BELLEVUE, WA — (Marketwired) — 11/13/14 — (NASDAQ: BSQR), a leading enabler of smart, connected systems, today announced financial results for the third quarter and nine months ended September 30, 2014. Total revenue for the quarter was $24.5 million, up 6% compared to the second quarter of 2014 and up 4% year-over-year. Total revenue for the nine months was $70.3 million, up 6% from the same period in 2013. Net income for the quarter was $691,000, or $0.06 per share, compared to net income of $651,000, or $0.06 per share, in the second quarter of 2014 and a net loss of $3.6 million, or $0.32 per share, in the year-ago quarter. Net income for the nine months was $949,000, or $0.08 per share, compared to a net loss of $5.2 million, or $0.47 per share, for the same period in 2013. Adjusted EBITDAS for the quarter was $1.1 million, which was the same result for the second quarter of 2014 and an increase of $2.1 million compared to negative $1.0 million in the year-ago quarter. Adjusted EBITDAS for the nine months was $2.4 million compared to negative $1.8 million for the same period in 2013. Cash and investments at September 30, 2014 were $25.5 million, up $1.1 million from June 30, 2014.

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

*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 9/30/14 = $250,000).

Jerry Chase, President and CEO of Bsquare, commented, “Third quarter performance showed continued, steady operational improvements. We reported sequential and year-over-year revenue growth, we achieved sequential GAAP profitability and a $4.3 million year over year increase in net income. As previously stated, 2014 is a building year for our DataV Internet of Things initiative with initial revenue not expected until 2015. We currently expect that Q4 will also be GAAP profitable.”

The increase in third-party software revenue of $2.3 million, or 13%, was primarily driven by sales of Microsoft Windows Mobile operating systems;

The decrease in engineering services revenue, down $875,000 or 16%, was due primarily to recognition of revenue in the prior quarter from one of two large hand-held terminal projects completed in Japan;

The increase in third-party software margin, up 8% or 1 percentage point, was driven by a heavier concentration of sales of Microsoft Windows Mobile operating systems which is a higher margin product line;

The decrease in engineering services margin, down 35% or 11 percentage points, was due to the impact of the aforementioned project completed in Japan as well as a decrease in utilization and realized rate per hour;

The increase in proprietary software margin, up 28% or 16 percentage points, was driven by the increase in revenue on a relatively fixed cost of sales;

The decrease in operating expenses, down $355,000 or 10%, was primarily due to lower selling, general and administrative costs; and

The increase in cash and investments of $1.1 million was due to EBITDAS contribution as days sales outstanding, (DSOs) was stable at 44 for both Q3 and Q2 of 2014.

The Company currently has the following expectations for Q4 2014:

Total revenue is expected to be in the range of $24.5 million to $26.5 million; and

As noted in our last earnings call, the second of two hand-held terminal projects for a customer in Japan will be completed. Using the zero profit percentage of completion accounting method, revenue and gross margin will be positively impacted in Q4 by an amount similar to what was recognized in Q2. Under the zero profit percentage of completion accounting method, revenue is recognized equal to delivery cost during the project and the gross profit is recognized as revenue at completion.

Management will host a conference call today, November 13, 2014, at 5 p.m. Eastern Time (2 p.m. Pacific Time). To access the call dial 1-888-656-7432 or 1-913-312-0402 for international callers, and reference “BSQUARE Corporation Third Quarter 2014 Earnings Conference Call.” A replay will be available for two weeks following the call by dialing 1-877-870-5176, or 1-858-384-5517 for international callers; reference pin number 2995109. 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 we make regarding our financial results in future periods such as anticipated revenue, profitability, and cash and investments; and our strategies for product development and market position, including within the Internet of Things market. 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; the extent to which we are successful in retaining existing customers and adding new long-term relationships; our ability to execute our sales and marketing strategies around the Internet of Things and our product and service offerings more generally; our management of risks associated with protection of intellectual property and potential infringement claims; risks associated with recent changes in our senior management team; risks associated with our ability to achieve the anticipated benefits of our 2013 restructuring; 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.

Jerry Chase
BSQUARE Corporation
+1 425.519.5900

Brett Maas
Hayden IR
+ 1 646.536.7331

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