BSQR - Bsquare Announces Third Quarter 2021 Financial Results

November, 10 2021 04:05 PM BSQUARE Corporation

Operating results improve quarter over quarter; Company raises $32 million

PR Newswire

SEATTLE , Nov. 10, 2021 /PRNewswire/ -- Bsquare Corporation (NASDAQ: BSQR) today announced financial results for the third quarter of 2021. Revenue was $10 .6 million and loss from operations was $0.9 million , an improvement from the second quarter operating loss of $1.3 million . Cash increased $32 .1 million from June 30 , 2021. EBITDAS, a non-GAAP measure, improved $0.4 million compared to the second quarter of 2021.

"The quarter was in-line with our expectations. An increase in Edge to Cloud segment revenue combined with continued expense management drove quarter over quarter improvement in our operating results. R&D expense reflected ongoing investment in new products that we look forward to bringing to market soon. On our earnings call, we'll share some additional color about the thinking and strategies driving our product initiatives," said Ralph C. Derrickson , President and CEO of Bsquare.

In July, the Company raised $31.6 million through the sale of its common stock. Year-to-date, the Company has sold a total of 6.9 million shares of its common stock for net cash proceeds of $31.9 million . As described in previous SEC filings, the Company intends to use the proceeds to invest in growing its business.

Third Quarter 2021 Results Compared to Second Quarter 2021

Revenue for Q3 2021 was $10.6 million , flat to Q2 2021. Edge to Cloud revenue increased $0.3 million or 42% while Partner Solutions revenue decreased $0.3 million or 3%.
Partner Solutions gross margin rate was 11.9%, a decrease from Q2 2021 due to lower rebates provided by Microsoft. Edge to Cloud gross margin rate increased from Q2 2021 due to one-time revenue with relatively high margins.
Total operating expenses were $0.3 million lower than second quarter 2021 driven by reduced personnel costs and professional fees within selling, general and administrative expenses, partially offset by a slight increase in research and development expense related to new product development.
Net loss for the current quarter was $(0.9) million , or $(0.05) per diluted share, compared to net income of $0.3 million , or $0.02 per diluted share, in Q2 2021. Second quarter net income included a non-operating gain of $1.6 million related to the forgiveness of the Company's Paycheck Protection Program loan.
EBITDAS was a loss of approximately $(0.6) million , a $0.4 million improvement compared to second quarter EBITDAS loss of $(1.0) million .
Cash, cash equivalents and restricted cash increased $32.1 million from $9.2 million on June 30, 2021 to $41.4 million on September 30, 2021 . $31.6 million of the increase was driven by the sale of 6.8 million shares of the Company's common stock and the remaining increase was driven by operations, primarily customer cash collections.

Details as follows (unaudited, in thousands except percentages and per share amounts):



Three Months Ended



September 30, 2021


June 30, 2021


Quarter-over-Quarter Change


September 30, 2020


Year-over-Year Change

Revenue:




















Partner Solutions

$
9,638


$
9,960


$
(322)


$
9,145


$
493

Edge to Cloud


1,008



711



297



1,275



(267)

Total revenue


10,646



10,671



(25)



10,420



226

Total gross profit

$
1,328


$
1,192


$
136


$
1,890


$
(562)

Gross margin (1):




















Partner Solutions


12
%


14
%


(2.0)



19
%


(7.0)

Edge to Cloud


18
%


(27)
%


45.0



12
%


6.0

Total gross margin


12
%


11
%


1.0



18
%


(6.0)

Total operating expenses


2,194



2,513



(319)



2,028



166

Net (loss) income


(895)



293



(1,188)



(136)



(759)

Per basic share


(0.05)



0.02



(0.07)



(0.01)



(0.04)

Per diluted share


(0.05)



0.02



(0.07)



(0.01)



(0.04)

EBITDAS (2)


(582)



(988)



407



277



(859)






















Cash, cash equivalents and restricted cash

$
41,367


$
9,229


$
32,138


$
12,572


$
28,795

Notes:

(1)

Quarter-over-quarter change and year-over-year change represent percentage point change.

(2)

EBITDAS is a non-GAAP financial measure (reconciliation to most comparable GAAP financial measure provided after financial statement tables).

Third Quarter 2021 Results Compared to Third Quarter 2020

Partner Solutions revenue increased $0.5 million or 5% for the comparative period. The third quarter of 2020 was negatively impacted by the onset of the COVID-19 pandemic while the third quarter of 2021 reflects some modest recovery.
Edge to Cloud revenue decreased compared to the third quarter of 2020 driven by continued purchasing delays from one of our large customers.
Total operating expenses increased $0.2 million compared to the third quarter of 2020 driven primarily by research and development costs related to new product development.
Net loss for Q3 2021 was $(0.9) million , or $(0.05) per diluted share, compared to a net loss of $(0.1) million , or $(0.01) per diluted share, in Q3 2020.

