Revenue Performance - Total revenue for the three months ended September 30, 2023, was $9,292,000, an increase of 10.5% compared to $8,406,000 for the same period in 2022[40] - Partner Solutions revenue was $8,634,000 for the three months ended September 30, 2023, up from $7,557,000 in the same period last year, representing a growth of 14.3%[40] - Total revenue for the nine months ended September 30, 2023, decreased by $4.6 million, primarily due to a $4.4 million decrease in the Partner Solutions segment[211] - Partner Solutions revenue for the nine months ended September 30, 2023, decreased by $4.4 million or 17% compared to the same period in 2022[214] - Edge to Cloud revenue for the three months ended September 30, 2023, was $658 million, down 22.5% from $849 million in the same period of 2022[110] - Edge to Cloud revenue for the nine months ended September 30, 2023, decreased by $0.2 million or 7% compared to the same period in 2022[215] Profit and Loss - Net loss for the three months ended September 30, 2023, was $1,133,000, compared to a net loss of $1,125,000 for the same period in 2022, indicating a slight increase in losses[40] - Total comprehensive loss for the three months ended September 30, 2023, was $1,141,000, compared to $1,139,000 for the same period in 2022, indicating a marginal increase[40] - The company reported a basic and diluted loss per share of $0.06 for the three months ended September 30, 2023, compared to a loss of $0.05 for the same period in 2022[40] - Loss from operations for the three months ended September 30, 2023, was $(1,552,000), a 34% increase compared to $(1,154,000) in the same period of 2022[210] Operating Expenses - Operating expenses for the three months ended September 30, 2023, totaled $2,547,000, an increase of 11.3% from $2,289,000 in the same period in 2022[40] - Research and development expenses for the three months ended September 30, 2023, were $297,000, compared to $259,000 in the same period last year, showing an increase of 14.7%[40] - Operating expenses for the nine months ended September 30, 2023 decreased by approximately $670,000 compared to the same period in 2022, primarily due to reduced labor and marketing expenses[204] - SG&A expenses for the nine months ended September 30, 2023 decreased by approximately $750,000 compared to the same period in 2022[194] Cash and Assets - Cash used in operating activities for the nine months ended September 30, 2023, was $3,731,000, compared to $2,497,000 for the same period in 2022, representing an increase of 49.5%[43] - Cash, restricted cash, and cash equivalents at the end of the period were $9,038,000, down from $26,386,000 at the end of September 2022, indicating a decrease of 65.7%[43] - Cash and cash equivalents decreased significantly to $8.816 million as of September 30, 2023, down from $35.414 million at the end of 2022, indicating a reduction of approximately 75.1%[58] - As of September 30, 2023, total assets decreased to $39.54 million from $42.17 million as of December 31, 2022, representing a decline of approximately 6.3%[58] - The company had total cash and short-term investments of $31.8 million as of September 30, 2023, sufficient to meet cash requirements for the next 12 months[221] Shareholder Information - The company has 19,870,527 shares of common stock outstanding as of October 31, 2023, down from 20,337,906 shares as of December 31, 2022[52] - Shareholders' equity decreased to $33.518 million as of September 30, 2023, from $35.399 million at the end of 2022, reflecting a decline of about 5.3%[58] - During the nine months ended September 30, 2023, the company repurchased 552,147 shares for $0.7 million, totaling 731,004 shares repurchased for $0.9 million since the program's inception[159] Strategic Focus - The company is focusing on cloud-connected devices, aligning with the growth of IoT technologies, which is expected to create significant business opportunities[60] - The company continues to focus on expense discipline, which remains a top priority for the foreseeable future[151] Other Financial Metrics - The company recognized stock-based compensation of $233,000 for the quarter ended September 30, 2023[48] - The company recorded an impairment charge of approximately $363,000 during the third quarter of 2023 related to the carrying value of its right-of-use asset[124] - Other income for the three months ended September 30, 2023, was $419,000, a significant increase from $29,000 in the same period of 2022[210]

Company Participants Cheryl Wynne – Chief Financial Officer Operator I would now like to turn the conference over to Ralph Derrickson, President and CEO. Please go ahead. Thank you. Good afternoon, investors, and welcome. Joining me today is Cheryl Wynne, BSQUAREÂ's Chief Financial Officer. Before we go any further, weÂ'd like to remind you the call is being webcast and a recording of the call and the text of our prepared remarks will be available on the BSQUARE website. In our commentary, we may also refer ...

