Q3 2020 Bridgeline Digital Inc Earnings Call
Ladies and gentlemen, thank you for Sunday Night Conference call will begin momentarily. Thank you for your patience and please continue.
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Thank you for standing by and welcome to Rich line digital third quarter Twentytwenty earnings Conference call.
This time, all participants are not listen only mode. After the speakers presentations I would be a question and answer session. You asked the question during that portion of the call you want me to press Star one on your telephone. Please be advised that today's conference maybe recorded if you require any further actually sons. Please press star unsealed.
I wouldn't know and the conference over to Mark Delaney Chief Financial Officer breach line digital. Please go ahead sorry.
Thank you and good afternoon, everyone. My name is mortality and I'm, the Chief financial Officer for Bridgeline digital.
I'm pleased to welcome you to our fiscal 2023rd quarter Conference call.
Before we begin I would like to remind listeners that during this conference call.
So we make regarding Bridgeline digital.
Not historical facts are forward looking statements within the meaning of section 20, Sevena <unk>. All these Securities Act it might seem 33 and section 21. The all these Securities Act Nice you 34 and are subject to risks and uncertainties that could cause such statements should different from actual future events.
Or result.
These statements are mapr swing to the Safe Harbor provisions other private Securities Litigation Reform Act 1995.
The internal projections and beliefs upon which we base our expectations today may change overtime, and we express we disclaim and assumes no obligation to inform you if they do.
The results that we report today should not be considered as an indication of future performance.
Changes in economic business competitive.
Technological <unk> regulatory and all the factors such as the impact of the cold and Nike pandemic and related public health measures.
Cause <unk> actual results could differ from those expressed or implied by the projections or forward looking statements made today.
For more people information about these factors and other risks that may impact our business. Please review. The reports these documents filed from time to time like bridge on digital with these securities and Exchange Commission.
Well. So please note that on the call today, we will discuss non-GAAP financial measures when discussing the Companys financial performance.
We provided a reconciliation of these non-GAAP measures to our GAAP financials in our earnings release.
You can you can obtain a copy of our earnings release by visiting our website.
I would now like to turn the Cold War, which every talk more president and CEO.
Thank you Mark good afternoon, everyone.
Well I delivered 22% growth in recurring revenue positive operating income and positive adjusted EBITDA in our third quarter.
Q4, we expect continued growth in recurring revenue and to repeat our bottom line performance with positive operating income in positive adjusted EBITDA yet.
Q3, close more sales than we had in our previous two quarters combined.
Q4 is off to a great yard and so far we close more steel from the first half of our Q4 than we did large higher third quarter.
Many of our new cost amongst your online retailers in United States in Europe.
Recently launched newly designed E commerce sites for global consumer electronics manufacturer that enables them to sell direct to consumer well also contributing to support their traditional b to b channel dealers and distributors.
We've seen significant investments for the healthcare industry with hospitals enhancing their website to incorporate virtual events as well it's implemented messaging systems in response to the cold at night teams pandemic.
Recently to talk regional healthcare networks extended their professional services retainer for ongoing enhancements to their website.
We've also had several online pharmacy to sell protective personal equipment acquired celebrate licenses to improved search and conversion for their ecommerce sites, we even had a bad Mary finally see by licenses just this month to further improve its online sales.
We recently won Niklasson manufacture with operations in Europe and in United States.
We also want to say all the sporting goods retailer in Asia with more than 2300 retail stores.
And I feel corridor, we had sales in three continents in across several verticals, including health care pharmaceutical education franchise and manufacturing [noise].
The value, we delivered to our culture, it's more relevant than ever several of our customers renewed their subscription agreements for multiyear terms, including both a fortune 10 multinational oil and glass gas company.
And one of the world's largest pharmacy chains.
We have also seen several like he's expansion within our customer base were caught that customers have grown to higher tier as far as software as their usage is increase.
Ridgeline experienced very few business delayed due to cold in April we saw slower professional services from some possibly paused work to reset their remote office policies and reassess their budget.
Just had a small less impact on our services revenue, which we expect to recoup they see customers return to the delayed service priorities.
We saw no significant impact from Kogan on licenses.
Customers continue to buy our software and in fact, they ought to be picks up.
Importantly, our customers.
Our customer base continues to invest and bridge line products than we see both cross sells wireless expansions from our online.
Oh Wow longtime customer.
Before they called it outbreak.
His line launched an initiative to leverage the unbound platform, along with the momentum and celebrate sales to deliberate even greater out of the box value to customers.
The call this initiative Robin and P 60.
Roughly 360 heavy towards telephonics sales and partnerships an online marketplaces, because allowed us to streamline our sales and marketing budget when more scale faster sales cycles growth subscription revenue and deliver stronger gross margins, which increased 29% no third quarter.
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Revenue three six years not only a sales strategy. It also guides our research and development.
Revenue Threesixty, we're expanding our technologies to help customers grow their online revenue and to do so with all of the box tool that drive all three components of ecommerce we increased site traffic.
We increased shopper conversion rate and we increased the average order value.
Our software it's grown each of these three revenue components for hundreds of customers over the years and our focus now is a package all of our solutions into discrete out with a box applications that are Kate compatible with any platform and bring this value to market faster anyone even wider audience.
We recently announced a new product called unbound pages on bank pages help franchises increase their online and in store traffic with out in the box store locator pages.
On bound pagers makes it easy for share to share locator map.
Store hours in contact information with your customers in a way that is both desktop and mobile friendly and has outstanding search engine ranking.
Unlike other locator pages.
Unbound pages are unique in the same email marketing and I'm like commerce to capabilities that we were able to easily include you talked about broader unbound product suite.
We will be making more announcements this year as we expand our revenue threesixty strategy with additional products.
We also intend to continue evaluating strategic growth opportunities through M&A with revenue Threesixty guiding our focus.
We continue to evaluate SAS companies, who products help their customers go online revenues and have efficient sales cycles himself.
We finished our third quarter with a strong cash position, which we expect to remain strong.
Furthermore, the company no longer needs to allocate cash for dividends to preferred stock holders, it's 100% a bargain bastards, who help dividend producing preferred stock have converted that preferred stock into common.
Finally.
The company received a 1 million dollar PBP loan that we expect to be forgiven in short we are well positioned to execute on any strategic opportunities that arise and are well situated to wait for just the right one.
We have sales momentum happy customers positive bottom line and strong cash.
This is the foundation for an exciting software company in our revenue Threesixty strategy has proven to win new customers, while delivering ring, even greater value to our customer base.
I'm excited to show you wouldn't even more success on our Q4 Paul.
At this time I'd like to trying to call over to our Chief Financial Officer, Mark Downey Mark.
Thanks Terry.
Today I will review our financial results the third quarter fiscal 2020 ended June 30. This 2020.
As I mentioned on our previous earnings call in March 2020 World Health organization declared Colby 19 as a pandemic.
And while we anticipated or operations in all locations to be affected.
We were not adversely impact in fact, our <unk>, our productivity increased and our bar robust business continuity plan was tested in real time, even as the virus continues to spread.
We have adjusted certain aspects of our operations to protect employees and customers, while still meeting customer needs for mission critical technology.
Limiting quick responses to address customer needs in light of cold mid nineties.
We continue to monitor the ever fluid.
Situation closely and it's possible that we may implement further measures to address the needs of our staff customers.
Total revenue for the quarter ended June 30, 2020, which is comprised of license and services revenue was 2.6 million for the quarter ended June Thirtyth 2020, that's compared to 2.7 million for the same period in 2019.
The following all the various components of revenue.
Subscription license revenue, which is comprised of size licenses.
Maintenance in hosting revenue and perpetual license revenue decreased 22% for the quarter ended June 30, 20, 21.9 billion from 1.6 million for the same period in 2019.
This increase is attributed to multiple renewals across the <unk> be diverse portfolio of customers, including retail healthcare financial services franchise education manufacturing and multi year license renewals. Unfortunately 500 pharmaceutical.
That's what manufacturing and global energy companies.
Especially in prior earnings calls deferred revenue accounting rules associated from our 2019 acquisitions dictated a full contracts or not recognized upon acquisition.
The only a portion of those revenues associated with walks you see a mess can be reflected.
We are now able as of March 1st the first annual license payment after the acquisition to recognize the full 100% value of these acquired contracts.
We curbing revenue, which is comprised of south licenses maintenance and hosting revenue increased 22% 1.9 billion for the quarter ended June Thirtyth 2020.
Well 1.6 million for the same period, it's one in 2019.
As a percentage of total revenue recurring revenue increased 14% to 73% of total revenue what a quarter ended June 30, 2020 compared to 59% for the same period in 2019.
Services revenue decreased 405000 to 730000 for the quarter ended June Thirtyth 2020.
It was compared to 1.1 million for the same period in 2019.
As a percentage of total revenue.
Services revenue accounts for 27%.
Total revenue for the quarter ended June Thirtyth 2020, compared to 41% of total revenue for the same period into 2019.
As a result, though the cold in 19 pandemic many clients put a hold on budget.
We plan for time any material occasions.
I'll be we assessed the next step for the businesses.
While average billable hovered around 52% Naples, 51% in May respectively.
Rich lines reaction to the real world events stimulate additional quick win engagements leading to an average billable utilization up over 72% in June.
Finally.
Lines overall focus is on increasing license revenue with some of our newer products such as the celebrates product line, which requires little or no services to implement.
This focus a lot when a company to partnerships customer's ability for self service are expected to further increase or license to services ratio overtime.
Total revenues well my two acquired businesses comprised approximately 41% of the total revenues for the quarter ended June Thirtyth 2020.
Gross profit increased 29% or 351000 to 1.6 million for the quarter ended June 30, 2020, as compared to 1.2 million put the same period in 2000 Nike.
Cost of revenue decreased 20% or 412000 to 1.1 billion for the quarter ended June 30, 2020, compared to 1.5 million policy period in 2019.
Gross profit margin increased 14% to 59% for the quarter ended June Thirtyth 2020, compared to 40 Parker said the same period in 2019.
[noise] operating expenses.
Decreased 65% or 2.6 million to 1.4 million for the quarter ended June Thirtyth 2020 from formally the same period in 2019.
Include within the core we totals as of June 30, 2020.
Oh, the net benefits in overall efficiencies of the previously announced reduction of our U.S. in in kind of operations.
Eliminating redundancies in combining certain responsibilities in functions.
Included within the quarter ended June 2019 results or acquisition charges of 930000 relates to the acquisition extensive and Celebral respectfully.
That's we've stayed on prior earnings calls we got to conclude on March 12, 2019. The sale of 10227 0.5 units of series C preferred stock and associated warrants with the market value of 41.5 million less the gross proceeds received a 10.2 10.2.
Good which resulted in a noncash charge to warrant liability expenses of 11.3 million.
The net proceeds this transaction, where all the key to each other freestanding financial instruments based on their fair values, which are comprised the preferred stock and warrants.
Due to fair value during the accounting rules the derivative warrants are independently we filed on a quarterly basis.
Well the quarter ended June 30 to 2020, this evaluation, which takes into account the overall increase in our market share price from the previous quarter resulted in a 1.8 million noncash loss to change in fair value of warrant liabilities as compared with 10.1 million knocking at scale.
In the same period in 2019 exactly.
Operating income for the quarter ended June 30, 2020 is 150000 ask appear to an operating loss of $2.8 million for the same period in 2019.
Net loss applicable to common shareholders. The fiscal quarter ended June Thirtyth 20 21.7 million.
Compared to net income of 7.2 million for the same period 2019.
Adjusted EBITDA.
For the quarter ended June 32020 is a gain of 420000 or 11 cents per diluted share compared to eight net loss of.
One point Sixmillion or 77 cents per diluted share for the same period 2019.
Our non-GAAP adjusted net loss for the quarter ended June Thirtyth 2020 is one point fourmillion or 37 cents per diluted share compared to an adjusted net income of 8.6 million or what else and 21 cents per diluted share for the same period in 2019.
At June Thirtyth 2020, the company had cash a 1.165 million and accounts receivable net of 799000.
That's compared to September 32019, where the company had cash it's 296000 and accounts receivable net 979000.
As of July 31st 2020, or cash balances consistent with our June results.
Total days sales outstanding for the quarter ended June 30, 2020 is 42.1 days an improvement from many beginning of the or high 48.8 <unk>.
Total day sales outstanding for the quarter ended June 32019 was 60.3 days.
Primary reason for these improvements can be attributed to our exceptional strong customer relationships and consistent conversion of accounts receivable into cash.
In February 2016, this assay issue the issue a 42 leases.
Which outlined principles for the recognition measurement presentation into schools from leases applicable to both less wars and lessees.
This new standard requires less cease to recognize most leases on the balance sheet well the rights and obligations created by these are those leases.
As a result of adopting the new staring at ESMO till the first 2019. The company is recognized as of June Thirtyth 2020.
Operating lease assets and liabilities of approximately 325000.
On December 31st 2019.
The company fall the first amended and restated certificate of designations for the series, a convertible preferred stock, which amended and restated the series a preferred stock conversion price mandatory conversion redemption option in dividends.
The company has 264000 off authorized shares of series, a convertible preferred stock, which may be converted into shares of common stock.
As of June 30, 2020.
Series, they prefer shareholders have converted 100% or 262 310 shares issued and outstanding plus 19767 trading time shares of series a convertible preferred into 1 million 611 five.
Hundred 84 shares of common stock.
Additionally, as of June 30, 2020, the series C preferred shareholders, having covered a 20% or 84 shares issued and outstanding series B convertible preferred into 9555 shares of common stock.
We anticipate being able to convert all remaining series C convertible preferred shares during the fourth quarter 2020.
On April 17, 2020, the Comping entered into a loan would be it'd be bank as a lender in an aggregate principal amount of a million all 47 500.
I was waiting to their paycheck protection program under the carriers are.
The PPP loud is evidenced by a promissory note.
Subject to the terms of the no the P.P.P. loan bears interest at a fixed rate of one per cent per annum.
With the first six months of interest deferred.
Hi, good initial term of two years. It's subsequently increased to five years and is unsecured and guaranteed by the small business administration.
The company will apply to the lender for forgiveness, all their P.P. long.
With the amount, which maybe forgiven equal to the sum of payroll costs.
Covered rent obligations and utility payments incurred by the company turning to 24 week period, beginning on April 21st 2020.
Calculated in accordance with the terms of the Kara.
As of June 30, 2020, we have calculated our forgiveness based on the S.P.A. requirements to be 554000, or 53% of the applicable PPP wont drawdown.
Our total assets or 11.3 million total liabilities of 8 million.
As a result, although our series a and series C convertible preferred shares conversions common stock.
We have 4 million logs or 90 640 issue Anikst outstanding shares of common stock as of June through 2020, that's compared to 2 million 798, 475 issued and outstanding shares of common stock as of September Thirtyth 2019.
Want to wrap up with some financial outlook.
We expect continued growth within our recurring revenue and to generate positive operating income and adjusted EBITDA for the fourth quarter fiscal 2020.
Thank you offer listening and at this time, we would like to open up open the call up to QNX.
Thank you I saw a reminder to ask a question you want me to press Star one on your telephone.
The withdraw your question press the pound Ashton.
Please standby, we compile dickie on our roster.
I first question is from Howard Halpern with Taglich Brothers. Please go ahead.
Hi, Congratulations Irene.
Hi, guys side.
Mark.
I am sorry on congratulations on achieving operational profitability, that's a that's a big deal.
Oh, thank you.
Thank you.
<unk>.
Hey.
How many new customers have you.
How do you Oh, you've gotten that are most of them.
To celebrate product category.
Most of them celebrates in terms of quantity celebrates side.
It's really the.
Selling quick and it's a model that we're going to be using to sell all of our software last quarter, a long we had eight.
License sale.
And six of them, where we're celebrating.
Oh I don't know.
Just two quarter, where but.
Seven.
Three and four.
And.
Revenue 360.
360 has done a marketing.
No I like the terminal.
And Mark.
It really describe our strategy, where we're taking on.
We're taking orchestra, which are more.
That traditionally would require a bunch of professional services to customers.
From a bottom line door and Poland the components out at all that directly impact rabbit.
Radnor.
So that they can be sold just like celebrates without requiring a bunch of professional services.
And the making them compatible with all of our competitor platform like merger, telling shopify and so forth and this is enabling us to expand our prospective customer bases anyone regardless of what there if they've got a competitive platform.
To have our sales be fully telephonic and ultimately completely talks, let's just be able to buy our software through our website for what is the sales cycle lower cash.
So it's really off to a great start.
I am talking a little bit about how you envision.
Revenue between.
If I could come in initial product license.
So I want to do Ya.
Thanks.
You got.
Yourselves in Iraq.
In corn based too.
Well off.
[laughter].
Essentially said.
Well.
[laughter] client base has that become cost.
Our national purchase.
Right right, so what we're doing.
There are.
Hundreds of implementation on our platform that have one dogs and that's unique ways they implement.
Revenue enhancement they might send out coupon.
I might have special artificial intelligence systems that recognize most important keywords and registered them with Google They might have recommendation engine and we're taking those that practices from all those different customers and bottom blame about this gives us cross sell opportunities, where we're now going into our own customer base.
And saying Hey hear something that we did for another customer we've got a bundled all you can just buying directly without a big complicated than expected implementation process and selling it throughout our own customer base and then of course also selling out to the rest of the world and we believe that.
What's called marketplaces, where platform like magento occurring and allow other companies sell their magento compatible products.
Marketplaces will be a significant distribution point for us.
We've already got sales from the hybrid marketplace.
So mark like Shopify marketplace.
The any type of that can you eat.
I guess, you sell tumors, especially the machine.
Uh huh.
And in that.
[music].
Right, so a lot of car.
Technology came from the.
Celebrates product line and this artificial intelligence is able to understand the pattern, some which people behave on your website, which ones of those patterns turn into actual purchases and we're leveraging that capability with some other newer eight <unk>, we've developed to be able to put them.
Right product in front of the right person at the right time, when they that's had an online door.
This includes the ability to do recommendation people, who bought this also by that even to be able to register product that individual one quick purchase pages that are registered with Google.
Okay well.
Well keep up the good thing.
Okay. Thank you.
Keep on ground.
Thank you Howard well, we're very excited to have a positive operating income and adjusted EBITDA and send you a working hard for you and all the other investors. Thanks.
Yes.
Thank you.
Our next question from bankruptcy. Please go ahead.
Hey, Hey are yet this is Ben I'm sure I've spoken to you before so I wanted to dropping a little bit from the financial side to the technical side and as as you know like a I think you mentioned shopify is your competitor and technology changes really fast right and a lot of your competitors are heavily invest.
Then technology you know there they're building new they're doing a lot of R&D new programming languages, all that kind of thing and I was wondering you know you have these acquisitions and how is the integration going in are you able to sort of build out modular systems that you can help out and one side with another platform and a I think you know based on your career site. It's kinda.
If I got dot net shop.
That is that kind of where do you see yourself investing heavily continuously forever.
Right well those are great question and.
You do advances in our system integration over the last 10 years with.
What are called Rascally, P. eyes, and and also what's often called headless CMS and the just the both of these system and that you can have components that are running different languages and different servers and communicate quickly enough to be.
Able to pass information back and forth with reasonable standard.
To act like there on a single system and this is really what's allowing not should be successful with our current so we communicate with.
On Bob's platform with the Magento platform with an essay P ERP and Amistad personalization and Jan.
Got it.
Continuously and provide a single seamless output is always all running servers, you've been doing that's now for a little bit over a year.
It's working really well and I think it it's side, it's a standard that getting better every day and maturing so that problem that you just pointed out which should play computer Sciences forever and it's a tough one is one that in our particular industry is pretty mature and we're all leveraging that quick.
Okay Cool and then like in terms of like doubling down in like doesn't that is are you are you like switching one team to dot net or are you know it sounds like you guys have a lot of different languages. A jump work what do you got to work on lightning you've got to work on Magento. It's kind of specific staff you got P.H.P. you know what does that end up.
Reducing velocity and I think also like you know test coverage are you able to keep the bugs down as you guys are kind of just rolling out into a lot of features now so are you able to focus and make sure that you don't ship progressions and hurt your your you know your your net retention ratio.
Sure sure right. So on the language side most of our technology is enlightening and.
That.
And our engineers generally will also have lot of experience what some of the usual suspects with P.H.P. and Ruby and job.
And is we integrate with more and more.
I expect some of those languages to become a bigger part of our engineering team but.
Most of our integration what's happening in Ratably.
We don't Todd I get to caught up and and having to do too many things outside of the standard languages that weren't cost them too because they all have a ratable interface.
Now on the regression thing she way doesn't stop near and Dear to my heart, we care a lot about that and what we do not only are rebuilding unit cap and automation suites and integration cost and all the good stuff on her own software well whenever we do and implementation for cost.
We create a tough suite for each of our customer and that goes into our R&D team.
And every time they.
We need a patch big first run it across all of our customer tests. We've a lot of those are built on like.
Oh.
It's actually.
Trying to remember, which technology used a blanket right now, but screen recorders that are simulating click throughs on their website for example have oh.
A stage version of their site running but for record.
I shouldn't click through analysis work in other cases for some of our bigger customers will actually have.
Deeper integration tasks that are running or unit costs that are running inside of their sweet, but we run that across all our customers on every odd and every patch so that sub that's how we're approaching that.
She way issue.
NFL reminder, ladies and gentlemen, maybe I've a question Justin God benchmark.
[noise] [noise].
I love that comes into Malibu likes to turn the call back to management for their final remark.
Thank you and thank you all for listening.
We appreciate the support and patients. So all of you our shareholders our partner at our goal to continue to build a scalable business model, which in turn will bring shareholder value. We've read very important milestones. Just now we have positive operating income positive adjusted EBITDA We've got.
Hi, subscription license growth new products that are being released its a very exciting time, we're really looking forward to sharing our Q4 results with you on our next conference call stay healthy and be well.
Thank you ladies and gentlemen, this concludes today's conference call.
I now disconnect have a wonderful.
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