Good day, and welcome to the BSQUARE Corporation's Second Quarter 2020 Financial Results Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Leslie Phillips, Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. Before we begin, we'd like to remind you that this call is being webcast and a recording of the call and the text of our prepared remarks will be available on BSQUARE's 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 refer to 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 BSQUARE's earnings release issued today and on our website at www.bsquare.com under Investors. All per share amounts discussed today are fully diluted numbers where applicable. Now, I'd like -- now I'd like to turn the call over to Ralph Derrickson, BSQUARE's President and CEO.

Thank you, Leslie. Good afternoon, and welcome to the BSQUARE Q2 2020 Earnings Call. Joining me this afternoon is Chris Wheaton, our CFO. We will take you through our Q2 results and share our insights from this very unique quarter. Thank you for taking the time to participate today. As you recall, I started in March of 2019, and while I take responsibility for results I reported in Q1 2019, I can take no credit. What has happened in the fourth quarter since Q2 2019, good, bad or indifferent, has been on my watch. The last year has been an exciting time in a period of significant business rebuilding. I am pleased with our progress, and I'm more optimistic about our prospects today than I was when I started. Let me say at the outset that Q2 2020 was unlike any quarter any of us have experienced in our personal or professional lives. At BSQUARE, we saw a significant reduction in ordering activity in our Partner Solutions segment that started in April and worsened in May. By June, we started to see some improvement in ordering, but it wasn't strong enough to make up for the weak May. As a result, Q2 revenue in the Partner Solutions segment was essentially half of what it was in the first quarter. At the same time, revenue in the Edge-to-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 3-quarter run of improving revenue. Looking further at the drop in Partner Solutions revenue, there were a number of factors that amplified the decline. Q1 2020 saw strong order activity, and we benefited from a few unusually large orders with higher-than-typical margins. Q2 is seasonally a weaker quarter was made worse as the COVID-19 pandemic disrupted normal ordering activity. The combination of these factors drove the steep decline in Partner Solutions revenue. Note, however, that even with the quarter-over-quarter decline, Partner Solutions' revenue in the first half of 2020 is only $800,000 lower than the first half of 2019. The near parity of Partner Solutions' revenue in the first half of 2020 and 2019, despite the challenges of the COVID-19 pandemic, highlight the success of our efforts to rebuild the business. As I'll speak to later, there is a growing opportunity for cross-selling with our edge-to-cloud segment. Operating expenses in Q2 2020 were lower by $700 million. We made adjustments during the quarter to further reduce costs consistent with our ongoing efforts to manage expense. 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 than we started in the quarter. The attention to cost control and operating discipline initiated last year and continued through this quarter has served us well. We are well positioned for the second half of the year to exploit the opportunity that we are creating from of the increasingly evident connections between our business segments. Before I speak to that, however, let me turn things over to Chris to take us through the Q2 numbers in detail.

