Q2 2020 Bsquare Corp Earnings Call
Yeah.
[music].
Please standby.
Good day and welcome to the piece Square Corporation second quarter 2020 financial results call.
Today's conference is being recorded.
This time I would like to turn the conference over to let's say Phillips Investor Relations. Please go ahead.
Thank you and good afternoon, everyone. That's why we began we'd like to remind you get this call is being webcast and not a recording of the call ametek's. If our prepared remarks will be available on these course much site.
During this call we will be making forward looking statements. These statements are based on current expectations and assumptions are subject to risks and uncertainties that could cause actual results to differ materially. During this call batch that will also refer to GAAP and non-GAAP financial measures.
Please refer to the cautionary checks regarding forward looking statements abolish the non-GAAP reconciliation to comparable GAAP financial measures continues to be squares earnings release issued today and on our website at Www Dot you squared dot com under investors all per share announced yesterday, our fully diluted numbers where applicable.
Now I'd like to true up now I'd like to turn the call up at a roster extend these <unk> president and CEO.
Thank you got ugly good afternoon, and welcome to the be square Q2, 2020 earnings call. Joining me. This afternoon, it's Chris squeezing our CFO.
We will take you through our Q2 results Im sure insights from this very unique quarter. Thanks for taking the time to participate today.
I do call I started in March 2019, and while I take this possibility for results I report or the two 120 19 I can take no credit.
Happened in the fourth quarter since Q2, 29, feeling good bad or defer has been on my watch the last year has been an exciting time in a period of the significant business rebuilding I'm pleased with our progress and I'm more optimistic about our crosstex today than it was when I started.
Let me say anything about that gets you to 2020 was on like any quarter any of us have experienced in our personal professional lives.
A piece, where we saw a significant reduction in ordering activity in our partner solutions segment that started in April and worsen didn't day by June we started to see some improvement in ordering but it wasn't strong enough to make up for the week.
As a result Q2 revenue in apartments solution segment was essentially half what it was in the first quarter.
The same time revenue, where it's a cloud segment remained steady down only slightly.
Total revenue for Q2 was 8.9 million a decline from Q1 2020 that marked the end of our three quarter run up improving revenue.
Looking further out the drop in partner solutions revenue there were a number of factors that amplified the decline Q1 20 Twond. He saw strong order activity and we benefited from a few unusually large orders with higher than typical margins.
Due to seasonally weaker quarter made worse as the cobot 19 pandemic disrupted normal ordering activity.
The combination of these factors drove the speed decline in part or solutions revenue.
Note, however that even with the quarter over quarter decline partner solutions revenue in the first half. The 2020 is only $800000 lower than the first half of 2019, the near parity of partner solutions rather than in the first half of 2020 and 29 team. Despite the challenges of the cope with 19 pandemic.
Hi, I like the success of our efforts to rebuild the business because I'll speak to later, there's a growing opportunity for cross selling with our edge the caused segment.
Operating expenses in Q2 2020 were lower by just under a million dollars. He made adjustments during the quarter to further reduce costs consistent with our ongoing efforts to manage its done.
As a result, we were able to avoid the heavy losses, we've seen in prior periods when revenue was higher.
Cash was another bright spot for us in Q2 2020 collections from strong sales in Q1, coupled with proceeds from the PPP loan and aggressive cash management allowed us to end the quarter with nearly $2 million more in cash that we started in the quarter.
Essentially the cost control.
And operating discipline initiated last year and continue to this quarter has served us well, we're well positioned for the second half of the year to exploit the opportunity.
We are creating somebody increasingly evident connection between our business segments.
Before I speak about however, let me turn things over to Chris will take us into Q2 members in detail.
Thank you Ralph and good afternoon investors like fourth earnings call rounding out of exciting for me square and for me personally.
I've been nothing leaves about what I found one or rather the square my belief of the quality of the company's opportunities remain privileged.
Well the quarter just ended whats strange it was not a manageable attack there any bright spots for sort of four to sharing with you today.
