BSQUARE CORPORATION BELLEVUE, Wash., Nov. 7, 2017 /PRNewswire/ -- Bsquare Corporation (NASDAQ: BSQR) today announced financial results for the third quarter of 2017.
Jerry Chase, Bsquare President and CEO, commented, "We are pleased with the continued increase in the level of pilot activity for DataV, our industrial Internet of Things software offering. After closing four new paid pilots during the second quarter, we added seven additional pilots during the third quarter. These pilots are with major industrial businesses and cover all seven of our DataV applications. We expect the majority of these pilots to convert into production deployments as they are successfully concluded. Also after the close of the third quarter, we had our first major DataV subscription renewal booking. This four-year renewal, which was with Itron, Inc., is valued at $2.9 million and, we believe, attests to the value of DataV."
"Based on these results and a strong pipeline, we plan on maintaining an accelerated rate of investment in DataV sales, marketing, service delivery and product development while we continue managing our third-party software and engineering services businesses leanly with an emphasis on cash generation."
Third Quarter 2017 Financial Highlights
-- Revenue for the quarter was $19.7 million, down 13% compared to the
third quarter of 2016 and up 4% compared to the second quarter of 2017.
-- Net loss for the quarter was $2.5 million, or $0.20 per diluted share,
compared to net loss of $0.1 million, or $0.01 per diluted share, in the
third quarter of 2016 and net loss of $2.6 million, or $0.20 per diluted
share, in the second quarter of 2017.
-- Adjusted EBITDAS ((1)) was negative $1.8 million, down $1.8 million from
the third quarter of 2016 and improved by $0.2 million from the second
quarter of 2017.
-- Cash, cash equivalents and short-term investments at September 30, 2017
totaled $26.8 million, a decrease of approximately $4.8 million from
September 30, 2016 and $0.5 million from June 30, 2017.
Details as follows (unaudited, in thousands except percentages and per share amounts):
Three Months Ended
------------------
Q3-Q3 Q3-Q2
9/30/2017 9/30/2016 Change (2) 6/30/2017 Change (2)
--------- --------- --------- --------- ---------
Revenue:
Third-party Software $16,240 $18,226 $(1,986) $15,505 $735
Proprietary Software 1,200 990 210 481 719
Professional Engineering
Service 2,213 3,251 (1,038) 2,862 (649)
----- ----- ------ ----- ----
Total Revenue $19,653 $22,467 $(2,814) $18,848 $805
Total Gross Profit $4,380 $3,677 $703 $3,873 $507
Gross Margins:
Third-party Software 16% 16% 0% 15% 1%
Proprietary Software 97% 96% 1% 92% 5%
Professional Engineering
Service 27% (8)% 35% 36% (9)%
Total Gross Margin 22% 16% 6% 21% 1%
Total Operating Expenses $6,926 $4,092 $2,834 $6,492 $434
Net Loss $(2,468) $(106) $(2,362) $(2,560) $92
Per Share-Diluted $(0.20) $(0.01) $(0.19) $(0.20) $ -
Adjusted EBITDAS (1) $(1,843) $4 $(1,847) $(2,041) $198
Cash, Cash Equivalents
and Short-Term
Investments $26,758 $31,577 $(4,819) $27,296 $(538)
Notes:
(1) Adjusted EBITDAS = Income (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 2017 Results (Compared to Third Quarter 2016)
-- Third-party software revenue decreased for the third quarter of 2017
compared to the prior year period, primarily due to lower sales of
Microsoft Windows Embedded operating systems in the current period.
-- Proprietary software revenue increased, primarily due to DataV software
revenue recognized in the current period.
-- Professional engineering service revenue decreased, primarily due to the
completion in 2016 and early 2017 of several existing customer projects
and a shift in our sales generation and staffing priorities towards
DataV. Professional engineering service gross margin increased,
primarily due to higher utilization of professional engineering
personnel in the current period. In addition, the third quarter of 2016
included restructuring costs (completed in the fourth quarter of 2016).
-- Operating expenses increased, due to continued investment in DataV
sales, marketing, service delivery and product development.
Additional DataV Metrics (Including Non-GAAP Measures)
-- During the third quarter of 2017, we recorded $318,000 in DataV bookings
(a non-GAAP measure defined as the contract value of new agreements
signed with customers), including seven new paid pilots. Cash receipts
from DataV contracts totaled $2.1 million in the first nine months of
2017.
-- DataV backlog (a non-GAAP measure defined as total DataV bookings less
DataV revenue recognized to date) was $3.5 million at September 30,
2017, compared to approximately $5.7 million at December 31, 2016.
