to make voice
mail relevant, again, in our opinion. Additionally, changes to backend billing have enabled enterprise users
to upgrade and retain services. Collectively, this has translated to three sequential quarters of sales growth,
after several years of attrition.
Customer concentration remains an issue, as Sprint remains the lone CommSuite customer. Within this
account we estimate current premium users at slightly in excess of 1M, with penetration into the Sprint
Android base of devices at 5-7% (CommSuite is installed on over 19M Android devices and comes pre-
Page 9 of 25
SMITH MICRO SOFTWARE, INC
Location for family
(people), pets and “things”
offers a $1B+ TAM in the
next five years
Company Note - September 30, 2018
loaded with each smartphone). However, we believe that recent product enhancements could translate to
incremental opportunities with new operators.
Location: SafePath
SafePath represents a $30-50M TAM with Sprint
Simply stated, location adds value. Acquired in 2016 (Porto, Portugal based iMobileMagic), SafePath is a
comprehensive carrier grade platform to track people, pets and things. This can be accomplished via a
smartphone, wearable or other tracking device. The initial cross platform (IOS and Android) commercial
solution, SafePath Family, combines location-based technology with parental controls for positioning, geo-
fencing, automatic check-ins and family alerts. Parental controls can restrict, manage and monitor child
usage of devices including time spent on apps, what applications are available, restricting phones calls to
select numbers and filtering out unwanted content. We believe these capabilities can be expanded beyond
a “family” environment to include elderly monitoring for Alzheimer’s, i.e. like Life Alert (“I’ve fallen and I can’t
get up”) and even parole applications, to pet trackers, and other “things” or assets (auto). Location can be
provided from traditional smartphones, wearables such as smartwatches and other tracking enabled
devices. We believe that the advent of location enables wearables offers a large and unique opportunity to
connect into the SafePath ecosystem.
From a carrier perspective this 1) Adds incremental recurring device revenue streams and 2) Can be used
as a churn reduction tool. To date, services have been priced at a premium ($6+/month at Sprint), but could
conceivably be used to reduce churn. Why? Family plans tend to have lower churn rates. SafePath Family
provides further attract and secure this attractive subscriber base.
Figure 12: SafePath
Source: Smith Micro Investor Presentation, June 2018
SafePath is starting from a small base that included international carriers DTAC, Digi, and AIS before
adding Sprint in October, 2017. At Sprint, SafePath is displacing Location Labs who was acquired by Avast
Software in 2014 for up to $220M ($140M plus up to an $80M earnout). To date, Location Labs has more
scale (4 billion cumulative location lookups with 1 billion added in 2017) and a larger installed base of
carriers (including AT&T and T-Mobile) and users. At Smith Micro, the Sprint conversion has taken longer
than origially anticipated, but will ultimately deliver over 300k subs and $3.5M in quarterly sales (we
estimate this represents less than 5% of the Sprint sub base, or a potential TAM of $100+M per year at
Page 10 of 25
SMITH MICRO SOFTWARE, INC Company Note - September 30, 2018

20% penetration). We also highlight that the pending T-Mobile Sprint merger could return the Sprint user
base to a Location Labs controlled customer. Consequently, SafePath will need to drive penetration into
additional carriers, but we highlight the TAM of the existing installed base and further US penetration
(AT&T, Verizon and T-Mobile) represents a $500M+ annual market opportunity. Under conservative
expectations of 5%-10% penetration, each carrier represents $30-50M in annual recurring sales to its
location vendor. New solutions such as for elderly, pets and other applications could further enhance this
addressable market.

Figure 13: Competitive Location Landscape

Source: Smith Micro Investor Presentation, June 2018 and ROTH Capital

Figure 14: SafePath US Addressable Customers and US Carrier Targets

Location Addressable TAM

Carrier Provider Subs ($US) Comment
AT&T Location Labs 149.9M $200M+ AT&T FamilyMap. $9.99/mo for 10 lines
Sprint SafePath/ 54.6M $100- Transition installed base from Location
Location Labs 200M Labs to SafePath. No cut off date disclosed.
T-Mobile Location Labs 74.0M*** $100- Integrated with FamilyMode ($10/mo)
200M
Verizon Internal/ 113.7M $200M+ Integrated with Verizon SmartFamily.
Location Labs Location premium $9.99 ($5 increment)
Source: Company reports, SEC filings and ROTH Capital Partners

Importantly, competitive solutions require integration with other point solutions to provide not only tracking,
but content monitoring and other parental controls. For example, AT&T, Verizon and T-Mo all offer family
solutions, with location provided by Location Labs, but the comparable solution to SafePath is offered at a
$10 monthly price point vs $6.99 at Sprint. We believe that Smith Micro is actively engaged with other US
based mobile operators.

