SMSI Flurry of Announcements

Posted on March 9, 2021 by Scott Shuda

Smith Micro Software (SMSI) reported 4Q20 financial results last night, and a whole lot more. Results were steady, but guidance was weak compared to past results.

The big news was Smith is acquiring Avast’s Family Safety Mobile Business, including Location Labs. Avast was Smith’s only real competitor, so the deal makes Smith the only outside vender for the telcos.

“Acquiring the Family Safety Mobile Business from Avast will present a significant opportunity for Smith Micro to transform the global market for carrier-grade digital family mobile software,” said William W. Smith, Jr., President and CEO of Smith Micro Software. “The acquisition will create one of the leading family safety software solutions providers for wireless carriers and will blend two highly experienced and talented development teams.”

Smith Micro will pay $66 million, with the potential of of additional amounts in an earn-out. The deal is expected to close mid-April 2021. Smith and Avast will enter into a preferred partner arrangement in which they will collaborate to respond to future carrier tenders which require both family mobile safety and IoT or digital security services.

In a third press release, Smith announced that it will launch a $62 million underwritten public offering to fund the purchase price payable to Avast. With the 15% green shoe, and existing cash on the balance sheet, this is more than will be required to fund the deal. Thus Smith appears to believe both (i) this is a good moment to raise capital, and (ii) additional cash will be necessary/helpful in managing the pro forma business. B. Riley Securities and Roth Capital Partners are acting as joint book-running managers for the offering, with Lakestreet Capital Markets and The Benchmark Company acting as Co-Managers.

Disclosure: I am long shares of Smith Micro and could buy or sell securities at any time.

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