BSQUARE Reports Fourth Quarter Results for 2003; Best Top-Line Results in Eight Quarters.Business Editors 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.--(BUSINESS WIRE)--Jan. 29, 2004 BSQUARE Corporation (Nasdaq:BSQR) today reported financial results for the fourth quarter and year ended December December: see month. 31, 2003. Revenue for the fourth quarter of 2003 was $10.8 million compared to revenue of $9.4 million in the prior quarter. Net loss for the quarter was $3.4 million ($0.09 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) compared to a net loss of $3.0 million ($0.08 per diluted share) in the prior quarter. In the fourth quarter of 2002, the company reported revenue of $9.3 million and a net loss of $11.1 million ($0.30 per diluted share). For the year ended December 31, 2003, the company reported revenue of $37.6 million and a net loss of $13.7 million ($0.37 per diluted share). This compares to 2002 revenue of $37.5 million and a net loss of $73.5 million ($2.02 per diluted share), including $14.9 million ($0.41 per diluted share) due to the cumulative effect of a change in accounting principle related to goodwill. "This was the company's best top-line quarter since the third quarter of 2001, 8 quarters ago," 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. "Our continuing software and service business reported year-over-year growth. Although the overall revenue increase from 2002 to 2003 is small, it is significant considering we experienced an $8.2 million decrease in revenue from the discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: 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 from 2002 to 2003. Clearly, these results reflect a dramatic change in our business mix over the last 18 months. The top-line results, coupled with the dramatic reduction in our loss year-over-year, reflects both growing acceptance of our software and service offerings by smart device makers as well as operational improvements resulting from turnaround Turnaround A situation where a company that has had poor performance for an extended period of time experiences a positive reversal. Notes: A speculator may profit from a turnaround if he or she accurately anticipates the improvement of a poorly performing company. initiatives." In the fourth quarter of 2003, software sales of $8.6 million, including $7.6 million of 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. 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. , were up 21 percent from $7.1 million in the prior quarter. Software sales increased to $28.2 million for the year, up 45 percent from the prior year. Of that total, $24.6 million was attributable to sales of Microsoft Windows embedded software. 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. said, "BSQUARE is one of Microsoft's largest value-added val·ue-add·ed adj. Of or relating to the estimated value that is added to a product or material at each stage of its manufacture or distribution: partners worldwide for sales of Microsoft Windows Embedded software. In addition to providing a consistent revenue stream with potential for further growth, our partnership with Microsoft generates new business opportunities through customer leads and joint marketing activities." The number of SDIO See SDIO card. Now! enabled devices in the market place continued to expand. Six companies became BSQUARE SDIO Now! licensees during the fourth quarter, including Compal Electronics Compal Electronics (Chinese: 仁寶電腦股份有限公司) is a Taiwanese original design manufacturer, handling the production of notebook computers and monitors for a variety of clients around the world, including Dell and , Dell Computer Corporation (company) Dell Computer Corporation - One of the biggest US manufacturers of IBM PC compatibles. "From notebooks to networks", their slogan says. http://us.dell.com. , and Intel Corporation (company) Intel Corporation - A US microelectronics manufacturer. They produced the Intel 4004, Intel 8080, Intel 8086, Intel 80186, Intel 80286, Intel 80386, Intel 486 and Pentium microprocessor families as well as many other integrated circuits and personal computer networking . Over 16 new Microsoft Windows Mobile for Pocket PC and Smartphone A cellular telephone with information access. It provides digital voice service as well as any combination of e-mail, text messaging, pager, Web access, voice recognition, still and/or video camera, MP3, TV or video player and organizer (see PDA). devices with SDIO Now! were shipped by Dell, 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 , HTC HTC HTML (Hyper Text Markup Language) Component HTC High Tech Computer Corp (Taiwan, China) HTC Hennepin Technical College (Minnesota) HTC High-Throughput Computing and others in the quarter. While service revenue for the quarter was $2.1 million versus $2.3 million in the third quarter of 2003, the fourth quarter of 2003 marked the beginning of a turnaround for BSQUARE's service business. During the quarter, we added new management and a number of issues affecting the group's profitability are being addressed. The service business is showing improvements in utilization of resources, pricing and contract management. Year over year, service revenue was down from $18.0 million in 2002 to $9.4 million in 2003, which included the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. decrease in the discontinued Microsoft tools consulting business of $8.2 million. BSQUARE's service organization is at the forefront of helping our customers bring cutting-edge smart devices to the marketplace. During the year, BSQUARE provided service solutions to a variety of new customers developing smart devices ranging from rugged military handhelds, new phones based on Windows Mobile The Windows platform from Microsoft for handheld devices, including PDAs, cellphones and Portable Media Centers. See Pocket PC, Pocket PC Phone Edition, Smartphone and Portable Media Center. for Smartphone, Pocket PC-based industrial data collection devices, retail point-of-sale point of sale n. pl. points of sale A business or place where a product or service can be purchased. Also called point of purchase. point systems, kiosks, and convergent home entertainment devices. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Crowley, the growth of software sales had a positive impact on the company's service business. "Our software sales and overall market support of Microsoft technologies are assisting our advancement of developing service solutions for smart device makers. We anticipate that in 2004 we will see more software customers take advantage of our services capabilities." In the fourth quarter, the company shipped its first units of the Power Handheld handheld: see personal digital assistant. device to seed customers' initial requirements. "It's a major achievement to ship our first customer units. We also recognize that the success of Power Handheld is dependent upon the enterprise market initiatives of our customers," Crowley said. "However, our market entry with Power Handheld is taking longer than expected while expenses and cash needs to meet the requirements of production are growing. As previously announced, our board of directors has formed a strategic planning Strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy, including its capital and people. committee chartered with exploring strategic financing options for the Power Handheld due to the significant working capital needs of this business." Scott Mahan, BSQUARE's chief financial officer, said that the company's continued focus on operational efficiencies as part of the turnaround plan has paid dividends at the 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. level. "Year over year, research and development and selling, general and administrative expenses were down an aggregate of $12.7 million. R&D and S,G &A expenses were up from a total of $5.1 million in the third quarter to $5.5 million in the fourth quarter of 2003. Of this increase, $100,000 related to increased S,G &A expenses in Japan while a $300,000 increase in R&D expenses associated with the launch of the Power Handheld device accounted for the remainder. Over $2.4 million of the fourth quarter R&D and S,G &A expenses were attributable to the Power Handheld business." Additionally, we continue to address expenses in areas that won't impact our long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. growth potential. To this end, the company is in the process of closing its Japan operation. Completion of the closure is expected in the first quarter of 2004. Mahan added, "Operating losses operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. at the under-performing Japan operation totaled $2.0 million in 2003; of that, $900,000 occurred in the fourth quarter of 2003, including $400,000 of restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). expenses. Remaining closure costs in 2004 are not expected to be material." Mahan also commented that BSQUARE Taiwan's operation will remain unaffected and sales opportunities in Japan will be addressed through Taiwan and U.S. operations. Included in 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 fourth quarter of 2003 is a net restructuring credit of $540,000. Restructuring expenses of $400,000 from the Japan operation closure were offset by a credit of over $940,000 related to the reversal of an excess facilities restructuring reserve. During the fourth quarter of 2003, the company used $5.2 million in cash, of which $3.0 million was used to fund operations, while $2.2 million funded inventory purchase commitments of Power Handheld inventory. At December 31, 2003, BSQUARE had a balance of $17.7 million in cash and cash equivalents, restricted cash 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, as compared with $22.9 million at the end of the third quarter of 2003. Crowley concluded, "2003 was a year of transition for BSQUARE on many fronts. As we move into 2004, we remain very excited about the prospects for our business and dedicated to our goal of reaching profitability." Conference Call Management will host the conference call today, Thursday, January 29, 2004, at 2:00 PM Pacific Standard Time. To access the call, please dial 706-634-1118 and reference BSQUARE or confirmation #: 4963111. The call may also be accessed by web cast at www.BSQUARE.com in the investor relations Investor relations The process by which the corporation communicates with its investors. section. A web cast replay will be available for one year following the call. About BSQUARE BSQUARE is a leading global provider of software, engineering services and consulting for the smart device market. Since 1994, BSQUARE has delivered world-class device makers with the building blocks necessary to design, develop, and test innovative products quickly and cost effectively. A sample of BSQUARE customers includes Motorola, Hewlett-Packard, Texas Instruments See TI. (company) Texas Instruments - (TI) A US electronics company. A TI engineer, Jack Kilby invented the integrated circuit in 1958. Three TI employees left the company in 1982 to start Compaq. , Vodafone U.K., HTC, Microsoft and others. BSQUARE is one of Microsoft's largest value-added partners worldwide for Windows Embedded software, a Gold-level Systems Integrator An individual or organization that builds systems from a variety of diverse components. With increasing complexity of technology, more customers want complete solutions to information problems, requiring hardware, software and networking expertise in a multivendor environment. of the year, and a leading Windows Mobile solutions provider for Smartphone and PocketPC. The company's SDIO Now! technology has been adopted by over 50 top-tier smart device makers. For more information, visit BSQUARE at www.bsquare.com or call 888-820-4500. 