Breaking News

Siemens Agrees to Buy Dresser-Rand For $7.6 Billion in All Cash Deal
Tweet TWEET

Bsquare Reports Third Quarter 2013 Results

Bsquare Reports Third Quarter 2013 Results 
BELLEVUE, WA -- (Marketwired) -- 11/12/13 --  BSQUARE Corporation
(NASDAQ: BSQR), a leading enabler of smart, connected systems, today
announced financial results for the third quarter and nine months
ended September 30, 2013. Total revenue for the quarter was $23.6
million, up 8% compared to the second quarter of 2013 and down 8%
year-over-year. Total revenue for the nine months was $66.3 million,
down 12% year-over-year. The net loss for the quarter was $3.6
million, or $0.32 per share, compared to a net loss of $805,000, or
$0.07 per share, in the second quarter of 2013 and compared to net
income of $610,000, or $0.05 per share, in the year-ago quarter. The
net loss for the nine months was $5.2 million, or $0.47 per share,
compared to net income of $220,000, or $0.02 per share, in the
year-ago period. Both the three-month and nine-month periods in 2013
included the negative effect of a $2.2 million increase in the
Company's deferred tax asset allowance ($0.19 per share effect for
the three months and $0.20 per share for the nine months). Adjusted
EBITDAS for the quarter was negative $1.0 million compared to
negative $337,000 in the second quarter of 2013 and positive $1.2
million in the year-ago quarter. Adjusted EBITDAS for the nine months
was negative $1.8 million compared to positive $2.0 million in the
year-ago period. 
Details as follows (unaudited, in 000's except per share amounts):  


 
                                                Three Months Ended          
                                      ------------------------------------- 
                                       9/30/2013    6/30/2013    9/30/2012  
                                      -----------  -----------  ----------- 
Revenue:                                                                    
  Third-party Software                $    18,004  $    16,254  $    18,339 
  Engineering Services                      5,116        4,986        5,850 
  Proprietary Software                        452          597        1,296 
                                      -----------  -----------  ----------- 
Total Revenue                              23,572       21,837       25,485 
                                      -----------  -----------  ----------- 
Total Gross Profit                          3,369        3,793        4,842 
Gross Margins:                                                              
  Third-party Software                         13%          16%          16%
  Engineering Services                         17%          18%          16%
  Proprietary Software                         42%          63%          80%
                                      -----------  -----------  ----------- 
Total Gross Margin                             14%          17%          19%
                                      -----------  -----------  ----------- 
Total Operating Expenses                    4,764        4,579        3,727 
                                      -----------  -----------  ----------- 
Net Loss                              $    (3,567) $      (805) $       610 
                                      ===========  ===========  =========== 
  Per Share-Diluted                   $     (0.32) $     (0.07) $      0.05 
                                      ===========  ===========  =========== 
Adjusted EBITDAS                      $      (994) $      (337) $     1,183 
                                      ===========  ===========  =========== 
Cash and Investments EoQ              $    21,539  $    20,977  $    19,554 

 
Notes: 
Adjusted EBITDAS = Operating income (loss) before depreciation,
amortization and stock compensation expense. Adjusted EBITDAS is a
non-GAAP measurement (reconciliation provided after financial
statement tables). 
 Cash and Investments EoQ includes both short and
long-term amounts (long-term at 9/30/13 = $250,000). 
CEO Commentary
 Jerry Chase, interim Chief Executive Officer of
Bsquare, commented on results and the business, "During the quarter
we continued to deliver important products and services to the smart
connected device ecosystem. Our financial results to date have not
met our goals or expectations. As a result, during Q3 and continuing
into Q4 Bsquare has taken significant steps to correct this
situation, better position the Company to serve its customers and to
return the company to a sound financial footing in 2014. In July we
added two new Board members, Harel Kodesh and myself. In parallel,
Andrew Harries was appointed as Board Chair to lead the Board as it
works with management to re-shape Bsquare's strategic direction. In
September Brian Crowley stepped down as CEO, and I was appointed
interim CEO. In October the Company implemented a restructuring that
included a workforce reduction that impacted approximately 20% of the
Company's personnel and targeted approximately $4 million in annual
cost savings. These actions and the resulting severance and
restructuring costs have affected, or will negatively affect, our Q3
and Q4 results but will largely be complete by the fourth quarter,
and will position the Company to enter 2014 on a more stable footing.
Going forward, Bsquare will maintain its focus on building strategic
solutions for our customers, and building and maintaining a solid
financial foundation. In addition we believe Bsquare is well
positioned to increase its participation in the rapidly growing
Internet of Things market. As we drive to grow in this market, we
will initially seek to deepen and broaden our relationships with our
base of world-class customers." 
Financial Commentary on Third Quarter Results (Comparison to Second
Quarter Results) 


