BELLEVUE, Wash., May 13, 2019 /PRNewswire/ -- Bsquare
Corporation (NASDAQ: BSQR) today announced financial results for
the first quarter of 2019.
"Q1 was a difficult quarter for us," said newly-appointed
Bsquare President and CEO Ralph C.
Derrickson. "The DataV product initiative has not met
expectations, and the third-party software business has continued
to decline. To improve the business, we must lower expenses
and rekindle revenue growth."
"In the second half of 2019 we are implementing a series of
initiatives as part of a program I call One Bsquare that aligns our
sales and marketing, strategic partnerships, and product
development efforts. One Bsquare balances our third-party and IoT
businesses, meeting our customers where they are, much earlier in
their IoT/cloud journey. We intend to go to market with a
pragmatic edge-to-cloud message and offering that builds on our
legacy embedded OS business with a complimentary suite of software
and services that allows our customers to build and operate the
next generation of intelligent devices and systems."
"While I expect these initiatives, when fully implemented over
the next several quarters, will have a positive impact on revenue
growth, we cannot wait and see. We must implement expense
reductions now and to that end we have flattened the organization,
eliminating positions and redundancy at all levels. Last week
we took the difficult step of downsizing our product development
team and reducing annualized expense by approximately $4.5 million. Having these changes behind us in
the second quarter will help set us up for reduced cash burn in the
second half of 2019," concluded Mr. Derrickson.
First Quarter 2019 Financial Highlights
- Revenue was $15.1 million, down
27% compared to the first quarter of 2018 and down 10% compared to
the fourth quarter of 2018.
- Net loss was $2.8 million, or
$(0.22) per diluted share, compared
to a net loss of $2.4 million, or
$(0.19) per diluted share, in the
first quarter of 2018, and a net loss of $5.5 million, or $(0.43) per diluted share, in the fourth quarter
of 2018.
- Adjusted EBITDAS (1) was negative $2.5 million, compared to negative $2.0 million in the first quarter of 2018 and
negative $1.6 million in the fourth
quarter of 2018.
- Cash, cash equivalents, restricted cash, and short-term
investments at March 31, 2019 totaled $15.3 million, a decrease of approximately
$6.2 million from March 31, 2018 and a decrease of $1.7 million from December
31, 2018.
Details as follows (unaudited, in thousands except percentages
and per share amounts):
|
Three Months
Ended
|
|
|
March 31,
2019
|
|
|
March 31,
2018
|
|
|
Q1-Q1
Change (2)
|
|
|
December 31,
2018
|
|
|
Q1-Q4
Change (3)
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third-party
software
|
$
|
13,101
|
|
|
$
|
16,064
|
|
|
$
|
(2,963)
|
|
|
$
|
13,862
|
|
|
$
|
(761)
|
|
Proprietary
software
|
|
251
|
|
|
|
1,795
|
|
|
|
(1,544)
|
|
|
|
1,082
|
|
|
|
(831)
|
|
Professional
engineering service
|
|
1,744
|
|
|
|
2,819
|
|
|
|
(1,075)
|
|
|
|
1,895
|
|
|
|
(151)
|
|
Total
revenue
|
$
|
15,096
|
|
|
$
|
20,678
|
|
|
$
|
(5,582)
|
|
|
$
|
16,839
|
|
|
$
|
(1,743)
|
|
Total gross
profit
|
$
|
2,391
|
|
|
$
|
5,200
|
|
|
|
(2,809)
|
|
|
$
|
3,690
|
|
|
$
|
(1,299)
|
|
Gross margins
(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third-party
software
|
|
15
|
%
|
|
|
17
|
%
|
|
|
(2)
|
%
|
|
|
17
|
%
|
|
|
(2)
|
%
|
Proprietary
software
|
|
15
|
%
|
|
|
98
|
%
|
|
|
(83)
|
%
|
|
|
87
|
%
|
|
|
(72)
|
%
|
Professional
engineering service
|
|
23
|
%
|
|
|
26
|
%
|
|
|
(3)
|
%
|
|
|
24
|
%
|
|
|
(1)
|
%
|
Total gross
margin
|
|
16
|
%
|
|
|
25
|
