Bsquare Fourth Quarter 2019 Results Demonstrate Continued Progress
BELLEVUE, Wash., Feb. 24, 2020 /PRNewswire/ -- Bsquare Corporation (NASDAQ: BSQR) today announced financial results for the fourth quarter and full year 2019.
"The pace of our work to stabilize and improve Bsquare accelerated in the fourth quarter and our financial results are a reflection of that effort. Opportunities we identified in the Partner Solutions segment in Q4 drove sequential revenue growth and the value we continue to deliver to customers in the Edge to Cloud segment lifted our margins above our guidance," said Bsquare President and CEO Ralph C. Derrickson.
"Our improving instrumentation of the business also helped us identify additional expense reductions, including closing the Taiwan operations and further reducing our personnel spending in the US. We now have a leadership team comprised of entrepreneurs and a clear plan based on a sustainable business model. With a relentless focus on operating discipline, we will build a growing, predictable enterprise in 2020," added Mr. Derrickson.
2019 Financial Highlights
-- Revenue was $15.4 million, up by $0.8 million from $14.6 million in the
third quarter of 2019, primarily from higher sales of Microsoft
operating systems in the Partner Solutions segment.
-- Blended gross margin was higher than expected, bolstered by continued
strength in the Edge to Cloud segment.
-- GAAP net loss for the current quarter was $1.4 million, or $(0.10) per
diluted share, compared to net loss of $1.1 million, or $(0.09) per
diluted share, in the third quarter of 2019.
-- Adjusted EBITDAS ((1)) was negative $0.3 million, compared to negative
$0.5 million in the third quarter of 2019.
-- Net loss excluding restructuring costs was $0.6 million compared to $0.9
million in the third quarter of 2019
-- Cash, cash equivalents, restricted cash, and short-term investments on
December 31, 2019 totaled $10.6 million, a decrease of approximately
$1.0 million from September 30, 2019,
-- For the third consecutive sequential quarter, Bsquare's operating
expenses, excluding restructuring costs, were at the lowest level since
the fourth quarter of 2016.
The Partner Solutions business segment, formerly reported as Third-Party Software, generates revenue from the re-sale of partners' software, predominantly Microsoft OS software, and the services to support them. The Edge to Cloud business segment, formerly and separately reported as Professional Engineering Service and Proprietary Software, generates revenue from consulting and operating services and licensed software.
The following table provides details regarding our earnings results for the fourth quarter of 2019 (unaudited, in thousands except percentages and per share amounts):
Three Months Ended
December December Q4-Q4 September
31, 31, 30, Q4-Q3
2019 2018 Change 2019 Change
(2) (2)
Revenue:
Partner Solutions $
13,287 $
13,862 $
(575) $
12,556 $
731
Edge to Cloud 2,079 2,977 (898) 2,085 (6)
Total revenue $
15,366 $
16,839 $
(1,473) $
14,641 $
725
Total gross profit $
2,650 $
3,690 (1,040) $
2,632 $
18
Gross margins:
Partner Solutions 14 17
% (3)
% % 14
%
(-)
%
Edge to Cloud 35 47
% (12) 40
% (5)
% % %
Total gross margin 17 22
% (5) 18
% (1)
% % %
Total operating
expenses $
4,027 $
9,293 $
(5,266) $
3,761 $
266
Total operating
expenses excluding
restructuring costs
and goodwill
impairment (3) $
3,313 $
5,555 $
(2,242) $
3,508 $
(195)
Net loss $
(1,360) $
(5,533) $
4,173 $
(1,107) $
(253)
Diluted net loss per
share $
(0.10) $
(0.43) $
0.33 $
(0.09) $
(0.01)
Net loss excluding
restructuring costs
and goodwill
impairment (3) $
(646) $
(1,795) $
1,149 $
(854) $
208
Diluted net loss per
share excluding
restructuring costs
and goodwill
impairment (3) $
(0.05) $
(0.14) $
0.09 $
(0.07) $
0.02
Adjusted EBITDAS (1) $
(314) $
(1,634) $
1,320 $
(472) $
158
Cash, restricted
cash, cash
equivalents and
short-term
investments $
10,561 $
16,940 $
(6,379) $
11,610 $
(1,049)
Notes:
(1) Adjusted EBITDAS = Income (loss)
from operations before
depreciation, amortization, stock
compensation expense,
restructuring costs, and goodwill
impairment. Adjusted EBITDAS is a
non-GAAP financial measure
(reconciliation provided after
financial statement tables).
(2) For gross margin, amount represents
percentage point change.
(3) Total operating expenses excluding
restructuring costs and goodwill
impairment, net loss excluding
restructuring costs and goodwill
impairment, and diluted net loss
per share excluding restructuring
costs and goodwill impairment are
non-GAAP financial measures
(reconciliation provided after
financial statement tables.