 
--  The increase in third-party software sales, up $1.8 million or 11%,
    was due to an increase in Microsoft Windows Embedded operating system
    sales which, in turn, was driven by higher volumes across all customer
    segments;
--  The decrease in proprietary software revenue, down $145,000 or 24%,
    was driven by declines in several product lines, none of which was
    individually significant;
--  The decrease in third-party software margin, down 19% or three
    percentage points, was driven by lower Microsoft margins, a heavier
    concentration of sales in our lowest margin product line, Microsoft
    Windows embedded operating systems, and lower rebate;
--  The decline in proprietary software margin, down 33% or 21 percentage
    points, was driven by the decline in revenue given a relatively fixed
    cost of sales;
--  The increase in operating expenses, up $185,000 or 4%, was driven by
    severance costs associated with an executive departure;
--  The net loss increase was driven by the aforementioned factors and a
    $2.2 million, or $0.19 per share, increase in the Company's U.S.
    deferred tax asset allowance; and
--  Cash was up $562,000 driven by positive working capital changes and
    restricted cash decreased by $625,000 from June 30, 2013 as a result
    of a lease amendment.

  
Outlook 
The Company currently has the following expectations for Q4 2013: 


 
--  Total revenue is expected to be in the range of $22 million to $24
    million; and
--  Cash and investments are projected to decline by approximately $1.8
    million from S
eptember 30, 2013 due primarily to negative working
    capital effects and expenditures associated with the restructuring.

  
Conference Call 
Management will host a conference call today, November 12, 2013, at 5
p.m. Eastern Time (2 p.m. Pacific Time). To access the call dial
1-877-941-8416, or +1-480-629-9808 for international callers, and
reference "BSQUARE Corporation Third Quarter 2013 Earnings Conference
Call." A replay will be available for two weeks following the call by
dialing 1-877-870-5176, or +1-858-384-5517 for international callers;
reference pin number 4647277. A live and replay Webcast of the call
will be available at www.bsquare.com in the investor relations
section. 
About BSQUARE Corporation
 Bsquare, a global leader in embedded
solutions, applies experience and expertise on leading platforms to
create new connections with customers, new business models and to
enable new ways of working and communicating. Bsquare serves
customers by forging connections among the partners, people, tools
and technology needed to create smart connected devices. For more
information, visit www.bsquare.com.  
This release contains forward-looking statements within the meaning
of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Examples of forward-looking statements include,
among others, statements relating to our financial results in future
periods such as anticipated revenue, margins, spending,
profitability, and cash and investments; anticipated levels of
capital expenditures; future market conditions; potential sales or
projects in our pipeline; expectations for specific customers,
geographies or products; and anticipated effects of our
restructuring. 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, the following: whether we are able to maintain our favorable
relationship with Microsoft; changes in customer demand for our
engineering services; the extent to which we are successful in
gaining new long-term relationships with customers and retaining
existing ones; our ability to execute our sales and marketing
strategies for our service offerings, third-party products, and our
proprietary products; our ability to execute our international
expansion strategies; our success in leveraging strategic partnering
initiatives with companies such as Qualcomm; our management of risks
associated with protection of intellectual property and potential
infringement claims; our success in integrating acquisitions such as
MPC Data; our ability to implement workforce reductions in various
geographies; possible changes in the size and components of the
expected charges associated with the restructuring; risks associated
with our ability to achieve the anticipated benefits of the
restructuring; and such other risk factors as discussed in our most
recent Annual Report on Form 10-K and other filings with the SEC. 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 is a registered trademark of BSQUARE Corporation. All other
product and company names herein may be trademarks of their
respective owners. 


 
                                                                            
                                                                            
                                                                            
                            BSQUARE CORPORATION                             
                   CONDENSED CONSOLIDATED BALANCE SHEETS                    
                    (In thousands, except share amounts)                    
                                                                            
                                                                            
                                               September 30,   December 31, 
                                                    2013           2012     
                                               -------------  ------------- 
                                                (Unaudited)                 
                    ASSETS                                                  
Current assets:                                                             
  Cash and cash equivalents                    $      13,236  $       9,903 
  Short-term investments                               8,053          9,826 
  Accounts receivable, net of allowance for                                 
   doubtful accounts of $263 at September 30,                               
   2013 and $200 at December 31, 2012                 12,811         16,095 
  Deferred tax assets                                    160            296 
  Prepaid expenses and other current assets            1,300            858 
                                               -------------  ------------- 
                                                                            
    Total current assets                              35,560         36,978 
Equipment, furniture and leasehold                                          
 improvements, net                                       561            759 
Restricted cash                                          250            875 
Deferred tax assets                                      210          2,255 
Intangible assets, net                                   897          1,069 
Goodwill                                               3,738          3,738 
Other non-current assets                                  93            117 
                                               -------------  ------------- 
                                                                            
    Total assets                               $      41,309  $      45,791 
                                               =============  ============= 
                                                                            
     LIABILITIES AND SHAREHOLDERS' EQUITY                                   
Current liabilities:                                                        
  Third-party software fees payable            $      11,055  $      11,099 
  Accounts payable                                       778            553 
  Accrued compensation                                 1,986          2,205 
  Other accrued expenses                               1,332          1,732 
  Deferred revenue                                     1,074            837 
                                               -------------  ------------- 
                                 
