Bsquare Reports First Quarter 2020 Financial Results

BELLEVUE, Wash., May 11, 2020 /PRNewswire/ -- Bsquare Corporation (NASDAQ: BSQR) today announced financial results for the first quarter of 2020. Revenue increased to $16.7 million, up 8.4% over the $15.4 million reported for the fourth quarter of 2019 and adjusted EBITDAS was approximately break-even.

"Q1 was a solid quarter. We were able to increase revenue sequentially for the third consecutive quarter, we decreased operating expenses for the fifth consecutive quarter, and we hit break-even on an adjusted EBITDAS basis. We also added modestly to our cash balance, something that hasn't happened since Q4 2016. Bsquare started 2020 strongly and while the full impact of the COVID-19 pandemic is unknown, our team is well prepared to meet the challenges ahead," said Ralph C. Derrickson, Bsquare President and CEO.

First Quarter 2020 Financial Highlights

    --  Revenue increased to $16.7 million, up $1.3 million or 8.4% from $15.4
        million in the fourth quarter of 2019, the third consecutive period of
        increases.
    --  Partner Solutions segment revenue was up 21% over the prior quarter,
        driven by strong demand for our embedded operating system products from
        Microsoft and other third parties.
    --  Edge to Cloud segment revenue, while lower in Q1 2020 compared to Q4
        2019, was anticipated as we transitioned away from DataV to our new B2IQ
        suite of software and services.
    --  Operating expenses for the quarter were at their lowest level since the
        first quarter of 2019 and operating expenses, excluding restructuring
        costs, declined for the fifth consecutive quarter.
    --  Net loss for the current quarter was $0.5 million, or $0.04 per diluted
        share, compared to net loss of $1.4 million, or $0.10 per diluted share,
        in the fourth quarter of 2019.
    --  Adjusted EBITDAS was approximately break-even, compared to negative $0.3
        million in the fourth quarter of 2019.
    --  Cash, cash equivalents, restricted cash, and short-term investments on
        March 31, 2020 totaled $10.6 million, an increase of approximately $0.1
        million from December 31, 2019.

COVID-19 Impact

In mid-March, to comply with mandates designed to reduce the spread of the virus causing COVID-19, Bsquare temporarily closed our UK offices in Trowbridge and stopped all non-essential activities in our Bellevue, Washington office. During that time, a number of customers notified Bsquare that their businesses were considered essential under the guidelines applicable for maintaining essential business during the pandemic, informing Bsquare that it was considered an essential supplier to their businesses. In April, as part of a series of contingency planning efforts and to ensure it remained staffed appropriately to fulfill its role as an essential supplier, Bsquare applied for and received loan proceeds under the Paycheck Protection Program ("PPP"). Throughout the rapid change created by the COVID-19 crisis, Bsquare has continued to meet customer demands without interruption.

"We are seeing traction helping customers build and operate the next generation of intelligent devices and systems. In the long term these systems have the potential to make the world a better place and perhaps even play a role in how we respond to a future outbreak. Today, however, the impact of the COVID-19 pandemic on our business is highly uncertain, and prudence dictates that we suspend revenue and margin guidance," added Derrickson.

Details as follows (unaudited, in thousands except percentages and per share amounts):


                                                  
     
     Three Months Ended



                           March                                  December                           Quarter-over-   March

                                  31,                                       31,                                                31,           Year-over-
                                 2020                                      2019              Quarter Change                   2019 Year Change




     Revenue:


      Partner Solutions               $
       15,905                               $
        13,287                       $
            2,618                      $
         13,101   $
           2,804


      Edge to Cloud                           824                                      2,079                               (1,255)                             1,995          (1,171)



      Total revenue                        16,729                                     15,366                                 1,363                             15,096            1,633


      Total gross profit               $
       2,585                                $
        2,650                        $
            (65)                      $
         2,391     $
           194


      Gross margins (1):


      Partner Solutions                        17                                         14                             3
          %                                15
                                                %                                         %                                                                      %        2
         %


      Edge to Cloud                          (20)                                        35                                  (55)                                22             (42)
                                                %                                         %                                    %                                 %               %


      Total gross margin                       15                                         17                           (2)
          %                                16              (1)
                                                %                                         %                                                                      %               %


      Total operating
       expenses                             3,024                                      4,027                               (1,003)                             5,270          (2,246)


      Total operating
       expenses excluding
       restructuring costs
       (2)                                 3,024                                      3,313                                 (289)                             5,270          (2,246)



     Net loss                              (474)                                   (1,360)                                  886                            (2,846)           2,372


      Per diluted share                    (0.04)                                    (0.10)                                 0.06                             (0.22)            0.18


      Net loss excluding
       restructuring costs
       (2)                                 (474)                                     (646)                                  172                            (2,846)           2,372


      Per diluted share
       excluding
       restructuring costs
       (2)                                (0.04)                                    (0.05)                                 0.01                             (0.22)            0.18


      Adjusted EBITDAS (2)                   (28)                                     (314)                                  286                            (2,517)           2,489


      Cash, restricted
       cash, cash
       equivalents and
       short-term
       investments                    $
       10,644                               $
        10,561                          $
            83                      $
         15,263 $
           (4,619)




              
                Notes:



              
                (1)                 Quarter-
                                                  over-
                                                  quarter
                                                  change and
                                                  year-over-
                                                  year change
                                                  represent
                                                  percentage
                                                  point
                                                  change.



