Q1 2021 Bsquare Corp Earnings Call
[music].
You're currently holding for the B Square Corporation first quarter 2021 financial results conference. At this time, we are assembling our audience and will be underway in about one minute. We thank you for your patience in holding enough that you. Please your minimum of line.
[music].
Okay.
Yeah.
The day and welcome to the be Square Corporation first quarter 2021 financial results call. Today's conference is being recorded I would like to turn the conference over to Steven Gottlieb VP of Corporate Affairs. Please go ahead Sir.
Thank you and good afternoon, everyone before we begin we'd like to remind you that this call is being webcast.
And the the recording of the call and the text of our prepared remarks will be available on the squares website.
During this call we will be making forward looking statements. These statements are based on current expectations and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially.
During this call management will also afraid of GAAP and non-GAAP financial measures.
Please refer to the cautionary text regarding forward looking statements as well as the non-GAAP reconciliation to comparable GAAP financial measures contained in the scores earnings release issued today on our website at www <unk> com under investors.
All per share amounts discussed today are fully diluted numbers where applicable.
Now I'd like to turn the call over to Ralph Derrickson, <unk>, President and CEO.
Good afternoon, and welcome to the Q1 2021 day square of quarterly earnings call. Thank.
Thank you for taking the time to be with US This afternoon.
Our plan as usual to take you through the Q1 financial results provide our perspectives on the business and answer any questions you may have for us today.
For anyone who would like to a range of follow up conversation. Please contact Steven Gottlieb VP of corporate Affairs, who is responsible for investor relations and let off of our call today.
Joining me on the call is Chris Wheaton fellow entrepreneur and biscuit, our CFO and C O O I.
I will get US started and then hand things off the Chris.
Q1, 2021 was the building quarter for beef square from which we believe few conclusion should be drawn.
Partner solutions revenue was off modestly largely due to a difference in shipping days.
It's the cloud revenue also declined due to changes in revenue recognition that Chris will cover momentarily.
As planned in Q1 2021, we continued investing in the development of our Iot operations services and software growing out of our work with our large Iot customers you saw the I try and announcement in February regarding the expansion of our relationship.
The takeaway from Q1 2021 is that business building is not a linear process are always reflected in our most recent financials. We will continue executing our strategy with focus and discipline let.
Let me hand things off the Chris not to get into the specifics of the quarter.
Thank you Ralph and good afternoon investors.
Get right to the financial details of the quarter.
Total revenue for the first quarter of 2021 was $10 million nine 9% lower than Q4 2020.
Revenue in the partner solutions segment composed primarily of sales of Microsoft software was down 3% quarter over quarter.
This modest decrease was essentially the difference in shipping days in Q1 2021 versus Q4 2020.
After adjusting for the smaller number of shipping days in Q1 revenue in the first and fourth quarters would of been virtually equivalent.
Year over year comparisons in this segment of the first quarter 2020 show of the depths of the challenges that our partner solutions customers of experience during the 12 months since the onset of the pandemic.
Product mix drove a small quarterly increase in partner solutions gross margin rates.
This quarter's five 2% result, there's only 50 basis points less than last quarters of decline largely attributable to a small shift in Q1 sales away from the one higher margin product.
Comparisons of year over year margin reflect stability in the partner solutions segment.
Turning to the edge to cloud segment first quarter 2021 revenue was $1 2 million down $800000 from Q4 2020 due to onetime revenue recognition in Q4 2020 that did not reoccur in Q1 2021.
Timing of was also the primary contributor contributor to a reduction in an edge to cloud gross margins.
The onetime revenue in the fourth quarter of 2020 also happen to carry of unusually high gross margin.
Q1 is 22% gross margin is likely more indicative of our steady state margin for the segment.
We continue to make progress on stabilizing the <unk> our offerings that may prove beneficial to the segment margins.
Expenses in the first quarter of 2021 reflect deliberate ongoing and targeted investment and business building.
Without significant detriment to net loss of our Ebitdas, we have strengthened our team enhanced our relationships relationships with customers and partners and are actively exploring new opportunities at the point of connection between our partner solutions edge to cloud segments.
Net loss for Q1, 2021 was $900000 or <unk> <unk> per diluted share compared to a net loss of $200000 or <unk> <unk> per diluted share in Q4 2020.
EBITDA a non-GAAP measure of our operating performance was the loss of $600000 of $700000 decline compared to EBITDA in Q4 2020.
As a reminder, EBITDA provides another perspective on our ongoing operations by excluding certain noncash and irregular expenses, including some amortization expenses and stock based compensation expense.
Finally, cash cash equivalents and restricted cash totaled $10 $4 million on March 31 2021 the.
The timing of payments to keep vendors, including Microsoft our corporate insurance carrier and our auditors typically drives relatively high cash used in Q1 and this quarter was no different.
The decrease in cash of $2 $6 million from the December 31, 2020 is not indicative of future quarters cash requirements.