You are managing through time with great uncertainty as little business continuity.
Despite revenue declines a variety of other business fundamentals remain strong.
I indicate that we can emerge from this period relatively unscathed and on track.
The first quarter 2020 was unusually strong.
Well the second quarter was as Rob discussed it will cover in more detail shortly weaker than the first quarter taken together. The results produced a first half a year that exceeded our expectations appointments.
One of the more important measures of course it gives the progress is a comparison of this quarter's results to the second quarter of a year ago.
In fact net loss in Q2 2020 was $2.8 billion is better than the net loss in Q2, 20, I'd seen despite having $5.3 million less revenue.
Without the dramatic and essential steps, we took over the past 12 months to reduce our cost structure. The business conditions created by code would have been crisis and use it rather than simply challenging.
Navigating is highly highly unusual upon whats control with confidence, which is right, which raises directly from the hard decisions. We've made progress <unk> expenses and equally aggressively to conserve cash.
There's more specific highlights for teaching financial results.
Cash cash equivalents unrestricted cash totaled $12.6 million on June Thirtyth rate 20, an increase of 1.9 million from March 31st 2020.
The $1.6 million keeping people secured in early April comprised much of that increase.
But careful attention to spending in collections allowed us to further improve an already strong quarter cash.
It's worth noting that we no longer very short term investments electing to forego relatively smaller tours that favorite keep your cash ready for deployment against both opportunities and unexpected means.
Revenue for partner solutions down $7.8 million for the first quarter or what is the most obvious indicator of the effects of because of 19 pandemic on our business operations.
Ralph is already described Georgia the decrease in our assessment of its impact on the long term prospects, we're starting to see improve as part of solution sales with the month of me apparent low point and the hardest continued in the early bases this third quarter.
Gross margin for part of solutions was 14% returning to a level consist of the prior periods.
Margins were lower in Q2 them in the first quarter due largely to small number a larger high margin orders that did not recur.
Revenue in our as to cloud segment remained flat quarter over quarter, which was consistent with our expectations for rebuilding growth in this segment.
As to cloud gross margin improved sequentially for continues to reflect the cost of addressing customer requirements for previous little over software.
We are certainly the vessels will pay off with the hence relationships with these large biotech customers.
He will continue to wind down and the third quarter and margins should begin to improve.
Operating expenses for the quarter, where their lowest levels at the first quarter 2019.
Further when excluding restructuring costs are operating expenses declined for the sixth consecutive quarter.
He's not spending under control inline with revenue has been and will remain a management merger I'd be square.
Net loss for the current quarter was $1.1 million or eight cents per diluted share.
We're not loss of $500000 for four cents per diluted share the first quarter 2020.
A 1.5 million dollar decline in gross profit in Q2 compared to Q1.
Actually the only a 600000 dollar increase or quarter over quarter net loss.
The financial benefits of our efforts to bring our expense structure under control our clear.
Rounding out our key financial metrics EBITDAX was negative 800000 dollar for the second quarter down from approximately breakeven EBITDA was for both for people.
We are of course, following assuming all that we can't about cobot 19 in its current and anticipated attacks.
Not clear is that what is clear is that uncertainty will remain for the city for the foreseeable future. We're not in a position to make accurate predictions about the near term to this effect within.
Our current lack of reasonable visibility causes of to continues to be unable to provide revenue or margin guidance, we do intend to redeem guidance, where the white fluctuations such as those we've seen between Q1. It usually 2020 are sufficiently behind us.
With that let me turn the call back over to Ralph.
Thank you Chris.
Clearly the business environment created by the Coven 19 pandemic presents challenges and we must be prepared to take them head on.
In Q twos, those challenges allowed us to forge stronger relationships with our customers and suppliers our customers assets to help with terms and payments and we get the same with our vendors working together, we were able to manage through the payment masterpayment issues without having to take any write offs are getting caught and that skis with our suppliers.
The strength of our customer relationships as additive as was evident.