              
                (2)                 Total
                                                  operating
                                                  expenses
                                                  excluding
                                                  restructuring
                                                  costs, net
                                                  loss
                                                  excluding
                                                  restructuring
                                                  costs, net
                                                  loss per
                                                  diluted
                                                  share
                                                  excluding
                                                  restructuring
                                                  costs, and
                                                  Adjusted
                                                  EBITDAS are
                                                  non-GAAP
                                                  financial
                                                  measures
                                                  (reconciliation
                                                  provided
                                                  after
                                                  financial
                                                  statement
                                                  tables).

Financial Commentary on First Quarter 2020 Results (Compared to First Quarter 2019)

    --  Partner Solutions revenue increased for the quarterly period, driven by
        higher sales of Microsoft operating systems and other embedded software.
    --  Edge to Cloud revenue decreased when compared to the prior year
        quarterly period, primarily from completion of software consulting
        projects during 2019.
    --  Total operating expenses, both including and excluding restructuring
        costs, decreased when compared to the first quarter of 2019 due to lower
        salary, benefit and marketing costs from the continuing benefits of
        prior period spending reduction initiatives.
    --  Net loss, both including and excluding restructuring costs, for the
        current quarter decreased by $2.4 million, or $(0.18) per diluted share,
        as adjusted, vs. the first quarter of 2019.

Conference Call

Management will host a conference call today, May 11, 2020, at 5 p.m. Eastern Time (2 p.m. Pacific Time). To access the call dial 1-800-458-4121 or 1-856-344-9290 for international callers, and reference "BSQUARE Corporation First Quarter 2020 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 2630235. 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, 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 our preparation for and ability to service customers during the COVID-19 pandemic and our ability to achieve our business plans, strategies and expectations. 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; the impact of COVID-19 on our business; risks relating to our receipt of a PPP loan; 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, 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)




                                                                                                                      March                                        December
                                                                                                                                                                 
               31,
                                                                                                                            31, 2020                                        2019



                                                                                                                   (Unaudited)


                                    
              
                ASSETS



     Current assets:



     Cash and cash equivalents                                                                                                                 $
            10,044                  $
          7,712



     Restricted cash                                                                                                                                        600                            600



     Short-term investments                                                                                                                                                             2,249


      Accounts receivable, net of allowance for doubtful accounts of $65 and $31 at March 31, 2020 and
       December 31, 2019, respectively                                                                                                                    10,092                          9,216



     Contract assets                                                                                                                                        558                            494



     Prepaid expenses and other current assets                                                                                                              708                            244




       Total current assets                                                                                                                              22,002                         20,515



     Equipment, furniture and leasehold improvements, less accumulated depreciation                                                                         155                            252



     Deferred tax assets                                                                                                                                      7                              7



     Intangible assets, less accumulated amortization                                                                                                       144                            169



     Right-of-use lease asset, net                                                                                                                        1,499                          1,828



     Other non-current assets                                                                                                                               166                            284




       Total assets                                                                                                                            $
            23,973                 $
          23,055



                     
              
                LIABILITIES AND SHAREHOLDERS' EQUITY



     Current liabilities:



     Third-party software fees payable                                                                                                          $
            8,579                  $
          7,224



     Accounts payable                                                                                                                                       457                            408



     Accrued compensation                                                                                                                                   576                          1,001



     Other accrued expenses                                                                                                                                 771                            306



     Deferred revenue                                                                                                                                     2,052                          1,559



     Operating lease                                                                                                                                        421                            702




       Total current liabilities                                                                                                                         12,856                         11,200



     Deferred revenue, long-term                                                                                                                            548                            903



     Operating lease, long-term                                                                                                                           1,168                          1,256



     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; 13,098,718 and 13,042,293 shares issued and
       outstanding at March 31, 2020 and December 31, 2019, respectively                                                                                 139,091                        138,877



     Accumulated other comprehensive loss                                                                                                               (1,022)                         (987)



     Accumulated deficit                                                                                                                              (128,668)                     (128,194)




       Total shareholders' equity                                                                                                                         9,401                          9,696




       Total liabilities and shareholders' equity                                                                                              $
            23,973                 $
          23,055


                                 
        
                BSQUARE CORPORATION

                   
              
          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                      
              
          (In thousands, except per share amounts)

                                   
          
                (Unaudited)




                                                       Three Months Ended March
                                                             
                31,



                                     2020                                        2019




     Revenue:


      Partner Solutions                     $
              15,905                           $
         13,101



