BELLEVUE, WA — (Marketwired) — 02/19/15 — (NASDAQ: BSQR), a leading enabler of smart, connected systems, today announced financial results for the fourth quarter and full year ended December 31, 2014.

Jerry Chase, President and Chief Executive Officer of Bsquare, commented, “Throughout 2014, by focusing and executing on our existing businesses, we made good progress on our commitment to return to sustained profitability. This effort helped us increase our earnings per share in the fourth quarter compared to the third quarter. We rounded out our executive team with the hiring of Marty Heimbigner as CFO in November and we booked and shipped our first two MobileV proprietary software sales in December.”

Mr. Chase continued, “In 2015, we will continue to focus on profitability and cash flow, and we will undertake new initiatives focused on our proprietary software products, MobileV and DataV, to enhance shareholder value.”

Total revenue for the quarter was $25.6 million, up 4% compared to the third quarter of 2014 and down 1% year-over-year. Net income for the quarter was $1.4 million, or $0.12 per share, compared to net income of $691,000, or $0.06 per share, in the third quarter of 2014 and net loss of $23,000, or $0.00 per share, in the year-ago quarter. Adjusted EBITDAS for the fourth quarter of 2014 was $1.7 million, compared to $1.1 million in the third quarter of 2014 and $345,000 in the year-ago quarter. Our cash and investments (including restricted cash) increased by $1.2 million to $26.6 million during the fourth quarter of 2014.

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

Third-party software sales increased $839,000, or 4%, due to increases in sales of Microsoft Embedded software and other third party products as well as two significant sales of the Company–s new MobileV offering totaling $1.0 million, partially offset by a reduction in sales of Windows Mobile operating systems;

Engineering services revenue increased $212,000, or 4%, driven primarily by recognition of $598,000 of revenue and gross profit resulting from completion of a large hand-held terminal project in Japan, partially offset by decreases in revenue in both North American and Europe as a result of fewer engineering hours in the fourth quarter compared with the prior quarter;

Engineering services margin increased nine percentage points to 29%, primarily due to revenue recognition from the Japanese project described above. Without this impact, engineering services margin would have been 19%;

Operating expenses increased $236,000, or 7%, driven primarily by increased sales expenses associated with the timing of customer bookings signed in the fourth quarter and the related sales commissions, as well as increased investment in research and development to support new product initiatives; and

Cash and investments increased $1.2 million primarily due to Adjusted EBITDAS contribution, partially offset by changes in working capital. Days sales outstanding (DSO) was 49 for Q4, 44 for Q3 and 57 for Q4 2013.

Total revenue for the year was $95.9 million, up 4% from 2013. Net income for 2014 was $2.3 million, or $0.20 per share, compared to net loss of $5.3 million, or $0.47 per share, in 2013. The full-year 2013 results included the negative effect of a $2.2 million increase, or $0.20 per share, in the Company–s deferred tax asset valuation allowance. Adjusted EBITDAS was positive $4.1 million for 2014 compared to negative $1.5 million in 2013. Cash and investments increased by $5.6 million during the 2014 full year period.

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

Third-party software sales increased by $3.0 million, or 4%, with the majority of the increase driven by Microsoft Embedded software sales partially offset by declines in sales of both Adobe Flash, which was due to a significant sale in Q4 2013, and Windows Mobile operating systems;

The increase in engineering services revenue of $1.0 million, or 5%, was driven primarily by the previously mentioned completion of two large hand-held terminal projects in Japan, partially offset by lower revenue in North America;

The decrease in third-party software margin, down two percentage points, was driven primarily by a heavier concentration of sales of the lower margin product line of Microsoft Embedded software, lower rebates as well as the previously mentioned Adobe Flash sale that benefited Q4 2013;

The increase in engineering services margin, up 13 percentage points, was primarily due to completion of two Japan projects in 2014 (one completed in each of the second and fourth quarters), as well as improved utilization and an increase in realized rate per hour in both North America and Europe of approximately 4%. The two Japan projects, with recognized profit in 2014, added approximately 2% to the 2014 reported gross margin with a similar negative impact on 2013 margins;

The decrease in operating expenses of $4.1 million, or 23%, was primarily due to cost reductions enacted in Q4 2013, as well as a reduction in marketing expenses from qualified expenditures being reimbursed under a Microsoft rebate program during the year.

The Company has historically experienced seasonal fluctuations in revenue, and the first quarter has typically been the lowest revenue quarter. Management currently expects revenue for the first quarter to be in the range of $22.5 million to $24.5 million.

Management will host a conference call today, February 19, 2015, at 5 p.m. Eastern Standard Time (2 p.m. Pacific Standard Time.) To access the call dial 1-888-244-2459 or 1-913-981-4905 for international callers, and reference “BSQUARE Corporation Fourth 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 8252233. 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 U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: “expect,” “believe,” “plan,” “strategy,” “future,” “may,” “should,” “will,” and similar references to future periods. Examples of forward-looking statements include, among others: statements we make regarding expected operating results in future periods, such as anticipated revenue growth and profitability, and cash and investments; and strategies for customer retention, growth, product and service development, and market position. Forward-looking statements are neither historical facts nor assurances about future performance. Instead, they are based on current beliefs, expectations and assumptions about the future of our business and other future conditions. 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 extent to which we are successful in gaining new long-term customers and retaining existing ones; whether we are able to maintain our favorable relationship with Microsoft as a systems integrator and distributor; our ability to execute our development initiatives and sales and marketing strategies around DataV, the Internet of Things, MobileV, and our product and service offerings more generally; our success in leveraging strategic partnering initiatives with companies such as Microsoft, Intel, Aava Mobile, and Future Electronics; and such other risk factors as discussed in our most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. 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, the BSQUARE Logo, MobileV and DataV are trademarks of BSQUARE Corporation in the U.S. and other countries. Other names and brands herein may be trademarks of others.

Marty Heimbigner
BSQUARE Corporation
+1 425.519.5900

Brett Maas
Hayden IR
+ 1 646.536.7331

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