I'd say from fire couldn't steel and in Q2, there with a lot of steel as engagement with our customers was strong and we saw no customer losses.
Quarter.
Another trended that continued to strengthen in the quarter the growing synergy between our edge to cloud and partner solution segment as the purpose built devices are increasingly deployed as part of Aiotv networks that require continuous operation then updating.
Increasingly our traditional lets customers in the partner solutions segment are asking us to assist them with the complexity of developing deploying in managing the devices in a highly interconnected world of Aiotv.
Their needs and requirements increasingly mirror mirror the requirements.
Of our hedge the cloud customers, who are using our beat to I'd, you edge and cloud component in their purpose built system.
Our intelligent device and system offering is resonating.
And we see increasing evidence that there is a significant role for be square remain confident that our technology will be part of the answer.
Closing this call today I want to leave you with three takeaways first we have the right expense structure and sufficient cash to manage through the opportunity and the challenges that will no doubt faces in coming quarters.
Second we have a leadership team understands the business when you can and will adapt to the rapidly changing business circumstances, and finally, our customers are engaging with us and using our products and services to build intelligent devices and system that will be operating long after the coated 19 pandemic crisis fade.
As I said at the outset, I'm more optimistic about plus prospects today.
But I was when I started in March of last year.
I look forward to speaking with you in November and sharing our results on the Q3 earnings call in the meantime, I hope that you and your family are safe and healthy. Thank you for your time and your attention today.
Moderator. Please open the lines for questions.
Thank you and me if you would like to ask a question. Please take note by pressing star one on your telephone keypad.
If you're using a speaker phone. Please make sure I mean function is turned off to allow your signal to reach our equipment.
Again, it is star one if you would like to ask a question and I'll pause just for a moment to allow everyone an opportunity to signal for questions.
As a reminder to star one if you like to ask a question.
And we have no questions at this time.
Great I'd like to thank everybody for participating today I know many of you have follow up calls scheduled so I look forward to speaking to during those Paul. Thank you for joining us today.
And this does conclude today's call. Thank you for your participation you may now disconnect.
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Good day and welcome to the be Square Corporation second quarter 2020 financial results call.
Today's conference is being recorded.
This time I like to turn the conference over to let's say Phillips Investor Relations. Please go ahead.
Thank you and good afternoon, everyone before we begin you'd like to remind you that this call is being webcast and lot of recording that the call ametek's, if our prepared remarks will be available in due course much site.
During this call will be making forward looking statements. These statements are based on current expectations and assumptions are subject to risks and uncertainty that could cause actual results to differ materially. During this call batch that will also with write a GAAP and non-GAAP financial measures.
Please refer to the cautionary text regarding forward looking statements as well as non-GAAP reconciliation to comparable GAAP financial measures continues to be squish earnings release issued today and on our web site.
Www Dot you squared dot com <unk> under investors, all Chris your announced yesterday I fully diluted numbers where applicable.
Now I'd like to true up now I'd like to turn the call up it dropped Ericsson These core president and CEO.
Thank you I agree good afternoon, and welcome to the be square Q2, 2020 earnings call. Joining me this afternoon and Chris Wheaton our CFO.
I'll take you through our Q2 results I'm sure insights and it's very unique quarter. Thanks for taking the time to participate today.
As you recall I started in March 2019, and while I take the responsibility for results I reported in Q1 2019, I can take no credit.
What has happened in the fourth quarter since Q2, 20 banking good bad or defer has been on my watch the last year has been an exciting time in a period of the significant business rebuilding I'm pleased with our progress and I'm more optimistic about our crosstex today than it was when I started.
Let me say anything about that gets you to 20 sworn was on like any quarter anybody have experienced in our promotional professional lives.
These where we saw a significant reduction in ordering activity in our partner solution segment that started in April and working Didnt say like Jersey started to see some improvement in bordering but it wasn't strong enough to make up for the week.
As a result Q2 revenue in apartment solution segment was essentially half what it was in the first quarter at the same time revenue. It's a cloud segment remained steady down only slightly.
