BSQUARE Reports First Quarter Profits; Revenue Totals $13.3 Million; Operating Income Increases 68%.Business/High Tech Editors BELLEVUE, Wash.--(BUSINESS WIRE)--April 27, 2000 BSQUARE Corporation (Nasdaq: BSQR) reported today the growing demand for development of intelligent computing computing - computer devices (ICDs) helped boost revenue. For its first quarter ended March 31, 2000, revenue totaled $13.3 million compared to $9.2 million in the like quarter a year ago. Excluding one-time acquisition charges, net income for the quarter was $1.5 million, or $.04 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share. Including the one-time acquisition charge of $620,000, BSQUARE earned $995,000, or $.03 per diluted share, compared to the like quarter of $429,000, or $.02 per share. ICDs are an emerging class of products with sophisticated processing power that are designed for specific computing and communications applications. Examples include set-top boxes The cable TV box that sits on "top" of the TV "set," although it is often located several feet away in an equipment rack. The set-top box descrambles the premium channels and provides a tuner for the higher cable numbers that very old TVs did not support. for interactive television, handheld computers A computing device that can be easily held in one hand while the other hand is used to operate it. The Palm devices are a popular example. See Palm, smartphone and palmtop. , gaming systems, consumer "Internet appliances Also called "information appliance," "smart appliance," and "Web appliance," it is a device specialized for accessing the Web and/or e-mail. Designed for ease of use, it plugs into a telephone jack or LAN connection for Internet hookup. " such as web pads See Webpad. , navigational devices in vehicles, and Windows-based terminals A specialized terminal or slimmed-down PC used as a client to Windows Terminal Server. See Windows terminal. . "During the quarter, we signed several contracts for development and testing projects for semiconductor manufacturers and OEMs, which leads to current and future revenue growth. The demand for software in Windows-based intelligent computing devices is escalating, and these contracts are a direct reflection of the growth in this market," said William Baxter William Baxter may refer to:
New contracts signed by BSQUARE during the quarter included a number of service contracts with Matsushita Electric Industrial Co. (MEI) -- best known for its Panasonic products - including a significant contract for which BSQUARE will assist MEI with the integration of Windows CE (Windows Consumer Electronics) Microsoft's version of Windows for handheld devices and embedded systems that use x86, ARM, MIPS and SHx CPUs. Windows CE .NET superseded Windows CE 3.0. into its microprocessors. As anticipated, following the designation in January 2000 as the exclusive Porting Partner for Windows CE, BSQUARE is now signing deals directly with semiconductor vendors. As a result, BSQUARE's revenue stream became more diversified diversified (di·verˑ·s in the most recent quarter to include more product, original equipment manufacturers (OEMs) and semiconductor vendor revenues. Of total revenue this quarter, 77% was from Microsoft, compared to 84% in 1999. BSQUARE also signed a multi-million dollar contract with a major provider of interactive television services. And commenced a contract that is in excess of a million dollars for product and service for a major automobile manufacturer. The automobile manufacturer is implementing a new in-car navigation device. In the quarter, BSQUARE had 103 design wins compared to 44 design wins in the first quarter a year ago. Also during the quarter, BSQUARE entered into strategic partnerships with Insignia in·sig·ni·a also in·sig·ne n. pl. insignia or in·sig·ni·as 1. A badge of office, rank, membership, or nationality; an emblem. 2. A distinguishing sign. , WRQ (WRQ, Inc., Seattle, WA, www.wrq.com) A software company that specialized in terminal emulation and NT-Unix integration products. Founded in 1981 as Walker Richer and Quinn, Inc., a consulting firm in minicomputer and mainframe applications, it introduced an HP terminal emulator for the and Mobile Computing Using a computing device while in transit. Mobile computing implies wireless transmission, but wireless transmission does not necessarily imply mobile computing. Fixed wireless applications use satellites, radio systems and lasers to transmit between permanent objects such as buildings Corp. (MCC (The Microelectronics and Computer Technology Corporation, Austin, TX) The first high-tech research and development consortium in the U.S., created in 1982 by leading companies within the electronics industry. ) to help those companies distribute their respective products for Windows powered ICDs. BSQUARE will distribute Insignia's Jeode Java solution, which provides an efficient means for executing Java applications A Java program that is run stand alone. The Java Virtual Machine in the client or server is interpreting the instructions. Contrast with Java applet. See servlet. . BSQUARE will provide secure and persistent wireless communication between WRQ's devices and servers, and MCC's wireless router A network device that combines a wireless access point (base station), a wired LAN switch and a router with connections to a cable or DSL service. Wireless routers provide a convenient way to connect a small number of wired and any number of wireless computers to the Internet. that transmits data between CE devices to Windows servers See Windows Server 2003, Windows Home Server, Windows 2000 and Windows NT. . These new alliances allow for greater penetration of BSQUARE solutions into wireless Internet and mobile devices. "In forming these partnerships, we can offer a more complete line of products and services to our customers that assist them with their development needs. The use of and demand for intelligent computing devices, we believe, is still in its infancy. We are excited about the in-roads we have made with leading OEMs and semiconductor makers; our reputation as a complete solutions provider to the ICD ICD International Classification of Diseases (of the World Health Organization); intrauterine contraceptive device. ICD abbr. development market is building. We are currently forming new alliances, and look forward to announcing those partnerships and contracts in the near future," continued Baxter. For the quarter, gross margin was 52% compared to 54% in the prior year period. Cost of service increased as a percentage of related service revenue, due in large part to increased compensation for our engineers. First quarter income from operations increased 68.0% to $1.2 million compared to $719,000 in the first quarter a year ago. 