Transfer to NASDAQ Capital Market
Effective February 25, 2020, Bsquare will transfer its listing from the NASDAQ Global Market to the NASDAQ Capital Market. The Company elected to shift to the NASDAQ Capital Market as a reflection of its current and expected shareholders' equity status. The BSQR stock ticker symbol remains the same and the Company's reporting and compliance requirements will not change.
First Quarter 2020 Outlook
The company expects revenue for the first quarter of 2020 to be in range of $13.0 million to $14.0 million; and blended gross margin in the 11.5% to 13.5% range.
Conference Call
Management will host a conference call today, February 24, 2020, at 5 p.m. Eastern Time (2 p.m. Pacific Time). To access the call dial 1-888-394-8218 or 1-856-344-9221 for international callers, and reference "BSQUARE Corporation Fourth 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 5742195. 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 systems. We help companies realize the promise of IoT through the development of devices and systems that are cloud-enabled, share data seamlessly, facilitate distributed learning and control, and operate securely at scale. We believe that IoT-enabled systems can not only deliver value to our customers, but also can help people make better use of the resources of our planet and work more effectively to improve quality of life. Bsquare's suite of services and software components create for our customers new revenue streams and operating models while providing opportunities for lowering costs and improving operations. We serve a global customer base from offices in Bellevue, Washington, and the United Kingdom. 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; 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:
Christopher Wheaton, 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 and the Bsquare Logo 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)
December 31,
2019 2018
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $
7,712 $
10,005
Restricted cash 600 263
Short-term investments 2,249 6,409
Accounts receivable, net of allowance
for doubtful accounts of $31 at
December 31, 2019 and $40 at December
31, 2018 9,216 11,581
Prepaid expenses and other current
assets 244 685
Contract assets 494 1,053
Total current assets 20,515 29,996
Restricted cash, long term 263
Equipment, furniture and leasehold
improvements, net 252 911
Deferred tax assets 7 7
Intangible assets, net 169 267
Right-of-use lease assets, net 1,828
Other non-current assets including
contract assets 284 550
Total assets $
23,055 $
31,994
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Third-party software fees payable $
7,224 $
7,620
Accounts payable 408 565
Accrued compensation 1,001 1,629
Other accrued expenses 306 653
Deferred rent, current portion 347
Deferred revenue, current portion 1,559 1,652
Operating leases 702
Total current liabilities 11,200 12,466
Deferred rent 150
Deferred revenue 903 1,037
Operating leases, long-term 1,256
Commitments and contingencies
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; 13,042,293 issued
and outstanding at December 31, 2019
and 12,777,573 issued and outstanding
at December 31, 2018 138,877 138,280
Accumulated other comprehensive loss (987) (926)
Accumulated deficit (128,194) (119,013)
Total shareholders' equity 9,696 18,341
Total liabilities and shareholders'
equity $
23,055 $
31,994
BSQUARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended December 31, Year Ended December 31,
2019 2018 2019 2018
(Unaudited) (Unaudited)
Revenue:
Partner Solutions $
13,287 $
13,862 $
50,628 $
61,159
Edge to Cloud 2,079 2,977 8,655 12,255
Total revenue 15,366 16,839 59,283 73,414
Cost of revenue:
Partner Solutions 11,364 11,571 43,198 51,408
Edge to Cloud 1,352 1,578 5,989 6,496
Total cost of revenue 12,716 13,149 49,187 57,904
Gross profit 2,650 3,690 10,096 15,510
Operating expenses:
Selling, general and
administrative 2,838 3,526 11,316 17,074
Research and development 475 2,029 5,751 8,629
Restructuring costs 714 2,343
Goodwill impairment 3,738 3,738
Total operating expenses 4,027 9,293 19,410 29,441
Loss from operations (1,377) (5,603) (9,314) (13,931)
Other income, net 33 51 149 207
Loss before income taxes (1,344) (5,552) (9,165) (13,724)
Income tax (expense) benefit (16) 19 (16) (13)
Net loss $
(1,360) $
(5,533) $
(9,181) $
(13,737)
Basic net loss per
share $
(0.10) $
(0.43) $
(0.71) $
(1.08)
Diluted net loss per
share $
(0.10) $
(0.43) $
(0.71) $
(1.08)
Net loss excluding
restructuring costs
and goodwill
impairment (3) $
(646) $
(1,795) $
(6,838) $
(9,999)
Diluted net loss per
share excluding
restructuring costs
and goodwill
impairment (3) $
(0.05) $
(0.14) $
(0.53) $
(0.79)
Shares used in per share
calculations:
Basic 12,997 12,755 12,896 12,712
Diluted 12,997 12,755 12,896 12,712
BSQUARE CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASURES
(In thousands, unaudited)
Adjusted EBITDAS
---
Three Months Ended December 31, Year Ended December 31,
2019 2018 2019 2018
Loss from operations
as reported $
(1,377) $
(5,603) $
(9,314) $
(13,931)
Depreciation and amortization 201 173 897 639
Share-based compensation 148 58 519 678
Restructuring costs 714 2,343
Goodwill impairment 3,738 3,738
Adjusted EBITDAS (1) $
(314) $
(1,634) $
(5,555) $
(8,876)
(1) Adjusted EBITDAS is a non-GAAP
financial measure that BSQUARE
defines as income (loss) from
operations before depreciation
expense on fixed assets and
amortization expense (including
impairment) on intangible assets,
stock-based compensation expense,
restructuring costs, 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,
and Adjusted EBITDAS has
limitations, including that it
does not reflect our entire cost
structure to operate our business
(such as the cost of replacing
assets being depreciated or
amortized, capital expenditures,
and stock-based compensation
expenses which we expect to
continue being meaningful, and
income tax expense (benefit)) and
may not be comparable to similarly
titled measures used by other
companies. However, BSQUARE
regards Adjusted EBITDAS as a
complement to net income and other
GAAP financial performance
measures. BSQUARE uses Adjusted
EBITDAS to evaluate BSQUARE's
financial performance and the
effectiveness of its business
strategies on a consistent basis
across reporting periods, and
BSQUARE believes the measure is
often used by analysts, investors
and other interested parties to
evaluate comparable companies.