Page 11 of 25
SMITH MICRO SOFTWARE, INC
Graphics is expected to
return to growth and
profitability after a channel
overhaul and product
refresh by 2019
Company Note - September 30, 2018
Graphics & Other
Graphics: Nice properties, but sub-scale
Smith Micro has maintained an attractive, albeit it niche, consumer graphics portfolio built around several
titles (Rebelle, Moho, Poser and MotionArtist). Historically, this has produced revenue in excess of $5M per
year, with positive cash flow. However, a lack of investment and a retooling of the distribution channel has
pushed the business to a run rate below $2M. A product refresh in the second half of 2018 (four new
products) should remedy the top-line (likely pushing sales back a $4M annual run rate) with better
profitability in 2019, but the business will remain sub-scale and not a core focus for organic growth. We
believe the company could pursue a strategy to selectively add properties and scale.
Key products include:

Rebelle: Digital painting with natural water colors and acrylics

Moho: Animation tool for 2D movies, cartoons and anime

Poser: 3D art and animation software

MotionArtist: Integrates motion into interactive presentations
Mobile Connectivity: NetWise
Connectivity has been core to Smith’s DNA for over a decade. These capabilities largerly evolved to
support historic mobile hotspots (remember the old “hockey puck” wireless routers) for mobiler operators.
Smith provided the connectivity management and security between cellular and WiFi networks. Essentially,
they managed and optimized the connection. Key customers included a who’s who of US and European
based mobile operators: Verizon, AT&T, Sprint, Vodafone, etc. More recently, MSOs have joined the
customer ranks, including Comcast and Charter, as they expanded WiFi services and footprints outside the
home.
Smith Ultimately became the global leader in carrier connectivity solutions peaking at over $100M in sales
in 2010 and consumed key competitors PC Tel (in 2008) and Birdstep (for a european footprint in 2016) to
provide further scale and carrier relationships. However, this business became increasingly commoditized
as standardization (Hotspot 2.0) and embedded connectivity became more prevalent. In essence, it
became more difficult to sell connectivity as a technology.
Today, we estimate the business at around a $2M annual run rate, largely attributable to MSOs. We believe
the carrier channel remains strong for future services and believe the technology remains relevant in an
increasingly complex RF world.
Device/IoT Management: QuickLink IoT
Simllar to connectivity, Smith has a long history within device management. Essentially, they provide the
firmware that complies with all requisite standards to enable time to market, device management including
provisioning, diagnostics, over the air (OTA) updates, etc. as well as the gathering data for analytics. The
solution is based on the Open Mobile Alliances (OMA) LightweightM2M (LwM2M) standard which offers an
efficient client-server based archicture for IoT focused devices (constrained processing power, battery and
memory). While the solution is ideally situated for the emergence of billions of connected devices, the
market is fairly competitive and the solution has yet to yield meaningful design wins or revenue
contrinbution. Smith has announced it is exploring strategic options with this business segment.
Page 12 of 25
SMITH MICRO SOFTWARE, INC Company Note - September 30, 2018

Cost Structure Optimized

Costs are down 35%,
reducing the revenue
breakeven point to ~$7M 35% reduction in op-ex since 2016

Smith Micro has taken aggressive cost optimization actions since 2016. Overall, op-ex costs have declined
by 35% from $8.5M+ to $5.5M per quarter as the company has focused development in key areas with
near-term growth drivers; namely CommSuite and SafePath. This has reduced revenue break-even to
approx $7M with signicant operating leverage, particularly with sub driven growth from CommSuite and
SafePath.

We see the growth vectors largely focused around:

CommSuite: In the most recent quarter, CommSuite took a signifcant step up (we estimate from $3.5
to more then $4.5M) largely driven by upgrades in the backend billing capabilities and new feature
sets. Integration with voice assistant services such as Amazon’s Alexa and Google Home should
further these opportunities. However, we are modeling modest growth and limit our expectations to the
Sprint user base of non-iOS devices which we estimate at approximately 20M subs versus the
estimated CommSuite base of ~1.5M, or less than 10% penetration. Each 1% penetration translates to
$0.03+ EPS.

SafePath: Despite being in the early stages, we believe that SafePath offers the most attractive area of
growth for Smith Micro. At present, we estimate the SafePath base at approximately 100,000 subs
exiting the June quarter. This is in contrast to the anticipated Location Labs installed base of 300,000
subs which was expected to be converted in 1H18. However, Sprint has yet to set a date for sub base
conversion and could let natural attrition take hold in place of a forced migration strategy. Notably, Safe
and Found’s (Sprint’s brand name for SafePath) sub base has been split rougly 50/50 between new
and converted subscribers. Consequently, full conversion of the Location Labs base would translte to
greater than $4M in quarterly sales. Overall, we estimate the addressable opportunity within sprint at
over 10M subs/families. We estimate that at each 1% conversion translates to ~$0.08 EPS and target
a longer-term goal of 10% penetration within the Sprint TAM. We estimate that each US carrier can
drive $30-50M of annual SafePath sales, even under more aggressive pricing assumptions.

