Jul 15, 2021
[4 min Read]
BSQUARE Corporation (BSQR), founded in 1994, is headquartered in Seattle, Washington. The company provides software solutions and related engineering services to businesses that develop, market, and sell standalone intelligent systems in North America, Europe, and Asia. It operates through two segments, Partner Solutions and Edge to Cloud.
In addition, the company offers various professional services, such as operating system (OS) upgrade and porting, embedded OS support, field upgrade consulting, OS lockdown, and Microsoft Azure Sphere engineering services, as well as Windows 10 Internet of Things (IoT) enterprise training services. Further, it develops, deploys, and operates IoT systems for various businesses. The company serves OEMs, original design manufacturers, corporate enterprises, silicon vendors, and peripheral vendors.
The stock is listed on the Nasdaq stock exchange, with the previous close at $3.99 and a $53.49 million market cap.
The top three institutional holders:
Bsquare is a software and services company that designs, configures, and deployed technologies that solve difficult problems for manufacturers and operators of connected devices. Their products include software that connects devices to create intelligent systems that are cloud-enabled, contributed critical data, and facilitate distributed control and decision making. Their services include 24/7 Internet of Things (IoT) operations that allow their customers to focus on their businesses while they take care of security, monitoring, and general technology updates.
Partner Solutions: Embedded Operating System Software and Services
The company sells embedded operating system software and services to different large corporations. They view themselves as a Microsoft Corporation embedded OS distribution and technology partner. A decade ago, customers typically built devices on a single OS. But today, they increasingly have a multi-OS product strategy, which is expanding and accelerating the need for embedded OS expertise and services.
The majority of their revenue is coming from reselling Microsoft Windows Embedded and IoT operating system software to device makers. The primary cost of Partner Solutions consists primarily of the cost of embedded operating system software product costs payable to third-party vendors, net of rebate credits earned through Microsoft's distributor incentive program.
Edge to Cloud: IoT Software and 24/7 Operations Services
Customers are increasingly relying on Bsquare's extensive experience developing, deploying and operating large IoT systems at scales to solve their burdens that are challenging to meet through traditional technologies and support models. The company believes that outsourcing fleet management and 24/7 operations services to Bsquare can result in lower system development costs, greater security, better maintainability, lower operating costs, and improved return on investment for a customer's IoT system.
The primary cost of Edge to Cloud consists of salaries and benefits, contractor costs and re-billable expenses, and amortization of certain intangible assets related to acquisitions.
The company maintains distribution agreements with multiple third-party software vendors. For over 20 years, the company has been a Microsoft Authorized Distributor of Windows Embedded and IoT operating system software and licenses, including major product families such as Windows 10 IoT Enterprise, Windows Server IoT, and SQL Server IoT. They are also authorized to sell Windows IoT operating systems in Canada, the United States, Argentina, Brazil, Chile, Mexico, Peru, Venezuela, Puerto Rico, Columbia, and several Caribbean countries. They are an authorized distributor for Adobe Flash technologies and Adobe Reader. The company has the right to distribute Adobe Flash Lite licenses on a worldwide basis. They are an authorized distributor of McAfee security software in North America.
Total revenue decreased in 2020 compared to 2019, due to decreased sales in the Partner Solutions segment, primarily in NA and Asia, as well as decreased revenue in the Edge to Cloud segment.
Partner solutions revenue decreased $8.4 million and 17% in 2020 compared to 2019. The company believed that customer demand for embedded operating systems was adversely impacted by the economic downturn and related uncertainty stemming from the global COVID-19 pandemic.
Edge to Cloud revenue decreased $3.8 million and 44% in 2020 compared to 2019, due primarily to professional services revenue earned in 2019 that was not repeated in 2020. However, the company expects Edge to Cloud revenue will continue to vary in timing and amounts.
Gross profit and gross margin
Partner Solutions gross declined in 2020 compared to 2019 primarily as a result of lower third-party software sales. But its gross margin was favourable impacted by rebate credits earned through Microsoft's distributor incentives programs.
Edge to Cloud gross profit and gross margin decreased in 2020 compared to 2019, primarily due to decreased sales of software and services in 2020 compared to 2019 and lower margin project work.
SG&A expenses decreased in 2020 compared to 2019 due to low salaries and related benefits resulting from restructuring efforts in prior periods, and from lower professional services fees and contract labour. R&D expenses decreased in 2020 compared to 2019, primarily due to low salaries and related benefits resulting from restructuring efforts in prior periods.
Overall, the company decreased its net loss significantly in 2019 compared to 2020, from $(9.12) million to $(1.9) million, about ~400%. This indicates that the restructuring efforts from prior periods work perfectly to low the operating expenses. It signals positively to the market as the company has the ability to optimize its internal operation.
The company offers a full range of products and services that empower its clients in so many ways through a long-standing relationship with Microsoft. Currently, the company is in its early stage with less than 100 employees but has been established and developed a mature business model with various great products.
The stock is currently trading at $3.92 as of 10:10 am on July 14, 2021. The stock price has dropped more than 60% from its previous high of $8.04 on 29 June. Do I think this is the dip? It could be. But remember, buy low and sell high. Do your own due diligence before making any investment decisions. Don't let the market noise distracts you from making the right decision. Peace out.