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 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 sales, customer prospects, profitability, financial goals, revenue targets, cash usage, projected financial results and outlook and financing options for our Power Handheld business. 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. 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, including the Power Handheld, 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; and our ability to successfully support our operations, competition and intellectual property risks. In addition, demand for our Power Handheld based devices is uncertain and will be affected by a variety of business and economic conditions, including customer-ordering patterns. A more detailed description of certain factors that could affect actual results include, but are not limited to, those discussed in BSQUARE's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 2002 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" and in our subsequent Quarterly Reports on Form 10-Q Form 10-Q See 10-Q. . 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)
ASSETS December 31, December 31,
2003 2002
--------------------------
Current assets:
Cash and cash equivalents $ 5,700 $ 11,041
Restricted cash 3,906 2,582
Short-term investments 8,139 18,444
Accounts receivable, net 6,362 6,494
Inventory 327 --
Tax receivable 155 2,934
Prepaids and other current assets 2,793 1,966
---------- -----------
Total current assets 27,382 43,461
Furniture, equipment and leasehold
improvements, net 1,581 3,124
Restricted cash -- 3,358
Investments -- 210
Intangible assets, net 266 850
Deposits and other assets 1,001 2,566
---------- -----------
Total assets $ 30,230 $ 53,569
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,457 $ 1,942
Accrued compensation 1,031 3,079
Restructuring costs, current portion 1,433 5,659
Other accrued expenses 3,373 3,204
Deferred revenue 1,296 1,620
---------- -----------
Total current liabilities 10,590 15,504
Restructuring costs, net of current portion -- 5,431
---------- -----------
Total liabilities 10,590 20,935
---------- -----------
Shareholders' equity:
Preferred stock, no par value: authorized
10,000,000 shares; no shares issued and
outstanding -- --
Common stock, no par value: authorized
150,000,000 shares, issued and
outstanding, 37,503,176 shares as of
December 31, 2003 and 36,968,128 shares as
of December 31, 2002 117,889 117,149
Deferred stock-based compensation -- (15)
Accumulated other comprehensive loss (392) (325)
Accumulated deficit (97,857) (84,175)
---------- -----------
Total shareholders' equity 19,640 32,634
---------- -----------
Total liabilities and shareholders'
equity $ 30,230 $ 53,569
========== ===========
BSQUARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Twelve Months
Ended Ended
December 31, December 31,
-----------------------------------
2003 2002 2003 2002
------- -------- -------- --------
Revenue:
Software $ 8,593 $ 6,816 $ 28,163 $ 19,478
Service 2,092 2,468 9,379 18,028
Hardware 73 -- 73 --
------- -------- -------- --------
Total revenue 10,758 9,284 37,615 37,506
------- -------- -------- --------
Cost of revenue:
Software 6,667 5,246 21,233 13,948
Service 2,423 3,356 9,740 16,847
Hardware 59 -- 59 --
------- -------- -------- --------
Total cost of revenue 9,149 8,602 31,032 30,795
------- -------- -------- --------
Gross profit 1,609 682 6,583 6,711
Operating expenses:
Research and development 2,422 3,902 9,809 16,692
Selling, general and
administrative 3,038 4,261 13,364 19,230
Acquired in-process research and
development -- -- -- 1,698
Amortization of intangible assets 145 138 583 1,380
Impairment of goodwill and other
intangible assets 18 -- 453 6,472
Restructuring and other related
charges (credit) (544) 4,159 (2,960) 16,249
------- -------- -------- --------
Total operating expenses 5,079 12,460 21,249 61,721
------- -------- -------- --------
Loss from operations (3,470) (11,778) (14,666) (55,010)
Other income (expense), net 105 270 1,059 (1,900)
------- -------- -------- --------
Loss before income taxes and
cumulative effect of change in
accounting principle (3,365) (11,508) (13,607) (56,910)
Income tax (expense) benefit (6) 428 (75) (1,696)
------- -------- -------- --------
Loss before cumulative effect of
change in accounting principle (3,371) (11,080) (13,682) (58,606)
Cumulative effect of change in
accounting principle -- -- -- (14,932)
------- -------- -------- --------
Net loss $(3,371)$(11,080)$(13,682)$(73,538)
======= ======== ======== ========
Basic and diluted loss per share:
Loss before cumulative effect of
change in accounting principle $ (0.09)$ (0.30)$ (0.37)$ (1.61)
Cumulative effect of change in
accounting principle -- -- -- (0.41)
------- -------- -------- --------
Basic and diluted loss per
share $ (0.09)$ (0.30)$ (0.37)$ (2.02)
======= ======== ======== ========
Shares used in calculation of loss
per share:
Basic and diluted 37,474 36,912 37,270 36,413
======= ======== ======== ========
|
|
Printer friendly
Cite/link
Email
Feedback
Reader Opinion