BELLEVUE, Wash., Feb. 25, 2019 /PRNewswire/ -- BSQUARE
Corporation (NASDAQ: BSQR) today announced financial results
for the fourth quarter and full year ended December 31, 2018.
"During the fourth quarter we increased our emphasis on IoT
services and recalibrated our investment in DataV software,
increased investment in our software distribution business and
continued to develop our key partnerships with Microsoft and Amazon
Web Services (AWS), with whom we signed a three-year collaboration
agreement," said Kevin Walsh, acting
CEO. "Last week we announced the appointment of Ralph Derrickson as president and CEO and to the
company's board of directors, effective March 11th. Ralph brings broad strategic and
technical experience to Bsquare and we are confident in his ability
to accelerate our plans to establish a fiscally responsible
long-term strategy for growth and value creation."
Fourth Quarter 2018 Financial Summary
- Revenue for the quarter was $16.8
million, down 14% compared to the fourth quarter of 2017 and
up 1% sequentially compared to the third quarter of 2018.
- Operating expenses in the fourth quarter included a one-time
non-cash charge to write-off $3.7
million in goodwill associated with a 2011 acquisition which
was deemed impaired at December
31,2018
- Including the goodwill impairment charge of $3.7 million, net loss for the current quarter
was $5.5 million, or $(0.43) per diluted share, compared to net loss
of $4.2 million, or $(0.33) per diluted share, in the fourth quarter
of 2017 and net loss of $2.1 million,
or $(0.16) per diluted share, in the
third quarter of 2018.
- Excluding the goodwill impairment charge of $3.7 million, net loss for the current quarter
was $1.8 million, or $(0.14) per diluted share, as
adjusted.(1)
- Adjusted EBITDAS(2) for the quarter was negative
$1.6 million, an improvement of
$2.1 million from the fourth quarter
of 2017 and was approximately level compared to the third quarter
of 2018.
- Cash, cash equivalents, short-term investments and restricted
cash totaled $16.9 million at
December 31, 2018 (including
restricted cash of $0.5 million),
which decreased approximately $7.8
million from December 31, 2017
and $0.3 million from September 30, 2018.
Details as follows (unaudited, in thousands except percentages
and per share amounts):
|
Three Months
Ended
|
|
|
December 31,
2018
|
|
|
December 31,
2017
|
|
|
Q4-Q4
Change (2)
|
|
|
September 30,
2018
|
|
|
Q4-Q3
Change (2)
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third-party
software
|
$
|
13,862
|
|
|
$
|
17,213
|
|
|
$
|
(3,351)
|
|
|
$
|
14,241
|
|
|
$
|
(379)
|
|
Proprietary
software
|
|
1,082
|
|
|
|
311
|
|
|
|
771
|
|
|
|
796
|
|
|
|
286
|
|
Professional
engineering service
|
|
1,895
|
|
|
|
1,945
|
|
|
|
(50)
|
|
|
|
1,657
|
|
|
|
238
|
|
Total
revenue
|
$
|
16,839
|
|
|
$
|
19,469
|
|
|
$
|
(2,630)
|
|
|
$
|
16,694
|
|
|
$
|
145
|
|
Total gross
profit
|
$
|
3,690
|
|
|
$
|
3,616
|
|
|
|
74
|
|
|
$
|
3,359
|
|
|
$
|
331
|
|
Gross margins
(3):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third-party
software
|
|
17
|
%
|
|
|
17
|
%
|
|
|
(—)
|
%
|
|
|
16
|
%
|
|
|
1
|
%
|
Proprietary
software
|
|
87
|
%
|
|
|
81
|
%
|
|
|
6
|
%
|
|
|
86
|
%
|
|
|
1
|
%
|
Professional
engineering service
|
|
24
|
%
|
|
|
26
