PR Newswire | Mar 18, 2021 04:06PM EDT

03/18 15:05 CDT

Bsquare Fourth Quarter 2020 Results Reflect Increasing Business Stability2020 annual net loss improves sharply; Cash position increases year-over-year. SEATTLE, March 18, 2021

SEATTLE, March 18, 2021 /PRNewswire/ -- Bsquare Corporation (NASDAQ: BSQR) today announced financial results for the fourth quarter of 2020. Revenue was $11.1 million, up 6% over Q3 2020, while fourth-quarter net loss was $0.2 million, compared to a net loss of $0.1 million in the third quarter. Full year 2020 net loss was $1.9 million, a $7.3 million improvement over a net loss of $9.2 million in 2019. Our cash balance on December 31, 2020, increased by $2.4 million over the same date in 2019. Adjusted EBITDAS, a non-GAAP measure, improved $5.1 million during 2020 compared to 2019.

"Our business rebuilding continued in 2020 despite the impact of COVID-19 on our revenue. The improvements in net loss and cash signal an increasing stability in our business" said Ralph C. Derrickson, CEO, and President of Bsquare.

Added Derrickson: "The growing connection between our OS licensing business and our IoT software and operations business was increasingly evident in 2020. The expansion of our business with Itron was evidence of our renewed focus on customer service. The experience we gained serving them, as well as our other large IoT customers, will result in improvements to our IoT service and software offerings."

Fourth Quarter 2020 Financial Highlights

* Overall revenue for the quarter was $11.1 million, 6.2% higher than Q3 2020. Quarter-over-quarter improvement was primarily driven by revenue increases in the Edge to Cloud segment. * Partner Solutions gross margins were 15.7%, down from 19.1% in Q3 2020, while Edge to Cloud gross margins improved to 39.4%. * Net loss for the current quarter was $0.2 million, or $0.02 per diluted share, compared to a net loss of $0.1 million, or $0.01 per diluted share, in the third quarter of 2020. * Fourth-quarter results improved quarter- and year-end cash balances to $13.0 million, an increase of $2.4 million over December 31, 2019. * Adjusted EBITDAS was $0.1 million lower in Q4 2020 than in Q3 2020, but adjusted EBITDAS for the year was $5.1 million higher than adjusted EBITDAS for 2019.

The following table provides details regarding our financial results for the fourth quarter of 2020 (unaudited, in thousands except percentages and per share amounts):

Three Months Ended

December December Q4-Q4 September Q4-Q3 31, 2020 31, 2019 Change (1) 30, 2020 Change (1)

Revenue:

Partner $ 9,097 $ 13,287 $ (4,190) $ 9,145 $ (48)Solutions

Edge to Cloud 1,974 2,079 (105) 1,275 699

Total revenue $ 11,071 $ 15,366 $ (4,295) $ 10,420 $ 651

Total gross $ 2,205 $ 2,650 $ (445) $ 1,890 $ 315profit

Gross margins:

Partner 16 % 14 % 2 % 19 % (3) %Solutions

Edge to Cloud 39 % 35 % 4 % 12 % 27 %

Total gross 20 % 17 % 3 % 18 % 2 %margin

Totaloperating $ 2,407 $ 4,027 $ (1,620) $ 2,028 $ 379expenses

Totaloperatingexpenses $ 2,407 $ 3,313 $ (906) $ 2,028 $ 379excludingrestructuringcosts (2)

Net loss $ (206) $ (1,360) $ 1,154 $ (136) $ (70)

Diluted net $ (0.02) $ (0.10) $ 0.08 $ (0.01) $ (0.01)loss per share

Net lossexcluding $ (206) $ (646) $ 440 $ (136) $ (70)restructuringcosts (2)

Diluted netloss per shareexcluding $ (0.02) $ (0.05) $ 0.03 $ (0.01) $ (0.01)restructuringcosts (2)

Adjusted $ 148 $ (314) $ 462 $ 277 $ (129)EBITDAS (3)

Cash,restrictedcash, cash $ 12,960 $ 10,561 $ 2,399 $ 12,572 $ 388equivalentsand short-terminvestments

Notes:

^ For gross margin, amount represents percentage point change.(1)

Total operating expenses excluding restructuring costs, net loss excluding^ restructuring costs, and diluted net loss per share excluding restructuring(2) costs are non-GAAP financial measures (reconciliation provided after financial statement tables).