%
|
|
|
(9)
|
%
|
|
|
22
|
%
|
|
|
(6)
|
%
|
Total operating
expenses
|
$
|
5,270
|
|
|
$
|
7,678
|
|
|
$
|
(2,408)
|
|
|
$
|
9,293
|
|
|
$
|
(4,023)
|
|
Net loss
|
$
|
(2,846)
|
|
|
$
|
(2,434)
|
|
|
$
|
(412)
|
|
|
$
|
(5,533)
|
|
|
$
|
2,687
|
|
Per diluted
share
|
$
|
(0.22)
|
|
|
$
|
(0.19)
|
|
|
$
|
(0.03)
|
|
|
$
|
(0.43)
|
|
|
$
|
0.21
|
|
Net loss excluding
goodwill impairment (3)
|
$
|
(2,846)
|
|
|
$
|
(2,434)
|
|
|
$
|
(412)
|
|
|
$
|
(1,795)
|
|
|
$
|
(1,051)
|
|
Per diluted share
excluding goodwill impairment (3)
|
$
|
(0.22)
|
|
|
$
|
(0.19)
|
|
|
$
|
(0.03)
|
|
|
$
|
(0.14)
|
|
|
$
|
(0.08)
|
|
Adjusted EBITDAS
(1)
|
$
|
(2,517)
|
|
|
$
|
(2,006)
|
|
|
$
|
(511)
|
|
|
$
|
(1,634)
|
|
|
$
|
(883)
|
|
Cash, restricted
cash, cash equivalents and short-term investments
|
$
|
15,263
|
|
|
$
|
21,435
|
|
|
$
|
(6,172)
|
|
|
$
|
16,677
|
|
|
$
|
(1,414)
|
|
Notes:
(1)
|
Adjusted EBITDAS =
Income (loss) from operations before depreciation, amortization,
stock compensation expense and goodwill impairment charge. Adjusted
EBITDAS is a non-GAAP measurement (reconciliation provided after
financial statement tables).
|
(2)
|
For gross margin,
amount represents percentage point change.
|
(3)
|
Net loss excluding
goodwill impairment and per diluted share excluding goodwill
impairment are non-GAAP measurements and exclude the goodwill
impairment charge in the fourth quarter of 2018 of $3.7
million.
|
Financial Commentary on First Quarter 2019 Results (Compared
to First Quarter 2018)
- Third-party software revenue decreased for the quarterly
period, driven by lower sales of Microsoft Embedded and Windows
Mobile operating systems in Europe.
- Proprietary software revenue decreased for the quarterly
period, primarily due to timing of DataV software revenue
recognition, as a greater portion of a DataV software license fee
with a customer was recognized in the prior year period compared to
a DataV software license fee with another customer in the current
year period.
- Professional engineering service revenue decreased for the
quarterly period, primarily due to the completion in 2018 of
several existing customer projects.
- Operating expenses decreased for the quarterly period, due to
lower salary, benefit, and marketing costs in selling, general and
administrative expense areas from spending reductions initiated in
2018.
Second Quarter 2019 Outlook
On May 9, 2019, our Board of
Directors approved a restructuring plan to reduce our workforce by
38 positions, or approximately 25%, in the second and third
quarters of 2019 in order to reduce expense and re-align our
go-forward business model under the One Bsquare initiative.
The annualized expense equivalent of these reductions was
approximately $4.5 million, including
$1.0 million in contractor
fees. Severance costs associated with the one-time
involuntary benefit arrangement were approximately $1.1 million in cash; approximately half of these
costs will be paid out during the second quarter of 2019 with the
remaining costs to be paid in subsequent periods.
Management currently has the following expectations for the
second quarter of 2019:
- Revenue in the range of $12.5
million to $14.5 million,
reflecting a reduction in Embedded OS sales to Honeywell, which we
expect will impact revenue by $1.2
million to $1.5 million per
quarter.
- Blended gross margin in the 15% to 17% range.
- There will be a negative impact on cash in the second quarter
associated with the one-time severance expense but an easing in
cash utilization in the second half of 2019 as net losses will be
moderated by lower operating expenses as a result of headcount
reductions.
