Q1 2021 Bridgeline Digital Inc Earnings Call
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Ladies and gentlemen, please standby your bricks and digital first quarter 'twenty 'twenty one earnings call will begin momentarily again. Please standby your conference will begin in two minutes and thank you.
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Good afternoon, ladies and gentlemen, and welcome to the breach Lane digital first quarter, 'twenty 'twenty, one and earnings call.
This time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time, if anyone should require assistance. During the conference. Please press Star then zero on your Touchtone telephone and other.
Reminder, this conference call is being recorded I would now like to turn the conference over to your host and stuff like that Chief Financial Officer. Sir. Please go ahead.
Thank you and good afternoon, everyone. My name is Mark Downey, and I and the Chief financial officer for personal and digital.
I am pleased to welcome you to our fiscal 'twenty 'twenty, one first quarter conference call.
On the call. This afternoon is that record originally and president and CEO, who will begin with a discussion of our business highlights.
And then update you on our financial results for the quarter and well conclude by taking questions.
On February 3rd originally and announced that it had entered into an agreement to acquire 100% of the stock up a little like S. R. L.
<unk> helps companies make intelligent recommendations for optimizing search engine organic rankings.
And increasing their online traffic.
<unk> and touchless sales with and artificial intelligence system.
These capabilities fit perfectly it's originally and E Commerce, 360 strategy and broad suite of apps.
Additionally, on February 4th, which align announced a registered direct offering.
And two $7 million with lead investors and this offering including those certain all the special situations funds and other institutional investors.
Joseph Gunnar LLC acted as lead placement agent and Tigers Brothers, Inc. S KOL placement and Egypt.
If you would like a copy of these press releases you can access it on our website at originally and dotcom.
Before we begin I would like to remind listeners that during this conference call.
And then that we make regarding bridge lines that are not historical facts are forward looking statements within the meaning of section 27 day the.
And the Securities Act of 1933 and section 21 of the other security stack 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 may persuade them 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 overtime, and we expressly disclaim assume no obligation to inform you if they do.
Results that we report today should not be considered as an indication of future performance.
Changed it and economic business competitive technological regulatory and other factors such as the impact of the COVID-19, pandemic and related public health measures could cause actual results 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 and May impact our business. Please review the reports and documents filed from time to time.
Originally and 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 discussing the company's financial performance. We provided a reconciliation of these non-GAAP measures to our GAAP financials. You know earnings release, you can obtain a copy of our earnings release by visiting our website.
I would now like to turn the call over to Eric long President and CEO.
Thank you Mark and good afternoon, everyone.
Thanks to our E Commerce 360 strategy, we're delivering another quarter with operating profit and 15% growth and subscription license revenue.
Previously I've caught or E Commerce 360 strategy revenue 360.
And the marketing team has refined the name and so its E commerce 360 going forward.
Ecommerce 360, and several components that have boosted the trajectory for bridge line to accelerate sales reduce costs and guide strategic growth through M&A.
And E Commerce Street 60, we focus our business on guiding companies to grow their online revenue with apps that drive traffic boost conversion and raise the average order value E. Commerce 360 leads us to develop and acquire many apps that increase online revenues from these three dimensions.
All apps have a share dashboard that evaluates the strength of your ecommerce site to make recommendations for the multiple apps, we have that will help you grow.
E Commerce 360 apps are out of the box, enabling them to sell with a touchless sales process for faster sales cycles, and lower sales and marketing expenses. The recommendation dashboard further reduces sales caused by cross selling the best App at the right time to help our customers.
Because our amps or out of the box, we can increase our gross margin as a more significant percentage of our revenue and subscription and license versus services.
E Commerce 360 guides, our M&A focus towards apps that can drive traffic boost conversion and raise average order value.
The dashboard simplifies and integration of new products and accelerated cross sales across the acquired customer bases.
We recently major made a huge step forward and E. Commerce 360, with the acquisition of Blue rank S. R. L.
Who rank us and asked that drives traffic with a recommendation dashboard powered by an artificial intelligence engine that evaluate your search engine optimization relative to your competitors and identify areas of opportunity.
It is smart enough to recognize the quick wins and the most complicated changes you can implement to drive more traffic.
Check out we ranked dotcom and give it a try its really excellent.
We rank has a gold mine of data behind it and AI dashboard that includes analysis of 50 million web sites over the past 10 years, we intend to combine this data with the data we've accumulated about ecommerce to enrich the recommendation engine even further.
