Q2 2021 Bridgeline Digital Inc Earnings Call
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Good day and thank you for standing by book onto that reached 90 day thought incorporated second quarter 2021 earnings call at this time on pretty spot.
On the mood.
And the speaker's presentation, there will be a question and answer session.
Quick question on during the session human need to price.
And one on your telephone please be advised that today's conference is being recorded.
If you require any further assistance. Please press star zero and I would not like to hand, the conference all parties Speaker today, Mike Dolan CFO. Please go ahead.
Thank you and good afternoon, everyone. My name is Mark Downey, and I am the Chief financial Officer, or originally and digital I am pleased to welcome you to our fiscal 2020, one second quarter conference call.
On the call. This afternoon is that record.
Originally and digital 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 May 12th Bridge line and announced that it had entered into an agreement to acquire Hawk search and.
Intelligent product search and recommendation engine.
Hawk search <unk> AI.
AI powered technology helps online retailers and engage customers and convert more sales with personalized site search and intelligent recommendations that connect customers with hyper relevant products and boost online revenue.
Additionally.
Originally and closed on May 14th day registered direct offering priced at the market of a million or 60 shares of its common stock at a price of $2.20 per share for gross proceeds of approximately $2 4 million.
And a securities purchase agreement with certain institutional investors and connection with a private placement of 2007 hundred shares of its series D convertible preferred stock at a price of 1000 per share.
The company expects to receive gross proceeds from this private placement of approximately $2 7 million.
Joseph Gunnar and co LLC acted as lead placement agent and Todd and scrubbers and as KOL placement agent.
If you would like a copy of these press releases you can access it on our website originally and dotcom.
Okay.
Before we begin I would like to remind listeners that during this conference call comments that we make regarding bridge lines that are not historical facts are forward looking statements within the meaning of section 27 day on the Securities Act with banks and 33 and section 20 <unk> of the Securities Act and 1934 and are subject to.
Risks and uncertainties that could cause such statements to different materially from actual future events or results.
These statements are made first weighted to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
And the internal projections and beliefs on what.
We base our expectations today may change over time, and we expressly disclaim and assume no obligation to inform you if they do.
Results that we reported today should not be considered as an indication of future performance.
Changes in 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 bridge loans actual results to different materially from those expressed or implied by the projections or forward looking statements made today.
Day.
For more detailed information about these factors and other risks that may impact our business. Please review the zone B reports and documents.
And from time to time bright branches on 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 provide a reconciliation of these non-GAAP measures to our GAAP financials and our 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 Todd, Our President and CEO.
Thank you Mark and good afternoon, everyone. It certainly is an exciting time for bridge line of shareholders and our customers after evaluating dozens of strategic opportunities. We've been fortunate to find two acquisitions that fit perfectly into our E Commerce 360 strategy and.
E Commerce III 60, we focus on helping our customers grow their online revenue with turnkey apps that drive traffic boost conversion and raise average order value E. Commerce 360 leads us to develop and acquire complementary app that helped drive online revenue from these three dimensions are intelligent dashboards powered by <unk> is.
Being trained to understand which of our apps can make the biggest impact on your ecommerce $3 60 revenue drivers and provide recommendations as to which of our products can make the greatest impact to your website.
E Commerce 360 apps are out of the box, enabling them to be sold with a touchless sales process for a fast sales cycle with low sales and marketing expenses are.
Our recommendation dashboard will further reduce sales caused by cross selling the best apps at the right time to help our customers.
Because our apps are out of the box, we can increase our gross margin as a more significant percentage of our revenue is subscription and license versus professional services.
E Commerce 360 guides, our M&A focus towards apps that can drive traffic boost conversion or raise the average order value and it also transformed rich lines relationship with content management businesses from that of a competitor to a partner whose products complement their tools is it repositioned our technology to be synergistic.
And with other commerce and content platforms.
In March we acquired Blue rank as far out and this month, we acquired Hawk search the combination of bridge line with Blue rank and Hawk search positions bridge line for strong growth in 2021 with a unique product suite that will help our customers increase their online revenue stronger traffic conversion and average order value.
We'll rank is off to a strong start delivering to 10, new customers per day 1500 qualified sales leads per month strong gross margin and exciting capabilities that all of our customers need to drive more traffic to their websites.
Ooh rank will become a foundation for us to offer SCO packages to our customers generate new customers, who can benefit from our other products and it gives us a recommendation dashboards that can drive cross sales throughout our customer base.
We will rank also reinforces our commitment to the franchise market with SCL enhancement and enhancements for each France on Champ franchisee to drive traffic to their local pages and into their store.
