Q1 2023 Bridgeline Digital Inc Earnings Call
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Good day and welcome to the bridge light digital first quarter 2023.
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It is now my pleasure to introduce <unk>, Chief Financial Officer, Thomas when housing.
Thank you and good afternoon, everyone. Thank you for joining us on the call today. My name is Tom Warehousing Bridge launch Chief Financial Officer.
I'm pleased to welcome you to our fiscal 2023 first quarter conference call on the call with US. This afternoon as Ari Kahn French lines, President and CEO will begin the call with a discussion of our business highlights I'll then update you on our financial results for the quarter will conclude by taking questions.
Before I begin I'd like to remind listeners that during the conference call today 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 section 21 E of the Securities Act 1934.
Subject to restaurant 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 1095.
All 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.
He is also a report today should not be considered as an indication of future performance.
Changes in economic business competitive.
<unk> 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 by the projections 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 branch light digital with the <unk>.
<unk> and Exchange Commission.
Also please note that on the call. This afternoon, we will discuss some non-GAAP financial measures when commenting on the company's financial performance. We provide a reconciliation of our GAAP financials to these non-GAAP measures in our earnings release.
You can obtain a copy of our earnings release by visiting our web sites.
I would now like to call turn the call over to Ari Kahn, our president and CEO Ari <unk>.
Thank you, Tom and good afternoon, everyone and happy Valentine's day.
In the third quarter, we won 22 license sales totaling over half a million and total contract value for the quarter $1 million in annual recurring revenue and three quarters of a million dollars in consulting services, our customer base continues to expand their investment in our software with 10 subscription license sales to existing customers.
Searches, our strongest selling product line with better than 18% organic CAG or renewal rates in the high nine.
Search is now more than half of our subscription revenue.
Thursday, I'm, sorry, driven by partnerships with optimized like Big Commerce.
Me and other platforms as well as the agencies and system integrators.
We've taken a vertical approach to sales and marketing and search with especially strong results in the EBITDA to be electrical distribution center.
Our recent partnership with Duda is an exciting opportunity where more than 1 million websites can now add our rank sto optimization product to their site with the click of a button.
Also do that partners with 20000 digital agencies, who can now make all purchases of all ranked for their customer basis.
Since the last month alone since January .
Our partnership with Duda has sold more than 150 grew rank licenses.
In the first quarter, originally delivered $4 1 million in revenue, including $3 2 million of subscription and license and another $900000 in services.
Excluding non recurring perpetual license sales.
$100000 in our prior year comparable period total revenue decreased by $100000 overall versus the first quarter of fiscal 'twenty two.
That's driven by a single large customer who while renewing for the ninth consecutive year on the legacy rigs like product restructured their website, which reduced their subscription by half from 150000 to 75000 per quarter independent of this single customer reducing their subscription or subscription renewal rate is over 90% with.
More than 125, renewing customers, including dairy Queen Ron Jon and Guardian life.
Our subscription and license revenue is 79% of total revenue in our search products have grown to be more than half of our SaaS revenue.
We ended our first quarter was $2 5 million in cash during the quarter. We made the final earn out payment of 250000 from the Hawk search acquisition and now we have no remaining earn outs do for any of our previous acquisition.
Rich line and now that it's E 360 dashboard is now available on the Shopify App store.
<unk> has partnered with Briggs signed the power of analytics and prescribed new revenue strategies for their 4 million users across 175 countries.
Shopify users can now use the bridge line E 360 dashboard to grow their online revenue directly within the shopify administrative interface.
Rich line delivered several technological advances in its first quarter, including you talk search rapid user interface framework. The rapid UI framework reduces the time and expense of launching new Hawk search powered websites. The framework not only reduces the total cost of ownership for our new Hawk search customer.
But also accelerates bridge lines customer acquisition sales cycle by allowing prospective customers to see how hawk search improved search within their site before purchasing.
We also expanded our natural language processing and machine learning capabilities in Hartford.
To allow industry specific intelligence to be bundled and loaded into sites with MLP industry knowledge packs.
<unk> allow us to offer additional value to customers and key industries by pre configuring their site with Sentinel stop words unit conversion and other natural language intelligence, commonly used by their specific customer base for example.
A hardware store site that sales pace may need to know that cotton and dove, our versions of white and a search for either of those where it should return all white tile products.
Similarly, our usu store needs to understand that the search for sizes over 30 are European and should be converted to the U S side before returning the search results.
Search allows you to configure this type of intelligence and our MLP industry knowledge packs allow you to take this intelligence out of the box for key industries to increase your ecommerce conversion rate.
We're off to a great start for 2023 and intend to continue to make investments in our products and marketing to grow market share, especially for site search where we have enjoyed so much strong growth and customer success.
At this time I will turn the call over to our Chief Financial Officer, Tom warehouses.