Rank will become the heart of our dashboard for all of our apps, we will expand its recommendation capabilities to identify traffic improvement and identify which of our apps can boost conversion ray ban and huge order for our value best.
We were ranked not only gives us traffic app, a dashboard and big data. It is a lead generating machine. We ranked dotcom received over receives over a million monthly visits and creates hundreds of new accounts each day.
In terms of lead quality and collect more than 1500 free trials every month, where the customer is willing to enter credit card information to proceed very qualified leads and like many software companies Bridge lines primary growth challenge has been lead generation with a steady stream of stream of leads.
From we'll rank and our extensive collection of apps to sell each lead we expect the combination to yield outstanding growth results.
And <unk> acquisition was structured in such a way as to allow us to assume some of their debt. This reduced the cash outlay from bridge lines. So we could acquire with our cash on hand.
We raised $2 7 million this month to help accelerate our growth and specifically invest and our adobe to follow up on the massive number of sales leads that were now received from <unk>.
We rank will help us grow our topline increase our profitability and be a central part of our lead generation and cross sales will continue to look for acquisitions and we will continue to only pick the companies that have outstanding synergies like Uber.
Ranch recommendation dashboard, it'll be even easier for us to integrate the next acquisition and make the most out of software and customer base at this time I'd like to hand, the call over to our Chief Financial Officer, Mark Downey to speak through our results are.
Thanks, Gary and Larry.
We're excited to share the positive financial results for the first quarter of fiscal 'twenty 'twenty, one and at December 31, 'twenty and 'twenty with you. This afternoon.
Total revenue for the quarter ended December 31, 2020, which is comprised of licenses and services revenue was consistent at $2 8 million for the quarters ended December 30, <unk>, 'twenty and 'twenty and 2019.
The following all the various components of revenue.
Subscription and licensing revenue, which is comprised of SaaS licenses maintenance and hosting revenue and perpetual license revenue increased 15% per the quarter ended Cemetery force 40, and 22 2 million from $1 7 million for the same period and 2019.
As a percentage of total revenue subscription and license revenue increased 9% to 70% of total revenue for the quarter ended December 31, 2020, compared to 61 per cent for the same period and 2019.
This increase is attributed to significant multiyear license renewals across our diverse portfolio of fortune 500 companies.
Services revenue decreased 259800, 37000 and for the quarter ended December 30 force 2020, as compared to $1 1 million for the same period and 2019.
As a percentage of total revenue services revenue accounts for 30% of total revenue for the quarter ended December 31, 2020, compared to 39% of total revenue for the same period in 2019.
Which lines overall strategy as Eric has mentioned called E. Commerce 360 has been on increasing recurring subscription revenue with out of the box apps that require little or no services to implement.
And this focus and continued growth are expected to further increase our subscription and license to service revenue ratio.
Gross profit increased 27% or 405000 to $1 9 million for the quarter ended December 31, 'twenty and 'twenty as compared to $1 5 million for the same periods in 2019.
Cost of revenue decreased 30% or 401000 to 957000 and for the quarter ended December 31, 'twenty and 'twenty compared to $1 4 million for the same period in 2019.
This decrease is attributable to a reduction within our fixed cost to operating our cloud based sourcing model and variable internal support costs.
Gross profit margin increased to 66% for the quarter ended December 31, 'twenty and 'twenty compared to 52% for the same period and 2019.
Subscription and the licenses gross margin were 71% for the three months ended December 30, <unk> 'twenty and 'twenty.
Compared to 54% for the same period in 2019.
Services gross margin were <unk> 55 per cent for the three months ended December 31, 'twenty and 'twenty as compared to 48% per the same period and 2019.
Operating expenses decreased 30% or 736000 to $1 7 million for the quarter ended December 31 2020.
$2 4 million for the same period and 2019.
Included within the quarterly totals as of December 31, 2020, or the net benefits and overall efficiencies of the previously announced reduction of our U S and Canada operations by eliminating redundancies and combining certain responsibilities and functions.
These benefits were offset by acquisition charges of 210000 related to the acquisition of who ranked S. R. L specially.
For the quarter ended December 31, 2020 warrant liability revaluation, which considers the overall change and our closing market share price as of December 31, 2020 of $2.50 from the.
<unk> quarters clothing market share price of $1 86.