     Edge to Cloud                                      824                                   1,995




       Total revenue                                 16,729                                  15,096



     Cost of revenue:



     Partner Solutions                               13,156                                  11,149



     Edge to Cloud                                      988                                   1,556




     Total cost of revenue                           14,144                                  12,705




      Gross profit                                    2,585                                   2,391



     Operating expenses:


      Selling, general and
       administrative                                  2,897                                   2,934


      Research and development                           127                                   2,336


        Total operating expenses                       3,024                                   5,270




     Loss from operations                             (439)                                (2,879)


      Other income (loss), net                          (35)                                     33



      Loss before income taxes                         (474)                                (2,846)



     Income tax benefit




     Net loss                               $
              (474)                         $
         (2,846)



      Basic loss per share                  $
              (0.04)                          $
         (0.22)


      Diluted loss per share                $
              (0.04)                          $
         (0.22)


      Net loss excluding
       restructuring costs
       (3)                                  $
              (474)                         $
         (2,846)


      Per diluted share
       excluding
       restructuring costs
       (3)                                 $
              (0.04)                          $
         (0.22)


      Shares used in per share
       calculations:



     Basic                                           13,055                                  12,795



     Diluted                                         13,055                                  12,795


                                                                                    
              
                BSQUARE CORPORATION

                                                      
              
            RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO MOST DIRECTLY COMPARABLE GAAP FINANCIAL
                                                                                                      MEASURES

                                                                                 
              
                (In thousands, unaudited)




                                    Adjusted EBITDAS                
          
                Three Months Ended

    ---

                                                     March                                                                         December                                     March
                                                                                                                                
                31,
                                                           31, 2020                                                                         2019                                      31, 2019




       Loss from operations as reported                              $
          (439)                                                                                $
       (1,377)                $
     (2,879)



       Depreciation and amortization                                         196                                                                                          201                        194



       Stock-based compensation                                              215                                                                                          148                        168



       Restructuring costs                                                                                                                                    714




       Adjusted EBITDAS (1)                                           $
          (28)                                                                                  $
       (314)                $
     (2,517)




              
                (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
                                               (when
                                               applicable).
                                               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.
                                               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              
         
            Three Months Ended

    ---

                                                  March                                            December                 March
                                                                                                 
               31,
                                                        31, 2020                                            2019                      31, 2019



        Total operating
         expenses                                                 $
        3,024                                     $
      4,027        $
            5,270


        Restructuring costs                                                                                            714



        Total operating
         expenses excluding
         restructuring costs
         (1)                                                     $
        3,024                                     $
      3,313        $
            5,270




              
                (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,
                                               when
                                               applicable).
                                               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
                                               its 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               
         
            Three Months Ended

    ---

                                                  March                                             December                  March
                                                                                                  
               31,
                                                        31, 2020                                             2019                   31, 2019




       Net loss                                                   $
        (474)                                    $
      (1,360)                 $
      (2,846)


        Restructuring costs                                                                                               714



        Net loss excluding
         restructuring costs
         (1)                                                      $
        (474)                                      $
      (646)                 $
      (2,846)




              
                (1)              Net loss
                                               excluding
                                               restructuring
                                               costs is a
                                               non-GAAP
                                               financial
                                               measure that
                                               BSQUARE
                                               defines as
                                               net loss,
                                               plus an add-
                                               back for
                                               restructuring
                                               costs (and
                                               goodwill
                                               impairment,
                                               when
                                               applicable).
                                                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 its
                                               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                
        
             Three Months Ended

    ---

                                                  March                                              December                 March
                                                                                                   
               31,
                                                        31, 2020                                              2019                  31, 2019



        Diluted loss per
         share                                                     $
        (0.04)                                    $
      (0.10)                 $
      (0.22)


        Restructuring costs                                                                                            (0.05)



        Net loss excluding
         restructuring costs
         (1)                                                            (0.04)                                        (0.05)                 $
      (0.22)




              
                (1)              Net loss
                                               excluding
                                               restructuring
                                               costs is a
                                               non-GAAP
                                               financial
                                               measure
                                               that
                                               BSQUARE
                                               defines as
                                               diluted
                                               loss per
                                               share, plus
                                               an add-
                                               back for
                                               the per
                                               diluted
                                               share
                                               amount of
                                               restructuring
                                               costs (and
                                               goodwill
                                               impairment,
                                               when
                                               applicable).
                                                Other than
                                                being
                                               expressed
                                               on a per
                                               diluted
                                               share
                                               basis, this
                                               measure is
                                               the same as
                                               net loss
                                               excluding
                                               restructuring
                                               costs, has
                                               the same
                                               limitations,
                                               and is used
                                               and
                                               disclosed
                                               by BSQUARE
                                               for the
                                               same
                                               reasons.

( )

View original content to download multimedia:http://www.prnewswire.com/news-releases/bsquare-reports-first-quarter-2020-financial-results-301056933.html

SOURCE Bsquare