Bsquare Announces Second Quarter 2021 Financial Results

•

Revenue for Q2 2021 was $10.7 million, an increase of $0.7 million, or 7.0%, from Q1 2021. Partner Solutions drove the improvement with a revenue increase of $1.2 million or 13%. This was partially offset by a revenue decrease of $0.5 million or 40% in the Edge to Cloud segment. 

•

Partner Solutions gross margin rate was 13.9%, a decrease from Q1 2021 due to minor fluctuations in product mix. Edge to Cloud gross margin rate decreased from Q1 2021 which had benefited from one-time revenue with relatively high margins.

•

Net income for the current quarter was $0.3 million, or $0.02 per diluted share, compared to a net loss of $0.9 million, or $0.07 per diluted share, in Q1 2021.

•

Second quarter net income includes 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 $1.0 million, a $0.4 million decline compared to EBITDAS of $0.6 million in Q1 2021

•

Cash, cash equivalents and restricted cash totaled $9.2 million on June 30, 2021. The use of cash during the quarter was driven primarily by investment in R&D, operations and variation in working capital.

Three Months Ended

June 30,
2021

March 31,
2021

Quarter-over-
Quarter Change

June 30,
2020

Year-over-
Year Change

Revenue:

Partner Solutions

$

9,960

$

8,795

$

1,165

$

8,110

$

1,850

Edge to Cloud

711

1,177

(466)

814

(103)

Total revenue

10,671

9,972

699

8,924

1,747

Total gross profit

$

1,192

$

1,593

$

(401)

$

1,046

$

146

Gross margins (1):

Partner Solutions

14

%

15

%

(1)

%

14

%

0

%

Edge to Cloud

(27)

%

22

%

(49)

%

(15)

%

(12)

%

Total gross margin

11

%

16

%

(5)

%

12

%

(1)

%

Total operating expenses

2,513

2,444

69

2,121

392

Net income (loss)

293

(860)

1,153

(1,073)

1,366

Per basic share

0.02

(0.07)

0.09

(0.08)

0.10

Per diluted share

0.02

(0.07)

0.09

(0.08)

0.10

EBITDAS (2)

(988)

(560)

(428)

(806)

(182)

Cash, cash equivalents and restricted cash

$

9,229

$

10,365

$

(1,136)

$

12,582

$

(3,353)

(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).

•

Partner Solutions revenue increased for the comparative period. The second quarter of 2020 was negatively impacted by the onset of the COVID-19 pandemic while the second quarter of 2021 saw improvement in ordering by some of our larger customers.

•

Edge to Cloud revenue decreased compared to the second quarter of 2020, driven by lower professional services revenue from certain of the company's smaller customers.

•

Total operating expenses increased compared to the second quarter of 2020, due to one-time professional fees and a quarter-over-quarter decrease in vendor rebates.

•

Net income for Q2 2021 was $0.3 million, or $0.02 per diluted share, compared to a net loss of $1.1 million, or $(0.08) per diluted share, in Q2 2020.  Second quarter 2021 net income includes a non-operating gain of $1.6 million related to the forgiveness of the Company's Paycheck Protection Program loan.

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 CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

June 30, 2021

December 31, 2020

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

8,892

$

12,623

Restricted cash

337

337

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

6,318

6,177

Contract assets

46

456

Prepaid expenses and other current assets

743

409

Total current assets

16,336

20,002

Property and equipment, net of accumulated depreciation

654

322

Deferred tax assets

7

7

Intangible assets, net of accumulated amortization

22

71

Right-of-use lease asset, net

1,712

1,853

Other non-current assets

24

27

Total assets

$

18,755

$

22,282

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Third-party software fees payable

$

5,665

$

6,458

Accounts payable

263

489

Paycheck Protection Program loan

—

950

Accrued compensation

567

717

Other accrued expenses

211

216

Deferred revenue (1)

1,028

2,088

Operating lease

348

344

Total current liabilities

8,082

11,262

Deferred revenue, long-term

300

28

Operating lease, long-term

1,487

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

—

—

Common stock, no par: 37,500,000 shares authorized: 13,479,220 and 13,235,038 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

140,494

139,726

Accumulated other comprehensive loss

(1,035)

(992)

Accumulated deficit (1)

(130,573)

(130,006)

Total shareholders' equity

8,886

8,728

Total liabilities and shareholders' equity

$

18,755

$

22,282

BSQUARE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Revenue:

Partner Solutions

$

9,960

$

8,110

$

18,755

$

24,015

Edge to Cloud (1)

711

814

1,888

1,638

Total revenue

10,671

8,924

20,643

25,653

Cost of revenue:

Partner Solutions

8,578

6,944

16,037

20,100

Edge to Cloud

901

934

1,821

1,922

Total cost of revenue

9,479

7,878

17,858

22,022

Gross profit

1,192

1,046

2,785

3,631

Operating expenses:

Selling, general and administrative

2,148

2,067

4,423

4,964

Research and development

365

54

533

181

Total operating expenses

2,513

2,121

4,956

5,145

Loss from operations

(1,321)

(1,075)

(2,172)

(1,514)

Other income (loss), net

1,614

2

1,605

(33)

Income (loss) before income taxes

293

(1,073)

(567)

(1,547)

Income taxes

—

—

—

—

Net income (loss)

$

293

$

(1,073)

$

(567)

$

(1,547)

Basic earnings (loss) per share

$

0.02

$

(0.08)

$

(0.04)

$

(0.12)

Diluted earnings (loss) per share

$

0.02

$

(0.08)

$

(0.04)

$

(0.12)

Shares used in per share calculations:

Basic

13,332

13,110

13,267

13,051

Diluted

13,881

13,110

13,267

13,051

BSQUARE CORPORATION

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

(In thousands, unaudited)

EBITDAS

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Loss from operations, as reported (1)

$

(1,321)

$

(1,075)

$

(2,172)

$

(1,514)

Depreciation and amortization

123

164

246

360

Stock-based compensation

210

105

378

320

EBITDAS (1)

$

(988)

$

(806)

$

(1,548)

$

(834)

(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.

(1)

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.