Bsquare (BSQR) Reports Q2 Loss of $0.02

Bsquare (NASDAQ: BSQR) reported Q2 EPS of ($0.02), versus $0.15 reported last year. Revenue for the quarter came in at $22.7 million, versus $28.87 million reported last year.

Jerry Chase, Bsquare President and CEO, commented, "Despite a decline in revenue in our traditional businesses, the second quarter was critically important for Bsquare as we announced the first large-scale contract for DataV, our Internet of Things (IoT) software offering. This contract with a Fortune 500 industrial company, initially valued at $4.3 million, includes not only DataV software, but also DataV Services, a new systems integration capability that leverages our traditional professional engineering services expertise. As a result, we are accelerating our investment in DataV, which will primarily be reflected in increased R&D and sales and marketing spending and a shift in engineering services from our traditional focus toward DataV Services."

Chase continued, "To align resources with our key DataV growth initiatives, on July 28 our board of directors approved a restructuring plan that will reduce the size of our engineering services organization. We will be reallocating 21 engineers to DataV R&D and DataV Services, and a total of 26 employees and contractors will be involved in a workforce reduction, representing approximately 13% of our total workforce. We expect this plan will result in approximately $1.8 million in annualized cost savings once implemented. These actions and the resulting severance and restructuring costs will negatively impact our Q3 results, and we anticipate that they will be mostly completed during the third quarter of 2016. We currently expect to incur pre-tax restructuring charges to our GAAP financial results of approximately $0.6 million in the third quarter of 2016."

Q3 2016 Outlook

Management currently has the following expectations for Q3 2016:

• DataV:
  • Bookings will increase sequentially;
  • Cash collections for previously-booked software and services will commence;
  • DataV revenue will generally be recognized over the life of the contract; and
  • Operating expenses will continue to reflect increased investments in DataV R&D and sales and marketing in an effort to capitalize on a growing customer pipeline;
• Total revenue will be in the range of $20 to $22 million;
• Gross margin percentage for engineering services will continue to be lower than we have historically achieved as a result of our business transition to DataV;
• Despite increased investment in DataV, cash flow will be positive;
• Q3 GAAP net loss with implementation of our restructuring plan, including approximately $600,000 in estimated severance charges; and
• Accounts receivable balance, which has been growing due to extended payment terms granted to a highly creditworthy customer, is expected to plateau or decline marginally during Q3.

For earnings history and earnings-related data on Bsquare (BSQR) click here.

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