Graphics recovery: We assume a modest recovery in graphics in the back half of 2018 driven by
product refreshes in Moho and others. We assume sales remain at modest levels of <$500k versus a
2016 quarterly peak of $1.5M

Figure 15: SafePath Subscriber Sensitivity Analysis

Subs* 55k 155k 255k 355k 455k 555k 655k

ARPU/Pen 0.4% 1.1% 1.8% 2.5% 3.2% 3.9% 4.6%
$1.50 ($0.23) ($0.19) ($0.14) ($0.10) ($0.05) ($0.01) $0.03
$1.75 ($0.23) ($0.18) ($0.12) ($0.07) ($0.02) $0.03 $0.08
$2.00 ($0.22) ($0.16) ($0.11) ($0.05) $0.01 $0.07 $0.13
$2.25 ($0.22) ($0.15) ($0.09) ($0.02) $0.05 $0.11 $0.18
$2.50 ($0.21) ($0.14) ($0.07) $0.01 $0.08 $0.15 $0.23
$2.75 ($0.21) ($0.13) ($0.05) $0.03 $0.11 $0.19 $0.27
$3.00 ($0.21) ($0.12) ($0.03) $0.06 $0.15 $0.23 $0.32
$3.25 ($0.20) ($0.11) ($0.01) $0.08 $0.18 $0.27 $0.37
$3.50 ($0.20) ($0.10) $0.01 $0.11 $0.21 $0.31 $0.42

Source: ROTH Capital Partners estimates

Page 13 of 25
SMITH MICRO SOFTWARE, INC Company Note - September 30, 2018

Figure 16: SafePath Addressable Customers and US Carrier Targets

Sales Sales Sales

Segment 2017 2018E 2019E CAGR Comment
Mobile 18.3 23.4 26.6 20% CommSuite & SafePath
CommSuite 13.8 16.3 16.8 10% New features drive growth
SafePath 0.3 3.3 8.3 > 100% Conversion of Sprint base
Other 4.3 3.8 1.4 Neg Steady decline
Graphics 4.6 1.7 1.9 Neg Expected to stabilize and grow
Total 24.7 25.1 28.4 8% CommSuite & SafePath drivers
Source: Company reports, SEC filings and ROTH Capital

Serial capital raising is
behind the company given
its breakeven results and
net cash position
Balance Sheet
Breakeven results relieve the need of a serial capital raiser
Of note, after multiple financings (the most recent of $7M in May 2018), Smith Micro has cash on
the balance sheet of $8.7M (net cash of $5.9M). This represents a significant departure from
recent quarters, particularly given what we believe is a sustained return to profitability. Over the
past 24 months Smith Micro has more than doubled its share count (pre-warrant impact) and
raised in excess of $20M in capital. We believe these chronic fundraising days to achieve
breakeven results are behind the company. However, we believe the company could access
additional capital to selectively and opportunistically pursue M&A that add scale, skillsets or
geographic presence around its SafePath platform in the coming years.

Figure 17: Smith Micro Capital Raises

Debt/ Raise Price/ Shares

Date Equity (US$M) Int Rate (Mil) Comment
9/2/16 Debt $4.0 10% Note and warrant purchase agreement ($2.74 warrant exercise)
$2M exchanged for Series B Convert (9/17)
5/16/17 Equity $0.1 $1.10 0.1 Private placement
5/17/17 Equity $2.3 $1.10 2.2 Registered Direct
9/27/17 Convert $5.5 10% 4.8 10% convertible preferred @ $1.14 conversion price. Converted $2.8M debt.
3/6/18 Equity $5.0 1.75 2.9 100% warrant coverage @ $2.17
5/3/18 $7.0 $2.21 3.2 Stock priced at premium to market with 100% warrant coverage @ $2.11
Source: ThomsonReuters Eikon, SEC filings, company reports and ROTH Capital

Page 14 of 25
SMITH MICRO SOFTWARE, INC Company Note - September 30, 2018
Figure 18: Smith Micro Annual Sales (2015-2019E) Figure 19: Smith Micro Quarterly Sales (1Q16-4Q19E)

Source: ROTH Capital Partners Source: ROTH Capital Partners

Figure 20: Smith Micro 2016 Sales Mix Figure 21: Smith Micro 2019E Sales Mix

Source: ROTH Capital Partners Source: ROTH Capital Partners

Page 15 of 25
SMITH MICRO SOFTWARE, INC Company Note - September 30, 2018

Smith Micro Management

Smith Micro management
has been reinforced by
recent additions Recent additions have added to an experienced team

The Smith Micro senior management team has decades of experience across the telecom and technology
landscape. Recent additions have added to the depth and, perhaps more importantly, focus of the product
and strategy going forward.