Last month, we launched we rank assistant.
And consistent allows marketers to evaluate and for and improve their website traffic without ever leaving their platform and brings a gamification and aspect to woo rank that increases engagement with the product.
We also added new features that address google's upcoming core web vitals update where we check for three critical metrics that Google will be measuring and impacting search rankings with cumulative lay out shift first and put the display.
And largest content full paint.
We rank also launch data Bravo this year data Bravo helps marketers identify new sales opportunities and understand their class specs digital footprint by harnessing the power of wound ranks web data artificial intelligence and machine learning.
Ada Bravo is bringing new revenues to bridge light there were not even part of our original projections.
Last week, we announced the acquisition of Hawk search.
Search Springs Bridge line forward and both E Commerce and enterprise site search market site searches, our strongest segment and the marketing technology market, winning a customer per week with our Celebral product line.
Clarke search brings new capabilities that bridge line that will drive even more online revenue for our customers with enhanced merchandising capabilities product recommendations personalization and data rich search analyst day analytics and I.
You have to pay and also brings a really awesome team I've met with everybody last week and the energy at hoc search is infectious it's great.
We intend to accelerate the Hawks search roadmap with bridge and E. Commerce, 360 technologies, including natural language processing instant search and our new were ranked STL recommendation dashboard.
These combined technologies and the larger engineering teams will help Hawks search customers grow online revenue, even faster from there Hock search software.
Hock search brings hundreds of new customers and thousands of new sites to the bridge line family strong revenues and gross margins and excellent sales pipeline and great great great partnerships with World class digital agencies, as well as leading e-commerce and CMS vendors really a great time for bridge line right now.
Time, I'd like to turn the call over to our Chief Financial Officer, Mark Downey and take it away.
Thanks Gerry.
I'm very excited to share the positive financial results for the second quarter of fiscal 2020. One ended March 31, 2020 one with you this afternoon.
Total revenue, which is comprised of licenses and services revenue.
Well, it's $2 9 million for the quarter ended March 31, 2021, as compared to $2 $7 million on the same period and 2020.
The following are the various components of revenue.
Subscription and licensing revenue, which is comprised of SaaS licenses maintenance and hosting revenue.
And perpetual license revenue increased 8% to 2 million per the quarter ended March 31 2021.
One eight and value for the same period and 2020.
As a percentage of total revenues subscription and licensing revenue increased 2% to 69% of total revenue for the quarter ended March 31, 2021, compared to 67% per the same period and 2020.
This increase is attributed to significant multiyear license renewals across our share of our diverse portfolio of fortune 500 companies and the inclusion of one month of rent revenue.
Services revenue decreased 2% or 14000 to 885000.
<unk> ended March 31, 2021, as compared to 899000 and for the same period and 2020.
As a percentage of total revenue services revenue accounted for 31% of total revenue for the quarter ended March 31, 2020, one compared to 33% per the same period and 2020.
Original lines overall strategy as areas 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.
This focus and continued growth are expected to further increase our subscription and licenses to services revenue ratio.
Gross profit increased 16% or 254000 to one 8 million for the quarter ended March 31, 2021, as compared to $1 6 million per the same periods in 2020.
Cost of revenue decreased 10% or 118000 to $1 1 million for the quarter ended March 31, 2021, compared to $1 2 million for the same period and 2020.
This decrease is attributed to a reduction within our fixed cost to operate and our cloud based hosting model and variable and internal supporting costs.
Gross margin increased to 63% for the quarter ended March 31.
And in 'twenty, one compared to <unk> 57 per cent for the same period and 2020.
Subscription and license and the gross margin was 70% and for the three months ended March 31, 2021, as compared to 60% for the same period and 2020.
Services gross margin were 46% for the three months ended.
March 31, 2021, as compared to 49% for the same period in 2020.
Operating expenses decreased 24% or $6 16 to $1 9 million for the quarter ended March 31, 2021 from $2 6 million for the same period and 2020.
Included within the quarterly totals as of March 31, 'twenty, 'twenty, one or one month of lowering costs and acquisition charges of 84000.
Offset by a reduction within our fixed cost to operate our cloud based hosting model.
Amazon Web services and variable and Turo Sporting force.
For the quarter ended March 31, 2021 warrant liability revaluation was considered as the overall change and our close your market share price is at.
March 31, 2021 of $2 eight nine cents from the previous quarters, close and market share price of $2 and 58.
Resulted in a 430000 non.
Non cash derivative loss attributable to the change and the fair value of the warrant liabilities as compared to a $1 8 million noncash derivative gain for the same period in 2020.
