Bsquare Third Quarter 2020 Results Show Improving Financial Performance
SEATTLE, Nov. 12, 2020 /PRNewswire/ -- Bsquare Corporation (NASDAQ: BSQR) today announced financial results for the third quarter of 2020. Revenue was $10.4 million up 17% over Q2 2020, net loss was $0.1 million, adjusted EBITDAS was $0.3 million, and cash was breakeven for the quarter.
"We had a good quarter especially given the challenges we experienced in Q2. Revenue and margins were up sequentially, EBITDAS results improved, and cash utilization was minimal, all suggesting that COVID-19 did not derail us.' said Ralph C, Derrickson, CEO and President of Bsquare.
Added Derrickson: "The investments we made in our large Edge-to-Cloud customer relationships are bearing fruit and suggest that at the intersection of our two business segments, there lies the potential to accelerate our emergence from the period of business rebuilding that has dominated our management attention for the last five quarters."
Third Quarter 2020 Financial Highlights
-- Cash, cash equivalents, restricted cash, and short-term investments
totaled $12.6 million on September 30, 2020, unchanged from June 30,
2020.
-- Revenue for Q3 2020 was $10.4 million, up $1.5 million from Q2 2020.
Revenue increases were driven by higher sales in the Partner Solutions
segment and increased service revenue in the Edge-to-Cloud segment.
-- Partner Solutions gross margins were 19%, up from Q2 2020. Edge-to-cloud
margins also improved sequentially as investments in our large customers
began to wind down.
-- Net loss for the current quarter was $0.1 million, or $(0.01) per
diluted share, compared to a net loss of $1.1 million, or $(0.08) per
diluted share, in the second quarter of 2020.
-- Adjusted EBITDAS was approximately $0.3 million, a $1.1 million
improvement over the negative $0.8 million in the second quarter of
2020.
Details as follows (unaudited, in thousands except percentages and per share amounts):
Three Months Ended
September June 30, Quarter- September Year-
30, 2020 2020 over- 30, 2019 over-Year
Quarter Change
Change
Revenue:
Partner Solutions $
9,145 $
8,110 $
1,035 $
12,556 $
(3,411)
Edge to Cloud 1,275 814 461 2,085 (810)
Total revenue 10,420 8,924 1,496 14,641 (4,221)
Total gross profit $
1,890 $
1,046 $
844 $
2,632 $
(742)
Gross margins (1):
Partner Solutions 19 14 5 14 5
% % % % %
Edge to Cloud 12 (15) 27 40 (28)
% % % % %
Total gross margin 18 12 6 18 0
% % % % %
Total operating expenses 2,028 2,121 (93) 3,761 (1,733)
Total operating expenses excluding restructuring costs (2) 2,028 2,121 (93) 3,508 (1,480)
Net loss (136) (1,073) 937 (1,107) 971
Per diluted share (0.01) (0.08) 0.07 (0.09) 0.08
Net loss excluding restructuring costs (2) (136) (1,073) 937 (854) 718
Per diluted share excluding restructuring costs (2) (0.01) (0.08) 0.07 (0.07) 0.06
Adjusted EBITDAS (2) 277 (806) 1,083 (472) 749
Cash, restricted cash, cash equivalents and short-term investments $
12,572 $
12,582 $
(10) $
11,610 $
962
Notes:
(1) Quarter-over-quarter change and
year-over-year change represent
percentage point change.
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
(2) after financial statement tables).
Financial Commentary on Third Quarter 2020 Results Compared to Third Quarter 2019
-- Partner Solutions revenue increased for the comparative period, driven
by higher sales of Microsoft operating systems and other embedded
software.
-- Edge to Cloud revenue decreased when compared to the prior year third
quarter, primarily from completion of software consulting projects
during 2019 that did not recur in 2020.
-- Total operating expenses, both including and excluding restructuring
costs, decreased when compared to the third quarter of 2019 due to
announced spending reduction initiatives that reduced salary, benefit,
and marketing costs.
-- Net loss for Q3 2020 was $0.1 million or $(0.01) per diluted share
compared to a loss of $1.1 million or $(0.09) per diluted share in Q3
2019, an improvement of $1.0 million or $0.08 per diluted share.