|
%
|
|
|
(2)
|
%
|
|
|
26
|
%
|
|
|
(2)
|
%
|
Total gross
margin
|
|
22
|
%
|
|
|
19
|
%
|
|
|
3
|
%
|
|
|
20
|
%
|
|
|
2
|
%
|
Total operating
expenses
|
$
|
9,293
|
|
|
$
|
7,913
|
|
|
$
|
1,380
|
|
|
$
|
5,491
|
|
|
$
|
3,802
|
|
Net loss
|
$
|
(5,533)
|
|
|
$
|
(4,232)
|
|
|
$
|
(1,301)
|
|
|
$
|
(2,087)
|
|
|
$
|
(3,446)
|
|
Per diluted
share
|
$
|
(0.43)
|
|
|
$
|
(0.33)
|
|
|
$
|
(0.10)
|
|
|
$
|
(0.16)
|
|
|
$
|
(0.27)
|
|
Net loss excluding
goodwill impairment (1)
|
$
|
(1,795)
|
|
|
$
|
(4,232)
|
|
|
$
|
2,437
|
|
|
$
|
(2,087)
|
|
|
$
|
292
|
|
Per diluted share
excluding goodwill impairment (1)
|
$
|
(0.14)
|
|
|
$
|
(0.33)
|
|
|
$
|
0.19
|
|
|
$
|
(0.16)
|
|
|
$
|
0.02
|
|
Adjusted EBITDAS
(2)
|
$
|
(1,634)
|
|
|
$
|
(3,739)
|
|
|
$
|
2,168
|
|
|
$
|
(1,666)
|
|
|
$
|
32
|
|
Cash, restricted
cash, cash equivalents and short-term investments
|
$
|
16,940
|
|
|
$
|
24,754
|
|
|
$
|
(7,814)
|
|
|
$
|
17,271
|
|
|
$
|
(331)
|
|
|
|
Notes:
|
|
(1)
|
Net loss excluding
goodwill impairment and per diluted share excluding goodwill
impairment are non-GAAP measurements.
|
(2)
|
Adjusted EBITDAS =
Operating loss before depreciation, amortization, stock
compensation expense and goodwill impairment. Adjusted
EBITDAS is a non-GAAP measurement (reconciliation provided after
financial statement tables).
|
(3)
|
For gross margin,
amount represents percentage point change.
|
Financial Commentary on Fourth Quarter 2018 Results (Compared
to Fourth Quarter 2017)
- Third-party software revenue decreased for the fourth quarter
of 2018 compared to the prior year period, primarily due to lower
sales of Microsoft Windows Embedded operating systems to
Honeywell.
- Proprietary software revenue increased compared to the prior
year period primarily as a result of recognition of Itron DataV
revenue, which began in the first quarter of 2018. Proprietary
software gross margin increased vs. the prior year quarter due to
improved margins on DataV licenses.
- Professional engineering service revenue decreased slightly,
primarily from decreased legacy services revenue, partially offset
by increased revenue from DataV services. Professional engineering
service gross margin decreased versus the prior year quarter
primarily due to several projects being completed in 2017.
- Operating expenses, excluding the goodwill impairment charge of
$3.7 million, decreased when compared
to the fourth quarter of 2017 due to lower salary, benefit, and
marketing costs in selling, general and administrative expense
areas from 2018 spending reductions.
- Excluding the goodwill impairment charge of $3.7 million, net loss for the current quarter
decreased by $2.4 million, or
$0.19 per diluted share, as adjusted,
vs. the fourth quarter of 2017.
Full Year 2018 Financial Summary
- Revenue was $73.4 million, down
9% compared to 2017.
- Including the goodwill impairment charge of $3.7 million, net loss was $13.7 million, or $(1.08) per diluted share, compared to a net loss
of $9.1 million, or $(0.72) per diluted share, in 2017.
- Excluding the goodwill impairment charge of $3.7 million, net loss for the year was
$(10.0) million, or $(0.79) per diluted share, as adjusted.
- Adjusted EBITDAS(1) was negative $8.9 million, compared to negative $7.6 million in the prior year.