William W. Smith, Jr., Chairman, President and Chief Executive Officer: Bill is co-founder of Smith
Micro Software and has served as Chairman of the Board, President and Chief Executive Officer since
its inception in 1982. Prior to Smith Micro, he was employed by Rockwell International Corporation in a
variety of technical and management as well as roles with Xerox Data Systems, and RCA Computer
Systems Division. He received his BA in Business Administration from Grove City College.

Timothy C. Huffmyer, Chief Financial Officer: Tim joined Smith Micro in 2017 and brings more than
20 years of experience to Smith Micro, Tim served as Chief Financial Officer, Treasurer, and Vice
President of Finance for Black Box Network Services prior to joining the company. Earlier in his career,
Tim held various financial leadership and accounting roles at Ernst & Young, PrintCafe, Inc.,
CoManage Corporation and ITPI Staffing.

Charles Messman, Vice President of Investor Relations & Corporate Development: Charles has
over 20 years of experience in working with a large range of technology companies providing investor
relations counsel, strategy, financing alternatives, and M&A. Prior to joining Smith Micro, Charles was
the Vice President of Finance & Corporate Development at eGain Corporation as well as having co-
founded The MKR Group, serving as its President.

David P. Sperling, Chief Technology Officer: Dave is telecommuncations veteran (dating back to
1889) responsible for architecture and innovation for the company’s entire software portfolio. He began
his tenure at Smith Micro as a software engineer and advanced to the CTO role in 1999. Dave’s
expertise and innovations in fixed and wireless broadband connectivity have increased the adoption,
security, and reliability of wireless services and mobile devices for consumers and businesses. Dave is
a recognized thought leader and a contributor to several standards and industry organizations,
including the Open Mobile Alliance, Wireless Broadband Alliance, Wi-Fi Alliance, and the USB
Implementers Forum.

Page 16 of 25
SMITH MICRO SOFTWARE, INC Company Note - September 30, 2018

Risks
Customer concentration,
adoption cycles and
Customer concentration: Customer concentration remains a key concern with Sprint comprising
competition remain ~80% of sales in the most recent quarter (split between two product lines: CommSuite and SafePath).
ongoing concerns This is a high in recent history reflecting weakness in graphics in combination with recent success of
CommSuite upgrades and SafePath deployments. We believe that this sales concentraiton can mute
the valuation multiple in the near-term.

Location platform adoption and expansion: While we believe there is tremendous value in location-
based services such as SafePath, its remains early days in terms of adoption. Additionally, early
expectations of Sprint converting its Location Labs installed base to Smith Micro’s SafePath have been
delayed, forcing a more organic transition versus a hard cut and conversion. Furthermore, we believe it
will be important to develop and demonstrate the extension of the SafePath platform into other areas
beyond initial family safety and tracking, such as SOS, elderly, pets and other things services. The
company has taken the first steps on this front with SafePath IoT.

Competition: Competition remains aggressive in location-based services. Beyond Location Labs there
are a multitude of internal app based solutions solutions and offerings (such as Apple’s “Find my
iPhone” app) that pull basic geolocation data from the phone. In this environment, we believe it is
important for Smith Micro to demonstrate a suite of platform based solutions that drive incremental
revenue streams and customer retention.

Historic boom bust cycles: Historically, Smith Micro has experienced multiple boom and bust cycles
around different product cycles such as music/media and mobile connectivity. We believe that the
trend around location is larger, more diverse and more sustainable than these past cycles. In fact, we
estimate the location-based service market in the US at $1B+.

Valuation not inexpensive, but reasonable; Buy with $4PT

Some benefits given to
the current valuation, but
upside leverage remains Reasonable valuation with sustained profitability in sight
with each 1% of SafePath
penetration at Sprint While SMSI is up 60%+ from March lows ($1.48) and greater than 2x from 2017 trough levels (shares
translating to $0.08+ EPS bottomed out at less than $1 in 2017), the valuation remains reasonable at approximately ~2x our 2019E
EV/Sales estimates, in our opinion. We believe that shares of SMSI could ultimately trade at 3-4x EV/
forward twelve months sales as the company demonstrates penetration and growth in the SafePath
portfolio. Importantly, we believe that the valuation will not only be reflective of growth, but diversification of
the customer base beyond the highly concentrated Sprint focus.

We highlight the significant operating leverage in the model, each $1M in sales translates to $0.02+ fully
taxed EPS (Note: each 1% penetration of the Sprint SafePath opportunity equals $0.08+ EPS). Under our
current assumptions, we conservatively project growth of 13% in 2019, with approximately <3% penetration
of the Sprint SafePath opportunity, translating to an EPS run rate of $0.12 exiting 2019. Note: our long-term
target 10% penetration would conservatively add over $0.30 EPS (assuming more aggressive pricing and
full tax rates). Consequently, we initiate coverage with a Buy rating and see upside to $4 or 3.5x our CY19
EV/Sales estimates. As the company diversifies across the carrier landscape and adds additional products
to its SafePath platform, we believe the company could see further multiple expansion.

