Bsquare Reports Second Quarter 2019 Financial Results
BELLEVUE, Wash., Aug. 12, 2019 /PRNewswire/ -- Bsquare Corporation (NASDAQ: BSQR) today announced financial results for the second quarter of 2019.
"In May of 2019 we announced a series of initiatives called 'One Bsquare' that recognize and build on the connection between our smart device business and associated third-party software business and the IoT opportunity. We believe the promise of IoT will be realized through the development of intelligent devices and intelligent systems that are cloud-enabled, contribute data, facilitate distributed control and decision making, and operate securely at scale," said Bsquare President and CEO Ralph C. Derrickson. "We have an opportunity to help companies transform their businesses and operations to these intelligent systems that leverages our unique combination of expertise with embedded operating systems and IoT software and services."
"In Q2 we started implementation of the One Bsquare initiatives. During the quarter we restructured our executive team, flattening the organization and adding entrepreneurial leaders, and we formed a new team to focus on strategic partnerships. We downsized our software development organization and initiated the sales and marketing of our software and services for intelligent devices and systems. And, we announced a new customer in the facilities management space - Arcus FM - that we believe is representative of the customers we'll be closing moving forward."
"Our revenue was on the high end of our guidance and margins were in-line with guidance. Our efforts to manage expense are starting to impact our financials as our on-going operating expense, excluding restructuring costs, were at the lowest level since Q4 2016s. While I am pleased with these results, it will take another two or three quarters before the full impact of our rebuilding efforts is consistently reflected in our operating results," concluded Mr. Derrickson.
Second Quarter 2019 Financial Highlights
-- Revenue was $14.2 million, down by $900,000 from $15.1 million in the
first quarter of 2019, down 26.2% compared to the second quarter of 2018
and down 6.1% compared to the first quarter of 2018, primarily due to
lower sales of Microsoft Windows Embedded operating systems.
-- Operating expenses in the second quarter included a $1.4 million charge
for restructuring costs associated with a workforce reduction plan
approved by the Board of Directors during the quarter.
-- GAAP net loss for the current quarter was $3.9 million, or $0.30 per
diluted share, compared to net loss of $3.7 million, or $0.29 per
diluted share, in the second quarter of 2018 and net loss of $2.8
million, or $0.22 per diluted share, in the first quarter of 2019. The
GAAP net loss for the quarter includes $1.4 million in restructuring
costs.
-- Excluding the charge for restructuring costs of $1.4 million, net loss
for the current quarter was $2.5 million, or $(0.19) per diluted share,
as adjusted( (1)).
-- Adjusted EBITDAS ((2)) was negative $2.2 million, compared to negative
$3.6 million in the second quarter of 2018 and negative $2.5 million in
the first quarter of 2019.
-- Cash, cash equivalents, restricted cash, and short-term investments on
June 30, 2019 totaled $12.6 million, a decrease of approximately $2.7
million from March 31, 2019 and a decrease of $4.4 million from December
31, 2018.
Details as follows (unaudited, in thousands except percentages and per share amounts):
Three Months Ended
June June Q2-Q2 Change (2) March
30, 2019 30, 2018 31, 2019 Q2-Q1 Change (2)
Revenue:
Third-party
software $
11,684 $
16,992 $
(5,308) $
13,101 $
(1,417)
Proprietary software 258 281 (23) 251 7
Professional
engineering service 2,238 1,930 308 1,744 494
Total revenue 14,180 19,203 (5,023) 15,096 (916)
Total gross profit $
2,423 $
3,261 $
(838) $
2,391 $
32
Gross margins (3):
Third-party 15
% 15
software % 0
% 15
% 0
%
Proprietary software 67
% 64
% 2
% 15
% 52
%
Professional 22
% 29
engineering service % (8)
% 23
% (1)
%
Total gross margin 17
% 17
% 0
% 16
% 1
%
Total operating
expenses $
6,352 $
6,979 $
(627) $
5,270 $
1,082
Total operating
expenses excluding
restructuring costs
(1) 4,976 6,979 (2,003) 5,270 (294)
Net loss (3,868) (3,683) (185) (2,846) (1,022)
Per diluted share (0.30) (0.29) (0.01) (0.22) (0.08)
Net loss excluding
restructuring costs
(1) (2,492) (3,683) 1,191 (2,846) 354
Per diluted share
excluding
restructuring costs
(1) (0.19) (0.29) 0.10 (0.22) 0.03
Adjusted EBITDAS (2) (2,228) (3,570) 1,342 (2,517) 289
Cash, cash
equivalents and
short-term
investments $
12,560 $
17,861 $
(5,301) $
15,263 $
(2,703)
Notes:
(1) Net loss excluding restructuring and
per diluted share excluding
restructuring are non-GAAP
measurements.