Details as follows (unaudited, in thousands except percentages
and per share amounts):
|
Year
Ended
|
|
|
December 31,
2018
|
|
|
December 31,
2017
|
|
|
Change
(2)
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
Third-party
software
|
$
|
61,159
|
|
|
$
|
65,755
|
|
|
$
|
(4,596)
|
|
Proprietary
software
|
|
3,954
|
|
|
|
4,646
|
|
|
|
(692)
|
|
Professional
engineering service
|
|
8,301
|
|
|
|
10,410
|
|
|
|
(2,109)
|
|
Total
revenue
|
$
|
73,414
|
|
|
$
|
80,811
|
|
|
$
|
(7,397)
|
|
Total gross
profit
|
$
|
15,510
|
|
|
$
|
18,122
|
|
|
|
(2,612)
|
|
Gross margins
(3):
|
|
|
|
|
|
|
|
|
|
|
|
Third-party
software
|
|
16
|
%
|
|
|
16
|
%
|
|
|
(—)
|
%
|
Proprietary
software
|
|
90
|
%
|
|
|
96
|
%
|
|
|
(6)
|
%
|
Professional
engineering service
|
|
26
|
%
|
|
|
29
|
%
|
|
|
(3)
|
%
|
Total gross
margin
|
|
21
|
%
|
|
|
22
|
%
|
|
|
(1)
|
%
|
Total operating
expenses
|
$
|
29,441
|
|
|
$
|
27,543
|
|
|
$
|
1,898
|
|
Net loss
|
$
|
(13,737)
|
|
|
$
|
(9,058)
|
|
|
$
|
(4,679)
|
|
Per diluted
share
|
$
|
(1.08)
|
|
|
$
|
(0.72)
|
|
|
$
|
(0.36)
|
|
Net loss excluding
goodwill impairment (1)
|
$
|
(9,999)
|
|
|
|
(9,058)
|
|
|
|
(941)
|
|
Per diluted share
excluding goodwill impairment (1)
|
$
|
(0.79)
|
|
|
$
|
(0.72)
|
|
|
$
|
(0.07)
|
|
Adjusted EBITDAS
(2)
|
$
|
(8,876)
|
|
|
$
|
(7,030)
|
|
|
$
|
(1,300)
|
|
|
|
Notes:
|
|
(1)
|
Net loss excluding
goodwill impairment and per diluted share excluding goodwill
impairment are non-GAAP measurements.
|
(2)
|
Adjusted EBITDAS =
Operating loss before depreciation, amortization, stock
compensation expense, and goodwill impairment. Adjusted EBITDAS is
a non-GAAP measurement (reconciliation provided after financial
statement tables).
|
(3)
|
For gross margin,
amount represents percentage point change.
|
Additional DataV Metrics (Including Non-GAAP Measures)
(unaudited)
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.
- During the fourth quarter of 2018, we recorded $1.4 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 December 31, 2018 and
December 31, 2017.
- Total deferred revenue at December 30,
2018 was $2.7 million,
compared to $3.3 million at
December 31, 2017. The year end 2018
balance included DataV deferred revenue of $2.3 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 $4.2 million at
December 31, 2018 and approximately
$3.7 million at December 31, 2017.
First Quarter 2019 Outlook
Management currently has the following expectations for the
first quarter of 2019:
- Revenue in the range of $15
million to $17 million;
- Blended gross margin in the 15% to 17% range, due to lower
sequential contribution from proprietary software revenue,
and;
- A moderate increase from Q4 2018 cash utilization, adjusted for
approximately $1.3 million of final
Honeywell collections resulting from the 2018 loss of EMEA
sales.
Conference Call
Management will host a conference call today, February 25, 2019, at 5
p.m. Eastern Standard Time (2 p.m.
