BSQR - Earnings call transcript Q4 2017

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Operator

Good day, and welcome to the Bsquare Corporation Fourth Quarter 2017 Financial Results Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Leslie Phillips, Investor Relations for Bsquare. Please go ahead.

Leslie Phillips

Thank you, and good afternoon, everyone.

prepared like and you the that the of we'd is this call begin, made text webcast, be being a our we to Bsquare's that remind call and available Before on will website. remarks recording of

we uncertainties call, in forward-looking making actual release apply materially. to that on could be are are remarks, subject call. Please statements. earnings and content today the contained where assumptions diluted today differ the statements prepared forward-looking regarding expectations are cause this these posted and will Bsquare's numbers that discussed applicable. both statements cautionary in issued All refer to share based this of version to amounts During of These fully current per risks which of text to and the results

I'd turn Now Bsquare to President Jerry CEO. call Chase, the Jerry? to and over like

Jerry Chase

XXXX remain We Thank We large everyone. you, DataV exited pilots industries. DataV a year market corporations traction. increasing and DataV at across and variety good Leslie, closed XX new regarding of with momentum with the afternoon, optimistic

pilots been those and of and significant results second interest in we in closed year, sales indicating XX Importantly, a half of uptick investments of the making customer the in have the were marketing.

move of services and smart product These added excellent customers also of many market manufacturing, including with late pilots pilots expect segments, IoT corporations to gas, these commercial cover In view XXXX. to vending number a that We oil XXXX, as are to X deployments. industrial DataV deployments in convert candidates and with large retail. transportation, we we ahead and

industrial continues for This IoT. can expansion systems, perform we through first are Depending Itron, well our enthusiastic faster customers major the about business also needs, our benefits opportunities. of global additional business valued million. that and by existing lead customers which their Across-the-board, be with We renewal, customers, is some is potential years are will smart DataV to moving $X.X believe others. a energy at recorded achieved knowledgeable DataV subscription and than to provider our renewal. distribution X successfully on

current SaaS a quarter, DataV. services believe for DataV a we multiyear to significant will the we entered during engagement lead contract example, For into that

expect SaaS the quarter fourth the of early resulted XXXX. engagement the to in We quarter started from XXXX. sign or in particular pilot current late This that second a opportunity quarter

we we are than with However, customers, that expected. convert the finding frame is time some to longer

move to and manner to DataV, customer we'll streamline AWS focus with and our to on primarily We we we sale continue point on closely for order the from in we a conversions, initial to profile vast discussion cloud-based. majority offer And revenue. to trends the work focus our ability to engagements which the on being to based continue implementations the continued delivery Azure. DataV. the accelerate Microsoft Consequently, ideal DataV. have model IoT for expeditiously partners, value of long-term simplify cloud pilot our help in and of In Market SaaS future,

many can Management Bsquare, work another our area interest AWS, for recently as which FreeRTOS have unique together. One have our indicator AWS closely we us the partners. of announced view Device regarding our note developed the further co-funded of This As a AWS to functionality AWS and Microsoft. engagements acquisition in service to brings we and in by key closer of customers partner been or pilot initiative

turn me drivers. let revenue Now traditional our to

customers, being largest of Google, revenue our lower embedded quarters higher respect at business, expectations, our few in performance. line with of We software the traditional future resale contracts as slightly slightly higher the to Windows was in this of past margin Microsoft operate sequentially Regarding levels. for services engineering revenue revenue exhibited we remainder organization albeit to and our solidifying work of of the profitably, With renewed quarter embedded associated and XXXX. our gross the first business, indicative and XXXX, the engineering Coca-Cola levels. their continue our Two view

to Peter financial Biere, CFO, the like turn address the over call to quarter. in I'd performance Now our our fourth to

Peter Biere

Thank you, Jerry.

million $XX.X First, our to quarter, grouping call. for review quarter. the our Total revenue the break revenue changes down million from the fourth revenue by let's sequentially. for and prior range $XX.X in QX XX% within down earnings from year down we the guidance X% was was Compared million, provided quarter. revenue $XX.X I'll the

before mentioned seasonal decline Third-party that discussed software in level. few third-party customers revenue revenue a I've resales, we past had revenue over purchases quarters, declined was $XX.X million, few compared XX%. and this reflecting its believe Microsoft found to Year-over-year, by line QX, We've expected year-end. slightly higher the the

Our to bear QX out. results continue that

we seen competitive fallout. experience bulk continued While some might we believe variability, we've any of the

for succeeding opportunities. legacy this of new back we're of XX% with that engineering approximately flat $XXX,XXX, DataV revenue win continue was down fact, year Quarter XX% and and to XXXX quarter. lost quarter. year-over-year software quarter, prior while the the software In the down $XXX,XXX included service was Proprietary sequential X some XXXX earlier business software revenue was from Professional non-DataV revenue. prior year push of was revenue, comprised $X.X to in million

compared were the me, number final Revenue a for have explains in the year-over-year which delivery occur of would except X quarter XXXX. prior contracts sequential the in decline. contract X quarter the traditional when flat renewals, been their -- normally quarter, XXXX, point, to closed reached service of During which excuse

align to when ago, focus contracts Our the efforts now selling wind X traditional up, XXXX. requirements. going-forward DataV, staff are on we that A we to so contracts major customer on year set began for

the progress, our partially DataV of services software with we and DataV still in partially recorded total $XXX,XXX for our proprietary DataV quarter, engineering in in fourth approximately in the our revenue majority pilots segments. During accounted professional This is revenue.

