BSQUARE Announces Fourth Quarter and Year End Results; Reports 26% Sequential and 42% Year-Over-Year Quarterly Revenue Growth.BELLEVUE Bellevue (bĕl`vy  ).1 City (1990 pop. 30,982), Sarpy co., E Nebr., a suburb of Omaha, on the Missouri River; inc. 1855. , Wash. -- BSQUARE Corporation (Nasdaq:BSQR), a leading provider of embedded software Instructions that permanently reside in a ROM or flash memory chip. Embedded software may be immediately available to the CPU or, for faster execution, may be transferred to RAM first and then executed. solutions, today announced financial results for the fourth quarter and year ended December December: see month. 31, 2005. BSQUARE reported total revenue for the quarter of $12.7 million, an increase of 42% from the $8.9 million reported during the fourth quarter of 2004, and a 26% increase from the $10.1 million reported in the third quarter of 2005. The fourth quarter of 2004 included $1.4 million in sales to Cardinal cardinal, in zoology cardinal or redbird, common name for a North American songbird of the family Fringillidae (New World finch family). Healthcare compared to none for the third and fourth quarters of 2005. Sales to customers other than Cardinal increased 69% year-over-year. Cardinal, which represented 19% of revenue in 2004, began purchasing from a competitor in the second quarter of 2005. Total revenue for the year ended December 31, 2005 was $42.9 million, which included $831,000 in sales to Cardinal, compared to $38.9 million in 2004, which included $7.4 million in sales to Cardinal, representing a 34% year-over-year increase in revenue generated from customers other than Cardinal. The company reported a net loss for the quarter of $246,000, or $0.03 per share, compared to net income of $77,000, or $0.01 per share, in the fourth quarter of 2004, which included $56,000 in income from discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. . The company reported a net loss of $469,000, or $.05 per share, in the third quarter of 2005. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. for the quarter included $399,000 in bad debt expense associated with a previously disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). customer dispute. For the year ended December 31, 2005, the company reported a net loss of $1.3 million, or $0.14 per share, compared to a net loss of $7.1 million, or $0.74 per share, for 2004, which included a loss from discontinued operations of $6.3 million ($0.66 per share). Research and development expense was $1.9 million for the year ended December 31, 2005, representing an increase of $1.1 million, or 128%, over 2004, as the company continued to invest in expanding and improving its product offerings. Key Results, Achievements and Events: --Highest quarterly revenue since the third quarter of 2001. In 2001, the company's revenue was dominated dom·i·nate v. dom·i·nat·ed, dom·i·nat·ing, dom·i·nates v.tr. 1. To control, govern, or rule by superior authority or power: by the Microsoft (Microsoft Corporation, Redmond, WA, www.microsoft.com) The most successful and influential software company. Microsoft's software and Intel's hardware pioneered the PC and revolutionized the computer industry. Tools consulting business. Today, the company has a more diversified diversified (di·verˑ·s revenue base, generating revenue from the sale of Microsoft Embedded operating systems An operating system used in special-purpose applications (embedded systems). Embedded operating systems are typically very compact and often designed for real time operations. See embedded Linux, QNX, OS-9, Windows XP Embedded, Windows CE, VxWorks and Symbian OS. , professional engineering services and BSQUARE's own proprietary software products; --A 33% sequential One after the other in some consecutive order such as by name or number. increase in quarterly service revenue from $2.9 million in the third quarter of 2005 to $3.9 million this quarter. The increase was a result of strong market demand and improved sales execution; --Continued sequential increase in service gross profit margin Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. to 39% for the quarter, up from 30% in the third quarter of 2005. Increased service revenue and improved personnel utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be contributed to the increase; --The adoption by Hewlett-Packard See HP. Hewlett-Packard - (HP) Hewlett-Packard designs, manufactures and services electronic products and systems for measurement, computation and communications. The company's products and services are used in industry, business, engineering, science, medicine and (HP) of BSQUARE's version 2.1 SDIO See SDIO card. Now! technology into HP's iPAQ handhelds and a continuing multi-year collaboration Working together on a project. See collaborative software. with HP; --Continued progress in the development of the company's next generation reference designs that will serve the wireless, handheld handheld: see personal digital assistant. and portable media player markets. During the quarter, the company announced its Portable Media Player initiative and began sales and marketing activities in anticipation of initial product releases expected to begin in the second quarter of 2006; --Selected as a member of the Intel Storage Community (ISC (1) (Internet Systems Consortium, Redwood City, CA www.isc.org) An organization founded by