Discuss balance sheet and cash flow – be sure to detail the debt

Page 17 of 25
SMITH MICRO SOFTWARE, INC Company Note - September 30, 2018

Figure 22: Smith Micro Valuation Comps

9/28/18 CY2017
CY2018
CY2019CY2017
CY2018
CY2019 % O ff
Share Market Ent EV / Sales P/E Sale s % Chg 52 Wk
Rating Price Cap Value 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E High

S MS I Buy $2.52 $60 $55 2.4x 2.2x 1.9x NM NM 36.6x (19%) 9% 13% 26%

S oftware
ALRM Buy* $57.40 $2,738 $2,701 8.1x 6.9x 6.2x 65.4x 47.7x 41.6x 31% 17% 12% 3%
BB NC $11.38 $6,120 $4,630 4.6x 5.1x 4.9x 148.2x 105.4x 69.0x (33%) (11%) 4% 22%
M OBL Buy $5.30 $545 $446 2.6x 2.3x 2.1x NM NM NM 7% 11% 9% 7%
SNCR NC $6.60 $282 $253 0.5x 0.8x 0.8x 9.3x NM NM (26%) (30%) (2%) 58%
SSTI Buy** $61.29 $660 $645 27.8x 19.0x 14.1x NM NM 306.5x NA 46% 35% 7%

Group Average 8.7x 6.8x 5.6x NA 76.6x 139.0x (6%) 7% 12% 19%

Location/Telematics
GRM N NC $70.05 $13,875 $11,453 3.7x 3.5x 3.4x 24.1x 21.2x 20.7x 4% 7% 3% 1%
TNAV NC $5.05 $227 $142 1.0x 0.9x 0.6x NM NM NM (21%) 19% 50% 26%
CAM P Buy $23.96 $833 $797 2.2x 2.1x 1.9x 21.0x 19.6x 17.3x 7% 6% 7% 6%
DGII Buy $13.45 $366 $312 1.6x 1.3x 1.2x 67.5x 191.0x 36.0x (3%) 20% 10% 9%
ORBC Buy $10.86 $853 $1,061 4.2x 3.6x 3.3x NM NM 280.3x 32% 18% 10% 9%

Group Average 2.6x 2.3x 2.1x 37.5x 77.3x 88.6x 4% 14% 16% 10%
* Covered by Darren Aftahi
** Covered by Richard Baldry

Source: ThomsonReuters Eikon, SEC filings, company reports and ROTH Capital

Page 18 of 25
SMITH MICRO SOFTWARE, INC Company Note - September 30, 2018

VALUATION
While smith is up meaningfully from March lows ($1.48) and greater than 2x from 2017 trough levels (SMSI
bottomed out at less than $1 in 2017), the valuation remains reasonable at approximately <2x our 2019E
EV/Sales estimates, in our opinion. We believe that shares of SMSI could ultimately trade at 3-4x EV/
forward twelve months sales as the company demonstrates penetration and growth in the SafePath portfolio.
Importantly, we believe that the valuation will not only be reflective of growth, but diversification of the customer
base beyond the highly concentrated Sprint focus. Our $4 price target reflects a multiple of 3.5x EV/2019 sales
estimates. We believe this is in line with Mobile SaaS comps that are profitable and demonstrating double
digit growth.

Risks to achieving our price target include the penetration and growth of CommSuite and SafePath solutions
within Sprint in addition to the timing of customer diversification of carrier customers beyond Sprint.

RISKS
Customer concentration: Customer concentration remains a key concern with Sprint attributable for ~80% of
sales in the most recent quarter (split between two product lines: CommSuite and SafePath). This is a high in
recent history reflecting weakness in graphics in combination with recent success of CommSuite upgrades and
SafePath deployments. We believe that this sales concentraiton can mute valuation multiple in the near-term.
Location platform adoption and expansion: While we believe there is tremendous value in location based
services such as SafePath, its remains early days in terms of adoption. Additionally, early expectations of
Sprint converting its installed base of Location Labs customers to Smith Micro’s SafePath have been delayed
forcing a more organic transition versus a hard cut and conversion of the installed base. Furthermore, we
believe it will be important to develop and demonstrate the extension of the SafePath platform into other areas
beyond initial family safety and tracking, such as SOS, elderly, pets and other things services.
Competition: Competition remains aggressive in locartion based services. Beyond Location Labs there are
a multitude of internal app based solutions solutions and offerings (such as Apple’s “Find my iPhone” app)
that pull basic geolocation data from the phone. In this environment, we believe it is important for Smith Micro
to demonstrate a suite of platform based solutions that drive incremental revenue streams and customer
retention.
Historic boom bust cycles: Historically, Smith Micro has experienced multiple boom and bust cycles around
different product cycles such as music/media and mobile connectivity. We believe that the trend around location
is larger, more diverse and more sustainable than these past cycles. In fact, we estimate the location based
service market in the US at $1B+.

