BELLEVUE, Wash., Nov. 12, 2018 /PRNewswire/ -- Bsquare Corporation
(NASDAQ: BSQR) today announced financial results for the third
quarter of 2018.
"Our third quarter financial results reflect progress on a
number of fronts," said Kevin Walsh,
Acting CEO. "We have reduced operating expenses by removing
approximately $6 million in
annualized costs from the business over the past two quarters, and
we have decreased our quarterly cash usage."
"As we enter 2019, the importance of our IoT services business,
as well as strengthening our partnerships with AWS and Microsoft
Azure as the industry shifts toward cloud-anchored IoT
infrastructure, are key elements of our strategy. As we ramp our
IoT services offerings in response to customer demand, we will
continue to make targeted investments in DataV; we believe our IoT
services business provides an inroad to eventual DataV sales. And,
we are also implementing new initiatives in our third-party
software business that we believe will allow us to grow this
business while complementing our IoT services. Taken together, we
believe these changes will result in positioning Bsquare as a
trusted IoT solutions provider and will help us return to
profitability in the second half of 2019. As a result, the board
considers it timely to launch the search for a permanent CEO."
Third Quarter 2018 Financial Highlights
- Revenue for the quarter was $16.7
million, down 15.1% compared to the third quarter of 2017
and down 13.1% compared to the second quarter of 2018.
- Net loss for the quarter was $2.1
million, or $0.16 per diluted
share, compared to a net loss of $2.5
million, or $0.20 per diluted
share, in the third quarter of 2017 and a net loss of $3.7 million, or $0.29 per diluted share, in the second quarter of
2018.
- Adjusted EBITDAS (1) was negative $1.7 million, up $0.2
million from the third quarter of 2017 and up $1.9 million from the second quarter of
2018.
- Cash, cash equivalents and short-term investments at
September 30, 2018 totaled
$17.3 million, a decrease of
$9.5 million from September 30, 2017 and $0.6 million from June 30,
2018 due to a combination of lower operating expenses and
strong cash collections.
Details as follows (unaudited, in thousands except percentages
and per share amounts):
|
Three Months
Ended
|
|
|
September 30, 2018
|
|
|
September 30, 2017
|
|
|
Q3-Q3 Change
(2)
|
|
|
June 30, 2018
|
|
|
Q3-Q2 Change
(2)
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third-party
software
|
$
|
14,241
|
|
|
$
|
16,240
|
|
|
$
|
(1,999)
|
|
|
$
|
16,992
|
|
|
$
|
(2,751)
|
|
Proprietary
software
|
|
796
|
|
|
|
1,200
|
|
|
|
(404)
|
|
|
|
281
|
|
|
|
515
|
|
Professional
engineering service
|
|
1,657
|
|
|
|
2,213
|
|
|
|
(556)
|
|
|
|
1,930
|
|
|
|
(273)
|
|
Total
revenue
|
|
16,694
|
|
|
|
19,653
|
|
|
|
(2,959)
|
|
|
|
19,203
|
|
|
|
(2,509)
|
|
Total gross
profit
|
$
|
3,359
|
|
|
$
|
4,380
|
|
|
$
|
(1,021)
|
|
|
$
|
3,261
|
|
|
$
|
98
|
|
Gross
margins:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third-party
software
|
|
15.7
|
%
|
|
|
16.1
|
%
|
|
|
(0.4)
|
%
|
|
|
14.8
|
%
|
|
|
0.9
|
%
|
Proprietary
software
|
|
86.1
|
%
|
|
|
97.2
|
%
|
|
|
(11.1)
|
%
|
|
|
64.4
|
%
|
|
|
21.7
|
%
|
Professional
engineering service
|
|
26.3
|
%
|
|
|
26.8
|
%
|
|
|
(0.5)
|
%
|
|
|
29.4
|
%
|
|
|
(3.1)
|
%
|
Total gross
margin
|
|
20.1
|
%
|
|
|
22.3
|
%
|
|
|
(2.2)
|
%
|
|
|
17.0
|
%
|
|
|
3.1
|
%
|
Total operating
expenses
|
$
|
5,491
|
|
|
$
|
6,926
|
|
|
$
|
(1,435)
|
|
|
$
|
6,979
|
|
|
$
|
(1,488)
|
|
Net loss
|
|
(2,087)
|
|
|
|
(2,468)
|
|
|
|
381
|
|
|
|
(3,683)
|
|
|
|
1,596
|
|
Per diluted
share
|
|
(0.16)
|
|
|
|
(0.20)
|
|
|
|
0.04
|
|
|
|
(0.29)
|
|
|
|
0.13
|
|
Adjusted EBITDAS
(1)
|
|
(1,666)
|
|
|
|
(1,843)
|
|
|
|
177
|
|
|
|
(3,570)
|
|
|
|
1,904
|
|
Cash, cash
equivalents and short-term investments
|
$
|
17,271
|
|
|
$
|
26,758
|
|
|
$
|
(9,487)
|
|
|
$
|
17,861
|
|
|
$
|
(590)
|
|
|
Notes:
|
(1)
|
Adjusted EBITDAS =
loss from operations before depreciation, amortization and stock
compensation expense. Adjusted EBITDAS is a non-GAAP measurement
(reconciliation provided after financial statement
tables).
|
(2)
|
For gross margin,
amount represents percentage point change.
|
Financial Commentary on Third Quarter 2018 Results (Compared
to Third Quarter 2017)
- Third-party software revenue decreased for the quarterly
period, primarily due to lower sales of Microsoft Windows Embedded
operating systems to Honeywell.
