Bsquare reports fourth quarter and full year 2016 results

Bsquare Corporation (NASDAQ: BSQR) today announced financial results for the fourth quarter and full year ended December 31, 2016.

Jerry Chase, Bsquare President and Chief Executive Officer, commented, “During 2016 we saw a successful launch of DataV, our new Internet of Things (IoT) proprietary software offering, with PACCAR, Inc., a global Fortune 500 transportation company and Itron, Inc., a world-leading technology and services provider. We also delivered solid results from our traditional third-party software business and optimized our engineering services business to support both DataV and our traditional services customers.”

Mr. Chase continued, “Given our recent successes with DataV and the strength of our pipeline, we will continue targeted investments in sales and marketing, research and development, and in building an enterprise-class product support and integration services team to ensure customer success.”

Mr. Chase concluded, “We experienced strong cash flow in 2016, partly as a result of our success with DataV, increasing cash by $3.2 million during the year. We anticipate continued DataV customer traction in 2017 but believe that it will not occur uniformly throughout the year. Further, given the ability of DataV to support multiple licensing and deployment options, we expect varying revenue recognition patterns in 2017. We have built a strong base from which to grow and to further enhance shareholder value.”

Q4 2016 Financial Highlights
Total revenue for the quarter was $26.8 million, up 19% compared to the third quarter of 2016, and up 7% from the prior year period. Net loss for the quarter was $1.3 million, or $0.10 per share, compared to net loss of $0.1 million, or $0.01 per share, in the third quarter of 2016 and net income of $1.1 million, or $0.09 per share, in the year-ago quarter. Adjusted EBITDAS* for the fourth quarter of 2016 was a negative $0.8 million, compared to break-even in the third quarter of 2016 and a positive $1.9 million in the fourth quarter of 2015. Our cash and investments increased to $33.2 million at the end of the fourth quarter of 2016.

As previously disclosed, we initiated a restructuring plan in July 2016 reducing the size of our engineering services organization. These actions and the resulting severance and restructuring costs negatively impacted our Q3, Q4 and full year results, and they were mostly completed during the third quarter of 2016. We incurred pre-tax restructuring charges of $831,000 in the third quarter of 2016 and $154,000 in the fourth quarter.

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

Financial Commentary on Fourth Quarter 2016 Results (Comparison to Third Quarter 2016)

• Third-party software sales increased $5.5 million, or 30%, due to increases in sales of Microsoft Embedded software and Windows Mobile operating systems and as a result incremental customer orders ahead of expected 2017 price changes;
• Engineering services revenue decreased $506,000, or 16%, driven primarily by completion of several large projects and our transition to supporting DataV contracts;
• Engineering services margin averaged 7%, up from the prior quarter of negative 8%. Both quarterly periods were impacted by restructuring charges reducing margin by an average of 6% and 26% for the current and prior quarterly periods, respectively. Before the restructuring charges, margins averaged 14% and 18% for the current and prior quarterly periods, respectively, or approximately 4% lower during the current quarterly period due to lower overall revenue and customer mix during the current quarter;
• Operating expenses increased $1.2 million, or 29%, primarily related to increased sales expenses associated with the timing of customer bookings signed in the fourth quarter, as well as increased investment in marketing programs to support our DataV product initiatives; and
• Cash and investments increased $1.6 million in the fourth quarter primarily due to DataV contractual payments received in advance of revenue recognition, partially offset by changes in working capital.

Full Year 2016 Financial Highlights
Total revenue for 2016 was $97.4 million, down 9% from 2015. Net loss for 2016 was $1.1 million, or $0.09 per share, compared to net income of $6.1 million, or $0.49 per share, in 2015. Adjusted EBITDAS was $0.7 million for 2016 compared to $8.5 million in 2015. Cash and investments increased by $3.2 million during the 2016 full year period.

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

View press release in full here