Offsetting this warrant liability loss for the quarter ended March 31, 2021 is series B convertible warrants with a fair market value of 210000, which represents 2 million and 556 875 shares expiring worthless as of March 12, 2020 one.
Net loss applicable to common shareholders for the quarter ended March 31, 2021 is 556000 compared to net income applicable to common shareholders of 795000 and for the same period and 2020.
Adjusted EBITDA for the quarter ended March 31, 2020. One is a gain of 235000 or five cents per diluted share compared to a loss of 331000 or eight cents per diluted share for the same period and 2020.
Our non-GAAP adjusted net loss for the quarter ended March 31, 2021 is 211000 or <unk> <unk> per diluted share compared to an adjusted net income of $1 five 5 million or 33 cents per diluted share for the same period and 2020.
On March one 2021, the company persuaded to a share purchase agreement acquired all of the issued and outstanding shares of who ranked and entity located in Belgium.
The company acquired for the <unk> transaction as the business on.
Combination.
We determined that the fair value of the gross assets acquired is not concentrated in a single single identifiable asset or group of similar assets.
And just acquired and liabilities assumed that'd been recognized at their estimated fair values as of the acquisition date.
The purchase price consisted of cash paid at closing.
The FERC cash payable and installments post closing.
And you sell a note issued to one of the selling shareholders and amounts payable to one selling shareholder as consideration for assistance with certain matters related to the acquisition for a period of one year on the closing date of the acquisition.
The purchase agreement also provides for additional consideration and the advent of achievement of certain revenue targets and operational goals and selling shareholders persuade to three separate earn out provisions.
On March 31, 2021, the company had cash of $3 5 million accounts receivable net of 717000.
Compared to September 30 of 2020, where the company had cash of 861000 and accounts receivable net 665000.
Total day sales outstanding for the quarter ended March 31, 2021 is $42 seven days as compared to 45 three days for the same period and 2020.
The primary reason for these improvements can be attributed to our exceptional strong customer relationships and consistent conversion of accounts receivable into cash.
And March 31, 2020, one as a result of the <unk> acquisition, we have the purchase price and contingent consideration payable of 2 million and debt of 2.12 million respectfully.
As of March 31, 2020, one we have $5 million 391548 shares of common stock and 350 shares of the series C convertible preferred stock.
<unk> equals 30800, and United shares of common stock.
Our total assets are $17 $9 million and our total liabilities are $6 5 million.
Bridge like looks forward to continued success and 2021 by delivering shareholder value and expanding our customer success with exciting technical innovations.
Thank you all for listening and.
And at this time, we would like.
Well wrap the call to Q&A.
Thank you as a reminder, just a quick question on you will need to press star one on your and standpoint to withdraw your question press the pound key.
Yeah.
Yes.
Your first question comes from the line of whole wide Hoffman from tag and each brothers your lifestyle open.
Congratulations on how are you hi.
Okay.
Al Gore and solid quarter.
Yeah.
To start off with wound rank.
What type of impact.
Do you see it having in terms of being you being able to leverage you know leverage that within your commerce between 60, and and that would be work on integrating that and keep into your operations.
Well, what we think is interesting because it comes at Commerce 360 from a lot of different angles first of all it's a traffic app. It helps companies drive more traffic to their website that is square and the middle of the value proposition that we have and ecommerce $3 60 and help companies grow.
Revenue.
And of all the way that it helps businesses drive more traffic is through on intelligent dashboard that can make recommendations.
And this moves us forward and our ability to create a more intelligent dashboard can not only make recommendations like we ranked does to improve your traffic, but to make recommendations for improving your conversion and improving your average order value and selecting the best Bridge line product to add to your website. So it moves us forward on the.
Coal front.
And then thirdly. It also is a.
Lead generation machine, we get 10, new customers every single day, we get.
1500 customers per well on leads per month, who are qualified enough leads to enter a credit card number to start a free trial now those customers those 1500 lead.
They may or may not end up wanting will rank, but now we've got contact information, we can help them understand hawk search or other products and and.
And find the right product for them to start their bridge line relationship. So it moves us forward and all three of those direction, and then and nice bonuses that.
Yes.
We will rank launched data Bravo, so data Bravo dot com is a new product that helps marketers research sales leads and.
Competitive web sites and this wasn't even part of our revenue forecast and selling quite well. So we're very excited about that too.
Okay now.
And now it has Hawks Hawks search officially joined break clients starting to generate revenues for the company or is it still pending.
It is pending we signed the definitive agreement.