Conference Call

Management will host a conference call today, November 10, 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 Third Quarter 2021 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 2526037. 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," "continue," "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

Steven Gottlieb

Bsquare Corporation, Chief Financial and Operating Officer

Bsquare Corporation, VP Corporate Affairs

+1 425.519.5900

+ 1 425.519.5900

investorrelations@bsquare.com

Steveng@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)



September 30, 2021


December 31, 2020



(Unaudited)





ASSETS








Current assets:








Cash and cash equivalents

$
41,030


$
12,623

Restricted cash


337



337

Accounts receivable, net of allowance for doubtful accounts of $50 and $50 at September 30, 2021 and December 31, 2020, respectively


5,992



6,177

Contract assets


33



456

Prepaid expenses and other current assets


562



409

Total current assets


47,954



20,002

Property and equipment, net of accumulated depreciation


705



322

Deferred tax assets


—



7

Intangible assets, net of accumulated amortization


—



71

Right-of-use lease asset, net


1,660



1,853

Other non-current assets


24



27

Total assets

$
50,343


$
22,282

LIABILITIES AND SHAREHOLDERS' EQUITY








Current liabilities:








Third-party software fees payable

$
6,407


$
6,458

Accounts payable


400



489

Paycheck Protection Program loan


—



950

Accrued compensation


424



717

Other accrued expenses


147



216

Deferred revenue (1)


1,098



2,088

Operating lease


354



344

Total current liabilities


8,830



11,262

Deferred revenue, long-term


247



28

Operating lease, long-term


1,430



1,630

Paycheck Protection Program loan, long-term


—



634










Shareholders' equity:








Preferred stock, no par: 10,000,000 shares authorized; no shares issued and outstanding


172,318



139,726

Common stock, no par: 37,500,000 shares authorized: 20,357,099 and 13,235,038 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively


(1,014)



(992)

Accumulated other comprehensive loss


(131,468)



(130,006)

Accumulated deficit (1)


39,836



8,728

Total shareholders' equity

$
50,343


$
22,282

(1)

In connection with the preparation of our financial statements, we identified an immaterial error related to the recognition of $77,000 in revenue in our Edge to Cloud segment in the third quarter of 2019 that had a rollforward effect on consolidated equity and deferred revenue in all quarterly and annual periods through the first quarter of fiscal year 2021. Reported amounts revise Edge to Cloud revenue, deferred revenue and accumulated deficit (and line items including such amounts) in prior period financial statements to correct this error.

BSQUARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)



Three Months Ended September 30,


Nine Months Ended September 30,



2021


2020


2021


2020

Revenue:
















Partner Solutions

$
9,638


$
9,145


$
28,393


$
33,160

Edge to Cloud (1)


1,008



1,275



2,896



2,913

Total revenue


10,646



10,420



31,289



36,073

Cost of revenue:
















Partner Solutions


8,491



7,402



24,528



27,502

Edge to Cloud


827



1,128



2,648



3,050

Total cost of revenue


9,318



8,530



27,176



30,552

Gross profit


1,328



1,890



4,113



5,521

Operating expenses:
















Selling, general and administrative


1,786



1,987



6,209



6,951

Research and development


408



41



941



222

Total operating expenses


2,194



2,028



7,150



7,173

Loss from operations


(866)



(138)



(3,037)



(1,652)

Other (loss) income, net


(29)



2



1,575



(31)

Loss before income taxes


(895)



(136)



(1,462)



(1,683)

Income taxes


—



—



—



—

Net loss

$
(895)


$
(136)


$
(1,462)


$
(1,683)

Basic loss per share

$
(0.05)


$
(0.01)


$
(0.09)


$
(0.13)

Diluted loss per share

$
(0.05)


$
(0.01)


$
(0.09)


$
(0.13)

Shares used in per share calculations:
















Basic


19,603



13,165



15,419



13,205

Diluted


19,603



13,165



15,419



13,205

(1)

Reported amounts give effect to the revision of prior period financial statements to correct the immaterial error described in footnote (1) to our condensed consolidated balance sheet, above.

BSQUARE CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASURES
(In thousands, unaudited)

EBITDAS


















Three Months Ended September 30,


Nine Months Ended September 30,



2021


2020


2021


2020

Loss from operations, as reported (1)

$
(866)


$
(138)


$
(3,038)


$
(1,652)

Depreciation and amortization


66



134



312



494

Stock-based compensation


218



281



596



601

EBITDAS (2)

$
(582)


$
277


$
(2,130)


$
(557)

(1)

Reported amounts give effect to the revision of prior period financial statements to correct the immaterial error described in footnote (1) to our condensed consolidated balance sheet, above.

(2)

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 and stock-based compensation expense. Through 2020, Bsquare also excluded restructuring costs applicable to 2019, which are no longer applicable in 2021. 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. 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 EBITDAS as a complement to net income and other GAAP financial performance measures. Bsquare uses 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.

SOURCE Bsquare

Company Name:	BSQUARE Corporation
Stock Symbol:	BSQR
Market:	NASDAQ
Website:	bsquare.com

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