Q2 2019 Bsquare Corp allowance Call
BELLEVUE Sep 7, 2019 (Thomson StreetEvents) -- Edited Transcript of Bsquare Corp allowance conference shout or presentation Monday, August 12, 2019 at 9:00:00pm GMT
TEXT translation of Transcript
================================================================================
Corporate Participants
================================================================================
* Peter J. Biere
BSQUARE company - CFO, Secretary & Treasurer
* Ralph C. Derrickson
BSQUARE company - President, CEO & Director
================================================================================
Conference shout Participants
================================================================================
* Leslie Phillips
The Blueshirt Group, LLC - Director of IR
================================================================================
Presentation
--------------------------------------------------------------------------------
Operator [1]
--------------------------------------------------------------------------------
Good day, ladies and gentlemen, and salute ought Bsquare company Second area 2019 economical Results conference Call. Today's conference is being recorded. at this time, I'd although ought convert the conference at ought Leslie Phillips, Investor Relations. interest proceed ahead.
--------------------------------------------------------------------------------
Leslie Phillips, The Blueshirt Group, LLC - Director of IR [2]
--------------------------------------------------------------------------------
Thank you and good afternoon, everyone. ago we begin we'd although ought remember you that this shout is being webcast and that a recording of the shout and the text of our prepared remarks will exist available at Bsquare's website.
During this call, we will exist making forward-looking statements. These statements are based at trend expectations and assumptions that are prone ought risks and uncertainties that could manufacture authentic results ought disagree materially. interest refer ought the cautionary text regarding forward-looking statements contained at Bsquare's allowance free issued today and at the posted translation of these prepared remarks at our website at www.bsquare.com below Investors, both of which use ought the content at this call. entire per part amounts discussed today are fully diluted numbers where applicable.
Now I'd although ought convert the shout at ought Ralph Derrickson, Bsquare headmaster and CEO.
--------------------------------------------------------------------------------
Ralph C. Derrickson, BSQUARE company - President, CEO & Director [3]
--------------------------------------------------------------------------------
Thank you, Leslie. It's a rapture ought state with you today and notice at this, my second allowance shout because joining Bsquare. while I joined the company at March of 2019, we initiated an assessment of our manufacture and service offering, the impartial view and our undergo with Industrial Internet of Things or IIoT customers and legacy clever instrument customers. because our founding at 1994, our worry has greatly focused at providing software solutions and services ought worry that ripen impartial and sell dedicated goal stand-alone clever devices. Our solutions include reselling software from Microsoft. Examples of these clever devices include connecting computing devices such because smartphones, set-top boxes, point-of-sale terminals kiosks, tablets and handheld news collection devices also because clever vending machines, ATM, digital science and in-vehicle telematics and entertainment devices. These clever devices use different versions of Microsoft Windows Embedded, Android, Linux or QNX operating systems that are typically connected ought a network via thread ought wireless connection. Our customers because these clever devices include world-class engine manufacturers, creative compose manufacturers, corporate enterprises, silicon vendors and peripheral vendors. The majority of our revenue continues ought derive from the reselling of Microsoft Windows operating system software ought these customers.
In early 2014, the company initiated development of our proprietary software platform ought grade the then emerging IIoT market. This worry initiative referred ought because DataV included software products, applications and services designed ought permit IIoT devices ought generate meaningful and actionable news because our customers. The intention of the DataV initiative was ought enter a new impartial with a software-as-a-service worry copy with higher margins and recurring revenue. at the time, the Internet of Things and IIoT impartial were identified because high-growth opportunities by industry analysts, and hazard investor poured lay millions of dollars into IoT and IIoT start-up companies.
Bsquare initiated sales and marketing of DataV late at the first area of 2016, becoming an early actor at the IIoT market. The company believe the revenue from reselling Microsoft Windows operating system software used to refuse quickly and the DataV program became the foremost concentrate of our sales and marketing efforts.
We continued ought impartial DataV at 2017 and 2018. Most of the DataV sales were because proof-of-concept prototypes or astronaut projects that did no further ought action deployment. However, 4 big industrial customers did further beyond astronaut projects into deployment, and we persist ought serve those customers today.
The IoT and IIoT markets, which I'll refer ought collectively because IoT, persist ought mean a important growth occur because Bsquare and are the concentrate of headmaster technique companies including Microsoft, Amazon Web Services, Google and Intel. We believe the pledge of IoT will exist realized over development of clever devices and intelligent systems that are cloud enabled, further data, facilitate distributed govern and decision-making, and operate securely at scale.