And to acquire Hawks search last week and the closing will be later this month as we round out some of the HR details and other administrative details behind closing the actual acquisition and Hawk searched this really reinforces our commitment to the site.
Search.
Our industry.
This is our fastest growing part of our business with celebrated.
And Hock has.
On top of capabilities that are above and beyond anything that solid growth had.
And we'll be able to offer those to our solid growth customer base and Celebral is has some capabilities like natural language processing for example.
Net add a ton of value to woo ranked bringing these two products together truly makes us a leader and site search it gives us great momentum and a fantastic customer base to build off of.
And how many new people, you're bringing on board with.
The Hawks are to acquisition.
Okay. The Hawk search team has we're bringing in about 15 people and Hawk search was.
One of its owners was a really strong agency a lot of people are probably heard of American Eagle Dot com, one of the leading agencies and the world I wouldn't say.
Chicago based but they've got offices everywhere and.
So.
So we worked closely with them to find the right people to join the bridge line team. It was the whole overall Hawk team was great and then other people from Hawk moved into American Eagle. So it really became a win win and I'm excited about our relationship with American Eagle Dot Com now I think that that's going to really add a lot of <unk>.
To bridge line.
No.
You have any kind of numbers that it might have generated in 2020.
We're not publishing those numbers at this time, because we do of course internally, but not for the public.
Hey.
And.
Hawk search I know you talked about will rank, but what do you envision and the number of you know I mean customers customers a day of customers a month what is your.
I guess and planned going in and see that.
Search share share well we are.
King.
Hock search having currently it has over 350 customers and it is bringing and.
Probably a customer a week, which is similar to what a solid growth is doing the customers from Walgreens from Bob.
Hawk search are oftentimes on larger and.
And have more sophisticated needs and some cases.
Specially when it comes to personalization, which is a very.
New and upcoming aspect to the site search space that.
Hawks search really excels at.
And is this going to carry a little higher gross margin and celebrate.
And it does well in terms of the gross margin as a percentage is probably similar.
And to the solid boroughs G M, which is strong I mean, we're talking on the.
Hi, <unk> 70 per cent range.
Okay, and and just in general just as you know and why.
And he has been changing and evolving what general kind of activity youre seeing for cell growth and all.
All your products in general just from.
And from a high level view.
Well sales certainly.
Picked up for better and worse during <unk>.
During the last year I don't know how much of it was because of just general growth online and to the fact that <unk>.
Bridge line as a company has been maturing and now that we've got so many more leads coming in and great partnerships, including the partnerships that came along with hot search we're expecting that to grow our big mantra, We just had our.
Board meeting on.
On Friday, just a few days ago is it is time for us to be a growth company, we expect to see great topline results.
Okay, Okay, well keep up the great work guys.
Thanks Howard.
Thank you. Your next question comes from the line of Alex Silverman from <unk> investments your line so okay.
Hi, there hi, there.
You guys have had a busy few months here.
Yeah.
Howard asked a any number of questions that I had as well so I'm really just left with a couple can.
Can you tell us what one month of blue rank generating for you and they went in.
And from in terms of revenue and what it added what will rank added to your SG&A.
Sure.
So we will rank produced about 150, K and revenue for its first month.
On the SG&A side so on.
I'm not sure exactly it's going to be like a 100 K will rank overall is profitable as a standalone entity. It even covers its own.
Earn out and acquisition cost. So it's generating leads for us is growing our top line and it's grown and bottom line.
Okay, great and.
That 150 is that a is that euros or is that dollars.
That's dollars. So actually you know, what it's a little bit higher than $150. So it's been $1 50 and 200.
Okay great.
And did you say hawk should likely close by the end of May.
That's that's what we expect to close probably net odd.
This week, but next week.
Okay. So in theory, you should have maybe a month of hawk in the second quarter.
Exactly exactly I think that it would be very convenient from a.
Counting perspective to close Hock on May 31st and then have a solid June for Hawk. So that gives us one month of blue rank last quarter. Three months of were ranked this quarter plus one month of Hawk next quarter three months of each of them.
Got it.
Very helpful. Thanks, so much for taking my questions.
Great. Thank you Alex really appreciate everything.
Thank you and there are no further questions at this time, you make a bigger percentage.
Everyone. We really appreciate the support and patience of all of you and our other shareholders.
Our goal to continue to.
Deliver a buildable scalable business model, which in turn will build shareholder value. Thank you for joining US today, we look forward to speaking you again on our Q3 fiscal 'twenty One conference call.
Stay healthy and well.
This concludes today's conference call. Thank you for participating and you may now disconnect.
And then.
And then.
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