Conference Call
Management will host a conference call today, November 12, 2020, at 5 p.m. Eastern Time (2 p.m. Pacific Time). To access the call dial 1-800-437-2398 or 1-856-344-9206 for international callers, and reference "Bsquare Corporation Third 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 5860407. 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 Seattle, 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
Steven Gottlieb
BSQUARE Corporation
BSQUARE Corporation
+1 425.519.5900
+ 1 425.519.5900
investorrelations@bsquare.com
Steven.gottlieb@bsquare.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)
September 30, December 31,
2020 2019
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $
12,209 $
7,712
Restricted cash 363 600
Short-term investments 2,249
Accounts receivable, net of allowance for doubtful accounts of $50 and $31 at September 30, 2020 and December 31, 2019, respectively 5,514 9,216
Contract assets 553 494
Prepaid expenses and other current assets 423 244
Total current assets 19,062 20,515
Equipment, furniture and leasehold improvements, less accumulated depreciation 403 252
Deferred tax assets 7 7
Intangible assets, less accumulated amortization 95 169
Right-of-use lease asset, net 1,471 1,828
Other non-current assets 25 284
Total assets $
21,063 $
23,055
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Third-party software fees payable $
5,722 $
7,224
Accounts payable 287 408
Notes payable 962
Accrued compensation 456 1,001
Other accrued expenses 658 306
Deferred revenue 2,142 1,559
Operating lease 317 702
Total current liabilities 10,544 11,200
Deferred revenue, long-term 10 903
Operating lease, long-term 1,269 1,256
Notes payable, long-term 618
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; 13,180,139 and 13,042,293 shares issued and outstanding at September 30, 2020 and December 31, 2019,
respectively 139,516 138,877
Accumulated other comprehensive loss (1,017) (987)
Accumulated deficit (129,877) (128,194)
Total shareholders' equity 8,622 9,696
Total liabilities and shareholders' equity $
21,063 $
23,055
BSQUARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Revenue:
Partner Solutions $
9,145 $
12,556 $
33,160 $
37,341
Edge to Cloud 1,275 2,085 2,913 6,576
Total revenue 10,420 14,641 36,073 43,917
Cost of revenue:
Partner Solutions 7,402 10,762 27,502 31,834
Edge to Cloud 1,128 1,247 3,050 4,637
Total cost of revenue 8,530 12,009 30,552 36,471
Gross profit 1,890 2,632 5,521 7,446
Operating expenses:
Selling, general and administrative 1,987 2,462 6,951 8,478
Research and development 41 1,046 222 5,276
Restructuring costs 253 1,629
Total operating expenses 2,028 3,761 7,173 15,383
Loss from operations (138) (1,129) (1,652) (7,937)
Other income (loss), net 2 22 (31) 116
Loss before income taxes (136) (1,107) (1,683) (7,821)
Income taxes
Net loss $
(136) $
(1,107) $
(1,683) $
(7,821)
Basic loss per share $
(0.01) $
(0.09) $
(0.13) $
(0.60)
Diluted loss per share $
(0.01) $
(0.09) $
(0.13) $
(0.60)
Net loss excluding restructuring costs (3) $
(136) $
(854) $
(1,683) $
(6,192)
Per diluted share excluding restructuring costs (3) $
(0.01) $
(0.07) $
(0.13) $
(0.48)
Shares used in per share calculations:
Basic 13,165 12,934 13,205 12,982
Diluted 13,165 12,934 13,205 12,982
BSQUARE CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASURES
(In thousands, unaudited)
Adjusted EBITDAS
---
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Loss from operations, as reported $
(138) $
(1,129) $
(1,652) $
(7,937)
Depreciation and amortization 134 216 494 696
Stock-based compensation 281 188 601 371
Restructuring costs 253 1,376
Adjusted EBITDAS (1) $
277 $
(472) $
(557) $
(5,494)
(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 Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Total operating expenses $
2,028 $
3,761 $
7,173 $
15,383
Restructuring costs 253 1,629
Total operating expenses excluding restructuring costs (1) $
2,028 $
3,508 $
7,173 $
13,754
(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 Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Net loss $
(136) $
(1,107) $
(1,683) $
(7,821)
Restructuring costs 253 1,629
Net loss excluding restructuring costs (1) $
(136) $
(854) $
(1,683) $
(6,192)
(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 Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Diluted loss per share $
(0.01) $
(0.09) $
(0.13) $
(0.60)
Restructuring costs (0.02)
$ $
(0.12)
Net loss excluding restructuring costs (1) $
(0.01) $
(0.07) $
(0.13) $
(0.48)
(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.
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