X% margins XX.X% margin from of $X.X revenue Next third-party higher improvement in the or year-ago by profit nearly margins was time. within and year million Gross revenue primarily the undergoing I'll to XX% year-ago from turn gross gross lower due prior to to also of X.X% in the lower our third in lower our gross quarter. was profit our quarter driven Total in that gross the which down lower guidance margins quarter reflected in is software and the profit gross XX%. at The restructuring period software levels was services, in quarter. margin totaled business. engineering third-party The

higher year, While many from lost the our were our lower-margin customers third rates are the historical revenue margins. blended accounts, has prior party customers relatively of for than continuing we so decreased

DataV. the a for loss quarter Total per million teams, in line this quarter, the XXXX, were our from scaling in third customer $X.X our expenses $X.X of We Next, a X of and marketing loss loss net for XXXX. million operating approximately expenses X $X.XX success or $X.X operating $X.X fourth recorded or quarter net increases I'll or of results compared expectations, critical support to quarter $X.X of million speak quarter. and of and in $X.XX our and in year-ago for and the XXXX the steady of up quarter in In with million the $X.XX sales, reflect share bottom share share of a to net million the per per million investment product XXXX. quarter $X.X line fourth development, of

quarter to million DataV XX% some with largely higher-margin our to first full vary continue and Speaking DataV in DataV million XXXX, decreases larger $XX.X overall Gross and software the million, XXXX. average business, total combined proprietary to segments, both revenue of revenue our time, our software in of of as of a revenue reporting with in Gross compared margins revenue profit increases from mix services gains our increases the services and or The contract down part first revenue high-margin XX% due was the $XX.X our achieved third-party unit, reflecting business becomes will revenue margins revenue. on professional new $XX.X offset third-party or for in XXXX, margins. of in profit were totaled year of recognition to by for our the engineering software our XX% year XXXX.

For drive of was cost in explain million in the XXXX, with million targeted these R&D, of investments majority total compared in approximately OpEx growth the XXXX. Again, DataV sales to marketing full year $XX.X $XX and million or $X.X for million year per full the XXXX share $X.XX was in loss of per net comparative each or $X.X XXXX. loss of the a $X.XX periods. Net share, increases in compared to

we used due basis project -- in business. year X the has DataV the XXXX DataV Moving Including grow our during and totaled in primarily to during of XX, our timing. XXXX $X.X to to investments $XX.X net $X both legacy the a sheet. amount of invested and million balance of December Cash businesses, profits quarter of Cash a million quarterly on as from XXXX. full varied, approximately million

due XX, understand million our Our due help Honeywell. this accounts discuss will million Microsoft, at convert DataV of which $XX.X Honeywell receivable non-GAAP next of of about $X several million flows investors balance we I'll December payments better metrics, about receivable believe, approximately to is cash $X.X cash. totaled business. to from and XXXX, which, Net

and the bookings, before use EBITDAS, defined that and measure our our the section revenue to or can generate compensation, cash as periodic DataV measures deferred in monitor collected. backlog and cash measures to since of and non-GAAP to non-GAAP and sales, income believe revenue our which stock-based often reconciliations found in amortization those earnings be been We our to adjusted unbilled SEC business. We information meaningful periods related relevant be we recognized in different operations a use as has received ability our been release than Relations filings. have provide website our Additional orders as information related from of will GAAP of in and comparable depreciation, Investor the operating management performance

as services agreements this include Our customers. with primarily amount the DataV adjusted for a the compared new measures as and which year. XX, deferred DataV an we're million and $X.X to to the $X.X year. outlook closing our incurred to sheet EBITDAS revenue million deferred for non-GAAP XXXX. of quarter, at non-GAAP third-party to approximately was We using DataV due Itron. the to value $X.X total defined in $X.X $X.X the software was a renewal during at compared cash million and is bookings, from to $X.X back Backlog describe DataV combined remarks. call in negative XXXX, on professional contract compared as during bookings XX, of prior measure, year-end. Jerry our less million provide from revenue. million to Each Several $X.X the December the a revenue, XXXX measure, recognized negative which bookings recognized year-ago unbilled $X December engineering date, quarter $X.X includes is turn expenses collected quarter prior full the DataV recorded million with balance, million million is first I'll now signed is balance Of DataV XXXX, in million fourth approximately defined higher We $X.X the revenue to contracts million lower quarter and

Jerry Chase

Thank you, Peter.