COMPANY DESCRIPTION
Smith Micro Software is a provider of software solutions for connectivity, communications and location for
mobile operators and MSOs (cable companies). In particular, the company offers voice messaging capabilities
via its CommSuite platform and location based services for Family and IoT markets. Smith Micro also maintains
a portfolio of graphics software to create, sahae and monetize visually rich 2D/3D content.

MENTIONED COMPANIES
AT&T (T: NC), Sprint Corp (S: NC), T-Mobile (TMUS: NC), Verizon (VZ: NC)

Page 19 of 25
SMITH MICRO SOFTWARE, INC Company Note - September 30, 2018
Smith Micro Software Inc.

Fiscal Year Ends December

Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19
Income Statement 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18E 4Q18E 1Q19E 2Q19E 3Q19E 4Q19E 2016 2017 2018E 2019E

Revenue 5.6 5.9 5.8 5.7 5.5 6.9 6.1 6.6 6.7 6.9 7.3 7.6 28.2 23.0 25.1 28.4
COGS 1.3 1.3 1.2 1.4 1.3 1.1 1.0 1.1 1.1 1.2 1.3 1.3 7.6 5.1 4.5 4.9
Gross Profit 4.3 4.6 4.6 4.4 4.2 5.8 5.1 5.5 5.5 5.7 6.0 6.2 20.7 17.9 20.6 23.5

R&D 2.4 2.1 2.1 2.2 2.3 2.2 2.1 2.1 2.1 2.1 2.1 2.1 15.5 8.8 8.7 8.4
S&M 1.7 1.5 1.4 1.5 1.7 1.4 1.4 1.4 1.4 1.4 1.4 1.4 9.4 6.1 6.0 5.6
G&A 2.2 2.0 2.1 1.7 2.0 1.8 1.8 1.8 1.8 1.8 1.8 1.8 9.3 8.0 7.2 7.0
Operating Income (2.0) (1.1) (0.9) (1.0) (1.8) 0.4 (0.2) 0.3 0.3 0.5 0.7 1.0 (13.6) (5.0) (1.2) 2.5

Amortization 0.2 0.2 0.2 0.2 0.2 0.3 0.3 0.3 0.3 0.3 0.3 0.3 1.6 0.8 1.2 1.2
Non-recurring Costs 0.4 0.3 (0.1) (0.7) 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.7 (0.1) 0.1 0.0
Operating Income (reported) (2.6) (1.6) (0.9) (0.5) (2.0) 0.1 (0.5) (0.0) (0.0) 0.2 0.4 0.7 (15.9) (5.7) (2.5) 1.3

Net Interest (0.3) (0.4) (0.3) (0.2) (0.2) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.3) (1.2) (0.6) (0.6)
Other (0.0) (0.6) (0.4) 0.0 (0.2) (2.1) 0.0 0.0 0.0 0.0 0.0 0.0 0.6 (1.0) (2.3) 0.0
EBT (2.9) (2.6) (1.7) (0.7) (2.4) (2.2) (0.6) (0.2) (0.2) 0.0 0.3 0.6 (15.6) (7.9) (5.3) 0.7

Income Tax 0.0 0.0 0.0 (0.6) 0.0 0.0 (0.1) (0.0) (0.0) 0.0 0.1 0.1 (2.8) (0.6) (0.2) 0.2

Net Income (2.9) (2.6) (1.7) (0.2) (2.4) (2.2) (0.5) (0.1) (0.1) 0.0 0.2 0.4 (12.8) (7.3) (5.2) 0.5

Share (Basic) 12.2 13.2 14.3 14.3 15.3 21.2 21.2 21.2 21.2 21.2 21.2 21.2 11.9 13.5 19.7 21.2
Shares (FD) 12.2 13.2 14.3 14.3 17.1 21.9 21.2 25.7 25.7 25.7 25.7 25.7 11.9 13.5 21.5 25.7

EPS (Basic) - GAAP ($0.24) ($0.20) ($0.12) ($0.01) ($0.16) ($0.10) ($0.02) ($0.01) ($0.01) $0.00 $0.01 $0.02 ($1.07) ($0.54) ($0.26) $0.02

Pro Forma EPS (FD) ($0.11) ($0.11) ($0.09) ($0.04) ($0.10) $0.01 ($0.01) $0.01 $0.01 $0.01 $0.02 $0.03 ($0.94) ($0.35) ($0.09) $0.07