Thank you, Ralph, and good afternoon, investors. This is my fourth earnings call, rounding out an exciting day for BSQUARE and for me personally. I've been nothing but pleased about what I found when I arrived at BSQUARE, and my belief in the quality of the company's opportunities remains resolute. While the quarter just ended was strange, it was not unmanageable. In fact, there are many bright spots for us that I look forward to sharing with you today. We are managing the time with great uncertainty and little business continuity. Despite revenue declines, a variety of other business fundamentals remain strong, and they indicate that we can emerge from this period relatively unscathed and on track. As noted, the first quarter of 2020 was unusually strong. While the second quarter was, as Ralph has discussed and we'll cover in more detail shortly, weaker than the first quarter. Taken together, the results produced in the first half of the year that exceeded our expectations and plans. One of the more important measures of our significant 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 million better than the net loss in Q2 2019, despite having $5.3 million less in revenue. Without the dramatic and essential steps we took over the past 12 months to reduce our cost structure, the business conditions created by COVID would have been crisis inducing rather than simply challenging. We're navigating this highly unusual time with control and with confidence, which arises directly from the hard decisions we've made to aggressively reduce expenses and equally aggressively to conserve our cash. Here's some more specific highlights of our Q2 financial results. Cash, cash equivalents and restricted cash totaled $12.6 million on June 30, 2020, an increase of $1.9 million from March 31, 2020. The $1.6 million PPP loan secured in early April comprised much of that increase. With careful attention to spending and collections allowed us to further improve an already strong quarter for cash. It's worth noting that we no longer carry short-term investments, electing to forgo relatively small returns in favor of keeping our cash ready for deployment against both opportunities and unexpected needs. Revenue for Partner Solutions, down $7.8 million from the first quarter, was the most obvious indicator of the effects of the COVID-19 pandemic on our business operations. Ralph has already described the origins of this decrease and our assessment of its impact on the long-term prospects. We're starting to see improvements in Partner Solutions sales with the month of May at the apparent low point, and that progress continued in the early weeks of this third quarter. Gross margin for Partner Solutions was 14%, returning to a level consistent with prior periods. Margins were lower in Q2 than in the first quarter, due largely to a small number of larger high-margin orders that did not reoccur. Revenue on our edge-to-cloud segment remained flat quarter-over-quarter, which was consistent with our expectations for rebuilding growth in this segment. Edge-to-Cloud gross margin improved sequentially, but continues to reflect the cost of addressing customer requirements for previously delivered software. We are certain these investments will pay off with enhanced relationships with these large IoT customers. This investment will continue to wind down in the third quarter, and margins should begin to improve. Operating expenses for the quarter were at their lowest level since the first quarter of 2019. Further, when excluding restructuring costs, our operating expenses declined for the sixth consecutive quarter. Keeping our spending under control and in line with revenue has been and will remain a management mantra at each quarter. Net loss for the current quarter was $1.1 million or $0.08 per diluted share compared to a net loss of $500,000 or $0.04 per diluted share in the first quarter of 2020. The $1.5 million decline in gross profit in Q2 compared to Q1 translated to only a $600,000 increase in our quarter-over-quarter net loss. The financial benefits of our efforts to bring our expense structure under control are clear. Rounding out our key financial measures, EBITDA was negative $800,000 for the second quarter, down from approximately breakeven EBITDA results in Q1. We are, of course, following and assuming all that we can about COVID-19 and its current and anticipated impacts. It's not clear is that -- what is clear is that uncertainty will remain for the foreseeable future. We're not in a position to make accurate predictions about the near-term business effect from the pandemic. Our current lack of reasonable visibility causes us to continue to be unable to provide revenue or margin guidance. We do intend to resume guidance when wide fluctuations such as those we've seen between Q1 and Q2 of 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 COVID-19 pandemic presents challenges, and we must be prepared to face them head on. In Q2, those challenges allowed us to forge stronger relationships with our customers and suppliers. Our customers asked us for help with terms and payments, and we did the same with our vendors. Working together, we were able to manage through the payment -- manage through payment issues without having to take any write-offs or getting caught in a squeeze with our suppliers. The strength of our customer relationships was evident. They say from fire comes steel. And in Q2, there was a lot of steel as engagement with our customers was strong, and we saw no customer losses in the quarter. Another trend that continued to strengthen in the quarter, is the growing synergy between our edge-to-cloud and Partner Solutions segment, as the purpose-built devices are increasingly deployed as part of IoT networks that require continuous operation and updating. Increasingly, our traditional OS customers in the Partner Solutions segment are asking us to assist them with the complexity of developing, deploying and managing the devices in the highly interconnected world of IoT. Their needs and requirements increasingly mirror the requirements of our edge-to-cloud customers, who are using our B2IQ Edge and Cloud components in their purpose-built systems. Our intelligence device and system offering is resonating, and we see increasing evidence that there is a significant role for BSQUARE. We remain confident that our technology will be part of the answer. Closing this call today, I want to leave you with 3 takeaways. First, we have the right expense structure and sufficient cash to manage through the opportunities and the challenges that will no doubt face us in the coming quarters. Second, we have a leadership team, who understands the business we're in and who 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 systems that will be operating long after the COVID-19 pandemic crisis phased. As I said at the outset, I am more optimistic about these growth prospects today than 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 line for questions.

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 you during those calls. Thank you for joining us today.

And this does conclude today's call. Thank you for your participation. You may now disconnect.