Total revenue for Q2 was 8.9 million a decline from Q1 2020 that marked the end of our three quarter Ron had been proven revenue.
Looking further out the drop in partner Who's in Radnor, there were a number of factor that amplifies. The decline Q1, 2020 saw strong order activity and we benefited from a few unusually large orders with higher than typical mark.
Q2, seasonally weaker quarter made worse, the covert 19 pandemic disrupted normal ordering activity.
The combination of these factors drove the speed decline can partner solutions revenue.
Note, however that even with the quarter over quarter decline partner for decent revenue in the first topic 2020 is only $800000 lower than the first half of 2019, the near parity apart or something rather than in the first half of 2020 and 2019, despite the challenges of to cope with Nike brand.
Hi, I like the success of our efforts to rebuild the business as I'll speak to later, there's a growing opportunity for cross selling with our edge the cloud segment.
Operating expenses in Q2 2020 were lower by just under a million dollars. He made adjustments during the quarter to further reduce costs consistent with our ongoing efforts come there gets done.
As a result were able to avoid the heavy losses, we've seen in prior periods when revenue was higher.
Cash was another bright spot for us in Q2 2020 collections from strong sales in Q1, coupled with proceeds from the PPP loan and aggressive cost management allowed us to end the quarter with nearly $2 million more in cash that we started in the quarter.
You tend to the cost control.
And operating discipline initiated last year and give you can give quarter, that's sort of this well, we're well positioned for the second half of the year to exploit the opportunity that we are creating somebody increasingly evident connection between our business segments.
I speak about however, let me turn things over to Chris ill take that into Q2 numbers in detail.
Thank you Ross and good afternoon investors like fourth earnings call rounding out an exciting for me square and for me personally.
But nothing leaves about what I'm going around to be square, Michael equal the quality of the company's opportunities remain.
Well the quarter just ended whats bridge it would knock on manageable.
Pretty bright spots worse, I look forward to sharing with you today.
You are managing for Simon great uncertainty and little business continuity.
Despite revenue declines a variety of other business fundamentals remain strong.
They indicate that we can emerge from this period relatively unscathed and on track.
The first quarter 2020 was unusually strong.
Well the second quarter was as Robert discussed it will cover in more detail shortly weaker than the first quarter. They come together. The results produced the first half a year that exceeded our expectations appointments.
Well the more important measures of our significant progress as a comparison if this quarter's results to the second quarter of a year ago.
Net loss in Q2, 2020 was $2.8 million better than the net loss in Q2 2019.
Bodies, having $5.3 million lost revenue.
Without the dramatic in the central steps, we took over the top 12 months to reduce our cost structure. The business conditions created by coated would've been crisis and use it rather than simply challenging.
Navigating this highly highly unusual climate control with confidence, which is right, which raises directly from the hard decisions, we've made progress or whatever.
Lenses and equal aggressively to conserve cash.
There's more specific highlights for Q2 financial results.
Cash cash equivalents unrestricted cash totaled $12.6 million on June Thirtyth twice wanting an increase of 1.9 million from March 31st 2020.
The $1.6 million Pvp long secured in early April comprised much of that increase.
The careful attention to spending in collections allowed us to further improve an already strong quarterly cash.
It's worth noting that we no longer very short term investments one thing to forego relatively small returns.
Bigger keeping our cash ready for deployment against both opportunities and unexpected means.
Revenue for partner solutions down $7.8 million from the first quarter. What is the most obvious indicator of the effects of because of 19 endemic on our business operations.
Ralph is already described the Oregon the decrease in our assessment of its impact on the long term prospects, we're starting to see improvement quarter solution sales with a month, but maybe apparent low point and the harvest continued in the early weeks as this third quarter.
Gross margin for part of solutions was 14% returning to a level consistent with prior period.
Margins were lower in Q2 than in the first quarter due largely to be small number a larger high margin orders, but did not recur.
From an order as to cloud segment remained flat quarter over quarter, which was consistent with our expectations for rebuilding growth in this segment.