Item 1 Financial Statements 1 Item 3 Quantitative and Qualitative Disclosures About Market Risk 17 Item 1A Risk Factors 18 BSQUARE CORPORATION FORM 10-Q For the Quarterly Period Ended June 30, 2023 TABLE OF CONTENTS PART I. FINANCIAL INFORMATION BSQUARE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts) (Unaudited) 1 BSQUARE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In thousands, except per share amounts) (Unaudited) | --- | --- | ...

Financial Data and Key Metrics Changes - Total revenue for Q1 2023 was approximately $8.1 million, an increase of $200,000 or 2% from Q4 2022, driven by the Partner Solutions segment [8][17] - Loss from operations improved to $448,000 in Q1 2023 from a loss of $1.5 million in Q4 2022, primarily due to decreased operating expenses [17][12] - Net loss for the quarter was $71,000, significantly improved from a net loss of $1.2 million in the previous quarter [17] Business Line Data and Key Metrics Changes - Partner Solutions revenue increased by $190,000 or 3% quarter-over-quarter, attributed to an additional shipping day in Q1 [9][10] - Edge to Cloud segment revenue remained flat at $874,000, with a slight increase in gross profit due to favorable cost of revenue [11] - Gross margin rate for Partner Solutions improved by 10 basis points, while Edge to Cloud saw a 180-basis point improvement in gross margin rate [10][11] Market Data and Key Metrics Changes - The Partner Solutions segment is heavily reliant on the success of Microsoft's Windows IoT operating system, facing competition from Linux and Android [21][22] - The Edge to Cloud segment continues to provide stable revenue, primarily from a few large customers with long-term contracts [25] Company Strategy and Development Direction - The company aims to maximize the Partner Solutions segment while preserving margins and minimizing revenue decline [24] - A shift in positioning for the SquareOne product is intended to enhance customer engagement without altering the business model [26] - The company is exploring both organic and inorganic growth opportunities, including potential acquisitions and special dividends for shareholders [29][36] Management's Comments on Operating Environment and Future Outlook - Management anticipates a continued year-over-year decline in Partner Solutions revenue, exacerbated by COVID-19 [21][24] - The company is focused on running efficiently and has implemented headcount reductions to align with revenue realities [27] - Future growth strategies will be evaluated, with a focus on shareholder value creation [29][36] Other Important Information - The company has a plan to repurchase up to $5 million worth of common stock, with approximately 304,000 shares repurchased for $400,000 in Q1 2023 [19] - The Annual Shareholder Meeting is scheduled for June 15, 2023, where key proposals, including the declassification of the Board of Directors, will be voted on [30][31] Q&A Session Summary Question: What options are being considered for shareholder value? - The company is contemplating using cash for complementary acquisitions or making a special dividend to shareholders, with no specific timeline provided [36] Question: How is the company addressing the revenue decline in Partner Solutions? - Management acknowledges the long-term revenue decline and is focused on maximizing the segment while preserving margins [24]

Revenue Performance - Total revenue for the first quarter of 2023 was $8,141,000, a decrease of 16.4% compared to $9,732,000 in the same period of 2022[69] - Partner Solutions revenue was $7,267,000, down from $9,132,000 year-over-year, while Edge to Cloud revenue increased to $874,000 from $600,000[69] - Total revenue for the three months ended March 31, 2023, was $8,141,000, a decrease of $1,591,000 or 16% compared to $9,732,000 in the same period of 2022[103] - Partner Solutions revenue decreased by $1,865,000 or 20% for the three months ended March 31, 2023, compared to $9,132,000 in the same period of 2022[107] - Edge to Cloud revenue increased by $274,000 or 46% for the three months ended March 31, 2023, compared to $600,000 in the same period of 2022[109] - Revenue recognized at a point-in-time for the three months ended March 31, 2023, was $7.4 million, compared to $9.3 million for the same period in 2022, indicating a decrease of about 20%[156] Profit and Loss - Gross profit for the first quarter was $1,285,000, compared to $1,483,000 in the first quarter of 2022, reflecting a decrease of 13.3%[69] - Gross profit for the three months ended March 31, 2023, was $1,285,000, a decrease of $198,000 or 13% compared to $1,483,000 in the same period of 2022[103] - The net loss for the first quarter of 2023 was $71,000, significantly improved from a net loss of $888,000 in the same quarter of 2022[69] - Net loss for the three months ended March 31, 2023, was $71,000, a significant improvement compared to a net loss of $888,000 in the same period of 2022[103] Operating Expenses - Operating expenses decreased by $1 million compared to the fourth quarter of 2022 and by $0.7 million compared to the first quarter of 2022, totaling $1,733,000[77] - Operating expenses for the three months ended March 31, 2023, were $1,733,000, a decrease of $671,000 or 28% compared to $2,404,000 in the same period of 2022[103] - Selling, general and administrative (SG&A) expenses decreased