BELLEVUE, WA — (Marketwired) — 08/13/13 — (NASDAQ: BSQR), a leading enabler of smart, connected systems, today announced financial results for the second quarter and six months ended June 30, 2013. Total revenue for the quarter was $21.8 million, down 11% year-over-year, while total revenue for the six months was $42.7 million, down 15%. The net loss for the quarter was $805,000, or $0.07 per share, compared to a net loss of $202,000, or $0.02 per share, in the prior year, while the net loss for the six months was $1.7 million, or $0.15 per share, compared to a net loss of $390,000, or $0.04 per share, in the prior year. Adjusted EBITDAS for the quarter was negative $337,000, down 189% year-over-year, while Adjusted EBITDAS for the six months was negative $822,000, down 199%.

Details as follows (unaudited, in 000-s except per share amounts):

Percentage changes calculated as to whether effect is positive or negative on net income.

Adjusted EBITDAS = Operating income (loss) before depreciation, amortization and stock compensation expense. Adjusted EBITDAS is a non-GAAP measurement (reconciliation provided after financial statement tables).
Cash and Investments EoQ includes both short and long-term amounts (long-term at 6/30/13 = $875,000).

Brian Crowley, chief executive officer of Bsquare, commented on Q2 results and business activity, “We are disappointed to have generated a loss in the quarter. Our service and third-party revenue both improved relative to Q1 while product revenue declined. The improving service revenue demonstrates that our efforts to improve sales productivity and service utilization are beginning to take hold. During the quarter we completed the transition of our North America Solutions sales force and our new sales team has been on board since May. We hired individuals with direct experience in our industry and we are working to get everyone productive as quickly as possible. Our product revenue is still dominated by a few large opportunities and the timing of opportunities can impact our results as they did this quarter. This demonstrates the need to further build our product pipeline in order to deliver consistently growing results and we have programs underway designed to accomplish this. We also made progress with our new business initiatives — we grew our Windows 8 application porting revenue again this quarter, closed new customers for our Handheld Terminal development services on both the Android and Windows Embedded 8 Handheld operating systems and progressed the development of our HTML5 rendering engine solution. We expect improved results in the third quarter for all three of our revenue lines and are determined to return to consistent revenue growth and profitability as quickly as possible.”

During Q2, the Company made progress in a number of areas, including:

Renewed its main OEM distribution agreement with Microsoft. The agreement, which is effective for the period July 1, 2013 to June 30, 2014, renews the Company-s Microsoft distribution relationship for the 15th year and allows the Company to distribute the complete line of Microsoft Windows Embedded operating systems within the United States, Canada, Mexico and the Caribbean. The Company also distributes the entire Microsoft Windows Embedded portfolio in the United Kingdom and Germany and Windows Mobile worldwide except for China and Korea;

Appointed Harel Kodesh and Jerry Chase to the Board of Directors. The Company also appointed Andrew Harries as Chairman of Bsquare-s Board. Mr. Harries, Mr. Kodesh and Mr. Chase were appointed for the industry, strategic and management experience that they bring to Bsquare and are now working proactively with management to shape Bsquare-s strategic direction;

Won a significant new service contract with a Japanese Handheld Terminal OEM for software development services on an Android-based terminal;

Won new service contracts with Android and QNX Smartphone OEMs; and

Announced general availability of the next generation Mobile Development Platform (MDP), which is based on the Qualcomm® Snapdragon 800 (8974) processor from Qualcomm Technologies, Inc. This MDP will be released in both a tablet and smartphone form factor by Bsquare and is designed to provide application developers and device manufacturers with access to the high-performance Android 4.2 platform for developing, testing, optimizing and showcasing applications and games.

The decrease in engineering services revenue, down $1.7 million or 26%, was driven by roughly equal declines in North America and Japan. The North American decrease was driven by two customers which contributed meaningfully in the year-ago quarter, but none in the current quarter. The Japan decline was primarily driven by project timing at our largest customer in that geography;

The decrease in proprietary software revenue, down $191,000 or 24%, was due primarily to a decline in Handset Certification Platform revenue as customers on that China-based program did not renew their contracts in 2013;

The decrease in service margin, down 10% or two percentage points, was driven primarily by lower revenue as compared to a portion of service cost of sales which is fixed in nature; and

Cash was up $185,000 ($680,000 sequentially) driven by positive working capital changes.

The Company currently has the following expectations for Q3 2013:

Total revenue is expected to be in the range of $22 million to $24 million; and

Cash and investments are projected to decrease by approximately $1 million from June 30, 2013 due primarily to negative working capital effects.

Management will host a conference call today, August 13, 2013, at 5 p.m. Eastern Daylight Time (2 p.m. Pacific Daylight Time). To access the call dial 1-877-941-1427, or +1 480-629-9664 for international callers, and reference “BSQUARE Corporation Second Quarter 2013 Earnings Conference Call.” A replay will be available for one week following the call by dialing 1-877-870-5176, or +1 858-384-5517 for international callers; reference pin number 4631390. A live and replay webcast of the call will be available at in the investor relations section.

Bsquare, a global leader in embedded solutions, applies experience and expertise on leading platforms to create new connections with customers, new business models and to enable new ways of working and communicating. Bsquare serves customers by forging connections among the partners, people, tools and technology needed to create smart connected devices. For more information, visit .

This release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include, among others, statements relating to our financial results in future periods such as anticipated revenue, margins, spending, profitability, and cash and investments; anticipated levels of capital expenditures; future market conditions; potential sales or projects in our pipeline; and expectations for specific customers, geographies or products. 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, the following: whether we are able to maintain our favorable relationship with Microsoft; changes in customer demand for our engineering services; the extent to which we are successful in gaining new long-term relationships with customers and retaining existing ones; our ability to execute our sales and marketing strategies for our service offerings, third-party products, and our proprietary products such as TestQuest; our ability to execute our international expansion strategies; our success in leveraging strategic partnering initiatives with companies such as Qualcomm; our management of risks associated with protection of intellectual property and potential infringement claims; our success in integrating acquisitions such as MPC Data; and such other risk factors as discussed in our most recent Annual Report on Form 10-K and other filings with the SEC. 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 may be 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 is a registered trademark of BSQUARE Corporation. All other product and company names herein may be trademarks of their respective owners.

Scott Mahan
BSQUARE Corporation
+1 425.519.5900

Brett Maas
Hayden IR
+ 1 646.536.7331

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