BSQUARE Reports First Quarter 2015 Results

Revenue up 16% year-over-year; Net Income $1.8 million; EPS $0.15

News provided by

BSQUARE Corporation

May 14, 2015, 04:10 ET

BELLEVUE, Wash., May 14, 2015 /PRNewswire/ -- BSQUARE Corporation (NASDAQ: BSQR), a leading enabler of smart, connected systems and emerging provider of actionable data solutions for the Internet of Things (IoT), today announced financial results for the three months ended March 31, 2015.

  • Revenue for the first quarter of 2015 was $26.3 million, a 3% increase compared to the fourth quarter of 2014 and a 16% increase over the first quarter of 2014.
  • Net income for the first quarter was $1.8 million, or $0.15 per share, compared to net income of $1.4 million, or $0.12 per share, in the fourth quarter of 2014 and a net loss of $0.4 million, or $0.03 per share, in the year-ago quarter.
  • Adjusted EBITDAS* for the first quarter was $2.3 million, an increase of $0.6 million compared to $1.7 million in the fourth quarter of 2014 and an increase of $2.1 million compared to $0.2 million in the year-ago quarter.
  • Cash and investments at March 31, 2015 were $26.8 million, up $0.2 million from December 31, 2014.

Details as follows (unaudited, in 000's except per share amounts):


Three Months Ended

3/31/2015

12/31/2014

3/31/2014

Revenue:










Third-party Software

$

19,808

$

20,056

$

17,695

Engineering Services

4,477


4,979


4,281

Proprietary Software

1,980


560


755

Total Revenue

26,265


25,595


22,731

Total Gross Profit

5,449


4,764


3,535

Gross Margins:










Third-party Software

14

%

14

%

13

%

Engineering Services

17

%

29

%

15

%

Proprietary Software

93

%

85

%

78

%

Total Gross Margin

21

%

19

%

16

%

Total Operating Expenses

3,573


3,476


3,732

Net Income (Loss)

$

1,823

$

1,396

$

(393)

Per Share-Diluted

$

0.15

$

0.12

$

(0.03)

Adjusted EBITDAS*

$

2,286

$

1,724

$

210

Cash and Investments EoQ**

$

26,844

$

26,640

$

23,226

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 each date above was $250,000).

CEO Commentary

Jerry Chase, President and CEO of BSQUARE, commented, "First quarter improvements in financial performance were the result of continued focus and execution on our core business. Regarding new product initiatives, our team won an order for MobileV in the quarter and we expect additional wins during the remainder of the year. We also continue to expect revenue for DataV products and services in 2015, building on the decades of experience we have with smart, connected systems."

Financial Commentary on First Quarter 2015 Results (Comparison to Fourth Quarter 2014)

  • The increase in proprietary software margin, up 9% or 8 percentage points, was driven by larger than expected sales of our legacy software in the quarter combined with a relatively fixed cost of sales;
  • The decreases in engineering services revenue, down $502,000 or 10%, and in engineering services margin, down 41% or 12 percentage points, were due primarily to recognition of revenue from a large hand-held terminal project in Japan completed during the fourth quarter of 2014; and
  • The increase in cash and investments of $0.2 million was due to EBITDAS contribution of $2.3 million, offset by a reduction in accrued expenses and third-party software fees payable of $2.1 million. Days sales outstanding, (DSO) improved to 47 days from 49 days at December 31, 2014.

Outlook

We currently have the following expectations for Q2 2015:

  • Total revenue in the range of $25 to $28 million; and
  • Continued GAAP profitability.

Conference Call

Management will host a conference call today, May 14, 2015, at 5 p.m. Eastern Time (2 p.m. Pacific Time). To access the call dial 1-888-661-5176 or 1-913-312-1379 for international callers, and reference "BSQUARE Corporation First Quarter 2015 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 3061521. A live and replay Webcast of the call will be available at www.bsquare.com in the investor relations section.

About BSQUARE Corporation

BSQUARE Corporation, (NASDAQ:  BSQR), is a leading enabler of smart, connected systems and an emerging provider of actionable data solutions for the Internet of Things (IoT). 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 growth and profitability, and cash and investments; and strategies for customer retention, growth, product and service development, 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: 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 ability to execute our development initiatives and sales and marketing strategies around DataV™, the Internet of Things, MobileV™, and our product and service offerings more generally; our success in leveraging strategic partnering initiatives with companies such as Microsoft, Intel, Aava Mobile, and Future Electronics; 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, DataV and MobileV 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,

2015

December 31,

2014

(Unaudited)




ASSETS






Current assets:






Cash and cash equivalents

$

9,948

$

13,127

Short-term investments

16,646


13,263

Accounts receivable, net of allowance for doubtful

   accounts of $94 at March 31, 2015

   and $125 at December 31, 2014

13,490


13,626

Deferred tax assets

10


10

Prepaid expenses and other current assets

705


717

Total current assets

40,799


40,743

Equipment, furniture and leasehold improvements, net

1,234


1,336

Restricted cash

250


250

Deferred income taxes

391


391

Intangible assets, net

695


729

Goodwill

3,738


3,738

Other non-current assets

54


54

Total assets

$

47,161

$

47,241

LIABILITIES AND SHAREHOLDERS' EQUITY






Current liabilities:






Third-party software fees payable

$

10,793

$

12,247

Accounts payable

211


165

Accrued compensation

1,738


2,106

Other accrued expenses

1,374


1,539

Deferred rent, current portion

280


275

Deferred revenue

555


712

Total current liabilities

14,951


17,044

Deferred tax liability

144


144

Deferred rent

1,404


1,476

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; 11,818,368 shares issued and outstanding at March 31, 2015 and 11,767,577 shares issued and outstanding at December 31, 2014

131,410


131,071

Accumulated other comprehensive loss

(923)


(846)

Accumulated deficit

(99,825)


(101,648)

Total shareholders' equity

30,662


28,577

Total liabilities and shareholders' equity

$

47,161

$

47,241

BSQUARE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts) (Unaudited)



Three Months Ended

March 31,

2015

2014

Revenue:






Software

$

21,788

$

18,450

Service

4,477


4,281

Total revenue

26,265


22,731

Cost of revenue:






Software

17,078


15,555

Service

3,738


3,641

Total cost of revenue

20,816


19,196

Gross profit

5,449


3,535

Operating expenses:






Selling, general and administrative

3,007


3,300

Research and development

566


432

Total operating expenses

3,573


3,732

Income (loss) from operations

1,876


(197)

Other income (expense), net

24


(91)

Income (loss) before income taxes

1,900


(288)

Income tax expense

(77)


(105)

Net income (loss)

$

1,823

$

(393)

Basic income (loss) per share

$

0.15

$

(0.03)

Diluted income (loss) per share

$

0.15

$

(0.03)

Shares used in calculation of income (loss) per share:






Basic

11,778


11,390

Diluted

12,057


11,390

BSQUARE CORPORATION

NON-GAAP INFORMATION AND RECONCILIATION TO COMPARABLE GAAP FINANCIAL MEASURES

(In thousands, unaudited)





Three Months Ended

March 31,

2015

2014

Adjusted EBITDAS:






Operating income (loss) as reported

$

1,876

$

(197)

Depreciation and amortization

146


163

Stock-based compensation expense

264


244

Adjusted EBITDAS (1)

$

2,286

$

210


(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.

SOURCE BSQUARE Corporation

Related Links

http://www.bsquare.com

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