                                           
    Total current liabilities                         16,225         16,426 
Deferred tax liability                                   206            206 
Deferred rent                                            422            154 
Shareholders' equity:                                                       
  Preferred stock, no par value: 10,000,000                                 
   shares authorized; no shares issued and                                  
   outstanding                                            --             -- 
  Common stock, no par value: 37,500,000                                    
   shares authorized; 11,203,707 shares issued                              
   and outstanding at September 30, 2013 and                                
   11,065,217 shares issued and outstanding at                              
   December 31, 2012                                 129,215        128,474 
  Accumulated other comprehensive loss                  (791)          (733)
  Accumulated deficit                               (103,968)       (98,736)
                                               -------------  ------------- 
                                                                            
    Total shareholders' equity                        24,456         29,005 
                                               -------------  ------------- 
                                                                            
    Total liabilities and shareholders' equity $      41,309  $      45,791 
                                               =============  ============= 
                                                                            
                                                                            
                                                                            
                            BSQUARE CORPORATION                             
   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS   
            (In thousands, except per share amounts) (Unaudited)            
                                                                            
                                                                            
                            Three Months Ended         Nine Months Ended    
                               September 30,             September 30,      
                             2013         2012         2013         2012    
                                                                            
                         -----------  -----------  -----------  ----------- 
Revenue:                                                                    
  Software               $    18,456  $    19,635  $    51,818  $    55,645 
  Service                      5,116        5,850       14,461       19,893 
                         -----------  -----------  -----------  ----------- 
                                                                            
    Total revenue             23,572       25,485       66,279       75,538 
                         -----------  -----------  -----------  ----------- 
                                                                            
Cost of revenue:                                                            
  Software                    15,965       15,730       43,087       45,094 
  Service                      4,238        4,913       12,683       16,410 
                         -----------  -----------  -----------  ----------- 
                                                                            
    Total cost of                                                           
     revenue                  20,203       20,643       55,770       61,504 
                         -----------  -----------  -----------  ----------- 
                                                                            
      Gross profit             3,369        4,842       10,509       14,034 
Operating expenses:                                                         
  Selling, general and                                                      
   administrative              3,960        2,866       11,432       10,557 
  Research and                                                              
   development                   804          861        2,205        2,909 
                         -----------  -----------  -----------  ----------- 
                                                                            
      Total operating                                                       
       expenses                4,764        3,727       13,637       13,466 
                         -----------  -----------  -----------  ----------- 
                                                                            
Income (loss) from                                                          
 operations                   (1,395)       1,115       (3,128)         568 
Other income (expense),                                                     
 net                             (15)          28          100          122 
                         -----------  -----------  -----------  ----------- 
                                                                            
Income (loss) before                                                        
 income taxes                 (1,410)       1,143       (3,028)         690 
Income tax expense            (2,157)        (533)      (2,206)        (470)
                         -----------  -----------  -----------  ----------- 
                                                                            
Net income (loss)        $    (3,567) $       610  $    (5,234) $       220 
                         ===========  ===========  ===========  =========== 
                                                                            
Basic income (loss) per                                                     
 share                   $     (0.32) $      0.06  $     (0.47) $      0.02 
                         ===========  ===========  ===========  =========== 
                                                                            
Diluted income (loss)                                                       
 per share               $     (0.32) $      0.05  $     (0.47) $      0.02 
                         ===========  ===========  ===========  =========== 
                                                                            
Shares used in                                                              
 calculation of income                                                      
 (loss) per share:                                                          
  Basic                       11,194       10,943       11,150       10,935 
                         ===========  ===========  ===========  =========== 
                                                                            
  Diluted                     11,194       11,474       11,150       11,450 
                         ===========  ===========  ===========  =========== 
                                                                            
                                                                            
                                                                            
                                                                            
                             BSQUARE CORPORATION                            
    NON-GAAP INFORMATION AND RECONCILIATION TO COMPARABLE GAAP FINANCIAL    
                                   MEASURES                                 
                          (In thousands, unaudited)                         
                                                                            
                             Three Months Ended        Nine Months Ended    
                               September 30,             September 30,      
                         ------------------------- -------------------------
                             2013         2012         2013         2012    
                         ------------ ------------ ------------ ------------
                                                                            
Adjusted EBITDAS:                                                           
  Operating income                                                          
   (loss), as reported      $ (1,395)       $1,115    $ (3,128)         $568
  Depreciation and                                                          
   amortization                   181          275          586          758
  Stock-based                                                               
   compensation expense           220        (207)          726          685
                         ------------ ------------ ------------ ------------
                                                                            
Adjusted EBITDAS (1)          $ (994)       $
1,183    $ (1,816)      $ 2,011
                         ============ ============ ============ ============
                                                                            
                                                                            
                                                                            
(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 operating income (loss) 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 by 
 (used in) 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, the   
 Company regards Adjusted EBITDAS as a complement to net income and other   
 GAAP financial performance measures, including an indirect measure of      
 operating cash flow.                                                       

  
Bsquare Contact:
Scott Mahan
BSQUARE Corporation
+1 425.519.5900
investorrelations@bsquare.com 
Investor Contact:
Brett Maas
Hayden IR
+ 1 646.536.7331
Brett@haydenir.com 
 
 
Press spacebar to pause and continue. Press esc to stop.