Exhibit 99.1
BSQUARE Reports Second Quarter 2011 Results
Company Continues Investment in New Growth Initiatives
BELLEVUE, WA, August 4, 2011 –BSQUARE Corporation (NASDAQ:BSQR), a leading enabler of smart, connected devices, today announced financial results for the second quarter and six months ended June 30, 2011. Total revenue for the quarter was $23.4 million, down 13% year-over-year, while total revenue for the six months was $49.4 million, up 13%. Net income for the quarter was $21,000, or $0.00 per share, down 99% year-over-year, while net income for the six months was $205,000, or $0.02 per share, down 62%. EBITDA for the quarter was $809,000, or $0.07 per share, down 81% year-over-year, while EBITDA for the six months was $1.9 million, or $0.17 per share, up 2%.
The current quarter was negatively impacted by service project overruns in the amount of $600,000, or $0.05 per share. The year-ago quarter was positively affected by a cost overrun contract amendment signed with the Ford Motor Company in the amount of $2.5 million, or $0.24 per share. The year-ago quarter was also positively affected by the reversal of a loss contract accrual related to the Ford project recorded in the first quarter of 2010 in the amount of $390,000 or $0.04 per share. The year-ago six month results were negatively affected by an auction rate security write down in the amount of $546,000, or $0.05 per share.
Details as follows (in 000’s except per share amounts):
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||
| 6/30/2011 | 6/30/2010 | Inc/(Dec) | 6/30/2011 | 6/30/2010 | Inc/(Dec) | |||||||||||||||||||
Revenue: | ||||||||||||||||||||||||
Third-party Software | $ | 15,336 | $ | 16,294 | -6 | % | $ | 32,666 | $ | 27,328 | 20 | % | ||||||||||||
Engineering Services | 6,363 | 9,659 | -34 | % | 13,622 | 14,592 | -7 | % | ||||||||||||||||
Proprietary Software | 1,723 | 952 | 81 | % | 3,142 | 1,930 | 63 | % | ||||||||||||||||
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Total Revenue | 23,422 | 26,905 | -13 | % | 49,430 | 43,850 | 13 | % | ||||||||||||||||
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Total Gross Profit | 5,107 | 7,776 | -34 | % | 10,357 | 8,958 | 16 | % | ||||||||||||||||
Gross Margins: | ||||||||||||||||||||||||
Third-party Software | 17 | % | 15 | % | 13 | % | 15 | % | 14 | % | 7 | % | ||||||||||||
Engineering Services | 18 | % | 47 | % | -62 | % | 21 | % | 23 | % | -9 | % | ||||||||||||
Proprietary Software | 80 | % | 85 | % | -6 | % | 81 | % | 85 | % | -5 | % | ||||||||||||
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Total Gross Margin | 22 | % | 29 | % | -24 | % | 21 | % | 20 | % | 5 | % | ||||||||||||
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Total Operating Expenses | 5,093 | 3,783 | -35 | % | 9,938 | 7,826 | -27 | % | ||||||||||||||||
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Net Income | $ | 21 | $ | 3,973 | -99 | % | $ | 205 | $ | 533 | -62 | % | ||||||||||||
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Per Share-Diluted | $ | 0.00 | $ | 0.39 | -100 | % | $ | 0.02 | $ | 0.05 | -60 | % | ||||||||||||
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EBTIDA | $ | 809 | $ | 4,349 | -81 | % | $ | 1,928 | $ | 1,883 | 2 | % | ||||||||||||
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Per Share-Diluted | $ | 0.07 | $ | 0.42 | -83 | % | $ | 0.17 | $ | 0.18 | -6 | % | ||||||||||||
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Cash and Investments EoQ | $ | 23,224 | $ | 17,191 | 35 | % | $ | 23,224 | $ | 17,191 | 35 | % | ||||||||||||
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Notes:
Cash and Investments EoQ includes both short and long-term amounts (long-term at 6/30/11 = $1.0 million).
EBITDA = Earnings before interest, taxes, depreciation, amortization and stock compensation expense and is a non-GAAP measurement (reconciliation provided after financial statement tables).
110 110th Ave. N.E., Suite 200, Bellevue, WA 98004 | TOLL-FREE: 1.888.820.4500 | MAIN: 425.519.5900 | FAX: 425.519.5999 | www.bsquare.com
©2011 BSQUARE Corporation. All rights reserved. BSQUARE is a registered trademark of BSQUARE Corporation. All other names, product names and trade names, as applicable, are trademarks or registered trademarks of their respective holders.
