Bsquare Corp (BSQR) 2021 Q1 法說會逐字稿

Good day, and welcome to the Bsquare Corporation's First Quarter 2021 Financial Results Call. Today's conference is being recorded.

I would like to turn the conference over to Steven Gottlieb, VP of Corporate Affairs. Please go ahead, sir.

Thank you, and good afternoon, everyone. Before we begin, we'd like to remind you that this call is being webcast and a recording of the call and the text of our prepared remarks will be available on Bsquare's website.

During this call, we will be making forward-looking statements. These statements are based on current expectations and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially.

During this call, management will also refer to GAAP and non-GAAP financial measures. Please refer to the cautionary text regarding forward-looking statements as well as the non-GAAP reconciliation to comparable GAAP financial measures contained in Bsquare's earnings release issued today on our website at www.bsquare.com, under Investors. All per-share amounts discussed today are fully diluted numbers where applicable.

Now I'd like to turn the call over to Ralph Derrickson, Bsquare President and CEO.

Good afternoon, and welcome to the Q1 2021 Bsquare quarterly earnings call. Thank you for taking the time to be with us this afternoon. Our plan, as usual, will be to take you through the Q1 financial results, provide our perspectives on the business and answer any questions you may have for us today. For anyone who would like to arrange a follow-up conversation, please contact Steven Gottlieb, VP of Corporate Affairs, who is responsible for Investor Relations and layout of our call today. Joining me on the call is Chris Wheaton, fellow entrepreneur and Bsquare's CFO and COO. I will get us started and then hand things off to Chris.

Q1 2021 was a building quarter for Bsquare, from which we believe few conclusions should be drawn. Partner Solutions' revenue was off modestly, largely due to a difference in shipping days. Edge to Cloud revenue also declined due to changes in revenue recognition that Chris will cover momentarily.

As planned in Q1 2021, we continued investing in the development of our IoT operations, services and software, growing out of our work with our large IoT customers. You saw the Itron announcement in February regarding the expansion of our relationship.

The takeaway from Q1 2021 is that business building is not a linear process or always reflected in our most recent financials. We will continue executing our strategy with focus and discipline.

Let me hand things off to Chris now to get into the specifics of the quarter.

Thank you, Ralph, and good afternoon, investors. Let's get right to the financial details of the quarter. Total revenue for the first quarter of 2021 was $10 million, 9.9% lower than Q4 2020. Revenue in the Partner Solutions segment, composed primarily of sales of Microsoft software, was down 3% quarter-over-quarter. This modest decrease was essentially difference in shipping days in Q1 2021 versus Q4 2020. After adjusting for the smaller number of shipping days in Q1, revenue in the first and fourth quarters would have been virtually equivalent. Year-over-year comparisons in this segment to the first quarter of 2020 show the depth of the challenges that our Partner Solutions customers have experienced during the 12 months since the onset of the pandemic.

Product mix drove a small quarterly increase in Partner Solutions gross margin rates. This quarter's 5.2% (sic) [15.2%] result is only 50 basis points less than last quarter's, a decline largely attributable to a small shift in Q1 sales away from one higher-margin product. Comparisons of year-over-year margin reflect stability in the Partner Solutions segment.

Turning to the Edge to Cloud segment. First quarter 2021 revenue was $1.2 million, down $800,000 from Q4 2020 due to a onetime revenue recognition in Q4 2020 that did not reoccur in Q1 2021. Timing was also the primary contributor to a reduction in Edge to Cloud gross margins. The onetime revenue in the fourth quarter of 2020 also happened to carry unusually high gross margin. Q1's 22% gross margin is likely more indicative of our steady-state margin for the segment. We continue to make progress on stabilizing and templatizing our offerings that may prove beneficial to the segment margins.

Expenses in the first quarter of 2021 reflect deliberate ongoing and targeted investment in business building. Without significant detriment to net loss or EBITDAS, we've strengthened our team, enhanced our relationships with customers and partners, and are actively exploring new opportunities at the point of connection between our Partner Solutions and Edge to Cloud segments.

Net loss for Q1 2021 was $900,000 or $0.07 per diluted share compared to a net loss of $200,000 or $0.02 per diluted share in Q4 2020. EBITDAS, a non-GAAP measure of our operating performance, was a loss of $600,000, a $700,000 decline compared to EBITDAS in Q4 2020.

As a reminder, EBITDAS provides another perspective on our ongoing operations by excluding certain noncash and irregular expenses, including some amortization expenses and stock-based compensation expense.

Finally, cash, cash equivalents and restricted cash totaled $10.4 million on March 31, 2021. The timing of payments to key vendors, including Microsoft, our corporate insurance carrier and our auditors typically drives relatively high cash usage in Q1, and this quarter was no different. The decrease in cash of $2.6 million from December 31, 2020, is not indicative of future quarters' cash requirements. While the business used cash in the first quarter as planned, our cash balance at the end of Q1 2021 is only $200,000 less than it was at the same date in 2020. The financial prudence we have instilled throughout the organization has become a source of pride for the entire leadership team.

Overall, Q1 2021 was an unremarkable financial quarter. Partner Solutions revenue continues to be buffeted by the impact of COVID on our customers' supply chains. Edge to Cloud revenue changes reflected accounting treatment more than a shift in the business, and operating expenses continued to be tightly managed, remaining largely flat quarter-over-quarter. Investors can expect that this financial and operational discipline will not change.

Thank you for your time and attention. I look forward to answering your questions at the end of this call. Let me now turn things back over to Ralph.

Thank you, Chris. As both Chris and I have shared on this call, business building is a process that takes time and requires discipline. We are making the necessary investments in a measured way to position Bsquare for growth.

In our press release, you'll note that today, we also announced that we were making some changes to our Board of Directors that will be effective on June 10, the date of our annual shareholder meeting. Andrew Harries will be stepping down as Chair and departing the Board to pursue other commitments.

He will be succeeded by Ryan Vardeman as Chairperson. Ryan joined the Bsquare Board in 2018, and he is the Principal at Palogic, our largest shareholder. Rob Peters, also of Palogic, will be departing the Board as well. Reducing the Board's size is consistent with efforts already taken by the company to reduce cost and increase focus on entrepreneurial, business-building efforts.

Neither Andrew or Rob have any disagreements with the company, and their departures will allow them to pursue other personal and professional endeavors. I look forward to working with Ryan and building value for our shareholders.

I want to thank Andrew Harries for his leadership. He was part of the team that recruited me to Bsquare, and I have enjoyed working closely with him these past 2 years as our chairperson.

I would also like to thank Rob Peters for his commitment and service to Bsquare. Rob has been an important mentor and voice of the shareholder for me that I have appreciated and I have benefited greatly from his contributions. Please join me in wishing them both the very best in their future endeavors.

Thank you for your time today. Operator, would you please open the line for questions. And while that is happening, let me remind you that if you would like to arrange a follow-up discussion with Chris and me, please contact Steven Gottlieb. Thank you.

(Operator Instructions) And at this time, there are no questions in the queue. (Operator Instructions) And with no questions in the queue, that does conclude today's call. We thank everyone for your participation. You may now disconnect.