While the business used cash in the first quarter as planned our cash balance at the end of Q1 2021 is the only $200000 less than it was at the same date in 2020 the.
The financial Prudence, we've instilled throughout the organization that would become a source of pride for the entire leadership team.
Overall Q1, 2021 was the wasn't unremarkable financial quarter.
Partner solutions revenue continues to be buffeted by the impact of COVID-19 on our customer supply chains edge to cloud revenue changes reflected the accounting treatment more than of shifting the business and operating expenses continued to be tightly managed remaining largely flat quarter over quarter.
Investors can expect this financial and operational discipline will not change.
Thank you for your time and attention I look forward to answering your questions at the end of this call. Let me now turn things back over to Ralph.
Thank you Chris.
As both Chris and I have shared on this call. This is building as the process that takes time and requires discipline.
We are making the necessary investments in a measured way to position be square for growth.
In our press release, you'll note that today, we also announced that we were making some changes to our board of directors that will be effective on June 10th the date of our annual shareholder meeting.
Andrew Harries will be stepping down as chair and departing the board to pursue other commitments.
He will be succeeded by Ryan Vardeman as chair person.
Brian joined the <unk> Square Board in 2018 is here and he is the principal at pelagic <unk> our largest shareholder.
Rob Peters also of pelagic will be departing the board as well.
<unk> the board size is consistent with efforts already taken by the company to reduce cost and increase focus on entrepreneurial business building efforts.
Either Andrew or Rob have any disagreements with the company and their departures will allow them to pursue other personal and professional endeavors.
Look forward to working with Ryan and building value for our shareholders.
I want to thank Andrew Harris for his leadership. He was part of the team that recruited me to be square and I have enjoyed working closely with him of these past two years as our chair person I would also like to thank Rob Peters for his commitment and service to be square, Rob has been an important mentor and voice of the shareholder from me that I have appreciated and I have benefited greatly.
From his contributions.
Please join me in wishing them, both the very best in their future endeavors.
Thank you for your time today, operator would you. Please open the line for questions and while that is happening. Let me remind you that if you would like to a range of follow up discussion with Chris and me. Please contact Steven Gottlieb. Thank you.
Thank you if you would like to ask a question. Please press star one on your telephone keypad and if you're on Speakerphone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again press star one to ask a question and we'll pause for just a moment to allow everyone an opportunity at the signal for questions.
And again that is star one if you have a question at this time.
Yeah.
And at this time there are no questions in the queue.
And I'll just give a final reminder, it is star one if you could have a question.
And with no questions in the queue that day.
This conclude today's call. We thank everyone for your participation you may now disconnect.
Okay.
[music].
Yeah.
[music].
[music].
[music].
Good day and welcome to the be Square Corporation first quarter 2021 financial results call. Today's conference is being recorded I would like to turn the conference over to Steven Gottlieb VP of Corporate Affairs. Please go ahead Sir.
Thank you and good afternoon, everyone before we begin we'd like to remind you that this call is being webcast and the.
Of the recording of the call from the text of our prepared remarks will be available on <unk> website.
During this call we will be making forward looking statements. These statements are based on current expectations and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially.
During this call management will also afraid of GAAP and non-GAAP financial measures.
Please refer to the cautionary text regarding forward looking statements as well of the non-GAAP reconciliation to comparable GAAP financial measures contained in the East Coast earnings release issued today on our website at Www <unk> com under the investors.
All per share amounts discussed today are fully diluted numbers where applicable.
Now I'd like to turn the call or the Ralph Derrickson biscuit of President and CEO.
Good afternoon, and welcome to the Q1 2021 day square of quarterly earnings call.
Thank you for taking the time to be with US This afternoon.
Our plan as usual to take you through the Q1 financial results provide our perspectives on the business and answer any questions you may have for us today.
For anyone who would like to a range of follow up conversation. Please contact Steven Gottlieb VP of corporate Affairs, who is responsible for investor relations and let off of our call today.
Joining me on the call is Chris Wheaton fellow entrepreneur and biscuit, our CFO and C O O I.
I will get US started and then hand things off the Chris.
Q1, 2021 was the building quarter for biscuit share from which we believe few conclusion should be drawn.
Partner solutions revenue was off modestly largely due to a difference in shipping days.
The card revenue also declined due to changes in revenue recognition that Chris will cover momentarily.
As planned in Q1 2021 we continued investing in the development of our Iot operations services and software growing out of our work with our large Iot customers you saw the <unk> announcement in February regarding the expansion of our relationship.
The takeaway from Q1 2021 is that business building is not a linear process are always reflected in our most recent financials. We will continue executing our strategy with focus and discipline let.
Let me hand things off the Chris not to get into the specifics of the quarter.
Thank you Ralph and good afternoon investors.
Get right to the financial details of the quarter.
Total revenue for the first quarter of 2021 was $10 million nine 9% lower than Q4 2020.