Paul Vixie, Carl Malamud and Rick Adams in 1994 and later sponsored by UUNET and other Internet companies. ). Through this membership, BSQUARE gains early involvement with new Intel roadmaps and the strategic development of leading-edge storage solutions; and --Consummated a reverse stock split and regained compliance with the Nasdaq $1 minimum bid price continued listing requirement set forth in Marketplace Rule 4450(a)(5). "I am pleased that we achieved the revenue goals we set forth at the end of the third quarter while also continuing to expand our product offerings to address several high growth market opportunities. We had an exceptionally strong quarter in all of our revenue lines, exceeding the 10-15% sequential revenue growth estimate we communicated to investors in the third quarter," said Brian Crowley Brian Crowley (born March 4, 1964) is an Irish politician and Member of the European Parliament for Ireland South for Fianna Fáil. He is co-president of the Union for a Europe of Nations group in the European Parliament in which Fianna Fáil sits. , president and chief executive officer of BSQUARE. "We also made tangible Possessing a physical form that can be touched or felt. Tangible refers to that which can be seen, weighed, measured, or apprehended by the senses. A tangible object is something that is real and substantial. An automobile is an example of tangible Personal Property. progress in further development of our product offerings, including improvements to our Wireless and Handheld Reference designs, our Portable Media Player Reference design, and our SDIO product line. We believe that these investments will contribute to our continued growth during 2006." Revenue Overview Software revenue for the quarter was $8.8 million, including $8.2 million in sales of third-party software products, primarily Microsoft Embedded operating systems. This compared to software revenue of $6.5 million in the fourth quarter of 2004 and $7.2 million in the third quarter of 2005. Third-party software sales were $5.8 million in the fourth quarter of 2004 and $6.7 million in the third quarter of 2005. Excluding sales to Cardinal, third-party software sales increased 85% year-over-year and 23% sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen . The year-over-year and sequential increases were due to further penetration within the company's existing customer base, new customer acquisition, improved sales execution and the beneficial impact of a customer referral relationship which began this quarter. Third-party software sales were $28.6 million for fiscal 2005 as compared to $25.7 million in 2004, an increase of 11%. Excluding sales to Cardinal, third-party software sales increased 52% year-over-year. Overall, these trends reflect improvements made at the company level as well as strengthening of the general embedded Inserted into. See embedded system. marketplace and Microsoft's improved market share. Proprietary software revenue was $601,000 for the quarter, compared to $682,000 in the fourth quarter of 2004 and $491,000 in the third quarter of 2005. Lower sales of the company's SDIO Now! product accounted for the decrease as compared to the prior year, whereas increased reference design revenue and increased revenue associated with the products acquired from Vibren Technologies accounted for the sequential growth. The company has been anticipating weaker SDIO Now! sales for some time due to the company's upgrade to its SDIO Now! 2.x product and Microsoft's introduction of a competing technology in its recent embedded operating system releases. This quarter included $185,000 in reference design royalty Compensation for the use of property, usually copyrighted works, patented inventions, or natural resources, expressed as a percentage of receipts from using the property or as a payment for each unit produced. revenue generated from one customer. Proprietary software sales were $2.6 million for fiscal 2005 as compared to $2.7 million in 2004, representing a slight decrease. Service revenue for the quarter was $3.9 million, a 63% increase compared to $2.4 million in the fourth quarter of 2004 and a 33% increase compared to $2.9 million in the third quarter of 2005. Service revenue improvement was attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to higher activity levels driven by overall market strength, sales improvements, improved personnel utilization and strength in Asia Pacific service revenue. Billable hours Billable Hours is a Canadian comedy series, which airs on Showcase. Set in the fictional Toronto law firm of Fagen & Harrison, the series focuses on three young lawyers struggling to balance their expectations in life with the difficult realities of building a career increased by 71% year-over-year and 12% sequentially. The company worked on 71 projects during the quarter, up 10 from the third quarter of 2005. The realized rate per hour increased 15% sequentially, recapturing the entire decline experienced in the third quarter of 2005. Service revenue was $11.7 million for fiscal 2005 as compared to $10.6 million in 2004, representing an 11% increase. Higher service revenue in the second half of 2005 attributable to the factors mentioned previously accounted for the increase. "This quarter represented a breakthrough top-line quarter in several areas. We topped the elusive $3 million revenue mark in service revenue, creating