Q4 2021 Bridgeline Digital Inc Earnings Call

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Today's call due to begin shortly please continue to standby and thank you for your patience.

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Good day, and thank you for standing by and welcome to Bridge line Digital Inc. Fourth quarter 2021 earnings call. At this time all participants are in a listen only mode. After the presentation there'll be a question and answer session.

Ask a question during the session you will need to press star one on your telephone. Please be advised that this call is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your host today, Tom with Allison Chief Financial Officer. Please go ahead.

Thank you Justin good afternoon, everyone.

Thank you for joining us today.

My name is Thomas wouldn't housing and I'm, the Chief Financial Officer for Bridge line digital ink.

I'm pleased to welcome you to our fourth quarter of fiscal 2021 conference call.

Joining me on the call. This afternoon is already Con Bridge line Digital's, President and CEO, who will begin with a discussion of our business highlights.

Then update you on our financial results for the quarter and we'll conclude by taking questions.

Before we begin I would like to remind listeners that during this conference call.

So we make regarding bridge lines that are not historical facts are forward looking statements within the meaning of section 27, a of the Securities Act of $19 33.

And section 21 E of the Securities Act of $19 34.

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.

Change overtime, and we expressly disclaim and assume no obligation to inform you if they do.

It's also a report today should not be considered as an indication of future performance.

Changes in economic business competitive technological regulatory and other factors such as the impact of related public health measures could cause bridge lines actual results to differ materially from those expressed or implied by the projections or forward looking statements made today tomorrow.

For more detailed information about these factors and other risks that may impact our business. Please review the reports and documents filed from time to time by British line digital with the Securities and Exchange Commission.

Also please note that on the call. This afternoon, you 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 in our earnings release, you can see.

Obtain a copy of our earnings release by visiting our website.

Now I would like to turn the call over to Ari Kahn, President and CEO CEO of bridge line Alright.

Thank you Tom and good afternoon, everyone.

2020, one we delivered 22% topline growth over the prior year with subscription revenue of $10 million for the year.

Our fourth quarter subscriptions grew to 335 billion more than 80% of our fourth quarter revenue is recurring subscription now and we have a $13 $4 million run rate for subscriptions heading into 2022.

We ended our fiscal year with $9 million in cash putting us in a great position to invest in growth for 2022, we have expanded our business development team with eight new people and tripled our marketing budget. These investments will position us for additional growth, while leaving a comfortable cash capex for future acquisitions and other opportunities.

Merchandize partner network is a strong part of our lead generation strategy, We recently announced product releases for Salesforce Dot com the optimized Li answered Big Commerce.

Each of these partnerships can drive substantial deal flow for bridge line. In addition to the leads created by our marketing investments, we continue to attract additional ISP partners as well as agency partnerships.

This year, we made two acquisitions, we rank and Hawk search both companies are fully integrated with bridge line and no significant restructuring expenses are required going forward.

Hot search, Florida site search and recommendation products that help companies increase online revenue with stronger economies conversion, given where do I start.

All of those problems.

Today <unk> has more than 400 customers in the site search market site search is now 40% of our revenue that is our fastest growing products that were merging solid blow some hostage to create the strongest feature set in the market.

We rank as a winning new customers every single day and its underlying data sets that enabled us to launch a new product data Bravo.

Data Bravo as a web intelligence application that help sales professionals and market analyst grow revenue with AI, driven trend identification and prediction about web technologies and usage.

We've won several data bravo customers already including enterprise customers and embedded license sales.

<unk> released our ecommerce $3 50, dashboards for both the Hawk search and mobile ranked product logs.

E Commerce 360 dashboard measures your ecommerce strength and makes recommendations when great selling software and services can help you drive more site traffic boost your site's conversion and increase your ecommerce sites average order volume.

The E Commerce 360 dashboard is an important part of our organic growth strategy and facilitates cross sales across the customer bases of their product line.

We have a dedicated sales team that leverages, our dashboard to sell additional bridge line software into our customer base.

This team has been particularly successful in cross selling Fox surge to customers, who use bridge lines unbound software.

To sum it up we are winning new customers at the strongest pace of our history and have the resources to further invest in sales and marketing to build on that success.

