Q2 2022 Bridgeline Digital Inc Earnings Call
Good day, everyone. This is your operator today's conference is scheduled to begin shortly until that time your lines will again be placed on hold thank you for your patience.
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Good day and thank you for standing by welcome to the Bridgepoint Digital Inc. Second quarter 2022 earnings call. At this time all participants are in a a sudden only mode.
After the Speakers' presentation, there'll be a question and answer session.
That's a good question. During this session you will need to press star one on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would like to hand, the conference over to your speaker for today, Mr. Thomas who penthouse and please go ahead Sir.
Thank you operator, and good afternoon, everyone.
Thank you for joining US today my name is Thomas Windholz them and I'm, the Chief Executive Officer, originally with digital.
I'm pleased to welcome you to our fiscal 2022 second quarter conference call.
On the call. This afternoon is already Cod British line Digital's, President and CEO , who will begin with a discussion of our business highlights.
I will then update you on our financial results for the quarter and we'll conclude by taking questions.
Before we begin I'd like to remind listeners that during this conference call comments that we make regarding <unk> that are not historical facts are forward looking statements within the meaning of section 27, a of the Securities Act of 1933 and <unk>.
Section 21 E of the Securities Act of $19 34, and are subject to risks and uncertainties that could cause such statements to differ materially from actual future events or results.
These statements are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Internal projections and beliefs upon which we base our expectations today may change overtime, and we expressly disclaim and assume no obligation to inform you if they do.
Results are we 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 public health measures could cause <unk> actual results to differ materially from those expressed or implied.
<unk> or forward looking statements made today.
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 bricks and digital with the Securities and Exchange Commission.
Also please note that on the call today, we will discuss some non-GAAP financial measures when commenting on the company's financial performance. We do provide a reconciliation of our GAAP financials to these non-GAAP measures in our earnings release, which you can find a copy on our website.
I'll turn the call over to Ari Kahn, our president and CEO Ari.
Thank you Tim good afternoon, everyone.
We had great sales, our second quarter with 33 license sales, an all time high for us.
Our software is becoming increasingly out of the box, which allows new customer licenses to contribute to our revenue more quickly than our license sales to services ratio to grow as each of these customers typically in less than three months, we will see their license fees drive strong for the business.
An important change to our new customer acquisition strategy is our partner network.
We have a dedicated partner team working with Isps independent software vendors and agencies to win new business.
Agency like American Eagle Dotcom, and ex engage had been particularly strong and they continue to be key agency partners help us win new customers.
Yes these side.
We partnered with Big Commerce optimized Lee and won several customers together.
There's a line as the only out of the back either be site search connector for optimizing optimizing BTB customers can purchase Hawk search directly from optimize Lee Administrated interface with optimized way. We've helped several beta be distributors grow online revenue, including cross sell electric cleaner supply 12 Gerry.
Electric we tend to expand our investments and to optimize the partnership and the BTB distributor sector to build on this momentum.
Our partnership with Big Tyler's continues to drive growth as well with new customers in manufacturing and automotive.
Together with Big Commerce, spiritually now powers, several manufacturers, including Berlin packaging textile block when way maker.
In addition to partner driven sales another important part of our strategy is cross sales with that.
Our expanding set of e-commerce apps, we can deliver a faster and more efficient license sales by cross sell this provides tremendous value to our customers with continue on incremental improvements to their website and also drives more license sales pull marketing dollars for bridge line is craft sales require less advertising expenses.
More than 25% of our new license sales this quarter with some cross sales, we expect cross sales to continue to deliver growth as we release and acquire new products and as our customer base of more than 2000 companies continues to grow.
This quarter, we launched our E 360, dashboard to drive new sales and target cross sales across our customer base.
The dashboard provides online marketers and at a glance view of their sites perform revenue performance. It makes recommendations as to how bridge line software can help them grow.
The dashboard organizes the challenges and opportunities related to ecommerce down to three basic categories traffic conversion and average order value.
This helps busy marketers sift through the noise and focus on the revenue generating aspects of their online sales.
We also launched our true presence brand since quarter, two preferences, our products suite tuned specifically for the franchise industry.