-- Total deferred revenue at September 30, 2017 was $2.7 million, compared
to $3.9 million at December 31, 2016. The September 30, 2017 balance
included DataV deferred revenue of $2.0 million. The deferred revenue
balances relating to our DataV sales 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 an additional $1.5 million at
September 30, 2017 and approximately $2.5 million at December 31, 2016.
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 new 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 2017 Outlook
Management currently has the following expectations for the fourth quarter of 2017:
-- Revenue in the range of $19.0 million to $21.0 million.
-- The Company expects to close additional paid pilots in the quarter, in
addition to booking the $2.9 million, 4-year license renewal with Itron,
Inc.
-- Blended gross margin in the 18% to 20% range.
-- A net loss, reflecting continued investments in R&D, sales and marketing
to grow DataV.
Conference Call
Management will host a conference call today, November 7, 2017, at 5 p.m. Eastern Time (2 p.m. Pacific Time). To access the call dial 1-888-778-9069 or 1-719-457-6931 for international callers, and reference "BSQUARE Corporation Third Quarter 2017 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 1901116. 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 DataV(TM), 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)
September 30, 2017 December 31, 2016
------------------ -----------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $13,131 $14,312
Short-term investments 13,627 18,888
Accounts receivable, net of allowance for
doubtful accounts of $50 at September 30, 2017
and December 31, 2016 16,609 21,579
Prepaid expenses and other current assets 957 878
Contract assets 697 -
--- ---
Total current assets 45,021 55,657
Equipment, furniture and leasehold improvements,
net 1,019 1,089
Deferred tax assets 7 7
Intangible assets, net 390 464
Goodwill 3,738 3,738
Other non-current assets including contract
assets 72 53
--- ---
Total assets $50,247 $61,008
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Third-party software fees payable $7,962 $14,831
Accounts payable 393 283
Accrued compensation 2,225 2,008
Other accrued expenses 814 714
Deferred rent, current portion 335 321
Deferred revenue 2,622 2,064
----- -----
Total current liabilities 14,351 20,221
Deferred tax liability - 23
Deferred rent 602 854
Deferred revenue 56 1,798
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; 12,625,455 shares issued and
outstanding at September 30, 2017 and
12,532,348 shares issued and outstanding at
December 31, 2016 137,187 135,660
Accumulated other comprehensive loss (905) (941)
Accumulated deficit (101,044) (96,607)
-------- -------
Total shareholders' equity 35,238 38,112
------ ------
Total liabilities and
shareholders' equity $50,247 $61,008
======= =======
BSQUARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts) (Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2017 2016 2017 2016
---- ---- ---- ----
Revenue:
Software $17,440 $19,216 $52,877 $58,118
Professional engineering service 2,213 3,251 8,465 12,526
----- ----- ----- ------
Total revenue 19,653 22,467 61,342 70,644
Cost of revenue:
Software 13,653 15,281 40,909 47,901
Professional engineering service 1,620 3,509 5,927 10,877
----- ----- ----- ------
Total cost of revenue 15,273 18,790 46,836 58,778
------ ------ ------ ------
Gross profit 4,380 3,677 14,506 11,866
Operating expenses:
Selling, general and administrative 5,338 3,283 15,249 9,693
Research and development 1,588 809 4,381 2,024
----- --- ----- -----
Total operating expenses 6,926 4,092 19,630 11,717
----- ----- ------ ------
Income (loss) from operations (2,546) (415) (5,124) 149
Other income, net 34 128 148 204
--- --- --- ---
Income (loss) before income taxes (2,512) (287) (4,976) 353
Income tax benefit (expense) 44 181 150 (144)
--- --- --- ----
Net income (loss) $(2,468) $(106) $(4,826) $209
======= ===== ======= ====
Basic income (loss) per
share $(0.20) $(0.01) $(0.38) $0.02
====== ====== ====== =====
Diluted income (loss) per
share $(0.20) $(0.01) $(0.38) $0.02
====== ====== ====== =====
Shares used in calculation of income
(loss) per share:
Basic 12,607 12,310 12,578 12,189
====== ====== ====== ======
Diluted 12,607 12,310 12,578 12,576
====== ====== ====== ======
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,
-------------------------------- -------------------------------
2017 2016 2017 2016
---- ---- ---- ----
Adjusted EBITDAS:
Income (loss) from operations as reported $(2,546) $(415) $(5,124) $149
Depreciation and amortization 163 139 483 442
Stock-based compensation expense 540 280 1,350 908
--- --- ----- ---
Adjusted EBITDAS (1) $(1,843) $4 $(3,291) $1,499
======= === ======= ======
(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 Corporation