As to cloud gross margin improved sequentially for continues to reflect the cost of addressing customer requirements for previous with little or software.
We are certainly the vessels will pay off with the hands relationships with these large biotech customers.
We will continue to wind down on the third quarter and margins should begin Hooper.
Operating expenses for the quarter were at their lowest levels at the first quarter 2019.
Further when excluding restructuring costs are operating expenses declined for the sixth consecutive quarter.
He's not spending under control and in line with revenue has been and will remain a management Monterrey. These work.
Net loss for the current quarter was $1.1 million or eight cents per diluted share compared to a net loss of $500000 for four cents per diluted share in the first quarter 2020.
A 1.5 million dollar decline in gross profit in Q2 compared to Q1.
Actually the only 600000 dollar increase quarter over quarter net loss.
The financial benefits of our efforts to bring our expense structure under control our clear.
Rounding out our key financial metrics EBITDAX was negative 800000 dollar for the second quarter down from approximately breakeven EBITDA was for both for people.
We are of course, following assuming all that we can't about code to 19 of the current and anticipated impacts.
Not clear is that what is clear is that uncertainty will remain for this for the foreseeable future. We're not in a position to make accurate prediction about the near term business. If that's okay.
Our current lack of reasonable visibility causes us to continue to be unable to provide revenue or margin guidance, we do intend to reduce guidance when white fluctuations such as those we've seen between Q1 in Q2 2020 are sufficiently behind us.
With that let me turn the call back over to Ralph.
Thank you Chris.
Clearly the business environment created by the Kobin 19 pandemic presents challenges and we must be prepared to take them head on in.
In Q twos, those challenges allowed us to forge stronger relationships with our customers and suppliers our customers as opposed to help with terms and payments and we get the same with our vendor working together, we were able to manage through the payment masterpayment issues without having to take any write offs are getting caught in a squeeze with our suppliers.
The strength of our customer relationships was evident as was evident.
Say from fire can steal and in Q2, there was a lot of feel as engagement with our customers with strong and we saw no customer losses.
Quarter.
Another trend that continued to strengthen in the quarter the growing synergy between our ex the cloud and partner solution segment.
The purpose built devices are increasingly deployed as part of IP networks that require continuous operation in updating.
Increasingly our traditional lets customers in the partner solution segment are asking us to assist them with the complexity of developing deploying in managing the devices in a highly interconnected world of Aiotv.
Their needs and requirements increasingly mirror mirror the requirement.
Our hedge the cloud customers, who are using our beat to I'd, you edge and cloud components in their purpose built system.
Our told this device and system offering is resonating.
And we see increasing evidence that there is a significant role for be square.
I'm confident that our technology will be part of the answer.
Well open the call today I want to leave you with three takeaways first you have the right expense structure and sufficient cash to manage through the opportunity and the challenges that will no doubt basis in coming quarters.
Second we have a leadership he understands the business when.
And we'll adapt to the rapidly changing business circumstances, and finally, our customers are engaging with us and using our products and services to build intelligent devices and system that will be operating long after the coated 19 pandemic crisis phase.
As I said at the outset I'm more optimistic about was prospects today.
That was when I started in March of last year.
I look forward to speaking with you in November and sharing our results on the Q3 earnings call in the meantime, I hope that you and your family are safe and healthy. Thank you for your time and your attention today.
Moderator. Please open the line for question.
Thank you any of you would like to ask a question. Please take note by pressing star one on your telephone keypad.
If you're using a speaker phone. Please make sure I mean function is turned off to a longer signal to reach our equipment.
Again, it is star one if you would like to ask a question and I'll pause just for a moment to allow everyone an opportunity to signal for questions.
As a reminder to star one if you like to ask a question.
And we have no questions at this time.
Greg I'd like to thank everybody for participating today I know many of you had follow up calls scheduled so I look forward to speaking to during those Paul Thanks for joining us today.
And this does conclude today's call. Thank you for your participation you may now disconnect.