Conference Call
Management will host a conference call today, May 13, 2019, 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 First
Quarter 2019 Earnings Conference Call." A replay will be available
for two weeks following the call by dialing 1-844-512-2921, or
1-412-317-6671 for international callers; reference pin
number 1638520. 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 Internet of Things (IoT) 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 IoT 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 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)
|
|
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
7,489
|
|
|
$
|
10,005
|
|
Restricted
cash
|
|
|
338
|
|
|
|
263
|
|
Short-term
investments
|
|
|
7,173
|
|
|
|
6,409
|
|
Accounts receivable,
net of allowance for doubtful accounts of $31 at March 31, 2019 and
$40 at December 31, 2018
|
|
|
9,713
|
|
|
|
11,581
|
|
Prepaid expenses and
other current assets
|
|
|
874
|
|
|
|
685
|
|
Contract
assets
|
|
|
841
|
|
|
|
1,053
|
|
Total
current assets
|
|
|
26,428
|
|
|
|
29,996
|
|
Restricted cash, long
term
|
|
|
263
|
|
|
|
263
|
|
Equipment, furniture
and leasehold improvements, net
|
|
|
989
|
|
|
|
911
|
|
Deferred tax
assets
|
|
|
7
|
|
|
|
7
|
|
Intangible assets,
net
|
|
|
242
|
|
|
|
267
|
|
Right-of-use assets,
net
|
|
|
1,089
|
|
|
|
550
|
|
Other non-current
assets including contract assets
|
|
|
655
|
|
|
|
550
|
|
Total
assets
|
|
$
|
29,673
|
|
|
$
|
32,544
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Third-party software
fees payable
|
|
$
|
7,317
|
|
|
$
|
7,620
|
|
Accounts
payable
|
|
|
221
|
|
|
|
565
|
|
Accrued
compensation
|
|
|
1,810
|
|
|
|
1,629
|
|
Other accrued
expenses
|
|
|
434
|
|
|
|
653
|
|
Deferred rent, current
portion
|
|
|
—
|
|
|
|
347
|
|
Operating lease,
current portion
|
|
|
1,131
|
|
|
|
—
|
|
Deferred revenue,
current portion
|
|
|
1,551
|
|
|
|
1,652
|
|
Total
current liabilities
|
|
|
12,464
|
|
|
|
12,466
|
|
Deferred
rent
|
|
|
—
|
|
|
|
150
|
|
Deferred
revenue
|
|
|
1,162
|
|
|
|
1,037
|
|
Operating
lease
|
|
|
374
|
|
|
|
—
|
|
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; 12,823,298 issued and outstanding at
March 31, 2019 and 12,777,573 issued and outstanding at December
31, 2018
|
|
|
138,448
|
|
|
|
138,280
|
|
Accumulated other
comprehensive loss
|
|
|
(916)
|
|
|
|
(926)
|
|
Accumulated
deficit
|
|
|
(121,859)
|
|
|
|
(119,013)
|
|
Total
shareholders' equity
|
|
|
15,673
|
|
|
|
18,341
|
|
Total
liabilities and shareholders' equity
|
|
$
|
29,673
|
|
|
$
|
31,994
|
|
BSQUARE
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(In thousands,
except per share amounts)
|
(Unaudited)
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Revenue:
|
|
|
|
|
|
|
|
|
Third-party
software
|
|
$
|
13,101
|
|
|
$
|
16,064
|
|
Proprietary
software
|
|
|
251
|
|
|
|
1,795
|
|
Professional
engineering service
|
|
|
1,744
|
|
|
|
2,819
|
|
Total
revenue
|
|
|
15,096
|
|
|
|
20,678
|
|
Cost of
revenue:
|
|
|
|
|
|
|
|
|
Third-party
software
|
|
|
11,149
|
|
|
|
13,354
|
|
Proprietary
software
|
|
|
213
|
|
|
|
41
|
|
Professional
engineering service
|
|
|
1,343
|
|
|
|
2,083
|
|
Total
cost of revenue
|
|
|
12,705
|
|
|
|
15,478
|
|
Gross
profit
|
|
|
2,391
|
|
|
|
5,200
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
|
|
2,934
|
|
|
|
5,448
|
|
Research and
development
|
|
|
2,336
|
|
|
|
2,230
|
|
Total
operating expenses
|
|
|
5,270
|
|
|
|
7,678
|
|
Loss from
operations
|
|
|
(2,879)
|
|
|
|
(2,478)
|
|
Other income,
net
|
|
|
33
|
|
|
|
44
|
|
Loss before income
taxes
|
|
|
(2,846)
|
|
|
|
(2,434)
|
|
Income tax (expense)
benefit
|
|
|
—
|
|
|
|
—
|
|
Net loss
|
|
$
|
(2,846)
|
|
|
$
|
(2,434)
|
|
Basic loss per
share
|
|
$
|
(0.22)
|
|
|
$
|
(0.19)
|
|
Diluted loss per
share
|
|
$
|
(0.22)
|
|
|
$
|
(0.19)
|
|
Shares used in per
share calculations:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
12,795
|
|
|
|
12,673
|
|
Diluted
|
|
|
12,795
|
|
|
|
12,673
|
|
BSQUARE
CORPORATION
|
NON-GAAP
INFORMATION AND RECONCILIATION TO COMPARABLE GAAP FINANCIAL
MEASURES
|
(In thousands,
unaudited)
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Loss from operations
as reported
|
|
$
|
(2,879)
|
|
|
$
|
(2,478)
|
|
Depreciation and
amortization
|
|
|
194
|
|
|
|
141
|
|
Stock-based
compensation
|
|
|
168
|
|
|
|
331
|
|
Adjusted EBITDAS
(1)
|
|
$
|
(2,517)
|
|
|
$
|
(2,006)
|
|
|
|
(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