Revenue in the partner solutions segment composed primarily of sales of Microsoft software was down 3% quarter over quarter.
This modest decrease was essentially the difference in shipping days in Q1 2021 versus Q4 2020.
After adjusting for the smaller number of shipping days in Q1 revenue in the first and fourth quarters would of been virtually equivalent.
Year over year comparisons in this segment of the first quarter 2020 show of the depths of the challenges that our partner solutions customers of experienced in the 12 months since the onset of the pandemic.
Product mix drove a small quarterly increase in partner solutions gross margin rates.
This quarter's five 2% result is the only 50 basis points less than last quarters of decline largely attributable to a small shift in Q1 sales away from the one higher margin product.
Comparisons of year over year margin reflects stability in the partner solutions segment.
Turning to the edge to cloud segment first quarter 2021 revenue was $1 2 million down $800000 from Q4 2020 due to onetime revenue recognition in Q4 2020 that did not reoccur in Q1 2021.
Timing of was also the primary contributor contributor to a reduction in an edge to cloud gross margins.
The one time revenue in the fourth quarter of 2020 also happen to carry the unusually high gross margin.
Q1 was 22% gross margin is likely more indicative of our steady state margin for the segment.
We continue to make progress on stabilizing the <unk> our offerings that may prove beneficial of the segment margins.
Expenses in the first quarter of 2021 reflect deliberate ongoing and targeted investment and business building.
Without significant detriment to net loss of our Ebitdas, we have strengthened our team enhanced our relationships relationships with customers and partners and are actively exploring new opportunities at the point of connection between our partner solutions edge to cloud segments.
Net loss for Q1, 2021 was $900000 or <unk> <unk> per diluted share compared to a net loss of $200000 or <unk> <unk> per diluted share in Q4 2020.
EBITDA of non-GAAP measure of our operating performance was the loss of $600000 of $700000 decline compared to EBITDA in Q4 2020.
As a reminder, EBITDA provides another perspective on our ongoing operations by excluding certain noncash and irregular expenses, including some amortization expenses and stock based compensation expense.
Finally, cash cash equivalents and restricted cash totaled $10 $4 million on March 31 2021 the.
The timing of payments to keep vendors, including Microsoft our corporate insurance carrier and our auditors typically drives relatively high cash usage in Q1, and this quarter was no different.
The decrease in cash of $2 $6 million from the December 31, 2020 is not indicative of future quarters cash requirements.
While the business used cash in the first quarter as planned our cash balance at the end of Q1 2021 is the only $200000 less than it was at the same date in 2020 the.
The financial Prudence, we've instilled throughout the organization that will become a source of pride for the entire leadership team.
Overall Q1, 2021 was the wasn't unremarkable financial quarter.
Partner solutions revenue continues to be buffeted by the impact of COVID-19 on our customer supply chains edge to cloud revenue changes reflected the accounting treatment more than of shifting the business and operating expenses continued to be tightly managed the remaining largely flat quarter over quarter.
Investors can expect this financial and operational discipline will not change.
Thank you for your time and attention and I look forward to answering your questions at the end of this call. Let me now turn things back over to Ross.
Thank you Chris.
As both Chris and I have shared on this call business building is the process that takes time and requires discipline.
We are making the necessary investments in the measured way the position be square for growth.
In our press release, you'll note that today, we also announced that we were making some changes to our board of directors that will be effective on June 10th the date of our annual shareholder meeting.
Andrew Harries will be stepping down as chair and departing the board to pursue other commitments.
He will be succeeded by Ryan Vardeman as chair person.
Brian joined the P Square Board in 2018 is here and he is the principal pelagic <unk> our largest shareholder.
Rob Peters also of <unk> will be departing the board as well, reducing the board size is consistent with efforts already taken by the company to reduce cost and increased focus on entrepreneurial business building efforts.
Either Andrew or Rob have any disagreements with the company and their departures will allow them to pursue other personal and professional endeavors I look forward to working with Ryan and building value for our shareholders.
I want to thank Andrew Harris for his leadership. He was part of the team that recruited me to be square and I have enjoyed working closely with him. These past two years as our chairperson I would also like to thank Rob Peters for his commitment and service to be square, Rob has been an important mentor and voice of the shareholder from me that I have appreciated and I have benefited greatly.
From his contributions.
Please join me in wishing them, both the very best in their future endeavors.
Thank you for your time today, operator would you. Please open the line for questions and while that is happening. Let me remind you that if you would like to a range of follow up discussion with Chris and me please contact Steven Gottlieb.
Thank you if you would like to ask a question. Please press star one on your telephone keypad and if you're on speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again press star one to ask a question and we'll pause for just a moment to allow everyone an opportunity to signal for questions.
And again that is star one if you have a question at this time.
And at this time there are no questions in the queue.
But I'll just give a final reminder, it is star one if you do have a question.
And with no questions in the queue that does conclude today's call. We thank everyone for your participation you may now disconnect.