increased scale in our gross margins, while breaking $8 million for the first time in third-party software sales," commented Crowley Crowley (krou`lē), city (1990 pop. 13,983), seat of Acadia parish, SW La.; inc. 1888. It is a shipping, milling, and storage center for a large rice-growing area and has a rice experiment station. Oil and natural gas wells are located nearby. . "While the fourth quarter significantly exceeded expectations we set last quarter, we benefited from several factors that we don't don't 1. Contraction of do not. 2. Nonstandard Contraction of does not. n. A statement of what should not be done: a list of the dos and don'ts. see reoccurring in the short term, the most significant of which was better than expected new customer revenue in our third-party software line. Based on current visibility into the first quarter of 2006, we expect to see total revenue increase 10% to 16% versus the first quarter of 2005 but decline sequentially 10% to 15%. We remain confident that the revenue run rates seen this quarter were not an anomaly Abnormality or deviation. Pronounced "uh-nom-uh-lee," it is a favorite word among computer people when complex systems produce output that is inexplicable. See software conflict and anomaly detection. and anticipate surpassing these levels during 2006." Gross Profit Margin Overview Overall gross profit was $3.2 million, or 25.2% of total revenue, for the quarter, compared to $2.1 million, or 23.7%, in the fourth quarter of 2004 and $2.3 million, or 22.3%, in the third quarter of 2005. The overall gross margin improvement was primarily the result of improvements in service gross profit margin. Overall gross profit was $9.9 million, or 23.0% of total revenue, for fiscal 2005 compared to $9.0 million, or 23.3%, in 2004. Software gross margin was 18.8% of software revenue for the quarter, compared to 24.4% in the fourth quarter of 2004 and 19.2% in the third quarter of 2005. Overall, software margins were impacted negatively on a comparative basis by the relative lower mix of high-margin proprietary software revenue as a percentage of total software revenue. Third-party software margin was 13.6% of third-party software revenue this quarter, down from 15.6% in the fourth quarter of 2004 and 14.2% in the third quarter of 2005. Third-party software margin fell slightly sequentially due to several large, low margin orders captured through the referral relationship mentioned previously. Service gross margin was 39.5% of service revenue this quarter, compared to 21.8% in the fourth quarter of 2004 and 29.9% in the third quarter of 2005. Service gross profit margin improvement was realized through higher revenue, improved rate per hour and improved utilization. Scott Mahan, BSQUARE's chief financial officer, commented, "We were pleased to see continued service margin improvement this quarter, continuing the momentum of the third quarter, and reaching our previously stated goal to achieve 35% service gross margin, or higher, on a quarterly basis by the end of 2005." Operating Expenses Overview For the quarter, operating expenses were $3.6 million, compared to $2.1 million in the fourth quarter of 2004 and $2.8 million in the third quarter of 2005. Sales, general and administrative expenses increased $636,000 sequentially, of which $399,000 related to bad debt expense taken against a customer receivable currently the subject of litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. and $105,000 which was attributable to higher bonuses and commissions resulting from higher sales. The remainder of the sequential operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. increase was primarily driven by $131,000 in increased research and development expenses associated with the company's product development efforts, particularly its DevkitIDP 270 reference design and Portable Media Player products. When compared to the fourth quarter of 2004, operating expenses increased $1.5 million. The year-over-year increase was driven by a $348,000 increase in research and development expense to support product development efforts, increased facilities costs, increased sales payroll payroll a list of employees, their salary rates, tax deductions, amounts paid, payroll tax, long service leave entitlements. and related expenses as well as the factors noted previously. Mahan commented, "As disclosed in our public filings, we have an ongoing dispute with a customer pertaining per·tain intr.v. per·tained, per·tain·ing, per·tains 1. To have reference; relate: evidence that pertains to the accident. 2. to engineering services provided in the first half of 2005. While we believe we have a strong contractual and legal position to enforce collection, and intend on exercising all prudent options available to us, we deemed it appropriate to reserve for the related customer account receivable account receivable Any amount owed to a business as the result of a purchase of goods or services from it on a credit basis. Although the firm making the sale receives no written promise of payment, it enters the amount due as a current asset in its books. this quarter given concerns regarding the customer's longer-term viability." Operating expenses were $11.5 million, or 26.7% of total revenue, for fiscal 2005 compared to $10.1 million, or 25.9%, in 2004, an increase of $1.4 million. Research and development expense to support the company's increased focus on its proprietary software products initiatives accounted for $1.1 million of the increase with the remainder primarily attributable to higher sales expenses. Cash Flow Overview The company's cash and cash equivalents and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments increased to $10.7 million at December 31, 2005 as compared to $10.2 million at September September: see month. 