Resulted in a $1 4 million noncash derivative loss attributable to the change and its fair value of the warrant liabilities.
Compared to a $1 1 million noncash derivative gain for the same period and 2019.
Offsetting this warrant liability loss for the quarter ended December 31 2020.
And 8000 and government grant income releases, the goodness of the P. P P won't respectfully.
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Operating profit for the quarter ended December 31, 'twenty and 'twenty, there's 179000 and as compared to an operating loss of 962000 and for the same period and 2019.
Net loss applicable to common shareholders for the first quarter ended December 31, 2020 is $1 2 million compared to $2 3 million for the same period and 2019.
Adjusted EBITDA.
For the quarter ended December 31, 'twenty and 'twenty is a gain of 672000 or <unk> 15 per diluted share.
Compared to a loss of 669000 or 24 cents per diluted share for the same period and 2019.
Our non-GAAP adjusted net loss for the quarter ended December 31, 'twenty and 'twenty is 683000 or 15 cents per diluted share.
There too and adjusted net income of 406000 or 15 cents per diluted share for the same period and 2019.
At December 31, 2020.
The company had cash of $1 3 million and accounts receivable and net of 863000.
And as compared to September 30th 'twenty, and 'twenty, where the company had cash of 861000 and accounts receivable net of 665000.
Total day sales outstanding for the quarter ended December 31, 'twenty and 'twenty was 47 nine days and is.
As compared to 48 eight days for the same period in 2019.
The primary reason for these improvements can be attributed to our exceptional strong customer relationships and consistent conversion of accounts receivable into cash.
As of December 31, 'twenty and 'twenty, we have 4 million warrants and 20170 shares of common stock and 350 shares of the series C convertible preferred stock when converted equals 30889 shares of common stock.
We anticipate being able to Cooper and all remaining series C convertible preferred stock during the first half of 'twenty 'twenty one.
Our total assets are $11 6 million and and total liabilities of $8 3 million.
Rich line looks forward to continue success in 'twenty and 'twenty, one by delivering shareholder value and expanding our customer success with exciting technical innovations.
Thank you all for listening.
And at this time, we would like to open the call up to Q&A.
Yeah.
Ladies and gentlemen, if you have a question and at this time. Please press Star then one key on your Touchtone telephone.
Once again, that's a number that's fine and then the number one key on your Touchtone telephone.
You have a question from Covid Hoffman from <unk>. Your line is open.
Hi, Hi, guys, a nice solid quarter.
Good recurring revenue growth.
Thank you Howard.
In terms of right now.
And now that we're entering into the second quarter and how many how.
And how many customers do you acquire and are in the first quarter and.
And you know what is the trend and so far in Q2.
Alright.
Oh, we picked up Oh I think it was.
Well customers and the first quarter, something and that and that range and that's pretty consistent for the first half of Q2 as well now that we've got this huge lead base coming in with <unk>, we expect that to accelerate significantly the big challenge that we've had and customer acquisition.
<unk> has been just our brand equity right I mean, not that many people know who bridge line as we only have so many leads coming in and that has moved up two orders of magnitude overnight for us that lead generation was one of the.
Very attractive things for us as we were evaluating will break.
First and foremost we look at technology after that we look at.
If the customer base make sure that the customers are leaving and that we can cross sell and deliver more value to them.
But the huge bonus here I mean, just giant one was the tremendous lead generation that we have and will rank.
Stand alone was didn't have a broad enough product suite to be able to.
To monetize that lead base as well as we'll be able to so we're going to do great things yes.
Okay, So and I guess brings me to a series of questions. Duke do you what kind of revenue that they generate last year do you have a rough estimate.
Yeah.
We were ranked with non audited company and we're auditing the financials for them.
After next day, she get 70 days to commit to do the audit, thereby 2 million dollar company Standalone.
Profitable and there were a few synergies.
And that.
That makes it even more powerful profitable work combined with fringe line.
Okay, and and what type of I guess incremental G&A costs might there be.
And from the acquisition during the.
Last part of the year do you have and a rough guesstimate.
Sure sure so will rank as a.
It's a it's a Belgium company and.
And.
We're going to have some additional going forward.
Finance costs, just in terms of managing the books and so forth for the entity and they're not big even when it was stand alone. It was not a significant amount so going forward, it's not going to make a significant difference and different we do have.
Cost that we'll have for the due diligence and for doing the deal that will come into this quarter and.