As upside DataV with services some contract noted QX for for range press that contract we in renewal. we have $XX engagement believe of SaaS in today's mentioned, will a Itron to $XX.X million, the revenue currently to the lead revenue QX, multiyear million previously the as DataV. in following we mentioned release, entered expectations XXXX, a potential significant from Also, in into

to expect of quarter current XXXX. the in or late the quarter sign second engagement early We SaaS

in contract the margin questions. loss sign Itron XX% to to call gross in expect continued in We and to the pilots the margin range, for upside XX% Blended marketing DataV. a Cathy, sales will in net reflecting open investments be R&D, and some with grow from renewal; our quarter. potential please additional

Operator

question take We'll Instructions]. our [Operator from Ryan with Palogic. first Vardeman

Ryan Vardeman

XXXX DataV position picture? significant will a in -- amount insofar point are in as point is -- to invested start framing we At opportunity be what At in a what really fair what DataV. you that big

Jerry Chase

asked ready get quite guidance up on offering around date, context question to certainly, be put definitive expect continue the not our ongoing that of this but to performance. would of when a opportunity pushing these go conferences, all guidance, we'll that we one We're trend say each investor we're direction calls. frequently. more that future trying our ready we -- color to certainly, particular to certainly, give So the to that's we toward. color, more We're And, to on in have

Ryan Vardeman

a slightly way. Okay. Maybe it ask different

Or do you confident over said point much on in see in time? line a some to of in years DataV could the guess, prepared how is reasonable this that that life you the we've project. back investment X At basis, return? get net could gross confidence net less remarks, positive that and DataV. project, a basis, we that, return investment as have will guys on of You you look I not in to a what going basis relates invested your cycle it only are invested, also but itself a we on on the that a over manifest you last

Jerry Chase

Yes. on see return a investment. our We positive we'll believe that

We market to the continue activity, at to signal our our serve encouragement ability it.

customers prepared plays we we an believe there's for, also looking favor. amongst of they're remarks, about awareness During which said increasing that into level what our

customers. -- we're definitely existing our So on based we with the potentially are positive here from that new we're voting feedback actions getting and

Ryan Vardeman

you provide significant it a opportunity? that it's as the relates Anymore like SaaS to that customer color would to besides

Jerry Chase

-- serve into in their we're to is this agreement environment. The well-known This them very ability company. would that confident at very And global yes. So we signed we is a integrate did a One the our to mentioned, quarter this and be targeting quarter. that we the early quarter we'll up level. parts. or X later the SaaS agreement negotiations we to sign high And into next contracts then break DataV here is actual

So pretty particular that bullish opportunity. about

Peter's I add. something got to think

Peter Biere

line are mean, doing guys license starting agreement so think confident DataV The their add, These would that I in and this so with in thing then Yes. and we that ahead license. a would is engage you Ryan, sign them the of them time customer and a -- what start work the we've integration they're -- usually case, in I been tight, would showing implementing.

-- this of willing at need the little agreement. and they're money on business has time does it and it's think So on serious but working line, circumstance, ahead us engage a I customer show least unusual when that out a a a the SaaS put table to

So in hear detail. it's not-too-distant positive, and you'll hopefully more the future,

Ryan Vardeman

selling quarter there has it, the or these you're customers? in a been I or Or way change And two mean, how last, that -- changed? in Okay. enterprise the that call has

Jerry Chase

that process selling has sharpened. say the would I

clearly pilots. on way to in customers and implementation. more the move more our focused really can those those, we deliver production, through define move they we we in and to we commercial have We what to, It's cleanly narrower are the commercial the can can call, the scope And discussions.

what emphasizing, more give Manage I our say, value We apps also are would and Repair, like quickly, that Track, customers Predict.

is a you license. So know, Ryan, that's PACCAR been also, then our nice. as And perpetual contract

that demonstrates with Microsoft, our those we have case-by-case a in with from entertain confidence a move which helps a lead Our and these basis, the number them prepared closely will to us. but a make have shows It that us and closer subscription contract and get Itron a amount AWS opportunities, is seems and of and may you license. SaaS, we little And of like they that we're partnered co-funded further along. contracts to on confidence partners, noticed very in tremendous to it customers things that Also, it bit remarks, easier. to

Ryan Vardeman

and and I'll cash receivable still question comfortable time ability over appropriate? still somebody to you're that with as receivables balance, you're in is, all the convert the let in your I your -- final to guess confident else step as

Peter Biere

Yes. confidence unequivocally I every in in say have dollar accounts can receivable. I

we we had to We or with just Honeywell, beyond write-offs write-downs that everybody actually terms. need have to and be. way my business, where haven't -- in we year, give right very pay extended that in they is us And few get terms. any Most customers have them

just And collect dollar, failed a so not we've to it's extended.

there. shape good So

Operator

to back Chase, additional [Operator any I'd turn remarks. there or you no to closing the are further Mr. this Instructions]. It at time. conference questions appears like for

Jerry Chase

customers to you and on Bsquare to like of quarter. your thank behalf for and you concluding I'd investors to team, look your interest joining back our the We for us. our business. reporting the call, forward for entire Before Thank next

Operator

your concludes participation. That for today's presentation. you Thank

You may now disconnect.

Bsquare (BSQR) 20 Feb 182017 Q4 Earnings call transcript