% of Sales
Gross Margin 77.0% 78.1% 80.0% 76.4% 76.0% 83.9% 83.7% 83.5% 82.9% 82.8% 82.3% 82.4% 73.2% 77.9% 82.0% 82.6%
R&D 43.4% 36.3% 35.4% 38.0% 41.3% 31.6% 35.0% 31.7% 31.5% 30.4% 28.8% 27.6% 55.0% 38.2% 34.6% 29.5%
S&M 29.6% 25.5% 24.3% 26.5% 31.7% 20.8% 22.8% 21.1% 21.0% 20.2% 19.2% 18.4% 33.2% 26.5% 23.7% 19.7%
G&A 39.3% 34.7% 36.2% 29.2% 35.9% 25.2% 28.5% 26.5% 26.3% 25.4% 24.1% 23.1% 33.1% 34.8% 28.7% 24.6%
Op Inc (normalized) (35.3%) (18.4%) (15.9%) (17.3%) (32.8%) 6.3% (2.6%) 4.1% 4.2% 6.8% 10.3% 13.3% (48.1%) (21.6%) (5.0%) 8.8%
Net Inc (52.7%) (43.9%) (28.7%) (2.8%) (43.6%) (31.3%) (7.6%) (2.1%) (2.0%) 0.2% 3.1% 5.5% (45.4%) (31.9%) (20.5%) 1.8%

% Change
Revenue (22.7%) (21.4%) (10.4%) (19.1%) (2.0%) 18.5% 5.7% 15.3% 21.8% (0.7%) 18.6% 14.7% (18.6%) 9.5% 13.0%
Op Inc (40.7%) (69.2%) (77.8%) (61.9%) (8.8%) (140.5%) (82.5%) (127.5%) (115.5%) 7.6% (564.5%) 269.1% (63.5%) (74.9%) (301.1%)
EPS (61.8%) (62.8%) (74.9%) 559.4% (9.1%) (108.6%) (91.5%) (115.6%) (106.9%) 30.3% (381.7%) 322.0% (62.6%) (74.1%) (175.6%)

Source: SEC filings, company reports and ROTH Capital Partners

Scott W Searle, CFA

ssearle@roth.com
(646) 616-2782

Page 20 of 25
SMITH MICRO SOFTWARE, INC Company Note - September 30, 2018

Smith Micro Software Inc.

Fiscal Year End December

Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19
Sales Model 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18E 4Q18E 1Q19E 2Q19E 3Q19E 4Q19E 2016 2017 2018E 2019E

Revenue Mix
Wireless 4.4 4.6 4.7 4.7 4.8 6.5 5.9 6.2 6.3 6.4 6.8 7.1 23.1 18.3 23.4 26.6
CommSuite 3.4 3.6 3.3 3.4 3.5 4.5 4.1 4.1 4.1 4.1 4.2 4.3 17.9 13.8 16.3 16.8
SafePath 0.0 0.0 0.1 0.2 0.3 0.7 0.9 1.4 1.6 1.8 2.2 2.7 0.0 0.3 3.3 8.3
Other 0.9 1.0 1.3 1.1 1.0 1.3 0.8 0.7 0.5 0.4 0.3 0.1 5.2 4.3 3.8 1.4
Graphics 1.2 1.2 1.1 1.1 0.7 0.4 0.2 0.4 0.4 0.5 0.5 0.4 5.1 4.6 1.7 1.9
Total 5.6 5.9 5.8 5.7 5.5 6.9 6.1 6.6 6.7 6.9 7.3 7.6 28.2 41.3 25.1 28.4

Revenue Mix
Wireless 78% 79% 81% 81% 88% 94% 96% 94% 94% 93% 93% 94% 82% 44% 93% 93%
Commsuite 62% 62% 57% 60% 64% 65% 67% 63% 62% 60% 58% 57% 63% 33% 65% 59%
SafePath 0% 0% 2% 3% 5% 10% 15% 21% 24% 26% 30% 35% 0% 1% 13% 29%
Other 16% 17% 22% 19% 19% 19% 14% 10% 8% 6% 5% 2% 19% 10% 15% 5%
Graphics 22% 21% 19% 19% 12% 6% 4% 6% 6% 7% 7% 6% 18% 11% 7% 7%

% Change (y/y)
Wireless (27.0%) (26.6%) (10.4%) (17.0%) 10.4% 40.5% 25.7% 33.7% 30.2% (1.7%) 14.8% 14.7% (20.7%) 27.8% 13.4%
Commsuite (26.5%) (24.8%) (20.7%) (18.3%) 1.6% 24.2% 24.2% 21.2% 17.4% (7.8%) 2.8% 4.1% (22.8%) 17.8% 3.4%
SafePath 845.0% 830.0% 468.4% 151.1% 133.2% 92.8% 1238.0% 148.8%
Other (28.9%) (32.2%) 20.6% (23.5%) 12.6% 27.7% (34.6%) (37.0%) (48.0%) (66.1%) (59.9%) (80.3%) (18.4%) (10.5%) (62.4%)
Graphics (1.9%) 6.7% (10.2%) (27.1%) (46.6%) (64.3%) (78.5%) (64.0%) (40.0%) 15.0% 110.8% 15.0% (9.3%) (63.0%) 7.6%
Total (22.7%) (21.4%) (10.4%) (19.1%) (2.0%) 18.5% 5.7% 15.3% 21.8% (0.7%) 18.6% 14.7% 46.3% (39.1%) 13.0%