<unk> does have unique challenges that we've addressed for several years true presence allows franchises to manage thousands of franchisee websites with distributed SCR requirements and complex location requirements.
And our second quarter, one of our largest franchise customers sport clips with nearly 2000 location launch true presence pages to help its customers find the nearest location.
We also won another important franchise, one 800 radiators wondering wanted radiators as one of the nations largest inventories of auto parts at selected Hawks search to increase.
B to B sales and improve site search and product recommendations throughout their parts catalog.
We will rank in its data Bravo product continued to contribute to new online sales with long term data license purchases for over $4000 in MLR each quarter this fiscal year.
Other wins this quarter include a top sporting goods wholesaler that Charles talked search to power. Its five ecommerce sites. We won several other sporting goods customers this quarter as well, including sports station tap sports retailer in Asia with more than 250 locations.
In the United States are leading privately owned bank with 1 million customers selected Hawks search to increase their customer sign ups and its corporate website the.
The bank chose Hawk search words powerful search recommendation engine. After you. All features this site will be implemented in partnership with typical and mechanical experience platform.
We're still strong in beauty with <unk> distributors that were going to keep investing in this market as our reputation is building momentum.
In Europe , one of the largest industrial equipment and services to be distributors chose bridge line Sellable software to power their online store southwest was selected for its natural language processing, the general support and B to be specific features a global biotech b to B distributor chose Hawk search to help its customers find.
Since online large catalog <unk>.
Search was selected because of general strength in the distributor sector and its references and electrical medical and automotive industries.
Finally, <unk> block a landscaping distributor with over 700 stores across North America chose Hawk search.
To drive online sales and their multi language catalog hawk searches cutting edge technology supports 20 languages, expanding customer acquisition opportunities in revenue across international E Commerce.
Last year, we made two acquisitions and we continue to evaluate strategic opportunities.
This is indeed, a challenging environment for stacks right now and we are only considering acquisitions that could be financed and accretive way.
Believe that valuations of our targets are going to continue to drop through the year, and we intend to be patient and evaluate opportunities overtime.
Companies, we consider need to have a customer base to whom we can cross sell our existing thing and of course products that can be sold to customers and attract new customers.
We look to companies globally with an emphasis in North America and Europe .
We ended this quarter with $4 7 million in cash and that was after paying nearly $1 million for deferred costs and debt for the wound rank in Hawk search acquisitions are.
Our cash balance and projected operations positions us well to continue our investments in sales and marketing and product innovation without requiring any additional capital for operations.
At this time.
Off the call to our Chief Financial Officer, Tamara and housing.
Thanks, sorry, I'm excited to share with you. This afternoon are positive financial results for the second quarter of fiscal 2022, which just ended on March 31 2022.
Total revenue for the quarter ended March 31, 'twenty, two which is comprised of both subscription and license and services revenue was $4 1 million versus $2 9 million in the prior year.
Now going into each component of revenue our subscription license revenue, which is comprised of SaaS licenses maintenance and hosting revenue and perpetual license revenue.
<unk>, 66% for the quarter to $3 3 million from 2.0 million in the prior year period.
As a percentage of total revenue our subscription license revenue has increased to 80% of total revenue for the quarter compared to 69% in the prior year period.
This increase in subscription license revenue includes the impact of our prior year acquisitions of who rank in Hawk search, which have a high percentage of subscription revenue.
Our services revenue.
8 million for the quarter was compared to $9 million is rounded in the prior year period.
Total revenue services revenue accounted for 20% of total revenue for the quarter.
Our cost of revenue increased 25% or zero point $3 million to $1 3 million for the quarter ended March 31, 2021, sorry, 2022, compared to $1 1 million in the prior year period.
As a result, our gross profit increased 54% or $1 million to be $2 8 million for the quarter as compared to $1 8 million in the prior year period.
Our overall gross margin percentage increased to 68% for the quarter compared to 63% in the prior year period.
Our subscription and license gross margins were 74% for the three months ended March 31, 2022, as compared to 70% in the prior year and our services gross margin were 43% for the three months ended March 2022, as compared to 46% in the prior year period.