30, 2005 and $12.9 million at December 31, 2004 ($1.2 million of the balance is restricted in each case). The sequential increase was driven by stronger cash collections and increases in the company's royalty payable to Microsoft at quarter-end compared to the third quarter of 2005. The full year decrease of $2.2 million in cash was attributable to the net loss of $1.3 million, $500,000 paid to acquire the assets of Vibren in the second quarter of 2005, $226,000 in capital expenditures and negative changes in working capital. The company's cash flows and working capital are sensitive to the timing of Microsoft Embedded operating systems sales within the quarter due to collection patterns and the timing of royalty payments to Microsoft. Conference Call Management will host a conference call today, Thursday Thursday: see week. , March 9 at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). To access the call, please dial 1-800-811-0667 or 1-913-981-4901 for international callers and reference "BSQUARE Corporation Fourth Quarter and Year End 2005 Earnings Conference Call." A replay will be available for one week following the call by dialing 1-888-203-1112 or 1-719-457-0820 for international callers; reference conference ID 9340862. A live and replay webcast of the call will be available at www.bsquare.com in the investor relations Investor relations The process by which the corporation communicates with its investors. section. About BSQUARE BSQUARE is a software solutions provider to the global embedded device marketplace. Committed to delivering quality and lowering project risk and time to market, our teams collaborate with smart device makers at any stage in their device development. Our solution portfolio includes software and hardware development, systems integration services, reference designs, board support packages, middleware Software that functions as a conversion or translation layer. It is also a consolidator and integrator. Custom-programmed middleware solutions have been developed for decades to enable one application to communicate with another that either runs on a different platform or comes from a , and applications. Device makers can also license best-in-class See best-of-class. software products and operating systems Operating systems can be categorized by technology, ownership, licensing, working state, usage, and by many other characteristics. In practice, many of these groupings may overlap. from us as a full service provider. Since 1994, BSQUARE has completed hundreds of successful projects and has become a trusted partner to smart device makers worldwide. For more information about BSQUARE, visit its website at www.bsquare.com. BSQUARE is a registered trademark of BSQUARE Corporation. Other product or service names mentioned herein are the trademarks of their respective owners. This release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995, including statements relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc our projected financial results, stock performance, business development and proprietary products strategy. The words "believe," "expect," "intend," "anticipate," "presume pre·sume v. pre·sumed, pre·sum·ing, pre·sumes v.tr. 1. To take for granted as being true in the absence of proof to the contrary: We presumed she was innocent. ," variations of such words, and similar expressions identify forward-looking statements, but their absence does not mean that the statement is not forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. . Our forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict and could cause actual results to differ materially from those projected. Factors that could affect our actual results include a decline in the market for our products, technology licenses and services; a decline in the market for Windows-based or other smart devices or the failure of this market to develop as anticipated; adverse changes in macro-economic conditions; our ability to successfully implement, execute and make adjustments in our business strategy, business model or product offerings to meet the needs of our current, new and potential customers; risks associated with the effects of our restructurings; our ability to successfully support our operations; competition; and intellectual property risks. A more detailed description of certain factors that could affect actual results include, but are not limited to, those discussed in BSQUARE's Quarterly Report on Form 10-Q Form 10-Q See 10-Q. for the period ended September 30, 2005 in the section entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: "Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial of Financial Condition and Results of Operations -- Factors That May Affect Future Results" and in other SEC filings. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. We undertake no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or after the date of this release or to reflect the occurrence of unanticipated events.
BSQUARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
December 31,
--------------------
2005 2004
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 7,694 $ 4,943
Short-term investments 1,800 6,800
Accounts receivable, net of allowance for
doubtful accounts of $687 in 2005 and $222
in 2004 7,296 4,841
Prepaid expenses and other current assets 440 376
--------- ---------
Total current assets 17,230 16,960
Equipment, furniture and leasehold improvements,
net 792 784
Intangible assets, net 304 --
Restricted cash 1,200 1,200
Other non-current assets 44 --
--------- ---------
Total assets $ 19,570 $ 18,944
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,662 $ 1,340
Other accrued expenses 3,298 2,693
Accrued compensation 964 878
Accrued legal fees 534 534
Deferred revenue 270 390
--------- ---------
Total current liabilities 7,728 5,835
Deferred rent 379 375
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; 9,553,566 shares issued and
outstanding at December 31, 2005 and 9,533,082
shares issued and outstanding at December 31,
2004 118,393 118,350
Accumulated other comprehensive loss (423) (406)
Accumulated deficit (106,507) (105,210)
--------- ---------
Total shareholders' equity 11,463 12,734
--------- ---------
Total liabilities and shareholders' equity $ 19,570 $ 18,944
========= =========
BSQUARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Year Ended
Ended December 31, December 31,
------------------ ----------------
2005 2004 2005 2004
-------- ------- ------- --------
(Unaudited)
Revenue:
Software $ 8,778 $ 6,524 $31,210 $ 28,364
Service 3,918 2,406 11,713 10,556
-------- ------- ------- --------
Total revenue 12,696 8,930 42,923 38,920
-------- ------- ------- --------
Cost of revenue:
Software 7,127 4,933 24,679 21,893
Service 2,372 1,880 8,360 7,977
-------- ------- ------- --------
Total cost of revenue 9,499 6,813 33,039 29,870
-------- ------- ------- --------
Gross profit 3,197 2,117 9,884 9,050
-------- ------- ------- --------
Operating expenses:
Selling, general and
administrative 2,941 1,857 9,504 9,176
Research and development 624 276 1,950 855
Restructuring charges -- -- -- 40
-------- ------- ------- --------
Total operating expenses 3,565 2,133 11,454 10,071
-------- ------- ------- --------
Loss from operations (368) (16) (1,570) (1,021)
Interest and other income, net 70 50 287 237
-------- ------- ------- --------
Income (loss) from continuing
operations before income taxes (298) 34 (1,283) (784)
Income tax benefit (provision) 52 (11) (14) (11)
-------- ------- ------- --------
Income (loss) from continuing
operations (246) 23 (1,297) (795)
Income (loss) from discontinued
operations -- 54 -- (6,256)
-------- ------- ------- --------
Net income (loss) $ (246)$ 77 $(1,297)$ (7,051)
======== ======= ======= ========
Basic and diluted loss per share:
Income (loss) from continuing
operations $ 0.03 $ 0.00 $ (0.14)$ (0.08)
Income (loss) from discontinued
operations $ 0.00 $ 0.01 $ (0.00)$ (0.66)
-------- ------- ------- --------
Basic and diluted income (loss)
per share $ 0.03 $ 0.01 $ (0.14)$ (0.74)
======== ======= ======= ========
Shares used in calculation of loss
per share:
Basic 9,551 9,507 9,541 9,464
======== ======= ======= ========
Diluted 9,551 9,868 9,541 9,464
======== ======= ======= ========
|
|
||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion