Bridgeline Digital Q2 2023 Earnings Call Transcript

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Provided by Quartr
May 15, 2023

There are 4 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Bridgeline Digital Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. And I would now like to hand the conference over to your speaker today, Mr.

Operator

Thomas Windhausen. Mr. Windhausen, please go ahead.

Speaker 1

Thank you, and good afternoon, everyone. Thank you for joining us today. My name is Tong Wen Housing, the Chief Financial Officer of Bridgeline. I'm pleased to welcome you to our fiscal 2023 Q2 conference call. On the call with us this afternoon is Ari Kahn, Bridgeline's President and CEO, who will begin the call with a discussion of our business highlights.

Speaker 1

I will then update you on our financial results for the quarter, and we will conclude by taking questions. Before we begin, I'd like to remind listeners that during this conference call, Comments that we make regarding Bridgeline that are not historical facts are forward looking statements within the meaning of Section 27A of the Securities Act of 1933 in Section 21E of the Securities Act of 1934 and are subject to risks and uncertainties that could cause such statements to differ materially from actual future events or results. These statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The internal projections and beliefs upon which we base our expectations today may change over time and we expressly disclaim and assume no obligation to inform you if they do. The results we report today should not be considered as an indication of future performance.

Speaker 1

Changes in economic, business, Competitive, technological, regulatory and other factors, such as the impact of public health measures, could cause these lines actually both to differ materially from those expressed or implied by the projections or forward looking statements made today. For more detailed information about these factors and other risks that may have an impact on our business, Please review the reports and documents filed from time to time by Bridgeline Digital with the Securities and Exchange Commission. Also, please note that on the call this afternoon, we will discuss Some non GAAP financial measures when commenting on the company's financial performance. We provide a reconciliation of our GAAP financials to these non GAAP measures in our earnings release. You can obtain a copy of our earnings release by visiting our website.

Speaker 1

I'd now like to turn

Speaker 2

the call over to Ari Kahn, Good Giant's President and CEO. Thank you, Tom, and good afternoon, everyone. In the Q2, we signed $1,400,000 in new sales, including $600,000 in licenses and over $800,000 in services. Hawk Search continues to be our best selling product and most Hawk Search contracts have a 3 year initial term, creating a strong backlog for future revenue. Fox Search has organic growth in the high teens and renewal rates of over 95%.

Speaker 2

This product line represents more than 40% of our revenue. HawkSearch sales are often sourced from partners, which lowers marketing expenses. Key platform partners include Optimizely, BigCommerce, Sitefinity and Salesforce. Agency and System Integrated also drive new sales with Important Hawk Storage sales in our 2nd quarter included The expansion of our relationship with UPS through the addition of HawkSurg to their Bridgeline product suite Growth in the footwear market, including Crocs, Foot Locker and New Balance in Asia and growth in the B2B Industrial distributor market with Blackhawk, Dealers Industrial Supply and Thomas Scientific. Our go to market strategy concentrates on verticals where we have strong case studies that can dominate with an Be Everywhere campaign.

Speaker 2

These core sectors include B2B Electrical Supply, Footwear, Franchise and Plumbing Distribution. WuRank is another important product for Bridgeline, and we've augmented our direct WuRank strategy with partner driven sales. Last quarter, we announced our partnership with DooDOT to sell WeRank and DooDOT's app store. This partnership has already sold over 500 WeRank licenses to the DooDot customer base. WeRank allows DooDot users to increase traffic to their sites by improving their rank on search engines such as Google.

Speaker 2

Through this partnership, more than 450,000 businesses can now add Bluerang to their site with a click of a button. Also, do that partners with 20,000 digital agencies who can now make bulk We not only grow sales through new product development and acquisition, but we're also able To leverage our customer bases for cross sales of 3rd party products, last week, we announced a partnership with AccessiBe, a market leader in web accessibility. Xfinity is trusted by over 180,000 customers, including PlayStation, Johnson and Johnson and NBC to identify and fix website compliance issues with the American Disability Act and similar legislation in Canada and Europe. With accessibility technology, this line not only increases our customers' total accessible market to include those with disabilities, but we also reduced our customers' legal risk associated with compliance violations. This line has delivered several important innovations in our product line this year.

Speaker 2

Most recently, we announced our Braco release for HawkSearch, which helps boost revenue for our customers while reducing their implementation costs. Rigel improved coordination across our products and pre tune HawkSearch powered website for their industry, while providing more out of the box capabilities to accelerate time to market. Bravo directly embeds WooRank and E Commerce 360 into the Hawk Search dashboard with BlueRamp customers alerted to SEO opportunities and Ecommerce 360 We provide an advanced analytics and recommendations for Bridgeline products and partner products like AccessiBe. Blanco's rapid UI framework provides point and click site configuration that enables customers to build and modify their site quickly. It also allows our sales team to easily demonstrate the power of HawkSearch to prospective customers In the context of their own website, Bronco introduced Fox Search Industry Accelerators, which are an important part of our vertical go to market strategy.

Speaker 2

Industry accelerators package domain specific intelligence that HawkSearches learned while powering other sites within that industry. When a new site is launched, rather than having to learn the behavior of its customers, It can use machine learning and human intelligence accumulated from similar sites in its industry to inject months of optimizations on day 1. For example, our machine learning on the B2B electrical distributor site may discover that beige light switches sell better Then orange ones and therefore pushes beige to the top of the web page and orange towards the bottom. Human configuration may further tune the site To tell us that cotton and dub are synonymous color names in customer searches, Glidgeline's industry accelerators package This kind of intelligence from dozens of sites into a single package so that when a new customer within an industry launches a new site, They can immediately incorporate optimizations learned from months or even years of customer behavior across similar sites on day 1. In the Q2, Bridgeline delivered $4,100,000 in revenue, including $3,300,000 in subscription and license and $800,000 in services.

Speaker 2

Subscription revenue was influenced this quarter by the full quarter reduction of the large customer we mentioned last quarter, Foods renewed for their 9th consecutive year on a legacy Bridgeline product, restructured their website This reduced subscription to Neste County for that account. Regardless of the full 3 month impact of this reduction, Subscription revenue for the 2nd quarter grew from the 1st quarter, thanks to strong sales and renewals. This quarter, over 200 of Bridgeline's Existing customers representing more than 90% of customers and of recurring revenue that was contracted for renewal during this quarter Renewed for a total contract value of $4,000,000 with several customers increasing the size of their license. Renewals included Global 500 Enterprises such as AstraZeneca, Toyota and UPS. Our subscription and license revenue was 80% of total revenue for the quarter with new contracts typically signing for 3 year initial terms and generally renewing for multiple subsequent years.

Speaker 2

At this time, I'd like to turn the call over to our Chief Financial Officer, Tom Wenhauser. Tom?

Speaker 1

Thanks, Ari. I'll provide a further update of our financial results for the Q2 of fiscal 2023, which ended March 31, 2023. Total revenue for the quarter ended March 31, 2023 was $4,100,000 compared to $4,100,000 in the prior year period. Now going into each component of revenue, our subscription and licenses revenue that is comprised of SaaS, comprised of SaaS licenses, Maintenance and hosting revenue and perpetual license revenue for the quarter was $3,300,000 which was consistent with the prior year period amount. As a percent of total revenue, subscription licenses was 80% of total revenue for the quarter ended March 31, 2023.

Speaker 1

Our services revenue was $821,000 for the quarter ended March of 2023, up slightly from $811,000 in the prior year quarter. As a percentage of total revenue, services revenue accounted for 20% of total revenue for the quarter ended March 31, 2023. Our cost of revenue decreased to $1,260,000 for the quarter ended March 2023 compared to $1,330,000 in the prior year period. And as a result, our gross profit increased $49,000 or 2 percent to $2,83,000 for the quarter ended March 23 as compared to 2,780,000 for the prior year period. Overall, our gross profit margin was 69% for the quarter ended March 23 compared to 68% in the prior year period.

Speaker 1

23, up from 43% in the same period in 2022. Our operating expenses were 3 point $5,000,000 for the quarter ended March 23 compared to $3,400,000 in the prior year period. The increase includes an additional $200,000 expense Slide 1 resulted in a non cash income of $200,000 for the period ended March 23 compared to income of $400,000 in the prior year period. Our change in share price is the primary driver of the change in fair value of these warrants. Moving on to net income, we had net loss of 500,000 the fiscal quarter ended March 23 compared to net income of $300,000 in the prior year period.

Speaker 1

Moving to EBITDA. Our adjusted EBITDA for the quarter ended March 2023 was negative $144,000 compared to negative $72,000 in the prior year period. Next, moving on to our balance sheet. At March 31, 2023, we had cash of $2,800,000 and accounts receivable of 1,100,000 Our cash increased this quarter despite debt payments of €300,000 in the quarter. Our total debt outstanding as of March 31, €700,000 with a weighted average interest rate of 4.1% with principal payments of view through 2028.

Speaker 1

Further, we have no immediate earn out from any of our previous acquisitions. As of March 31, 2023, we had total assets of 26 $18,000,000 and total liabilities of $6,900,000 We look forward to continued growth and success in fiscal 20 Thank you for joining us on the call today. And at this time, we'll open the call to questions and answers. Operator?

Operator

Thank One moment for our first question. Our first question?

Speaker 2

Can you

Speaker 3

give us an update on the industry environment in terms of what you're seeing In terms of the market and customer appetite, any particular technology you're interested in? Thanks.

Speaker 2

Yes. Thanks, We're seeing the our existing customers are continuing to make enhancements to their So from that perspective, we're not seeing any change in investments for the industry. New customer acquisition is also on par with last year. So regardless of the recession for the Customer base that we have and the prospective customers that we have, we're not seeing a change. One of the That we've seen is an awful lot of interest in AI and that's driving Some pretty interesting demand.

Speaker 2

We're seeing people integrate our software with other products Like HubSpot, for example, even chat GPT. And that's Going to that's really getting us excited about the potential for offering broader solutions. And we were looking at some partnerships with other Including the Accepted E partnership, where we're able to offer broader solutions with not just the technology that we own ourselves, but Incorporating that with other partner products as well. Okay. A quick follow-up.

Speaker 2

In terms of

Speaker 3

the competitive environment, Is that the same

Speaker 2

you mentioned AI, is that having any impact on competition

Speaker 3

For competitors kind of like

Speaker 2

a pick top match situation? Yes, not yet, not yet, but it is coming. The enhancements in AI are a lot of them are open source, like OpenAI and so forth that are going to allow a lot of companies to rapidly bring new capabilities into their product. And this is actually a big part of our Industry accelerator package that we're offering now. We think that the future, the near term future for AI It's not broad based generative AI like chatGBT, but instead have domain specific.

Speaker 2

So we're using 3rd party AI products, open AI products to understand narrow industries like Footwear or B2B Electrical Distributors or Plumbing or Paint Supplies and to have hyper

Speaker 3

Thank

Operator

you, I'm not seeing any questions in the queue. This will end the Q and A session. I would now like to turn the conference back to management for closing remarks.

Speaker 2

Thank you for joining us today. We appreciate the continued support of Our partners and with our shareholders. We're excited about our business and ongoing growth prospects, and we look forward to speaking with you again on our 3rd fiscal quarter 2023 conference call, which will be in August 2023. Thank you, everybody, and have a great week.

Operator

This concludes today's conference call. Thank you all for participating. You may now disconnect

Speaker 2

and

Operator

have a pleasant day.

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Earnings Conference Call
Bridgeline Digital Q2 2023
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