Our strongest growth areas site search and by merging our capabilities with hot search and solid growth, we have a winning solution for the market. Our E. Commerce 360 strategy is helping expand subscription and license revenue within our own customer base and our partner strategy is accelerating new logo wins.

At this time I'd like to turn the call over to our Chief Financial Officer, Tom and health in slightly more detail.

Thanks, sorry, I'm excited to share the positive financial results for the fourth quarter of fiscal 2021 with you. This afternoon.

Total revenue, which is comprised of both subscription and license revenue and services revenue increased 52% to $4 1 million for the quarter ended September 32021, as compared to $2 7 million for the same period in 2020.

Subscription license revenue, which is comprised of SaaS licenses maintenance and hosting revenue and perpetual license revenue increased 67% to $3 4 million for the quarter ended September 30 of 2021 from 2 million in the same period in the prior year.

As a percent of total revenue subscription licenses revenue accounted for 82% of total revenue for the quarter compared to 74% for the same period in 2020.

Services revenue also increased 7% to zero point $8 million for the quarter ended September 32021, as compared to 0.7 million for the same period in 2020.

As already mentioned bridge lines overall strategy referred to as E Commerce 360.

This is an increase in recurring subscription and license 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 the ratio of our subscription and license revenue to our services revenue.

Cost of revenue increased to four point, plus increased 49% or zero point $4 million to $1 3 million for the quarter ended September 30 of 2021 as compared to 0.9 million for the same period in 2020.

Our gross profit increased 53% or $1 billion to $2 8 million for the quarter ended September 30, as compared to $1 8 million in the same period in the prior year.

Gross profit margin percentage increased to 68% for the quarter ended September 32021, compared to 67% for the same period in 2020.

Subscription and license gross margin percentage was 75% for the three months ended September 30.

Compared with 76% for the same period in 2020.

Services gross margin percentage was 37% down from 43% for the three months ended September 30th 2021 'twenty 'twenty.

Operating expenses increased $1 8 million to $3 4 million for the quarter ended September 32021 from $1 7 million for the same period in 2020 include.

Included in the quarterly totals as of September 30 of 2021, our additional investment in sales and marketing and acquisition related costs associated with the integration of both will rank and Hawk search.

Our operating loss for the quarter ended September 30 of 2021 with 0.6 million as compared to 0.2 million operating profit in the same period in 2020.

Interest expense and other non operating expenses of 0.8 million.

<unk> 0.9 million of income in the prior year.

Prior year included government grant income related to our PPP loan.

Moving to GAAP net income and loss, we had a net loss of $1 4 million for the quarter ended September 30 of 2021 versus a net income of $1 1 million for the same period in the prior year.

Net loss attributable to common shareholders for the quarter ended September 32021 was $3 4 million compared to $1 1 million of income for the same period in 2020. The current year quarter included a $2 million noncash deemed dividend on preferred stock.

Moving to adjusted EBITDA, our adjusted EBITDA for the quarter ended September 32021 was 200000 compared to 500000 for the same period in 2020.

Our not our non-GAAP adjusted net loss for the quarter ended September 32021, zero point $5 million or six cents per diluted share compared to one <unk> compared to non-GAAP. Adjusted net income of $1 3 million or 26 cents per diluted share for the same period in the prior year.

Turning to a review of bridge lines balance sheet, we had approximately 9 million of cash on September 30th 2021 and exercise of the warrants generated over $7 million of proceeds in the fourth quarter.

As of September 32021, we had accounts receivable of $1 4 million compared to 0.7 million on September 30 of 2020.

Our current assets of $10 4 million exceeded our current liabilities of $8 3 million and total assets of $35 million exceeded total liabilities of $17 4 million.

There are two other items in the quarter that I wanted to highlight for you today. The first is that we received notification from SBA in August at a 100% of our PPP loans as PPP loans has been forgiven.

The item is that all of our series D preferred shares had been converted to common stock.

Where do I look forward to continued success in 2022 and beyond as we continue our focus on revenue growth expanding customer success technical.

Technical innovations and delivering shareholder value.

Thank you for joining us on the call today at this time, we'd like to open the call up to questions and answers moderator.

Thank you as a reminder to ask a question you will need to press star one on your telephone to Joel Your question press the pound key please standby with compile the Q&A roster.

And our first question comes from Howard Halpern from <unk> brothers.

Your line is now open.

