Smith Micro Software, Inc. — financial distress indicators
Financial-health summary
Smith Micro Software, Inc.'s reported numbers place it in the 'Very weak' financial-health band (distress score 86/100). The main indicators are operating profit does not cover interest, cash runway under 12 months and losses in each of the last 3 years. Independently, the Ohlson accounting model puts its 1-year failure probability at 99% and the market-implied (Merton) default probability is 4.8%.
Stress by dimension
Share price — last 12 months
Indicators behind the score
Each red flag shows the evidence from the company’s own filings and the financial or legal principle behind it. Points add to the 0–100 score.
Interest coverage (EBIT / interest) is -2.74×.
When EBIT < interest, debt service is funded from cash reserves or new borrowing — the classic precursor to payment default and covenant breach.
At the current free-cash-flow burn, cash covers ~3 months.
Going-concern standard: management must assess ability to continue for 12 months (ASC 205-40). Runway below that horizon forces dilution, asset sales or default.
Net income negative in 3 of 3 fiscal years.
Persistent losses erode equity and the capacity to absorb shocks.
Operating cash flow negative in 3 of the last 3 years.
A business that cannot fund itself from operations depends on external capital to survive.
O-score 5.18 → model probability 99%.
Ohlson (1980) logit model of 1-year corporate failure; O > 0 (p > 50%) is the original failure cut-off.
Revenue changed -16% year over year.
Falling sales reduce cash available for debt service.
Share count up +46% in a year.
Large issuance usually funds operating losses rather than growth.
Operating margin fell from -44% to -111% in two years.
Sharp margin compression signals loss of pricing power or cost control.
Revenue declined every year for three years.
Structural, not cyclical, decline.
Revenue vs net income
Cash generation
Debt vs cash vs equity
✅ Mitigating factors
- No material mitigating factors found in the available data.
📰 Recent news scan
- Smith Micro Announces Expanded Multi-Year Agreement with U.S. Tier 1 Mobile Operator to Advance Family Safety InnovationYahoo Finance · 2026-09-10
- Smith Micro Announces First Global Partner Launch of SafePath Connect™ Family Safety SolutionYahoo Finance · 2026-09-08
- Smith Micro Software (SMSI) Upgraded to Buy: What Does It Mean for the Stock?Yahoo Finance · 2026-08-27
- Smith Micro (SMSI) Q2 2026 Earnings Call TranscriptYahoo Finance · 2026-08-20
- Smith Micro Software Inc (SMSI) (Q2 2026) Earnings Call Highlights: Revenue Growth and ...Yahoo Finance · 2026-08-14
- Smith Micro Software, Inc. (SMSI) Reports Q2 Loss, Lags Revenue EstimatesYahoo Finance · 2026-08-13
⚖️ U.S. legal pathway — Title 11, U.S. Code
Which chapter would apply?
- Chapter 11 — reorganisation. Management usually stays in control as debtor-in-possession; the automatic stay (§362) halts collection; a plan must meet the best-interests test (§1129(a)(7)) and the absolute priority rule (§1129(b)) — creditors are paid before shareholders, who are frequently wiped out.
- Chapter 7 — liquidation. A trustee sells assets and distributes proceeds by statutory priority (§§507, 726).
- Subchapter V (“Chapter 5”) is a fast track for small-business debtors under a statutory debt cap, but SEC-reporting companies are excluded (§101(51D)) — so it rarely applies to listed companies.
What typically triggers a filing
- Payment default or covenant breach lenders will not waive; a debt maturity that cannot be refinanced.
- Auditor going-concern doubt (ASC 205-40 / PCAOB AS 2415) — often itself a default trigger in loan agreements.
- Creditors can force a case with an involuntary petition (§303) if debts are not paid as they come due.
- Delisting after sustained sub-$1 prices or equity deficits cuts off equity funding.
Transactions shortly before filing can be clawed back (preferences — 90 days, §547; fraudulent transfers — 2 years, §548).
Frequently asked questions
What do Smith Micro Software, Inc.'s financial-health indicators show?
As of 2026-10-08, Smith Micro Software, Inc.'s public financial data places it in the 'Very weak' band with a distress score of 86/100, driven by operating profit does not cover interest, cash runway under 12 months and losses in each of the last 3 years. This is a statistical screen of reported numbers — it does not mean the company is insolvent, has defaulted or will enter insolvency proceedings.
What is Smith Micro Software, Inc.'s financial distress score?
86/100 ('Very weak'). Ohlson O-score 5.18 (model 1-year failure probability 99%). Merton distance-to-default 1.67 σ (model default probability 4.8%).
What works in Smith Micro Software, Inc.'s favour?
No material mitigating factors were found in the available data.
How are shareholders treated if a company enters insolvency?
In a Chapter 11 reorganisation the absolute priority rule pays secured lenders, then unsecured creditors, before shareholders — so existing shares are usually cancelled or heavily diluted. In Chapter 7 the company is liquidated and shareholders rarely recover anything.
Other IT & Software companies with distress indicators
- Cyabra, Inc. (CYAB)Very weak 100/100
- Exyn Technologies, Inc. (EXYN)Very weak 100/100
- The OLB Group, Inc. (OLB)Very weak 100/100
- Roadzen, Inc. (RDZN)Very weak 100/100
- Rekor Systems, Inc. (REKR)Very weak 100/100
- Veea Inc. (VEEA)Very weak 100/100
Methodology
Score = capped sum of rule-based red flags across seven dimensions (liquidity, solvency, profitability, cash flow, sales trend, market signal, news). Ohlson O-score (1980) gives an accounting-based 1-year failure probability; Merton distance-to-default (Bharath & Shumway 2008) gives a market-implied probability. Financial institutions use a capital-based rule set. Recalculated every trading day from the latest filings, prices and news.