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. increased 35%, considerably lower than the 45% quarterly revenue growth, to $5.7 million compared to $4.3 million in the quarter ended March 31, 1999. "We are investing heavily in our research and development, and our people, to ensure that we are prepared to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. the future growth in the industry," said Brian V. Turner, CFO See Chief Financial Officer. . "Over the first quarter of 1999, R&D expenses grew to $2.0 million compared to $1.6 million in the first quarter a year ago. This will assist us in achieving our product revenue goals in the coming years." On January 5, 2000, BSQUARE merged with BlueWater Systems, a creator of software development tool kits for Windows-based ICDs. Results for the quarter include the acquisition of BlueWater Systems, which was completed in January 2000, and accounted for as a pooling of interest Noun 1. pooling of interest - an accounting method used in the merging of companies; the balance sheets are added together item by item; this method is tax-free . In connection with the merger, the company incurred a $620,000 pre-tax, merger-related expense in the quarter. The charge was primarily for investment banking, accounting and legal fees. Included in operating expenses are non-cash charges Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. for depreciation and amortization of deferred stock option compensation of $775,000 in 2000 and $664,000 in 1999. Excluding these non-cash charges and the one time merger related costs, diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of would have been $0.06 in 2000 and $0.04 for 1999. About BSQUARE BSQUARE (Nasdaq:BSQR) is a dynamic software company working with Fortune 500 companies to enable the age of intelligent computing devices. Specializing in the Microsoft Windows See Windows. (operating system) Microsoft Windows - Microsoft's proprietary window system and user interface software released in 1985 to run on top of MS-DOS. Widely criticised for being too slow (hence "Windoze", "Microsloth Windows") on the machines available then. family of 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. , BSQUARE supplies software products and services for the development and use of PC Companions, Internet appliances, industrial automation devices, Windows-based terminals, and other intelligent computing devices. From development tools to software infrastructures to end-user applications, BSQUARE's touch is on many embedded Inserted into. See embedded system. Windows-based devices available in the market today. For more information, visit BSQUARE at http://www.bsquare.com or call 888-820-4500. BSQUARE is a registered trademark of BSQUARE Corporation. All names, product names, and tradenames are trademarks or registered trademarks of their respective holders. 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. relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc our sales that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. The words "believe," "expect," "intend," "anticipate," variations of such words, and similar expressions identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Factors that could affect BSQUARE's actual results include adverse changes in BSQUARE's relationship with Microsoft, a decline in the market for Windows-based intelligent computing devices or the failure of such market to develop as anticipated, delays or announcements of delays by Microsoft of Windows CE product releases, the failure of BSQUARE to attract microprocessor vendors and to secure contracts on sufficiently profitable terms, BSQUARE's ability to complete work under contract, 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. , 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: "Risk Factors." Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. BSQUARE undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date of this release or to reflect the occurrence of unanticipated events.
BSQUARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
Three Months
Ended March 31,
-----------------
2000 1999
---- ----
(unaudited)
Revenue:
Service $ 12,284 $ 8,562
Product 1,008 605
-------- --------
Total revenue 13,292 9,167
-------- --------
Cost of revenue:
Service 6,197 4,108
Product 152 77
-------- --------
Total cost of revenue 6,349 4,185
-------- --------
Gross profit 6,943 4,982
-------- --------
Operating expenses:
Research and development 2,044 1,643
Selling, general and
administrative 3,520 2,502
Amortization of deferred
stock option compensation 171 118
-------- --------
Total operating expenses 5,735 4,263
-------- --------
Income from operations 1,208 719
Other income (expense) net:
Interest income, net 826 54
Merger related expenses (620) --
-------- --------
Income before income taxes 1,414 773
Provision for income taxes 419 344
-------- --------
Net income $ 995 $ 429
======== ========
Basic earnings per share $ 0.03 $ 0.02
======== ========
Weighted average shares
outstanding used to compute
basic earnings per share 32,566 18,458
======== ========
Diluted earnings per share $ 0.03 $ 0.02
======== ========
Weighted average shares
outstanding to compute
diluted earnings per share 35,628 28,468
======== ========
Cash based diluted earnings
per share, excluding merger related
expenses (1) $ 0.06 $ 0.04
======== ========
(1) Cash based diluted earnings per share is defined as net
income, excluding tax-effected non-cash expenses and merger related
costs.
BSQUARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
March 31, December 31,
2000 1999
---- ----
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 59,358 $ 55,604
Short-term investments 26,869 27,368
Accounts receivable, net 6,491 4,302
Prepaid expenses and
other current assets 579 609
--------- ---------
Total current assets 93,297 87,883
Furniture, equipment and
leasehold improvements, net 5,693 7,239
Deposits and other assets 1,422 211
--------- ---------
Total assets $ 100,412 $ 95,333
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 306 $ 653
Accrued expenses 4,921 4,424
Deferred revenue 4,269 1,130
--------- ---------
Total current liabilities 9,496 6,207
--------- ---------
Shareholders' equity:
Blue Water Systems, Inc.
Series A Preferred stock,
no par value: authorized 500,000 shares,
issued and no shares outstanding
in 2000 and 15,151 shares outstanding
in 1999 -- 250
Common stock, no par value:
authorized 50,000,000 shares,
issued and outstanding,
32,592,108 shares in 2000 and 91,722 90,827
32,556,224 in 1999
Deferred stock option
compensation (697) (868)
Cumulative foreign currency
translation adjustment (36) (15)
Accumulated deficit (73) (1,068)
--------- ---------
Total shareholders' equity 90,916 89,126
--------- ---------
Total liabilities and
shareholders' equity $ 100,412 $ 95,333
========= =========
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