by 32% to $1.449 million for the three months ended March 31, 2023, down from $2.143 million in the same period in 2022[123] - Research and development (R&D) expenses increased by 9% to $284,000 for the three months ended March 31, 2023, compared to $261,000 in the same period in 2022[125] Cash Flow and Investments - Cash, cash equivalents, restricted cash, and short-term investments totaled $34.0 million as of March 31, 2023, a decrease of $1.7 million since December 31, 2022[81] - Cash used in operating activities for the three months ended March 31, 2023, was $1,470,000, compared to $438,000 in the same period of 2022[103] - Cash from investing activities for the three months ended March 31, 2023, was a net outflow of $26,079,000, compared to $138,000 in the same period of 2022[103] - Cash used in investing activities totaled approximately $26.1 million for the three months ended March 31, 2023, primarily due to investments in treasuries[140] - Financing activities used cash of $0.3 million during the quarter ended March 31, 2023, mainly for the repurchase of common stock[142] Customer and Market Strategy - The company continues to focus on a small number of key customers in its Edge to Cloud segment to enhance its credibility as a technology partner[76] - Bsquare aims to retain and attract customers by offering superior service, technical support, and competitive pricing in response to market trends[74] Stock and Shareholder Information - Bsquare repurchased 303,638 shares for approximately $0.4 million under its Share Repurchase Plan during the first quarter of 2023[80] - The company reported restricted stock units of 25,555 for the three months ended March 31, 2023, compared to 22,898 in the same period of 2022, indicating an increase of approximately 12%[155] - Stock options increased from 991,588 for the three months ended March 31, 2022, to 1,216,055 for the same period in 2023, reflecting a growth of about 23%[155] Contract Assets and Liabilities - Contract assets at the end of the period for March 31, 2023, were $138,000, up from $17,000 at the end of March 31, 2022, reflecting a significant increase[161] - Deferred revenue at the end of the period for March 31, 2023, was $186,000, down from $1.2 million at the end of March 31, 2022, showing a decrease of approximately 84%[161] - The balance of contract liabilities decreased from $1.1 million at the beginning of the period to $186,000 at the end of the period for March 31, 2023[161] - The company recognized $132,000 in revenue from contract assets during the three months ended March 31, 2023, compared to $16,000 in the same period of 2022[161] - The company invoiced $45,000 in contract assets during the three months ended March 31, 2023, consistent with the previous year[161] - The average customer payment terms range from 30 to 60 days, with no asset impairment charges related to contract assets for the three months ended March 31, 2023, and 2022[160]

Cheryl Wynne - CFO Company Participants Conference Call Participants Ladies and gentlemen, greetings. And welcome to the BSQUARE Corporation Fourth Quarter 2022 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce you to Ralph C Derrickson, President and CEO. Please go ahead. Before we go any further, we'd like to remind you that this call is being webcast and the recording of the call and the text of our prepared remarks will be availab ...

Financial Performance - Total revenue decreased by $3.9 million or 10% in 2022, with Partner Solutions revenue down by $3.4 million (9%) and Edge to Cloud revenue down by $0.5 million (13%) compared to 2021[165][166]. - Total revenue for the year ended December 31, 2022, was $36,487 thousand, a decrease of 10% from $40,367 thousand in 2021[194]. - Gross profit for the year was $5,453 thousand, showing a slight increase of 1% compared to $5,415 thousand in the previous year[194]. - Net loss for the year was $3,858 thousand, representing a 72% increase from a net loss of $2,242 thousand in 2021[194]. - Partner Solutions revenue decreased to $33,119 thousand in 2022 from $36,516 thousand in 2021, while Edge to Cloud revenue decreased to $3,368 thousand from $3,851 thousand[202]. - Operating expenses increased to $9,719 thousand in 2022, up 4% from $9,307 thousand in 2021[194]. - Other income decreased significantly to $408 thousand in 2022, down 75% from $1,650 thousand in 2021[194]. Market and Competitive Landscape - Bsquare's expertise in developing and operating large IoT systems is seen as a sustainable competitive advantage, potentially leading to new revenue opportunities[26]. - The competition in the IoT-related software and engineering services market is significant, with expectations of increased competitive attention in 2022 and beyond[92]. - The company faces competition from larger competitors with greater financial resources, which may impact pricing strategies[93]. - The markets for Microsoft Windows IoT and Windows Mobile operating systems have declined, which could negatively impact the company's business and operating results[102]. Revenue Sources and Customer Trends - The company recognizes revenue and cost of sales for its IoT operations services under the name "Edge to Cloud"[26]. - Bsquare's target market for OS software and services includes connected device manufacturers across various sectors, including retail, healthcare, and