In can of 2019, we announced a progression of initiatives we shout One Bsquare that confess and found at the connection between the emerging IoT occur and our historic clever instrument worry that includes the resell of third-party software including Microsoft's Embedded OS. Our expertise at embedded operating systems, clever devices and our early undergo with IIoT from our DataV efforts uniquely stand Bsquare ought help customers change their worry and operations.
As isolate of our One Bsquare initiatives, we're going ought impartial with an edge-to-cloud software and service quarters that connects our customers' devices border ought the cloud, creating an clever system that allows the devices and systems ought operate securely at scale suring keen operating and deed data, empowering AI and engine learning that lowers operating costs and invent the latent because new worry models. Bsquare software and services will permit our customers ought upgrade and enhance existing devices and systems or ought found the ability into new devices and systems. Our solution will include Embedded OS software, and services also because IoT software components and services that we harvested from our DataV platform.
These news and services enhance the capabilities of cloud platforms offered by Microsoft and Amazon Web Services. Our solutions receive customers from the hardware and operating system at the border ought the cloud at scale with service and backward ought help them conduct their worry at the cloud. And same importantly, our software and service offering permit us ought comrade certainly with our cloud offerings from Microsoft and AWS and their technique partners. technique partnerships dating uphold ought Microsoft obtain CE at the early '90s are a hallmark of Bsquare's history and reputation.
Moving forward our revenue is expected ought exist a mixture of revenue from the resale of third-party software, including Microsoft Embedded OS, revenue from the licensing of Bsquare software and professional services including software development, dev ops services and cloud management.
Let's grade almost the One Bsquare implementation. at May, we began implementation of the One Bsquare initiatives because we announced at our final allowance call. Recall, we announced the following 5 initiatives: one, revising our go-to-market strategy; two, strengthening our strategic partnerships; three, offering customers an edge-to-cloud software and services offering; four, retooling sales and marketing; and five, focusing at operating excellence.
Starting with operating excellence. We began the process of restructuring our executive leadership team adding entrepreneurial leaders and flattening the organization. I'd although ought highlight the appendix of Mary Haggard, VP of Strategic Partnerships, ought found at our existing relationship with Microsoft and Amazon and ripen new ones. More at partnerships at a moment.
We also downsized our software development organization ought perfect align talent and utilization. We are implementing a general avenue because managing projects throughout entire regions house at best practices and the process is developed at our U.K. operation. We eat revised our corporate messaging and will exist rolling out changes ought our marketing puzzle and website at Q3 that think our edge-to-cloud focus. We eat consolidated our sales efforts creating one sales team selling entire products and services. And at June, we announced the new passenger at the instrument management space, Arcus FM, that we believe is deputy of the arrange of worry and customers we will exist selling ought moving forward.
We are also investing heavily at partnerships with the formation of a team dedicated ought house and maintaining strategic partnerships with hardware, software and cloud partners. We eat a desire history of partnership with Microsoft at the Embedded OS space that we intend ought found on. We eat new relationships such because Amazon Web Services that will evolve and mature, and we are forging new relationships that we'll exist announcing at the second half of this year.
Looking at our operation's progress. Our revenue was near the tall entire of our guidance, and our One Bsquare efforts ought conduct charge are starting ought collision our financials. Excluding restructuring costs, our expenses were at the lowest levels because Q4 2016 while we started ramping charge ought invest at DataV. still I'm pleased with these results, it will apt receive another 2 or 3 apartment ago the total collision of our rebuilding efforts is consistently evident at our operating results.
As I mentioned at our final call, until we eat improved visibility, we will no equip guidance because ought timing of profitability. I used to outlook by year-end, we will eat a much perfect sensation of our progress.
Now permit me convert it at ought Peter Biere, our leader economical Officer, ought discuss the second area of 2019 economical results.
--------------------------------------------------------------------------------
Peter J. Biere, BSQUARE company - CFO, Secretary & Treasurer [4]
--------------------------------------------------------------------------------
Thank you, Ralph. First, let's emerge at our revenue because the second quarter. full revenue was $14.2 million, near the tall entire of the $12.5 million ought $14.5 million guidance range announced at our Q1 2019 allowance call. Compared ought the preceding year quarter, full revenue was down 26% and down 6% sequentially.
Reviewing results by revenue grouping. Third-party software revenue was $11.7 million, lower year-over-year and sequentially. The year-over-year refuse resulted from software buying over portfolio with the biggest collision coming from the loss of Honeywell's EMEA business, which we previously announced at our Q1 2018 allowance call. Both the year-over-year and sequential declines are attributable ought the quarterly variability we've experienced at the past 2 years.