Adjusted EBITDAS = Income (loss) from operations before depreciation,^ amortization, stock compensation expense, and restructuring costs(3) (applicable only to 2019). Adjusted EBITDAS is a non-GAAP financial measure (reconciliation provided after financial statement tables).

Financial Commentary on Fourth Quarter 2020 Results Compared to Fourth Quarter 2019

* Partner Solutions revenue decreased for the comparative period, primarily driven by lower sales of Microsoft operating systems and other embedded software. * Edge to Cloud revenue decreased when compared to the prior year fourth quarter, primarily from completion of software consulting projects during 2019 that did not recur in 2020. * Total operating expenses, both including and excluding restructuring costs, decreased when compared to the fourth quarter of 2019 due to announced cost reduction initiatives that reduced salary, benefit, and marketing costs. * Net loss for Q4 2020 was $0.2 million or $(0.02) per diluted share compared to a loss of $1.4 million or $(0.10) per diluted share in Q4 2019, an improvement of ?$1.2 million or $0.08 per diluted share.

Conference Call

Management will host a conference call today, March 18, 2021, at 5 p.m. Eastern Time (2 p.m. Pacific Time). To access the call dial 1-800-437-2398 or 1-856-344-9206 for international callers, and reference "Bsquare Corporation Fourth Quarter 2020 Earnings Conference Call." A replay will be available for two weeks following the call by dialing 1-844-512-2921, or 1-412-317-6671 for international callers; reference pin number 8160192. A live and replay Webcast of the call will be available at www.bsquare.com in the investor relations section.

About Bsquare Corporation

Bsquare builds technology that is powering the next generation of intelligent devices and the systems in which they operate. We believe the promise of IoT will be realized through the development of intelligent devices and intelligent systems that are cloud-enabled, contribute data, facilitate distributed control and decision making, and operate securely at scale. Bsquare's suite of services and software components allow our customers to create new revenue streams and operating models while providing new opportunities for lowering costs and improving operations. We serve a global customer base from offices in Seattle, Washington, and the United Kingdom. For more information, visit www.bsquare.com.

Cautionary Note Regarding Forward-Looking Statements

This release contains "forward-looking statements" within the meaning of the safe-harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "expect," "believe," "plan," "strategy," "future," "may," "should," "will," and similar references to future periods. Examples of forward-looking statements include, among others, express or implied statements we make regarding the stability of our business, expected improvements to our IoT and software offerings, expected operating results in future periods, such as anticipated revenue, gross margins, profitability, cash and investments, and regarding strategies for customer retention, growth, new product and service developments, and market position. Forward-looking statements are neither historical facts nor assurances about future performance. Instead, they are based on current beliefs, expectations and assumptions about the future of our business and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements.

Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others: our ability to execute our development initiatives and sales and marketing strategies; the extent to which we are successful in gaining new long-term customers and retaining existing ones; whether we are able to maintain our favorable relationship with Microsoft as a systems integrator and distributor; our success in leveraging strategic partnering initiatives with companies such as Microsoft, AWS and Intel; the ongoing impact of COVID-19 on our business and on our customers and vendors; and such other risk factors as discussed in our most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. Any forward-looking statement made by us in this release is based only on information currently available to us and speaks only as of the date on which it is made. Except as required by law, we undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

Bsquare Contact: Investor Contact:

Christopher Wheaton, Chief Financial Officer Steven Gottlieb

Bsquare Corporation Bsquare Corporation

+1 425.519.5900 + 1 425.519.5900

investorrelations@bsquare.com steven.gottlieb@bsquare.com

Bsquare and the Bsquare Logo are trademarks of Bsquare Corporation in the U.S. and other countries. Other names and brands herein may be trademarks of others.