entertainment[25]. - Bsquare's customers increasingly recognize that IoT operations are not core competencies, leading to a trend of outsourcing these operations to reduce costs and mitigate risks[38]. - In 2022, customers outside of North America generated approximately 8% of total revenue, compared to 14% in 2021[65]. - The Partner Solutions segment accounted for 91% of total revenue in 2022, while Edge to Cloud accounted for 9%[165]. Operational Challenges - The company faces longer collection cycles in North America and unfavorable changes in regulatory practices and tariffs, which may adversely affect financial results[95]. - Continued supply chain disruptions and economic uncertainty adversely impacted customer demand for embedded operating systems[165]. - The company relies on third-party manufacturers and suppliers, and any errors or defects could negatively impact revenue and market acceptance[75]. - The company may face claims of infringement or invalidity related to its software products, which could result in significant costs and liabilities[79]. - The uncertain geopolitical environment and changing economic conditions may adversely affect the company's operating results[96]. Investment and Development - The company invested over $1.5 million in product development in 2022, with $0.5 million capitalized as internally developed software[188]. - Cash, cash equivalents, restricted cash, and short-term investments decreased by $4.5 million during 2022, primarily due to operations and investments in new product offerings[158]. - The company began making investments late in Q3 2022, resulting in increased interest income for Q4 2022[91]. Cost Management and Financial Strategy - Selling, general, and administrative expenses increased by $469,000 or 6% year-over-year, totaling $8.5 million in 2022[172]. - Research and development expenses decreased by $262,000 or 20% in 2022, totaling $1.0 million[172]. - The gross margin improved to 15% in 2022 from 13% in 2021, reflecting decreased costs of revenue in the Edge to Cloud segment[169][171]. - The gross margin for Partner Solutions improved to 15% in 2022 from 14% in 2021, while Edge to Cloud gross margin increased significantly to 18% from 10%[196]. - A reduction in force was executed in Q4 2022, resulting in nearly a 20% decrease in headcount and incurring $0.2 million in one-time termination benefits[130]. Regulatory and Compliance Issues - The company is subject to complex tax regulations and potential unknown tax exposure, which could significantly affect its results of operations[112]. - Compliance with evolving data privacy regulations, such as GDPR and CCPA, may limit the use and adoption of the company's products and services[141]. - The company relies on third-party software licenses, and any inability to license key software could harm its business[136]. Shareholder Actions - The company announced a Share Repurchase Plan to buy back up to $5 million of its common stock, repurchasing 178,857 shares for approximately $0.2 million in Q4 2022[157]. - The company anticipates retaining future earnings for business development and does not expect to declare cash dividends in the foreseeable future[145].

Financial Data and Key Metrics Changes - Total revenue for Q3 2022 decreased by $2 million or 19% compared to the previous quarter [8] - Gross profit decreased by $500,000, with a gross margin rate for Partner Solutions segment at 13% [11] - Net loss for the quarter was $1.1 million or $0.05 per diluted share, compared to a net loss of $600,000 or $0.03 per diluted share in the previous quarter [12] Business Line Data and Key Metrics Changes - Revenue in the Partner Solutions segment decreased by 19% quarter-over-quarter, attributed to fewer large orders [8] - Edge to Cloud segment revenue was $800,000, down $200,000 or 20% [9] Market Data and Key Metrics Changes - OS licensing customers are facing supply chain struggles, impacting product launches and purchasing decisions [9] - Economic conditions, including recession fears and rising interest rates, have led to cautious ordering patterns among customers [9] Company Strategy and Development Direction - The company plans to shift its focus from revenue growth to achieving breakeven business operations in 2023 [23] - Investments in customer account management are aimed at deepening relationships and improving visibility into customer needs [17] - The company is exploring strategic alternatives, including potential mergers and acquisitions, while also considering capital allocation options like stock repurchase or special dividends [26][27] Management's Comments on Operating Environment and Future Outlook - Management acknowledges Q3 as a difficult quarter, with expectations of continued supply chain issues and economic challenges into Q4 and 2023 [16] - The company aims to operate successfully with potentially lower revenue growth than previously planned, emphasizing the importance of cash preservation [25] Other Important Information - The company has a healthy liquidity position with total cash, cash equivalents, and short-term investments totaling $37.1 million as of September 30, 2022 [15] - A cooperation agreement was entered into with a large shareholder to declassify the Board of Directors, aligning with governance best practices [29][30] Q&A Session Summary Question: What is the competitive advantage of the Square One product? - Management noted that OS licensing customers are interested in selling Square One as a partnership to their customers, leveraging existing relationships for trust and stickiness [33][34] Question: Are there plans for increased market awareness and investor relations? - Management expressed a desire to wait until there are more customer wins before increasing marketing efforts, emphasizing a focus on tangible results over future promises [38][39]