(2) Adjusted EBITDAS = Income (loss) from
operations before depreciation,
amortization, stock compensation
expense, restructuring costs, and
goodwill impairment charge. Adjusted
EBITDAS is a non-GAAP measurement
(reconciliation provided after
financial statement tables).
(3) For gross margin, amount represents
percentage point change.
Financial Commentary on Second Quarter 2019 Results (Compared to Second Quarter 2018)
-- Third-party software revenue decreased for the quarterly period, driven
by lower sales of Microsoft Embedded and Windows Mobile operating
systems in Europe.
-- Proprietary software revenue decreased for the quarterly period,
primarily due to lower DataV software sales.
-- Professional engineering service revenue increased when compared to the
prior year quarterly period, primarily from completion of a customer
project in the current quarter.
-- Operating expenses, excluding the charge for restructuring costs of $1.0
million, decreased when compared to the second quarter of 2018 due to
lower salary, benefit and marketing costs from spending reductions
initiated in second half of 2018 and first half of 2019.
-- Excluding the charge for restructuring costs of $1.0 million, net loss
for the current quarter decreased by $1.2 million, or $(0.10) per
diluted share, as adjusted, vs. the second quarter of 2018.
Third Quarter 2019 Outlook
In the third quarter, we will continue with and accelerate the implementation of the previously announced One Bsquare initiatives to realign our business.
Management currently has the following expectations for the third quarter of 2019:
-- Revenue in the range of $12.5 million to $14.5 million; and
-- Blended gross margin in the 15% to 17% range.
Conference Call
Management will host a conference call today, August 12, 2019, at 5 p.m. Eastern Time (2 p.m. Pacific Time). To access the call dial 1-800-239-9838 or 1-856-344-9316 for international callers, and reference "BSQUARE Corporation Second Quarter 2019 Earnings Conference Call." A replay will be available for two weeks following the call by dialing 1-844-512-2921, or 1-412-317-6671 for international callers; reference pin number 6669112. A live and replay Webcast of the call will be available at www.bsquare.com in the investor relations section.
About Bsquare Corporation
Bsquare builds technology that is powering the next generation of intelligent devices and the systems in which they operate. We believe the promise of IoT will be realized through the development of intelligent devices and intelligent systems that are cloud-enabled, contribute data, facilitate distributed control & decision making, and operate securely at scale. Bsquare's suite of services and software components allow our customers to create new revenue streams and operating models while providing new opportunities for lowering costs and improving operations. We serve a global customer base from offices in Bellevue, Washington, the United Kingdom and Taiwan. For more information, visit www.bsquare.com.
Cautionary Note Regarding Forward-Looking Statements
This release contains "forward-looking statements" within the meaning of the safe-harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "expect," "believe," "plan," "strategy," "future," "may," "should," "will," and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding expected operating results in future periods, such as anticipated revenue, gross margins, profitability, cash and investments, and regarding strategies for customer retention, growth, new product and service developments, and market position. Forward-looking statements are neither historical facts nor assurances about future performance. Instead, they are based on current beliefs, expectations and assumptions about the future of our business and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements.
Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others: our ability to execute our development initiatives and sales and marketing strategies around DataV(TM), the Internet of Things, and our product and service offerings more generally; the extent to which we are successful in gaining new long-term customers and retaining existing ones; whether we are able to maintain our favorable relationship with Microsoft as a systems integrator and distributor; our success in leveraging strategic partnering initiatives with companies such as Microsoft, AWS and Intel; and such other risk factors as discussed in our most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. Any forward-looking statement made by us in this release is based only on information currently available to us and speaks only as of the date on which it is made. Except as may be required by law, we undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.
BSQUARE Contact:
Investor Contact:
Peter Biere, Chief Financial Officer
Leslie Phillips
BSQUARE Corporation
The Blueshirt Group
+1 425.519.5900
+ 1 415.217.5869
investorrelations@bsquare.com
leslie@blueshirtgroup.com
Bsquare, the Bsquare Logo, and DataV are trademarks of Bsquare Corporation in the U.S. and other countries. Other names and brands herein may be trademarks of others.
BSQUARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
June December
31,
30, 2019 2018
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $
6,333 $
10,005
Restricted cash 600 263
Short-term investments 5,627 6,409
Accounts receivable, net of allowance
for doubtful accounts of $31 and $40
at June 30, 2019 and December 31,
2018, respectively 8,957 11,581
Contract assets 788 1,053
Prepaid expenses and other current
assets 592 685
Total current assets 22,897 29,996
Restricted cash, long-term 263
Equipment, furniture and leasehold
improvements, less accumulated
depreciation 450 911
Intangible assets, less accumulated
amortization 218 267
Deferred tax assets 7 7
Right-of-use lease asset, net 897
Other non-current assets 498 550
Total assets $
24,967 $
31,994
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Third-party software fees payable $
7,378 $
7,620
Accounts payable 680 565
Accrued compensation 1,585 1,629
Other accrued expenses 65 653
Deferred rent 347
Deferred revenue 1,104 1,652
Operating lease 1,070
Total current liabilities 11,882 12,466
Deferred rent, long-term 150
Deferred revenue, long-term 1,094 1,037
Operating lease, long-term 156
Shareholders' equity:
Preferred stock, no par: 10,000,000
shares authorized; no shares issued
and outstanding
Common stock, no par: 37,500,000 shares
authorized; 12,794,598 and 12,777,573
shares issued and outstanding at June
30, 2019 and December 31, 2018,
respectively 138,562 138,280
Accumulated other comprehensive loss (1,000) (926)
Accumulated deficit (125,727) (119,013)
Total shareholders' equity 11,835 18,341
Total liabilities and shareholders'
equity $
24,967 $
31,994
BSQUARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended June Six Months Ended June
30,
30,
2019 2018 2019 2018
Revenue:
Third-party software $
11,684 $
16,992 $
24,785 $
33,056
Proprietary software 258 281 509 2,076
Professional engineering service 2,238 1,930 3,982 4,749
Total revenue 14,180 19,203 29,276 39,881
Cost of revenue:
Third-party software 9,923 14,480 21,072 27,834
Proprietary software 86 100 299 141
Professional engineering service 1,748 1,362 3,091 3,445
Total cost of revenue 11,757 15,942 24,462 31,420
Gross profit 2,423 3,261 4,814 8,461
Operating expenses:
Selling, general and
administrative 3,082 4,901 6,016 10,349
Research and development 1,894 2,078 4,230 4,308
Restructuring costs 1,376 1,376
Total operating expenses 6,352 6,979 11,622 14,657
Loss from operations (3,929) (3,718) (6,808) (6,196)
Other income, net 61 47 94 91
Loss before income taxes (3,868) (3,671) (6,714) (6,105)
Income tax benefit (expense) (12) (12)
Net loss $
(3,868) $
(3,683) $
(6,714) $
(6,117)
Basic loss per share $
(0.30) $
(0.29) $
(0.52) $
(0.48)
Diluted loss per share $
(0.30) $
(0.29) $
(0.52) $
(0.48)
Net loss excluding
restructuring costs
(3) $
(2,492) $
(3,683) $
(5,338) $
(6,117)
Per diluted share
excluding
restructuring costs
(3) $
(0.19) $
(0.29) $
(0.41) $
(0.48)
Shares used in per share
calculations:
Basic 12,855 12,697 12,879 12,685
Diluted 12,855 12,697 12,879 12,685
BSQUARE CORPORATION
NON-GAAP INFORMATION AND RECONCILIATION TO COMPARABLE GAAP FINANCIAL MEASURES
(In thousands, unaudited)
Three Months Ended June Six Months Ended June
30,
30,
2019 2018 2019 2018
Loss from
operations, as
reported $
(3,929) $
(3,718) $
(6,808) $
(6,196)
Depreciation and amortization 286 164 480 305
Stock-based compensation 39 (16) 207 315
Restructuring costs 1,376 1,376
Adjusted EBITDAS (1) $
(2,228) $
(3,570) $
(4,745) $
(5,576)
(1) Adjusted EBITDAS is a non-GAAP
financial measure. Generally, a
non-GAAP financial measure is a
numerical measure of a company's
performance, financial position or
cash flow that either excludes or
includes amounts that are not
normally excluded or included in
the most directly comparable
measure calculated and presented
in accordance with GAAP. Adjusted
EBITDAS is defined as income
(loss) from operations before
depreciation expense on fixed
assets and amortization expense
(including impairment) on
intangible assets, stock-based
compensation expense,
restructuring, and goodwill
impairment. Adjusted EBITDAS
should not be construed as a
substitute for net income (loss)
or net cash provided (used) by
operating activities (all as
determined in accordance with
GAAP) for the purpose of analyzing
our operating performance,
financial position and cash flows,
as Adjusted EBITDAS is not defined
by GAAP. However, BSQUARE regards
Adjusted EBITDAS as a complement
to net income and other GAAP
financial performance measures,
including an indirect measure of
operating cash flow.
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SOURCE Bsquare