Those are going to be around $100000 and will continue to be posting positive operating income I think we're like 650000 and positive operating income this quarter and we can't even stronger with Leerink.
Now you talked about you know the big lead generation is that going to require.
Additional personnel.
Run down those leads or is that going to be part of and automated.
The process that you're going to develop.
It will it will have more people now theres a lot of automation and one of the great things that we rank has is they've got the ability to connect and coming leads with <unk> with.
With databases to recognize the size of the company that the leads coming from and rapid new and and personnel the sector and so forth and automatically categorize it based on that information.
But we are going to be investing and additional sales.
Sales people. These are all touchless sales and will be.
Raised $2 $7 million, not two and acquire woo rank, we had cash on hand for that.
And two two to follow up on those on those leads and a large part.
And.
And those leads are.
Do you know or have a sense of what the breakdown might be between you know the U S. Non <unk> and outside the U S.
And the breakdown reached generations our.
Sure Yeah, So woot rank has never been geographically.
Focus and its marketing.
Just in terms of the way that the economies of the world are split up theres slightly heavier in the U S. Just use round numbers, probably 60% U S 40 per cent Europe. There is really nothing coming in through Asia, and that's because the.
And the products arent localized and the Chinese or Japanese all day.
But there are Australia and leads.
And how long do you think the integration might be with the dashboard and getting all that stuff squared away do you think by the second half.
And during the second half and how we should.
Unified product or unified dashboard.
Yeah, It will be by the second half it's great. The way that the wound ranked dashboard is structured is that it's got AI system, where you can it can learn different patterns and make recommendations and we're just going to expand that recommendation set that already exists from an infrastructure perspective.
To include recommendations about our products that improve conversion improve average order value. So the product itself is completely teed up for E. Commerce 360, we're very fortunate to have met the we rank.
And will your current customers be a bill that would be like this and second generation and product for them that DLC.
And it will it will so.
We will rank <unk>.
Adds value for every single one of bridge lines customers, there's not a single customer that can't drive value from rank and they're all going to get a free trial for and I think a lot of them are going to become long term customers.
Okay, and one last one and I might've missed it.
The warrants could you just break down again.
Is it March that have the warrants R.
Are gone, but that's limit that's right and it does warrant liability.
Going forward.
That's right that's right yeah. So there are approximately $5 4 million warrants with their.
And their cash warrants. So we will receive cash when they exercise and they have a strike price of $4.
$5 5 million warrants and half of those warrants expire and one month on March 12th I belief.
And so hey, we're looking great day, maybe.
Maybe it would be and the money by that and that'll be nice.
And the other half will expire in 2024.
Okay.
And I guess, you know well.
And maybe I'll get ahead and myself, a little bit, but you talked about do you have.
Robust or a growing pipeline of acquisition candidates that would even you know.
And we should be looking forward to seeing us sometime this year and next year.
Okay. That's an important question right.
Uh huh.
Big part of our strategy with E Commerce 360.
And two.
Rapidly grow our our product suites, we have more products to cross sell and to rapidly grow our customer base. So we have more customers that we can show our products to the the cost of selling a license to an existing customer much lower than finding a new customer so.
Strategic growth M&A is an important part of our strategy.
We've been very patient and careful we've looked at multiple opportunities every single month, we wanted to get the perfect one to kick it off and will rank is the perfect one and we've got a backlog of other opportunities that we're talking to and in the same way that we were so careful with.
We were ranked we're going to be careful with those but my my hope is that we can and are great.
Multiple companies and 2021.
Okay, Alright, and look forward to.
Coming a year and.
And keep up the good work.
Thank you Howard is going to be exciting.
Okay.
Once again to ask a question you will need to press Star then the number one key on your Touchtone telephone and again Thats Star then the number one.
And telephone.
Once again, if you'd like to ask a question you will need the best Star then the number one kilo and I touched.
Touchtone telephone.
There are no further questions at this time.
I would now like to turn the conference back to Mr. Ari Tan President and CEO.
Thank you Ron.
We look forward to continued success in 2021, we're off to a great start we rank is excellent and we have lots of different.
Ways that we're going to deliver value for our shareholders by expanding our customer base by expanding our product line, it's going to be very exciting year.
Thank you all for listening.
And have a wonderful 'twenty 'twenty, one and species.
Ladies and gentlemen. This concludes today's conference. Thank you for your participation and have a wonderful day you may all disconnect.
Okay.
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