Financial Performance - Total revenue for the three months ended September 30, 2022, was $8,406,000, a decrease of 21.0% compared to $10,646,000 for the same period in 2021[17] - Net loss for the nine months ended September 30, 2022, was $2,638,000, compared to a net loss of $1,462,000 for the same period in 2021, representing an increase in loss of 80.2%[22] - For the nine months ended September 30, 2022, total revenue was $28,532, a slight increase from $28,393 in the same period of 2021[42] - The company reported a net loss of $2,638 for the quarter ended September 30, 2022, compared to a net loss of $1,462 for the same quarter in 2021[29] - Total revenue for Q3 2022 was $8.406 million, a decrease of 21% compared to $10.646 million in Q3 2021[103] - The company recorded a net loss of $1.125 million for Q3 2022, compared to a net loss of $0.895 million in Q3 2021[104] Cash and Assets - Cash and cash equivalents decreased to $26,165,000 as of September 30, 2022, from $39,529,000 as of December 31, 2021, a decline of 33.9%[15] - Total current assets decreased to $42,279,000 as of September 30, 2022, from $45,410,000 as of December 31, 2021, a decrease of 5.0%[15] - Total shareholders' equity decreased to $36,665,000 as of September 30, 2022, from $39,125,000 as of December 31, 2021, a decline of 6.3%[15] - Total cash, cash equivalents, and restricted cash as of September 30, 2022, amounted to $26,386,000, down from $40,086,000 as of December 31, 2021[49] - The total long-lived assets decreased from $1,607,000 as of December 31, 2021, to $902,000 as of September 30, 2022, primarily due to the removal of fully-depreciated assets in North America[73] Operating Expenses - Operating expenses for the three months ended September 30, 2022, were $2,289,000, an increase of 4.3% compared to $2,194,000 for the same period in 2021[17] - Operating expenses for the nine-month period ended September 30, 2022, were flat compared to the same period in 2021[89] - Selling, general and administrative expenses increased by 14% to $2.030 million for the three months ended September 30, 2022, compared to $1.786 million in the same period in 2021[119] - Research and development expenses decreased by 37% to $259,000 for the three months ended September 30, 2022, compared to $408,000 in the same period in 2021[120] Revenue Breakdown - Revenue from North America for the three months ended September 30, 2022, was $7,698, down from $9,258 in the same period of 2021[42] - Partner Solutions revenue was lower than anticipated due to supply chain issues and decreased sales in Asia[86] - Partner Solutions revenue decreased by $2.1 million or 22% for the three months ended September 30, 2022, compared to the same period in 2021, primarily due to lower sales in Asia[109] - Edge to Cloud revenue decreased by $0.2 million or 16% for the three months ended September 30, 2022, compared to the same period in 2021, mainly due to non-recurring professional services revenue recognized in the prior year[110] Stock and Compensation - The total number of shares outstanding as of September 30, 2022, was 20,493,827, an increase from 20,357,099 shares as of September 30, 2021[27] - Total stock-based compensation expense for the three months ended September 30, 2022, was $184,000, compared to $218,000 for the same period in 2021, representing a decrease of approximately 15.6%[61] - The estimated fair value of stock options granted during the three months ended September 30, 2022, was $1.40, down from $2.75 for the same period in 2021[63] - The total number of stock options outstanding as of September 30, 2022, was 1,559,197, with a weighted average exercise price of $2.05[62] Future Outlook and Guidance - The company anticipates that market trends, including deep discounts from competitors, may continue to affect Partner Solutions revenue in future quarters[87] - Estimated revenue expected to be recognized in the future from unsatisfied performance obligations as of September 30, 2022, includes $326,000 for the remainder of 2022, $1,612,000 for 2023, and $1,330,000 for 2024[47] Miscellaneous - The company had no asset impairment charges related to contract assets for the three and nine months ended September 30, 2022 and 2021[43] - No customers accounted for 10% or more of total revenue for the three and nine months ended September 30, 2022, and 2021[74] - The documents include various amendments to the Articles of Incorporation, but no details on future outlook or guidance were mentioned[139] - There is no information regarding new products, technologies, market expansion, or mergers and acquisitions in the provided content[140]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to | --- | --- | --- | |---------------------------------------------------------------------------------------|---------------------------------------------------------- ...