- Proprietary software revenue decreased for the quarterly
period, primarily due to lower sales of other (non-DataV)
proprietary software.
- Professional engineering service revenue decreased for the
quarterly period, primarily due to the completion of several
existing customer projects in 2017.
- Operating expenses decreased for the quarterly period,
primarily due to lower salaries and related benefits in Selling and
General & Administrative expense from spending reductions in
fiscal 2018, partially offset by Research and Development
investment made in DataV.
Additional DataV Metrics (Including Non-GAAP
Measures)
- During the third quarter of 2018, we recorded $1.0 million in DataV bookings (a non-GAAP
measure defined as the contract value of new agreements signed with
customers).
- DataV backlog (a non-GAAP measure defined as total DataV
bookings less DataV revenue recognized to date and adjustments such
as de-bookings) was $6.5 million at
both September 30, 2018 and
December 31, 2017.
- Total deferred revenue at September 30,
2018 was $2.4 million,
compared to $3.3 million at
December 31, 2017. The September 30, 2018 balance included DataV
deferred revenue of $1.9 million. The
DataV deferred revenue balances do not represent the total contract
value of our DataV agreements.
- DataV unbilled deferred revenue (a non-GAAP measure defined as
future contract billings that have not been invoiced and,
accordingly, are not included in deferred revenue) was
approximately $4.6 million at
September 30, 2018 and approximately
$3.7 million at December 31, 2017.
Bookings, backlog and unbilled deferred revenue are non-GAAP
measures. These non-GAAP measures have been included because
management believes they provide meaningful information related to
our DataV product sales, since revenue from such sales may be
recognized in different periods than those in which orders have
been received or cash has been collected.
Fourth Quarter 2018 Outlook
Management currently has the following expectations for the
fourth quarter of 2018:
- Revenue in the range of $15.5
million to $17.5 million.
- Blended gross margin in the 18% to 22% range.
- Net cash usage of $0.5 million to
$1.5 million.
Conference Call
Management will host a conference call today, November 12, 2018, at 5
p.m. Eastern Time (2 p.m. Pacific
Time). To access the call dial 1-800-289-0438 or
1-323-794-2423 for international callers, and reference "BSQUARE
Corporation Third Quarter 2018 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 5720283. A live and replay Webcast of the call
will be available at www.bsquare.com in the investor relations
section.
About Bsquare Corporation
For more than two decades, Bsquare has helped its customers
extract business value from a broad array of physical assets by
making these assets intelligent, connecting them, and using the
data they generate to optimize business processes. Bsquare DataV
software solutions can be deployed by a wide variety of enterprises
to create business-focused Industrial Internet of Things systems
that more effectively monitor device data, automate processes,
predict events and produce better business outcomes. Bsquare goes a
step further by coupling its purpose-built DataV software with
comprehensive analytic and engineering services that help
organizations of all types make IIoT a business reality. 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 DataVâ„¢, the Industrial 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, 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)
|
|
|
|
September 30,
2018
|
|
|
December 31,
2017
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
11,392
|
|
|
$
|
12,859
|
|
Short-term
investments
|
|
|
5,879
|
|
|
|
11,895
|
|
Accounts receivable,
net of allowance for doubtful accounts of $49 and $50 at
September 30, 2018 and December 31, 2017,
respectively
|
|
|
13,124
|
|
|
|
18,014
|
|
Contract
assets
|
|
|
1,030
|
|
|
|
937
|
|
Prepaid expenses and
other current assets
|
|
|
677
|
|
|
|
548
|
|
Total
