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Bsquare Fourth Quarter 2020 Results Reflect Increasing Business Stability

03/18/21 at 4:05 pm EDT
2020 annual net loss improves sharply; Cash position increases year-over-year.

SEATTLE, March 18, 2021 /PRNewswire/ -- Bsquare Corporation (NASDAQ: BSQR) today announced financial results for the fourth quarter of 2020. Revenue was $11.1 million, up 6% over Q3 2020, while fourth-quarter net loss was $0.2 million, compared to a net loss of $0.1 million in the third quarter. Full year 2020 net loss was $1.9 million, a $7.3 million improvement over a net loss of $9.2 million in 2019. Our cash balance on December 31, 2020, increased by $2.4 million over the same date in 2019. Adjusted EBITDAS, a non-GAAP measure, improved $5.1 million during 2020 compared to 2019.

"Our business rebuilding continued in 2020 despite the impact of COVID-19 on our revenue. The improvements in net loss and cash signal an increasing stability in our business" said Ralph C. Derrickson, CEO, and President of Bsquare.

Added Derrickson: "The growing connection between our OS licensing business and our IoT software and operations business was increasingly evident in 2020. The expansion of our business with Itron was evidence of our renewed focus on customer service. The experience we gained serving them, as well as our other large IoT customers, will result in improvements to our IoT service and software offerings."

Fourth Quarter 2020 Financial Highlights

  • Overall revenue for the quarter was $11.1 million, 6.2% higher than Q3 2020. Quarter-over-quarter improvement was primarily driven by revenue increases in the Edge to Cloud segment.
  • Partner Solutions gross margins were 15.7%, down from 19.1% in Q3 2020, while Edge to Cloud gross margins improved to 39.4%.
  • Net loss for the current quarter was $0.2 million, or $0.02 per diluted share, compared to a net loss of $0.1 million, or $0.01 per diluted share, in the third quarter of 2020.
  • Fourth-quarter results improved quarter- and year-end cash balances to $13.0 million, an increase of $2.4 million over December 31, 2019.
  • Adjusted EBITDAS was $0.1 million lower in Q4 2020 than in Q3 2020, but adjusted EBITDAS for the year was $5.1 million higher than adjusted EBITDAS for 2019.

The following table provides details regarding our financial results for the fourth quarter of 2020 (unaudited, in thousands except percentages and per share amounts):


Three Months Ended



December
31, 2020



December
31, 2019



Q4-Q4
Change (1)



September
30, 2020



Q4-Q3
Change (1)


Revenue:




















Partner Solutions

$

9,097



$

13,287



$

(4,190)



$

9,145



$

(48)


Edge to Cloud


1,974




2,079




(105)




1,275




699


Total revenue

$

11,071



$

15,366



$

(4,295)



$

10,420



$

651


Total gross profit

$

2,205



$

2,650



$

(445)



$

1,890



$

315


Gross margins:




















Partner Solutions


16

%



14

%



2

%



19

%



(3)

%

Edge to Cloud


39

%



35

%



4

%



12

%



27

%

Total gross margin


20

%



17

%



3

%



18

%



2

%

Total operating expenses

$

2,407



$

4,027



$

(1,620)



$

2,028



$

379


Total operating expenses excluding restructuring costs (2)

$

2,407



$

3,313



$

(906)



$

2,028



$

379


Net loss

$

(206)



$

(1,360)



$

1,154



$

(136)



$

(70)


Diluted net loss per share

$

(0.02)



$

(0.10)



$

0.08



$

(0.01)



$

(0.01)


Net loss excluding restructuring costs (2)

$

(206)



$

(646)



$

440



$

(136)



$

(70)


Diluted net loss per share excluding restructuring costs (2)

$

(0.02)



$

(0.05)



$

0.03



$

(0.01)



$

(0.01)


Adjusted EBITDAS (3)

$

148



$

(314)



$

462



$

277



$

(129)


Cash, restricted cash, cash equivalents and short-term investments

$

12,960



$

10,561



$

2,399



$

12,572



$

388



Notes:

(1)

For gross margin, amount represents percentage point change.



(2)

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



(3)

Adjusted EBITDAS = Income (loss) from operations before depreciation, amortization, stock compensation expense, and restructuring costs (applicable only to 2019). Adjusted EBITDAS is a non-GAAP financial measure (reconciliation provided after financial statement tables).

Financial Commentary on Fourth Quarter 2020 Results Compared to Fourth Quarter 2019

  • Partner Solutions revenue decreased for the comparative period, primarily driven by lower sales of Microsoft operating systems and other embedded software.
  • Edge to Cloud revenue decreased when compared to the prior year fourth 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 fourth quarter of 2019 due to announced cost reduction initiatives that reduced salary, benefit, and marketing costs.
  • Net loss for Q4 2020 was $0.2 million or $(0.02) per diluted share compared to a loss of $1.4 million or $(0.10) per diluted share in Q4 2019, an improvement of $1.2 million or $0.08 per diluted share.