Total operating expenses excluding restructuring costs and goodwill impairment
---
Three Months Ended December 31, Year Ended December 31,
2019 2018 2019 2018
Total operating
expenses $
4,027 $
9,293 $
19,410 $
29,441
Restructuring costs 714 2,343
Goodwill impairment 3,738 3,738
Total operating
expenses
excluding
restructuring
costs and
goodwill
impairment (1) $
3,313 $
5,555 $
17,067 $
25,703
(1) Total operating expenses
excluding restructuring costs
and goodwill impairment is a
non-GAAP financial measure that
BSQUARE defines as total
operating expenses, plus an add-
back for restructuring costs and
goodwill impairment. This
measure should not be construed
as a substitute for total
operating loss for the purpose
of analyzing our operating
performance, and it has
limitations, including that it
does not reflect our entire cost
structure to operate our
business. However, BSQUARE
regards this measure as a
complement to GAAP operating
expenses because it excludes
costs that may not be indicative
of operating performance.
BSQUARE uses this measure to
evaluate BSQUARE's financial
performance and the
effectiveness of its business
strategies on a consistent basis
across reporting periods, and
BSQUARE believes the measure is
often used by analysts,
investors and other interested
parties to evaluate comparable
companies.
Net loss excluding restructuring costs and goodwill impairment
---
Three Months Ended December 31, Year Ended December 31,
2019 2018 2019 2018
Net loss $
(1,360) $
(5,533) $
(9,181) $
(13,737)
Restructuring costs 714 2,343
Goodwill impairment 3,738 3,738
Net loss excluding
restructuring
costs and
goodwill
impairment (1) $
(646) $
(1,795) $
(6,838) $
(9,999)
(1) Net loss excluding restructuring
costs and goodwill impairment is
a non-GAAP financial measure
that BSQUARE defines as net
loss, plus an add-back for
restructuring costs and goodwill
impairment. This measure should
not be construed as a substitute
for total operating loss for the
purpose of analyzing our
operating performance, and it
has limitations, including that
it does not reflect our entire
cost structure to operate our
business. However, BSQUARE
regards this measure as a
complement to GAAP net loss
because it excludes costs that
may not be indicative of
operating performance. BSQUARE
uses this measure to evaluate
BSQUARE's financial performance
and the effectiveness of its
business strategies on a
consistent basis across
reporting periods, and BSQUARE
believes the measure is often
used by analysts, investors and
other interested parties to
evaluate comparable companies.
Net loss per diluted share excluding restructuring costs and goodwill impairment
---
Three Months Ended December 31, Year Ended December 31,
2019 2018 2019 2018
Diluted net loss
per share $
(0.10) $
(0.43) $
(0.71) $
(1.08)
Restructuring costs 0.05 0.18
Goodwill impairment 0.29 0.29
Diluted net loss
per share
excluding
restructuring
costs and
goodwill
impairment (1) $
(0.05) $
(0.14) $
(0.53) $
(0.79)
(1) Diluted net loss per share
excluding restructuring costs
and goodwill impairment is a
non-GAAP financial measure
that BSQUARE defines as net
loss per diluted share, plus an
add-back for the per diluted
share amount of restructuring
costs and goodwill impairment.
Other than being expressed on a
per diluted share basis, this
measure is the same as net loss
excluding restructuring costs
and goodwill impairment, and it
has the same limitations, and
it is used and disclosed by
BSQUARE for the same reasons.
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SOURCE Bsquare