BSQUARE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(unaudited)

December 31,

2020 2019

ASSETS

Current assets:

Cash and cash equivalents $ 12,623 $ 7,712

Restricted cash 337 600

Short-term investments - 2,249

Accounts receivable, net of allowance for doubtfulaccounts of $50 at December 31, 2020 and $31 at 6,177 9,216December 31, 2019

Prepaid expenses and other current assets 409 244

Contract assets 456 494

Total current assets 20,002 20,515

Equipment, furniture and leasehold improvements, net 322 252

Deferred tax assets 7 7

Intangible assets, net 71 169

Right-of-use lease assets, net 1,853 1,828

Other non-current assets including contract assets 27 284

Total assets $ 22,282 $ 23,055

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Third-party software fees payable $ 6,458 $ 7,224

Accounts payable 489 408

Paycheck Protection Program loan 950 -

Accrued compensation 717 1,001

Other accrued expenses 216 306

Deferred revenue, current portion 2,165 1,559

Operating leases 344 702

Total current liabilities 11,339 11,200

Deferred revenue 28 903

Operating leases, long-term 1,630 1,256

Paycheck Protection Program loan, long-term 634 -

Shareholders' equity:

Preferred stock, no par: 10,000,000 shares - -authorized; no shares issued and outstanding

Common stock, no par: 37,500,000 shares authorized;13,235,038 issued and outstanding at December 31, 139,726 138,8772020 and 13,042,293 issued and outstanding atDecember 31, 2019

Accumulated other comprehensive loss (992) (987)

Accumulated deficit (130,083) (128,194)

Total shareholders' equity 8,651 9,696

Total liabilities and shareholders' equity $ 22,282 $ 23,055

BSQUARE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(unaudited)

Three Months Ended December 31, Year Ended December 31,

2020 2019 2020 2019

Revenue:

Partner Solutions $ 9,097 $ 13,287 $ 42,257 $ 50,628

Edge to Cloud 1,974 2,079 4,887 8,655

Total revenue 11,071 15,366 47,144 59,283

Cost of revenue:

Partner Solutions 7,669 11,364 35,171 43,198

Edge to Cloud 1,197 1,352 4,247 5,989

Total cost of 8,866 12,716 39,418 49,187revenue

Gross profit 2,205 2,650 7,726 10,096

Operating expenses:

Selling, general and 2,363 2,838 9,314 11,316administrative

Research and 44 475 266 5,751development

Restructuring costs - 714 - 2,343

Total operating 2,407 4,027 9,580 19,410expenses

Loss from operations (202) (1,377) (1,854) (9,314)

Other income, net (4) 33 (35) 149

Loss before income (206) (1,344) (1,889) (9,165)taxes

Income tax (expense) - (16) - (16)benefit

Net loss $ (206) $ (1,360) $ (1,889) $ (9,181)

Basic and diluted $ (0.02) $ (0.10) $ (0.14) $ (0.71)net loss per share

Net loss excluding (206) (646) (1,889) (6,838)restructuring costs

Diluted net loss pershare excluding $ (0.02) $ (0.05) $ (0.14) $ (0.53)restructuring costs

Shares used in pershare calculations:

Basic and diluted 13,225 12,997 13,139 12,896

BSQUARE CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO MOST DIRECTLY COMPARABLE GAAPFINANCIAL MEASURES

(In thousands, unaudited)

Adjusted EBITDAS

Three Months Ended Year Ended December 31, December 31,

2020 2019 2020 2019

Loss from operations as reported $ (202) $ (1,377) $ (1,854) $ (9,314)

Depreciation and amortization 139 201 633 897

Share-based compensation 211 148 812 519

Restructuring costs - 714 - 2,343

Adjusted EBITDAS ^(1) $ 148 $ (314) $ (409) $ (5,555)