Proprietary software revenue was $300,000, down 8% year-over-year besides during up 3% sequentially. Professional engineering services revenue, which totaled $2.2 million, was up 16% year-over-year and 28% sequentially. The year-over-year and sequential increases were mostly the arise of completion of an existing DataV plan at North America during the trend quarter.
Next, I'll discuss total interest and margins at the second quarter. total interest totaled $22.4 million during the area or 17% of revenue. Second area total interest was down year-over-year and even sequentially with total border at the upper entire of our guidance of 15% ought 17% announced at our Q1 2019 allowance call.
Third-party software total border was 15%, even while compared with the preceding year area and final quarter. Professional engineering services total border was 22% compared ought 29% at the preceding year area and 23% final area driven mostly by a lower border at the DataV plan completed at the trend quarter.
Turning ought operating expenses and our bottom cord results at the second quarter. full operating charge because the second area were $6.4 million including a $1.4 million accuse because restructuring costs. The restructuring accuse reflects almost $1 million of severance costs associated with previously announced head calculate reductions and impartial below $400,000 associated with the noncash write-down of previously capitalized software development costs. Excluding the accuse because restructuring costs, operating expenses were $5 million, an improvement of $2 million from the preceding year quarter, reflecting the fare reductions we've made at the past little quarters. Sequentially, operating costs, excluding the accuse because restructuring costs, improved by $300,000.
We recorded a net loss of almost $3.8 million or negative $0.30 per part because the second area of 2019. Excluding the $1.4 million accuse because restructuring costs, net loss because the second area of 2019 was $2.5 million or negative $0.19 per share. Compared ought a net loss of $3.7 million or negative $0.29 per part at the year ago area and a net loss of $2.8 million or negative $0.22 per part at the first area of 2019.
Adjusted EBITDAS is a non-GAAP economical criterion defined because operating allowance ago depreciation, amortization, stock-based compensation, restructuring costs and goodwill impairment. Our adjusted EBITDAS was negative $2.2 million at the second area of 2019 compared ought a negative $3.6 million at the year-ago area mostly owing ought lower revenue year-over-year and partially offset by lower operating expenses from the fare reductions we took at 2018 and 2019. interest refer ought the reconciliation ought the although GAAP economical measures at our allowance free issued today and posted at our website at bsquare.com below Investors.
Moving ought the remainder sheet. Cash, restricted money and investments totaled $12.6 million due ought June 30, 2019, down $2.7 million from March 31, 2019. at spite of lower charge levels, money usage because the epoch was higher because a arise of the timing of receivables collections and lower revenues. We persist ought outlook an easing at money utilization at the second area of 2019.
Our accounts receivable remainder totaled almost $9 million at June 30, 2019. almost $2 million of which is from Honeywell. We lengthen 270-day condition ought Honeywell and salary Microsoft because these products at 45 days, accordingly almost $1.7 million of this receivable will vary ought cash.
Moving ought guidance because the third area of 2019. because remarkable at today's periodical release, we currently eat the following expectations because the third area of 2019. We outlook revenue at the range of $12.5 million ought $14.5 million, and we hope blended total border ought exist at the 15% ought 17% range.
I will now convert the shout uphold ought Ralph because his closing remarks.
--------------------------------------------------------------------------------
Ralph C. Derrickson, BSQUARE company - President, CEO & Director [5]
--------------------------------------------------------------------------------
Thank you, Peter. still I'm pleased with the further of our One Bsquare initiatives ought date, there is much profession ought do. I emerge forward ought sharing our further because we persist ought -- house a future based at integrity, innovation, collaboration with our customers and our partners and fiscal obligation that builds estimate because you, our shareholders.
Moderator, interest cave the shout because questions.
================================================================================
Questions and Answers
--------------------------------------------------------------------------------
Operator [1]
--------------------------------------------------------------------------------
(Operator Instructions) We eat no questions at this time. I used to although ought convert the conference uphold ought management because any extra or closing remarks.
--------------------------------------------------------------------------------
Ralph C. Derrickson, BSQUARE company - President, CEO & Director [2]
--------------------------------------------------------------------------------
Thank you. ago concluding the call, at behalf of the full Bsquare team, I used to although ought thank our investors, our customers, our worry partners because your advantage and because your business. We emerge forward ought reporting uphold ought you next quarter. Thank you again because joining us today.
--------------------------------------------------------------------------------
Operator [3]
--------------------------------------------------------------------------------
Ladies and gentlemen, this concludes today's conference. We appreciate your participation.