Our operating expenses increased to $3 4 million in the quarter from $1 9 million in the prior year period. This increase in operating expenses includes the operating costs from our business was acquired last year.
This resulted in income from operations being a loss of 600000 for the quarter as compared to a loss of 100000 in the prior year period.
Moving on to other income and expenses in the quarter ended March 31, 2022, the change in fair value of contingent consideration and other income and expense was income of zero point $5 million as compared to a slight loss in the same period in two.
2021.
For the quarter ended March 31, 2022, the change in fair value of our liability classified warrants resulted in noncash can come from zero point $4 million as compared to 0.4 million non cash loss in the prior year period.
Yeah.
Overall, our net income was zero point $3 million for the quarter ended March 31, 22, as compared to a net loss of 0.6 million in the prior year period.
Change in net income includes the impact of the fair value adjustments that I just mentioned.
Moving to EBITDA, our adjusted EBITDA for the quarter was negative to zero point $1 million compared to a positive <unk> 2 million in the prior year period.
We got to our balance sheet at March 31, 2022, as already mentioned, we had $4 7 million of cash and accounts receivable of $1 4 million compared to last quarter ended December 31, where we had cash of $6 4 million and accounts receivable was $1 3 million.
In March our total assets were $33 million and our total liabilities were $10 3 million.
Bridgeport It looks to continue that looks forward to our continued success in the second half of this fiscal year and beyond as we continue to focus on revenue growth product innovation.
Spanning our customer success and delivering shareholder value.
<unk> you for joining us on the call today at this time, we'd like to open the call up for questions and answers.
Moderator.
Thank you at this time the floor is now open for questions. If you would like to ask a question. Please press star one on your telephone keypad.
Again, Thats star one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
We have a question from the line of how Great High return from Catholic Brothers. Your line is open. Please go ahead.
Congratulations guys great quarter.
Thank you Eric.
Could you.
Describe how important is the development of that dashboard in.
In both providing customer satisfaction and driving.
New sales of <unk>.
Core offerings.
Alright, well the dashboard itself. So we've got about 25% a little bit more than that of our new sales are happening within our existing customer base. So we've got a pretty broad product catalog now none of our customers actually all on all of our software and we're expanding them.
Side of that the number one lead generation tool for us in that 25% is the dashboard. So it's making all along all customers to become aware of the different products that we have been making recommendations to win one of the products. They don't own could help them and then notifying up on the other side.
And help them all to understand which customers might get value from product ballpark search for instance, or for us to speak with them one of our customers National Notary Association bought.
I'll hop search this most recent quarter.
Help them, they've gone online driven a tremendous amount of revenue they've got a product comps.
Complex product catalog and by recognizing that customers can.
Convert to a larger sales and you can increase average order value through being able to look at our dashboard is a great way for them for instance to just see the different body that we have is our product catalog grows we're going to do acquisitions that we could.
I released new products that dashboard is going to become even more important.
Our customers are.
Inundated.
Well.
Tiny companies all over the place then hey, you should buy language it either by that.
<unk>.
They can't even measurable social because theres so much.
So many options the dashboard simplifies everything for them cuts it down into three basic categories, how do we drive more traffic to your site.
How do we convert that traffic into a customer and how do we get each of those customers to buy more.
Simplifying everything that's where the value comes in for our customers keep it chapter I'll, just tell me, what I need to drive revenue and they get back on the dashboard.
Okay.
Adam.
I guess another question in terms of the addition of a dashboard and potential for future acquisitions product and are you looking for acquisitions that might have a larger customer base.
And how easily have you made that dashboard to integrate all that to exploit or the customer base for the quarter was 10 one.
So on our acquisition strategy integration as a huge risk and acquisitions integration, meaning technically bringing products together and that was the big part.
Initial concepts behind the dashboard and we believe that in our space growth both organically and Inorganically is the best route for bridge line and simplify integration by having a common dashboard thats really.
Just integrating at the.
At the interface level and knock down inside of databases and mobile more areas, where the integration risk compiled.
Combined.
It makes integration very fast like alright, just kept this dashboard on top of the product that we just acquired and like all of its customers learn about the rest of the place.