Pacific Standard Time.) To access the call dial
1-800-263-0877 or 1-646-828-8143 for international callers,
and reference "Bsquare Corporation Fourth 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 7785310. 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 DataV™, 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) (unaudited)
|
|
|
|
December
31,
|
|
|
2018
|
|
|
2017
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
10,005
|
|
|
$
|
12,859
|
Restricted
cash
|
|
|
263
|
|
|
|
—
|
Short-term
investments
|
|
|
6,409
|
|
|
|
11,895
|
Accounts receivable,
net of allowance for doubtful accounts of $40 at December 31, 2018
and $50 at December 31, 2017
|
|
|
11,581
|
|
|
|
18,014
|
Prepaid expenses and
other current assets
|
|
|
685
|
|
|
|
548
|
Contract
assets
|
|
|
1,053
|
|
|
|
937
|
Total
current assets
|
|
|
29,996
|
|
|
|
44,253
|
Restricted cash, long
term
|
|
|
263
|
|
|
|
—
|
Equipment, furniture
and leasehold improvements, net
|
|
|
911
|
|
|
|
989
|
Deferred tax
assets
|
|
|
7
|
|
|
|
—
|
Intangible assets,
net
|
|
|
267
|
|
|
|
365
|
Goodwill
|
|
|
—
|
|
|
|
3,738
|
Other non-current
assets including contract assets
|
|
|
550
|
|
|
|
89
|
Total
assets
|
|
$
|
31,994
|
|
|
$
|
49,434
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Third-party software
fees payable
|
|
$
|
7,620
|
|
|
$
|
10,547
|
Accounts
payable
|
|
|
565
|
|
|
|
375
|
Accrued
compensation
|
|
|
1,629
|
|
|
|
2,266
|
Other accrued
expenses
|
|
|
653
|
|
|
|
681
|
Deferred rent, current
portion
|
|
|
347
|
|
|
|
339
|
Deferred
revenue
|
|
|
1,652
|
|
|
|
3,219
|
Total
current liabilities
|
|
|
12,466
|
|
|
|
17,427
|
Deferred tax
liability
|
|
|
—
|
|
|
|
—
|
Deferred
rent
|
|
|
150
|
|
|
|
516
|
Deferred
revenue
|
|
|
1,037
|
|
|
|
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; 12,777,573 issued and outstanding at
December 31, 2018 and 12,664,489 issued and outstanding at December
31, 2017
|
|
|
138,280
|
|
|
|
137,622
|
Accumulated other
comprehensive loss
|
|
|
(926)
|
|
|
|
(916)
|
Accumulated
deficit
|
|
|
(119,013)
|
|
|
|
(105,276)
|
Total
shareholders' equity
|
|
|
18,341
|
|
|
|
31,430
|
Total
liabilities and shareholders' equity
|
|
$
|
31,994
|
|
|
$
|
49,434
|
BSQUARE
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(In thousands,
except per share amounts) (unaudited)
|
|
|
Three Months Ended
December 31,
|
|
|
Year Ended
December 31,
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third-party
software
|
$
|
13,862
|
|
|
$
|
17,213
|
|
|
$
|
61,159
|
|
|
$
|
65,755
|
Proprietary
software
|
|
1,082
|
|
|
|
311
|
|
|
|
3,954
|
|
|
|
4,646
|
Professional
engineering service
|
|
1,895
|
|
|
|
1,945
|
|
|
|
8,301
|
|
|
|
10,410
|
Total
revenue
|
|
16,839
|
|
|
|
19,469
|
|
|
|
73,414
|
|
|
|
80,811
|
Cost of
revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third-party
software
|
|
11,571
|
|
|
|
14,357
|
|
|
|
51,408
|
|
|
|
55,161
|
Proprietary
software
|
|
142
|
|
|
|
58
|
|
|
|
394
|
|
|
|
163
|
Professional
engineering service
|
|
1,436
|
|
|
|
1,438
|
|
|
|
6,102
|
|
|
|
7,365