CEO Commentary on Business and Financial Results
Brian Crowley, chief executive officer of BSQUARE, commented on the current quarter results and business activity, “We have talked for several quarters about various investments the company is making such as our Handset Certification Platform, or HCP, sales expansion in Europe and Asia, and the expansion of our Asia development platform. Some of these investments are still in their infancy and some are just beginning to pay off. For example, I am pleased to report that in Q2 we recognized our first revenue from our HCP installation at our recently announced customer, China Mobile. I also currently expect that we will start a HCP trial with a North American mobile operator in Q3. I am also pleased that we have generated $0.17 per share of EBITDA over the last six months, which is roughly in-line with the baseline of $0.14-0.15 per share, per quarter that we had previously communicated when factoring in the investments we made in the first half of 2011 which totaled roughly $1.0 million, or $0.09 per share, and the service project overruns that negatively affected the quarter.”
Financial Commentary on Three Month Results
| • | The decrease in third-party software sales (down $958,000, or 6%) was driven by lower purchasing volumes from several of the Company’s larger Microsoft® General Embedded licensing customers, partially offset by higher Microsoft® Windows Mobile® and Adobe® Flash® product sales; |
| • | The service revenue decline of $3.3 million, or 34%, was due to a $3.8 million decrease in Ford-related service revenue ($2.5 million of which was due to the cost overrun contract amendment signed in the year-ago quarter), offset partially by higher service revenue in Asia and in North America outside of Ford; |
| • | The increase in proprietary software revenue (up $771,000, or 81%) was driven by higher royalties from the Company’s Texas Instruments OMAP board support packages and sales of Qualcomm Snapdragon Mobile Development Platform products, as well as increased product support revenue; |
| • | The 13% (two percentage points) increase in third-party software gross margin was driven by increased sales of higher-margin Adobe Flash products, and lower sales to our top Microsoft General Embedded customers, which are generally lower margin; |
| • | Service margin decreased 62% (29 percentage points) due primarily to the positive impact in the year-ago quarter of the Ford amendment and reversal of the loss contract accrual as well as the project overruns which negatively affected the current quarter; |
| • | Operating expenses increased $1.3 million, or 35%, due primarily to the Company’s international expansion and additional stock compensation expense of $380,000, or $0.03 per share; and |
| • | Quarter-end cash and investments of $23.2 million, including long-term amounts, were up $1.8 million compared to March 31, 2011, and $6.0 million year-over-year. DSO decreased to 52 days in Q2 compared to 55 in Q1. |
110 110th Ave. N.E., Suite 200, Bellevue, WA 98004 | TOLL-FREE: 1.888.820.4500 | MAIN: 425.519.5900 | FAX: 425.519.5999 | www.bsquare.com
©2011 BSQUARE Corporation. All rights reserved. BSQUARE is a registered trademark of BSQUARE Corporation. All other names, product names and trade names, as applicable, are trademarks or registered trademarks of their respective holders.
Outlook
The Company currently has the following expectations for Q3 as compared to the current quarter:
| • | Total revenue is expected to be in the range of $24 million to $26 million. Third-party software sales are expected to improve as several customers that overbought in previous quarters are expected to increase purchasing volumes. Service revenue is expected to improve based on existing backlog, elimination of overrun issues and utilization improvement whereas proprietary software is expected to decline due to a decrease in Texas Instrument OMAP BSP royalties; |
| • | Service gross margin is expected to improve due to elimination of the overrun issues that negatively impacted Q2; |
| • | Profitability and EBITDA are expected to improve; and |
| • | Cash and investments are projected to be flat or up slightly. |
Conference Call
Management will host a conference call today, August 4, 2011, at 5 p.m. Eastern Time (2 p.m. Pacific Time). To access the call, dial 1-877-941-1428 or 1-480-629-9665 for international callers and reference “BSQUARE Corporation Second Quarter 2011 Earnings Conference Call.” A replay will be available for one week following the call by dialing 1-877-870-5176 or 1-858-384-5517 for international callers; reference pin number 4459309. A live and replay Webcast of the call will be available at www.bsquare.com in the Investor Relations section.
About BSQUARE
BSQUARE is an industry leader with a proven track record in providing production-ready software products, engineering services, solutions and automated testing for smart, connected devices. With deep technical knowledge of mobile and embedded technologies, BSQUARE enables device makers to develop and ship best in class products. Since 1994, BSQUARE has provided satisfied customers with innovative software solutions allowing them to get to market faster with reduced risk and cost. For more information, visitwww.bsquare.com.