Adjusted EBITDAS is a non-GAAP financial measure that Bsquare defines as income (loss) from operations before depreciation expense on fixed assets and amortization expense (including impairment) on intangible assets, stock-based compensation expense, and restructuring costs (applicable only to 2019). Adjusted EBITDAS should not be construed as a substitute for net income (loss) or net cash provided (used) by operating activities (all as determined in accordance with GAAP) for the purpose of analyzing our operating performance, financial position and cash flows, and Adjusted EBITDAS has limitations, including that it does not reflect our entire cost^ structure to operate our business (such as the cost of replacing assets(1) being depreciated or amortized, capital expenditures, and stock-based compensation expenses which we expect to continue being meaningful, and income tax expense (benefit)) and may not be comparable to similarly titled measures used by other companies. However, Bsquare regards Adjusted EBITDAS as a complement to net income and other GAAP financial performance measures. Bsquare uses Adjusted EBITDAS to evaluate Bsquare's financial performance and the effectiveness of its business strategies on a consistent basis across reporting periods, and Bsquare believes the measure is often used by analysts, investors, and other interested parties to evaluate comparable companies

Total operating expenses excluding restructuring costs.

Three Months Ended Year Ended December 31, December 31,

2020 2019 2020 2019

Total operating expenses $ 2,407 $ 4,027 $ 9,580 $ 19,410

Restructuring costs - 714 - 2,343

Total operating expenses excluding $ 2,407 $ 3,313 $ 9,580 $ 17,067restructuring costs ^(1)

Total operating expenses excluding restructuring costs is a non-GAAP financial measure that Bsquare defines as total operating expenses, plus an add-back for restructuring costs (applicable only to 2019). This measure should not be construed as a substitute for total operating loss for the purpose of analyzing our operating performance, and it has limitations,^ including that it does not reflect our entire cost structure to operate our(1) business. However, Bsquare regards this measure as a complement to GAAP operating expenses because it excludes costs that may not be indicative of operating performance. Bsquare uses this measure to evaluate Bsquare's financial performance and the effectiveness of its business strategies on a consistent basis across reporting periods, and Bsquare believes the measure is often used by analysts, investors, and other interested parties to evaluate comparable companies.

Net loss excluding restructuring costs.

Three Months Ended Year Ended December 31, December 31,

2020 2019 2020 2019

Net loss $ (206) $ (1,360) $ (1,889) $ (9,181)

Restructuring costs - 714 - 2,343

Net loss excluding restructuring $ (206) $ (646) $ (1,889) $ (6,838)costs ^(1)

Net loss excluding restructuring costs is a non-GAAP financial measure that Bsquare defines as net loss, plus an add-back for restructuring costs (applicable only to 2019). This measure should not be construed as a substitute for total operating loss for the purpose of analyzing our operating performance, and it has limitations, including that it does not^ reflect our entire cost structure to operate our business. However,(1) Bsquare regards this measure as a complement to GAAP net loss because it excludes costs that may not be indicative of operating performance. Bsquare uses this measure to evaluate Bsquare's financial performance and the effectiveness of its business strategies on a consistent basis across reporting periods, and Bsquare believes the measure is often used by analysts, investors, and other interested parties to evaluate comparable companies.

Net loss per diluted share excluding restructuring costs.

Three Months Ended Year Ended December 31, December 31,

2020 2019 2020 2019

Diluted net loss per share $ (0.02) $ (0.10) $ (0.14) $ (0.71)

Restructuring costs - 0.05 - 0.18

Diluted net loss per share excluding $ (0.02) $ (0.05) $ (0.14) $ (0.53)restructuring costs ^(1)

Diluted net loss per share excluding restructuring costs is a non-GAAP financial measure that Bsquare defines as net loss per diluted share, plus^ an add-back for the per diluted share amount of restructuring costs(1) (applicable only to 2019). Other than being expressed on a per diluted share basis, this measure is the same as net loss excluding restructuring costs, and it has the same limitations, and it is used and disclosed by Bsquare for the same reasons.

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SOURCE Bsquare