Conference Call

Management will host a conference call today, March 18, 2021, 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 Fourth 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 8160192. 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 and 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, express or implied statements we make regarding the stability of our business, expected improvements to our IoT and software offerings, 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; 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 ongoing impact of COVID-19 on our business and on our customers and vendors; 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 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)

(unaudited)



December 31,



2020



2019


ASSETS








Current assets:








Cash and cash equivalents

$

12,623



$

7,712


Restricted cash


337




600


Short-term investments





2,249


Accounts receivable, net of allowance for doubtful accounts of $50 at December 31, 2020 and $31 at December 31, 2019


6,177




9,216


Prepaid expenses and other current assets


409




244


Contract assets


456




494


Total current assets


20,002




20,515


Equipment, furniture and leasehold improvements, net


322




252


Deferred tax assets


7




7


Intangible assets, net


71




169


Right-of-use lease assets, net


1,853




1,828


Other non-current assets including contract assets


27




284


Total assets

$

22,282



$

23,055


LIABILITIES AND SHAREHOLDERS' EQUITY








Current liabilities:








Third-party software fees payable

$

6,458



$

7,224


Accounts payable


489




408


Paycheck Protection Program loan


950





Accrued compensation


717




1,001


Other accrued expenses


216




306


Deferred revenue, current portion


2,165




1,559


Operating leases


344




702


Total current liabilities


11,339




11,200


Deferred revenue


28




903


Operating leases, long-term


1,630




1,256


Paycheck Protection Program loan, long-term


634





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; 13,235,038 issued and outstanding at December 31, 2020 and 13,042,293 issued and outstanding at December 31, 2019


139,726




138,877


Accumulated other comprehensive loss


(992)




(987)


Accumulated deficit


(130,083)




(128,194)


Total shareholders' equity


8,651




9,696


Total liabilities and shareholders' equity

$

22,282



$

23,055


 

BSQUARE CORPORATION 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(unaudited)



Three Months Ended December 31,



Year Ended December 31,



2020



2019



2020



2019


Revenue:
















Partner Solutions

$

9,097



$

13,287



$

42,257



$

50,628


Edge to Cloud


1,974




2,079




4,887




8,655


Total revenue


11,071




15,366




47,144




59,283


Cost of revenue:
















Partner Solutions


7,669




11,364




35,171




43,198


Edge to Cloud


1,197




1,352




4,247




5,989


Total cost of revenue


8,866




12,716




39,418




49,187


Gross profit


2,205




2,650




7,726




10,096


Operating expenses:
















Selling, general and administrative


2,363




2,838




9,314




11,316


Research and development


44




475




266




5,751


Restructuring costs





714







2,343


Total operating expenses


2,407




4,027




9,580




19,410


Loss from operations


(202)




(1,377)




(1,854)




(9,314)


Other income, net


(4)




33




(35)




149


Loss before income taxes


(206)




(1,344)




(1,889)




(9,165)


Income tax (expense) benefit





(16)







(16)


Net loss

$

(206)



$

(1,360)



$

(1,889)



$

(9,181)


Basic and diluted net loss per share

$

(0.02)



$

(0.10)



$

(0.14)



$

(0.71)


Net loss excluding restructuring costs


(206)




(646)




(1,889)




(6,838)


Diluted net loss per share excluding restructuring costs

$

(0.02)



$

(0.05)



$

(0.14)



$

(0.53)


Shares used in per share calculations:
















Basic and diluted


13,225




12,997




13,139




12,896


 

BSQUARE CORPORATION 

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

(In thousands, unaudited)


Adjusted EBITDAS



Three Months Ended
December 31,



Year Ended
December 31,



2020



2019



2020



2019


Loss from operations as reported

$

(202)



$

(1,377)



$

(1,854)



$

(9,314)


Depreciation and amortization


139




201




633




897


Share-based compensation


211




148




812




519


Restructuring costs





714







2,343


Adjusted EBITDAS (1)

$

148



$

(314)



$

(409)



$

(5,555)




(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, and restructuring costs (applicable only to 2019). 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, and 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
December 31,



Year Ended
December 31,



2020



2019



2020



2019


Total operating expenses

$

2,407



$

4,027



$

9,580



$

19,410


Restructuring costs





714







2,343


Total operating expenses excluding restructuring costs (1)

$

2,407



$

3,313



$

9,580



$

17,067




(1)

Total operating expenses excluding restructuring costs is a non-GAAP financial measure that Bsquare defines as total operating expenses, plus an add-back for restructuring costs (applicable only to 2019). 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 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.

 

Net loss excluding restructuring costs.



Three Months Ended
December 31,



Year Ended
December 31,



2020



2019



2020



2019


Net loss

$

(206)



$

(1,360)



$

(1,889)



$

(9,181)


Restructuring costs





714







2,343


Net loss excluding restructuring costs (1)

$

(206)



$

(646)



$

(1,889)



$

(6,838)




(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 (applicable only to 2019). 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 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.

 

Net loss per diluted share excluding restructuring costs.



Three Months Ended
December 31,



Year Ended
December 31,



2020



2019



2020



2019


Diluted net loss per share

$

(0.02)



$

(0.10)



$

(0.14)



$

(0.71)


Restructuring costs





0.05







0.18


Diluted net loss per share excluding restructuring costs (1)

$

(0.02)



$

(0.05)



$

(0.14)



$

(0.53)




(1)

Diluted net loss per share excluding restructuring costs is a non-GAAP financial measure that Bsquare defines as net loss per diluted share, plus an add-back for the per diluted share amount of restructuring costs (applicable only to 2019). Other than being expressed on a per diluted share basis, this measure is the same as net loss excluding restructuring costs, and it has the same limitations, and it is used and disclosed by Bsquare for the same reasons.

 

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SOURCE Bsquare