BSQUARE is a registered trademark of BSQUARE Corporation. All other product and company names herein may be trademarks of their respective owners.
This release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements relating to our projected financial results, including but not limited to, forecasts for revenue, margins, profitability, cash, investments, and potential impairments, or future and potential sales or projects and expectations with respect to specific customers, geographies or products. All of the statements contained herein that do not relate to matters of historical fact should be considered forward-looking statements. Forward-
110 110th Ave. N.E., Suite 200, Bellevue, WA 98004 | TOLL-FREE: 1.888.820.4500 | MAIN: 425.519.5900 | FAX: 425.519.5999 | www.bsquare.com
©2011 BSQUARE Corporation. All rights reserved. BSQUARE is a registered trademark of BSQUARE Corporation. All other names, product names and trade names, as applicable, are trademarks or registered trademarks of their respective holders.
looking statements involve risks and uncertainties that could cause actual results to differ materially from such statements. There can be no assurance that forward-looking statements will be achieved. Important factors that could cause actual results to differ materially from those indicated in forward-looking statements include: whether we are able to maintain our existing favorable relationships with Microsoft Corporation and Ford Motor Company; risks, uncertainties and changes in financial condition; our ability to execute our product and sales strategies for TestQuest, HCP, and other products and services; intellectual property risks; and risks associated with our international expansion and ongoing operations. Therefore, all forward-looking statements should be considered in light of various important factors including, but not limited to, the risks and uncertainties listed above. Except as required by law, we make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date any such statement is made. Please also refer to our most recent Quarterly Report on Form 10-Q, Annual Report on Form 10-K and other filings with the SEC for other important risk factors that could cause actual results to differ materially from those indicated in any forward-looking statements.
| Company Contact: | Investor Contact: | |
| Scott Mahan, CFO | Brett Maas | |
| BSQUARE Corporation | Hayden IR | |
| 425.519.5900 | 646.536.7331 | |
| investorrelations@bsquare.com | brett@haydenir.com |
# # #
110 110th Ave. N.E., Suite 200, Bellevue, WA 98004 | TOLL-FREE: 1.888.820.4500 | MAIN: 425.519.5900 | FAX: 425.519.5999 | www.bsquare.com
©2011 BSQUARE Corporation. All rights reserved. BSQUARE is a registered trademark of BSQUARE Corporation. All other names, product names and trade names, as applicable, are trademarks or registered trademarks of their respective holders.
BSQUARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
| June 30, 2011 | December 31, 2010 | |||||||
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| ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 8,510 | $ | 10,814 | ||||
Short-term investments | 13,723 | 11,329 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $264 at June 30, 2011 and $290 at December 31, 2010 | 13,393 | 14,128 | ||||||
Deferred tax assets | 119 | 145 | ||||||
Prepaid expenses and other current assets | 780 | 403 | ||||||
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Total current assets | 36,525 | 36,819 | ||||||
Long-term investment | 116 | 122 | ||||||
Equipment, furniture and leasehold improvements, net | 759 | 653 | ||||||
Intangible assets, net | 882 | 1,049 | ||||||
Restricted cash | 875 | 875 | ||||||
Deferred tax assets | 2,376 | 2,495 | ||||||
Other non-current assets | 94 | 83 | ||||||
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Total assets | $ | 41,627 | $ | 42,096 | ||||
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| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Third-party software fees payable | $ | 9,121 | $ | 11,132 | ||||
Accounts payable | 372 | 261 | ||||||
Accrued compensation | 2,207 | 2,497 | ||||||
Other accrued expenses | 1,701 | 1,467 | ||||||
Deferred revenue | 1,516 | 1,417 | ||||||
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Total current liabilities | 14,917 | 16,774 | ||||||
Deferred rent | 205 | 240 | ||||||
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; 10,602,964 shares issued and outstanding at June 30, 2011 and 10,415,541 shares issued and outstanding at December 31, 2010 | 126,032 | 124,716 | ||||||
Accumulated other comprehensive loss | (543 | ) | (445 | ) | ||||
Accumulated deficit | (98,984 | ) | (99,189 | ) | ||||
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Total shareholders’ equity | 26,505 | 25,082 | ||||||
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Total liabilities and shareholders’ equity | $ | 41,627 | $ | 42,096 | ||||
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110 110th Ave. N.E., Suite 200, Bellevue, WA 98004 | TOLL-FREE: 1.888.820.4500 | MAIN: 425.519.5900 | FAX: 425.519.5999 | www.bsquare.com
©2011 BSQUARE Corporation. All rights reserved. BSQUARE is a registered trademark of BSQUARE Corporation. All other names, product names and trade names, as applicable, are trademarks or registered trademarks of their respective holders.
BSQUARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts) (Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenue: | ||||||||||||||||
Software | $ | 17,059 | $ | 17,246 | $ | 35,808 | $ | 29,258 | ||||||||
Service | 6,363 | 9,659 | 13,622 | 14,592 | ||||||||||||
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Total revenue | 23,422 | 26,905 | 49,430 | 43,850 | ||||||||||||
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Cost of revenue: | ||||||||||||||||
Software | 13,108 | 14,032 | 28,377 | 23,677 | ||||||||||||
Service | 5,207 | 5,097 | 10,696 | 11,215 | ||||||||||||
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Total cost of revenue | 18,315 | 19,129 | 39,073 | 34,892 | ||||||||||||
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Gross profit | 5,107 | 7,776 | 10,357 | 8,958 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative | 4,108 | 2,981 | 8,039 | 6,117 | ||||||||||||
Research and development | 985 | 802 | 1,899 | 1,709 | ||||||||||||
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Total operating expenses | 5,093 | 3,783 | 9,938 | 7,826 | ||||||||||||
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Income from operations | 14 | 3,993 | 419 | 1,132 | ||||||||||||
Other income (expense) | 34 | (5 | ) | 42 | (493 | ) | ||||||||||
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Income before income taxes | 48 | 3,988 | 461 | 639 | ||||||||||||
Income tax expense | (27 | ) | (15 | ) | (256 | ) | (106 | ) | ||||||||
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Net income | $ | 21 | $ | 3,973 | $ | 205 | $ | 533 | ||||||||
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Basic income per share | $ | 0.00 | $ | 0.39 | $ | 0.02 | $ | 0.05 | ||||||||
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Diluted income per share | $ | 0.00 | $ | 0.39 | $ | 0.02 | $ | 0.05 | ||||||||
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Shares used in calculation of income per share: | ||||||||||||||||
Basic | 10,563 | 10,157 | 10,497 | 10,142 | ||||||||||||
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Diluted | 11,529 | 10,287 | 11,657 | 10,268 | ||||||||||||
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110 110th Ave. N.E., Suite 200, Bellevue, WA 98004 | TOLL-FREE: 1.888.820.4500 | MAIN: 425.519.5900 | FAX: 425.519.5999 | www.bsquare.com
©2011 BSQUARE Corporation. All rights reserved. BSQUARE is a registered trademark of BSQUARE Corporation. All other names, product names and trade names, as applicable, are trademarks or registered trademarks of their respective holders.
NON-GAAP INFORMATION AND RECONCILIATION TO COMPARABLE GAAP FINANCIAL MEASURES
(In thousands, except per share amounts) (Unaudited)
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
EBITDA: | ||||||||||||||||
Net income as reported | $ | 21 | $ | 3,973 | $ | 205 | $ | 533 | ||||||||
Income tax expense | 27 | 15 | 256 | 106 | ||||||||||||
Interest and other income (expense) | (34 | ) | 5 | (42 | ) | 493 | ||||||||||
Depreciation and amortization | 188 | 238 | 402 | 473 | ||||||||||||
Stock-based compensation expense | 607 | 118 | 1,107 | 278 | ||||||||||||
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EBITDA (1) | $ | 809 | $ | 4,349 | $ | 1,928 | $ | 1,883 | ||||||||
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EBITDA per diluted share | $ | 0.07 | $ | 0.42 | $ | 0.17 | $ | 0.18 | ||||||||
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Diluted Shares | 11,529 | 10,287 | 11,657 | 10,268 | ||||||||||||
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| (1) | EBITDA 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. EBITDA is defined as net income (loss) before income taxes, interest income, depreciation and amortization, and stock-based compensation. EBITDA 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 EBITDA is not defined by GAAP. However, the Company regards EBITDA as a complement to net income and other GAAP financial performance measures, including an indirect measure of operating cash flow. |
110 110th Ave. N.E., Suite 200, Bellevue, WA 98004 | TOLL-FREE: 1.888.820.4500 | MAIN: 425.519.5900 | FAX: 425.519.5999 | www.bsquare.com
©2011 BSQUARE Corporation. All rights reserved. BSQUARE is a registered trademark of BSQUARE Corporation. All other names, product names and trade names, as applicable, are trademarks or registered trademarks of their respective holders.