% Change (seq)
Wireless (22.2%) 6.2% 1.3% (0.9%) 3.5% 35.2% (9.4%) 5.5% 0.8% 2.0% 5.9% 5.4%
Commsuite (17.5%) 5.1% (8.6%) 3.0% 2.6% 28.6% (8.6%) 0.6% (0.6%) 1.0% 1.9% 1.9%
SafePath 50.0% 90.0% 152.6% 31.3% 47.6% 16.1% 11.6% 21.9% 22.0%
Other (35.8%) 10.2% 26.9% (14.9%) (5.4%) 25.0% (35.0%) (18.0%) (21.9%) (18.7%) (23.0%) (59.7%)
Graphics (18.0%) 1.3% (9.7%) (2.9%) (39.9%) (32.3%) (45.5%) 62.5% 0.0% 29.7% 0.0% (11.4%)
Total (21.3%) 5.1% (1.0%) (1.2%) (4.7%) 27.1% (11.7%) 7.7% 0.7% 3.7% 5.4% 4.2%

Source: SEC filings, company reports and ROTH Capital Partners

Scott W Searle, CFA

ssearle@roth.com
(646) 616-2782

Page 21 of 25
SMITH MICRO SOFTWARE, INC Company Note - September 30, 2018

Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies
the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views
about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or
will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Disclosures:
ROTH makes a market in shares of Smith Micro Software, Inc, Alarm.com Holdings, Inc., CalAmp Corp., Digi International,
Inc., MobileIron, Inc., ORBCOMM, Inc. and ShotSpotter, Inc. and as such, buys and sells from customers on a principal basis.
Shares of Smith Micro Software, Inc and MobileIron, Inc. may be subject to the Securities and Exchange Commission's
Penny Stock Rules, which may set forth sales practice requirements for certain low-priced securities.
Within the last twelve months, ROTH has received compensation for investment banking services from CalAmp Corp..
ROTH and/or its employees, officers, directors and owners own options, rights or warrants to purchase shares of
ShotSpotter, Inc. stock.
A Research Analyst and/or a member of the Analyst's household own(s) debt or equity securities of ShotSpotter, Inc. stock.

Page 22 of 25
SMITH MICRO SOFTWARE, INC Company Note - September 30, 2018

Page 23 of 25
SMITH MICRO SOFTWARE, INC Company Note - September 30, 2018

Each box on the Rating and Price Target History chart above represents a date on which an analyst made a change to a
rating or price target, except for the first box, which may only represent the first note written during the past three years.
Distribution Ratings/IB Services shows the number of companies in each rating category from which Roth or an affiliate
received compensation for investment banking services in the past 12 month.

Distribution of IB Services Firmwide

IB Serv./Past 12 Mos.
as of 09/30/18
Rating Count Percent Count Percent
Buy [B] 258 77.48 140 54.26
Neutral [N] 46 13.81 27 58.70
Sell [S] 4 1.20 2 50.00
Under Review [UR] 24 7.21 11 45.83

Our rating system attempts to incorporate industry, company and/or overall market risk and volatility. Consequently, at any
given point in time, our investment rating on a stock and its implied price movement may not correspond to the stated 12-
month price target.
Ratings System Definitions - ROTH employs a rating system based on the following:
Buy: A rating, which at the time it is instituted and or reiterated, that indicates an expectation of a total return of at least
10% over the next 12 months.
Neutral: A rating, which at the time it is instituted and or reiterated, that indicates an expectation of a total return between
negative 10% and 10% over the next 12 months.

Page 24 of 25
SMITH MICRO SOFTWARE, INC Company Note - September 30, 2018

Sell: A rating, which at the time it is instituted and or reiterated, that indicates an expectation that the price will depreciate
by more than 10% over the next 12 months.
Under Review [UR]: A rating, which at the time it is instituted and or reiterated, indicates the temporary removal of the
prior rating, price target and estimates for the security. Prior rating, price target and estimates should no longer be relied
upon for UR-rated securities.
Not Covered [NC]: ROTH does not publish research or have an opinion about this security.

ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business
relationships with the covered companies mentioned in this report in the next three months. The material, information and
facts discussed in this report other than the information regarding ROTH Capital Partners, LLC and its affiliates, are from
sources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be used
as a complete analysis of the company, industry or security discussed in the report. Additional information is available upon
request. This is not, however, an offer or solicitation of the securities discussed. Any opinions or estimates in this report are
subject to change without notice. An investment in the stock may involve risks and uncertainties that could cause actual
results to differ materially from the forward-looking statements. Additionally, an investment in the stock may involve a high
degree of risk and may not be suitable for all investors. No part of this report may be reproduced in any form without the
express written permission of ROTH. Copyright 2018. Member: FINRA/SIPC.

Page 25 of 25