And add information about the new product that we acquired to the dashboard. So would all of their time to come.
Customers can learn about the new product that's available.
So it simplifies things quite a bit.
On the M&A front, it's a little bit tricky right now because I mean, the market is just falling through the.
Welcome to the farmer Mac that night.
A huge amount of cash to be able to just do an acquisition to take advantage of low valuations we have seen expectations.
Decrease the private companies for doing acquisitions, but will only do one.
We can do it in a way that one that diluting ourselves.
With that.
With the capital raise.
At these depressed levels in the market will come back.
Got it.
We're patient and watching.
Okay and just one final one are you are you happy with the level.
Uh huh.
Yes.
Sales and marketing expense going forward to even report from quarter to quarter.
Yes, So we reported about 1.25 million in sales and marketing and that's great and we're going to actually increase that a little bit going forward to be closer to about $1 $5 million a quarter in sales and marketing and.
Our.
New customer wins to sales dollar is right, where it should be looking at a lifetime value of about three to one and the customer acquisition cost. So we think that.
And appropriate in fact continue to investing on the sales side, but even more deals.
Okay, well, thank you and keep up the great work.
Thank you.
Yes.
The next question that you have is from the line of Walter Ramsey from Walrus Partners. Your line is open. Please go ahead.
Thank you congratulations.
Excellent quarter again, I have to say.
Got a few kind of detail questions. If you don't mind.
Yes.
Item.
As mentioned with the contingent.
Payment and that was adjusted to a profit can you just kind of go through that and.
Explain what happened there.
Walter I think thats one per ton okay.
Sure.
Sure. So the two things that our balance sheet that we have to adjust to fair value each period, the warrants and contingent consideration or you'd probably hear more of earn outs from the prior year acquisitions.
So in the period, we had an adjustment as to what our expected ultimate payout will be so reduce the liability and.
And that change in the balance sheet comes through the income statement.
But on the one.
But what it was that changed.
Not doing as good as you thought or the value of.
Securities that youre, giving them went down.
Yes.
Yes, there's some mechanics for it's not all it's all not all revenue driven there is some other operating results in there and mechanics and working capital adjustments.
So okay, alright, so we're off to a final payment and operating thing, Okay, I get that and as far as the warrants you mentioned that can you just tell us how many warrants are outstanding and then kind of.
Review for Us again, when they expire.
Price.
Sure.
$7 million outstanding in our 10-Q, which will filed Tonight will have a full table with all the all the exercise prices and extend the expiration dates but there really is no change in the warrants from our past quarter.
There are a handful that do expire here in may of 2022, but not much change in going forward in Q3, but the weighted average price on those around $4.
Okay, and I don't know if you want to get into it but.
Are there any macroeconomic factors that are really either helping or weighing on the business the supply chain inflation. The war the lockdowns in China, you name it I mean anything like that.
Not not impacting us so much.
Theres a lot going on right.
Ross.
Our team is and we've got some people in Israel and Belgium in the RASK in the United States and Canada, So not affected by the war and Macroeconomically, but the main thing.
Ted.
But we watch it as we see that our stock prices down and that just limits our ability to acquire a company.
Yes.
<unk>.
Doing doing a stack that's fine we'll wait I think that the company is getting cheaper everyday for a while.
What companies typically that will lag the public sector, we think in terms of their valuation expectations.
But all of this other macro economic stuff for us it doesn't impact us in supply chain and our customers are continuing to buy so we haven't seen that reduce their investments in technology at all.
Okay.
<unk> company in the world that seems to be saying that but congratulations James my track here.
Alright, Thanks again.
Thank you Walter.
Again, if you would like to ask a question. Please press star one on your telephone keypad.
There are no further questions at this time I would like to turn the call back to our presenters for any closing remarks.
Thank you.
Everybody. Thanks for joining us today, we appreciate the continued support of our customers our shareholders and our partners. We're excited about the business I mean things have really gone well and our growth prospects are better than ever. So we look forward to speaking with you again on our Q3 fiscal <unk>.
And we'll see you all soon stay healthy and well thank you.
This concludes today's conference call. Thank you all for joining you may now disconnect.
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