|
Total
cost of revenue
|
|
13,149
|
|
|
|
15,853
|
|
|
|
57,904
|
|
|
|
62,689
|
Gross
profit
|
|
3,690
|
|
|
|
3,616
|
|
|
|
15,510
|
|
|
|
18,122
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
|
3,526
|
|
|
|
5,733
|
|
|
|
17,074
|
|
|
|
20,982
|
Research and
development
|
|
2,029
|
|
|
|
2,180
|
|
|
|
8,629
|
|
|
|
6,561
|
Goodwill
impairment
|
|
3,738
|
|
|
|
—
|
|
|
|
3,738
|
|
|
|
—
|
Total
operating expenses
|
|
9,293
|
|
|
|
7,913
|
|
|
|
29,441
|
|
|
|
27,543
|
Loss from
operations
|
|
(5,603)
|
|
|
|
(4,297)
|
|
|
|
(13,931)
|
|
|
|
(9,421)
|
Other income,
net
|
|
51
|
|
|
|
66
|
|
|
|
207
|
|
|
|
214
|
Loss before income
taxes
|
|
(5,552)
|
|
|
|
(4,231)
|
|
|
|
(13,724)
|
|
|
|
(9,207)
|
Income tax benefit
(expense)
|
|
19
|
|
|
|
(1)
|
|
|
|
(13)
|
|
|
|
149
|
Net loss
|
$
|
(5,533)
|
|
|
$
|
(4,232)
|
|
|
$
|
(13,737)
|
|
|
$
|
(9,058)
|
Basic loss per
share
|
$
|
(0.43)
|
|
|
$
|
(0.33)
|
|
|
$
|
(1.08)
|
|
|
$
|
(0.72)
|
Diluted loss per
share
|
$
|
(0.43)
|
|
|
$
|
(0.33)
|
|
|
$
|
(1.08)
|
|
|
$
|
(0.72)
|
Shares used in per
share calculations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
12,755
|
|
|
|
12,640
|
|
|
|
12,712
|
|
|
|
12,594
|
Diluted
|
|
12,755
|
|
|
|
12,640
|
|
|
|
12,712
|
|
|
|
12,594
|
BSQUARE
CORPORATION
|
NON-GAAP
INFORMATION AND RECONCILIATION TO COMPARABLE GAAP FINANCIAL
MEASURES
|
(In thousands)
(unaudited)
|
|
|
Three Months Ended
December 31,
|
|
|
Year Ended
December 31,
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
Loss from operations
as reported
|
$
|
(5,603)
|
|
|
$
|
(4,297)
|
|
|
$
|
(13,931)
|
|
|
$
|
(9,421)
|
Depreciation and
amortization
|
|
173
|
|
|
|
151
|
|
|
|
639
|
|
|
|
634
|
Stock-based
compensation
|
|
58
|
|
|
|
407
|
|
|
|
678
|
|
|
|
1,757
|
Goodwill
impairment
|
|
3,738
|
|
|
|
—
|
|
|
|
3,738
|
|
|
|
—
|
Adjusted EBITDAS
(1)
|
$
|
(1,634)
|
|
|
$
|
(3,739)
|
|
|
$
|
(8,876)
|
|
|
$
|
(7,030)
|
|
|
(1)
|
Adjusted EBITDAS is a
non-GAAP financial measure. Generally, a non-GAAP financial measure
is a numerical measure of a company's performance, financial
position or cash flow that either excludes or includes amounts that
are not normally excluded or included in the most directly
comparable measure calculated and presented in accordance with
GAAP. Adjusted EBITDAS is defined as income (loss) from operations
before depreciation expense on fixed assets and amortization
expense (including impairment) on intangible assets, stock-based
compensation expense, and goodwill impairment. Adjusted EBITDAS
should not be construed as a substitute for net income (loss) or
net cash provided (used) by operating activities (all as determined
in accordance with GAAP) for the purpose of analyzing our operating
performance, financial position and cash flows, as Adjusted EBITDAS
is not defined by GAAP. However, BSQUARE regards Adjusted EBITDAS
as a complement to net income and other GAAP financial performance
measures, including an indirect measure of operating cash
flow.
|
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SOURCE Bsquare