current assets
|
|
|
32,102
|
|
|
|
44,253
|
|
Equipment, furniture
and leasehold improvements, less accumulated
depreciation
|
|
|
1,306
|
|
|
|
989
|
|
Intangible assets,
less accumulated amortization
|
|
|
291
|
|
|
|
365
|
|
Goodwill
|
|
|
3,738
|
|
|
|
3,738
|
|
Other non-current
assets
|
|
|
211
|
|
|
|
89
|
|
Total
assets
|
|
$
|
37,648
|
|
|
$
|
49,434
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Third-party software
fees payable
|
|
$
|
7,882
|
|
|
$
|
10,547
|
|
Accounts
payable
|
|
|
329
|
|
|
|
375
|
|
Accrued
compensation
|
|
|
2,016
|
|
|
|
2,266
|
|
Other accrued
expenses
|
|
|
535
|
|
|
|
681
|
|
Deferred
rent
|
|
|
355
|
|
|
|
339
|
|
Deferred
revenue
|
|
|
1,627
|
|
|
|
3,219
|
|
Total
current liabilities
|
|
|
12,744
|
|
|
|
17,427
|
|
Deferred rent,
long-term
|
|
|
247
|
|
|
|
516
|
|
Deferred revenue,
long-term
|
|
|
799
|
|
|
|
61
|
|
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; 12,747,225 and 12,664,489 shares
issued and outstanding at September 30, 2018 and
December 31, 2017, respectively
|
|
|
138,223
|
|
|
|
137,622
|
|
Accumulated other
comprehensive loss
|
|
|
(885)
|
|
|
|
(916)
|
|
Accumulated
deficit
|
|
|
(113,480)
|
|
|
|
(105,276)
|
|
Total
shareholders' equity
|
|
|
23,858
|
|
|
|
31,430
|
|
Total
liabilities and shareholders' equity
|
|
$
|
37,648
|
|
|
$
|
49,434
|
|
BSQUARE
CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands,
except per share amounts)
(Unaudited)
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third-party
software
|
$
|
14,241
|
|
|
$
|
16,240
|
|
|
$
|
47,297
|
|
|
$
|
48,542
|
|
Proprietary
software
|
|
796
|
|
|
|
1,200
|
|
|
|
2,872
|
|
|
|
4,335
|
|
Professional
engineering service
|
|
1,657
|
|
|
|
2,213
|
|
|
|
6,406
|
|
|
|
8,465
|
|
Total
revenue
|
|
16,694
|
|
|
|
19,653
|
|
|
|
56,575
|
|
|
|
61,342
|
|
Cost of
revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third-party
software
|
|
12,003
|
|
|
|
13,619
|
|
|
|
39,837
|
|
|
|
40,804
|
|
Proprietary
software
|
|
111
|
|
|
|
34
|
|
|
|
252
|
|
|
|
105
|
|
Professional
engineering service
|
|
1,221
|
|
|
|
1,620
|
|
|
|
4,666
|
|
|
|
5,927
|
|
Total
cost of revenue
|
|
13,335
|
|
|
|
15,273
|
|
|
|
44,755
|
|
|
|
46,836
|
|
Gross
profit
|
|
3,359
|
|
|
|
4,380
|
|
|
|
11,820
|
|
|
|
14,506
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
|
3,199
|
|
|
|
5,338
|
|
|
|
13,548
|
|
|
|
15,249
|
|
Research and
development
|
|
2,292
|
|
|
|
1,588
|
|
|
|
6,600
|
|
|
|
4,381
|
|
Total
operating expenses
|
|
5,491
|
|
|
|
6,926
|
|
|
|
20,148
|
|
|
|
19,630
|
|
Loss from
operations
|
|
(2,132)
|
|
|
|
(2,546)
|
|
|
|
(8,328)
|
|
|
|
(5,124)
|
|
Other income,
net
|
|
65
|
|
|
|
34
|
|
|
|
156
|
|
|
|
148
|
|
Loss before income
taxes
|
|
(2,067)
|
|
|
|
(2,512)
|
|
|
|
(8,172)
|
|
|
|
(4,976)
|
|
Income tax benefit
(expense)
|
|
(20)
|
|
|
|
44
|
|
|
|
(32)
|
|
|
|
150
|
|
Net loss
|
$
|
(2,087)
|
|
|
$
|
(2,468)
|
|
|
$
|
(8,204)
|
|
|
$
|
(4,826)
|
|
Basic loss per
share
|
$
|
(0.16)
|
|
|
$
|
(0.20)
|
|
|
$
|
(0.65)
|
|
|
$
|
(0.38)
|
|
Diluted loss per
share
|
$
|
(0.16)
|
|
|
$
|
(0.20)
|
|
|
$
|
(0.65)
|
|
|
$
|
(0.38)
|
|
Shares used in per
share calculations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
12,721
|
|
|
|
12,607
|
|
|
|
12,697
|
|
|
|
12,578
|
|
Diluted
|
|
12,721
|
|
|
|
12,607
|
|
|
|
12,697
|
|
|
|
12,578
|
|
BSQUARE
CORPORATION
NON-GAAP
INFORMATION AND RECONCILIATION TO COMPARABLE GAAP FINANCIAL
MEASURES
(In thousands,
unaudited)
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Loss from operations
as reported
|
$
|
(2,132)
|
|
|
$
|
(2,546)
|
|
|
$
|
(8,328)
|
|
|
$
|
(5,124)
|
|
Depreciation and
amortization
|
|
161
|
|
|
|
163
|
|
|
|
466
|
|
|
|
483
|
|
Stock-based
compensation
|
|
305
|
|
|
|
540
|
|
|
|
620
|
|
|
|
1,350
|
|
Adjusted EBITDAS
(1)
|
$
|
(1,666)
|
|
|
$
|
(1,843)
|
|
|
$
|
(7,242)
|
|
|
$
|
(3,291)
|
|
|
|
(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, and
stock-based compensation expense. 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