Oh, congratulations guys, great great quarter, great year, great navigating everything that has gone on and is this.

Current year.

Thank you I appreciate it.

In terms of I guess, one thing that I noticed that in the fourth quarter.

Is R&D.

Our R&D expenses to remain at this.

Relatively high level, given now that you have.

Rankin Hawk Serge.

To continually upgrade and add to or is it kind of moderate as we go forward over time.

Now this is kind of steady state right now.

Fourth quarter R&D was about 23% of revenue.

Sales and marketing was 24% of revenue and both of those areas I think are reasonable areas for us to continue to innovate and expand our market. So we'll keep those in place as the revenue grows.

The total number will grow but it will stay in those ballparks.

Okay.

And can you talk about you know you've had some time with ranking what are you seeing in terms of.

The lead generation and then conversion of those leads into at least one product and then cross selling over time.

Right right. Yeah. We're excited about we're ranked so we rank it continues to just generate a.

A tenant leaves and a ton of new customers every day, we get new costs.

Well, we'll ramp multiple new customers in the bank.

And some of them have already gone into our Hawk search pipeline and Theyre looking at Oxford, Who's not converted one other wugang customers for Oxford, yet, but we have converted hot search fasteners and non bank customers to add we ranked their suite and also the unbound customer base is very interested in hawk search and its been buying those.

So cross sell strategy is really firing on eight cylinders right now and will rank us, bringing new logo leads and one thing that we didn't initially anticipate with wound rank that's created a great opportunity for us.

Is that we're able to use both new leads for Blu ray in our partnership.

With other agencies and with I S vs. So that we can.

Steve then leads or.

A company that just wants agency style of work on their web site to bring even more value to them and in turn have been drive even more business for us.

Okay, and he knows charms what have you seen over the past year or two in terms of the customer acquisition costs.

Right. So our capex has been.

Getting better and better but it really took a quantum leap and the last four or five months. So partnerships has been a big part of this where most of our deals now have a partner attached to it rather than having to just market directly where admittedly we have law.

Limited brand equity.

We're able to leverage Salesforce dot com and big Commerce, and maximize Lee to drive leads for US and this has reduced all CAC or customer acquisition cost significantly. In addition to that because we're cross selling inside of ecommerce III 60, that's a whole different level of customer acquisition cost.

Right there in terms of selling a new license and that also is bringing the overall average down substantially.

And Ken and then new customers what are you seeing or are they mostly in north America with customers or are they.

Or are they more global customers.

The number of global customers, but <unk> has a lot of Midwest Gen momentum right now in fact searches driving.

Yeah.

Most of our new customer wins, it's our it's our best selling product already and a lot of those are Midwestern the verticals that we're seeing.

We're seeing b to b distributors, especially electronics and publication.

Oh and plumbing distributors, so we've seen a lot of that.

We have.

Somewhat.

Governments and actually that's even outside of the new well that have signed really big deals with us lately and tech companies. So one thing that we're doing is we're looking closely at where we've got momentum from a vertical perspective.

And targeting our marketing dollars to take over some of those verticals, we've always had strength in franchises and brand networks.

And where.

We've got our focus in that area and you should expect to see news from us and new customer wins in the franchise space as well.

Okay, and I guess, just one clean up.

Wood.

<unk>.

Preferred.

Some version what post the end of the quarter what is the common shares outstanding.

Tom do you have that on top of your head there.

Approximately.

Cool.

Our approximate.

Shares outstanding.

Jamie.

You got me I don't have that handy, it's about 10 point Tim.

Pinpoint.

$10 2 million more or less.

Something in there okay.

Oh, Okay, I'm, sorry, Tom's got it what do you got Tom.

Yep.

187.

And at some point and as already said.

Okay. That's that's good okay.

And just keep up the great work guys.

Great. Thank you Howard.

Thank you.

Yeah.

And again, if you'd like to ask a question that is star one.

I would now like to turn the call back over to bridges line management for closing remarks.

Great. Thank you Justin.

Everyone. We appreciate your support and.

All of our customers our shareholders really have been great. We're excited about our scalable business model and all of the growth that we've seen this year, we think that next year, it's going to be even better.

Hope everyone stays healthy and well happy holidays, we look forward to speaking with you again in the new year.

This concludes.

Today's conference call. Thank you for participating you may now disconnect.

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