Thanks, Alright, I will provide an update of our financial results for the first quarter of fiscal 2023, which ended December 31 2022.
Our revenue for the quarter ended December 31, 2022 was $4 1 million compared to $4 3 million in the prior year period.
Going into each component of revenue, our subscription and license revenue, which is comprised of SaaS licenses maintenance and hosting revenue and perpetual license revenue for the quarter ended December 31, 2022 was $3 2 million.
Prior year period included 100000 of nonrecurring perpetual license sales in the current year was impacted by a reduced contract and my longtime customer has already mentioned.
As a percentage of total revenue our subscription and license revenue was 79% of total revenue for the quarter ended December 31 2022.
Services revenue of 900000 for the quarter ended December 31, 2022, compared to 900000 in the prior year first quarter as a percentage of total revenue services revenue accounted for 21% of total revenue.
Our cost of revenue was consistent at $1 3 million for the quarter ended December 31, 2022, as compared to $1 3 million in the prior year period.
As a result, our gross profit was $2 8 million for the quarter compared to $3 million in the prior year period.
Our overall gross profit margin was 69% for the quarter ended December 31, 2022 compared to 70% in the prior year period.
Our subscription and license gross margins were 73% for the quarter compared to 76% in the prior year period, and our services gross margins were 51% for the quarter compared to 48% in the same period last year.
Our operating expenses were $3 2 million down zero point $3 million from the prior year period.
Moving below operating expenses or change in fair value of liability classified warrants resulted in a noncash income of 300000 in the quarter compared to $2 4 million in the prior year period change.
<unk> share price. So the primary driver of the change in the fair value of the warrants.
Our net loss was 100000 for the fiscal quarter ended December 31, 2022, compared to net income of $1 9 million in the prior year period inclusive of those more than fair value adjustments.
Adjusted EBITDA for the quarter ended December 31, 2022 was <unk> 1 million, which was consistent with the prior year period.
<unk>.
Moving to the balance sheet on December 31, 2022, we had cash of $2 $2 5 million and accounts receivable of $1 6 million and we had total assets at December 31, 2022 of $27 5 million versus total liabilities of $7 2 million.
We look forward to continued growth and success in fiscal 2023, as we continue our focus on revenue growth product innovation customer success and shareholder value.
Thank you for joining us on the call today at this time I'd like to open up the call to questions and answers.
Right are you there.
Certainly as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced towards draw. Your question. Please press star one.
On a given by while we compile the Q&A roster.
Yes.
And our first question comes from the line of Howard Halpern with <unk> brothers.
Good afternoon, guys good afternoon.
How are you.
Okay hope you're doing well too.
<unk>.
Hi.
One question that.
During the year.
During your commentary was about 150, new <unk> licenses.
Licenses, so you get those licenses and how is the process to get those customers.
Upsell those customers to generate more recurring revenue.
Okay, great great.
That's through our partnership with Duda, which has millions of websites that are powered by dude on where and their app store individual customers can start with a light version of will rank that starts at only $10 a month.
And has.
Good capabilities, but limited capabilities and their upgrade options for them going up to $25 for the next level and $50 for the level after that so at the individual customer can grow by a factor of five.
All by themselves what are the most exciting things in the <unk> partnership is access to the 20000 agencies that private label do data create websites for their customers and they're very motivated to add will rank to their own customers.
Sure and this is because with will rank the agency themselves are able to create reports that.
Identify where the strengths and weaknesses are.
Each individual site, Google core metrics.
Metrics.
And they can then sell their own agency services.
To improve the site based on those reports so they get beautiful custom-made report that they can provide to their customers and upgrades and in that.
Similarly, we have three tiers for those customers as well, but in that case, we're selling at bulk to an agency who might buy 1000 licenses at once so this partnership is only one month Ole it's off to an outstanding start and we think that it's really going to make.
And impact on our revenues.
Okay. Okay. That's good.
And could you talk a little bit.
Pipeline of customers that you have or potential customers you have and are you seeing them right.
I know you have mostly out of the box, but you have the.
We do consulting and customizing are you seeing more and more that they want that custom a little bit more customization than they have in the past.
Well, we're really focused on providing as much value out of the box as we can which is why with Hawk search we released the rapid UI framework, which allows customers to install hawks search and have it up and running all by themselves now you can always customize hawk search in a million different ways and either our service.
As are their own agency services can provide those customization, but today our professional services is only 20% of our overall revenue it's around $3 million a year and we expect it to kind of stay at that level with our customers buying our software.
Using it out of the box and only using us for the most sophisticated customization some of the examples of things that we do with our customers.
Customization front our <unk>.
<unk> management, so thats, where we help them analyze the search terms that their customers are using what the search results are and whether those are actually converting into sales and improve the natural language processing behind the scenes inside a site search we help them improve their site with regards to.
Ada American Disability Act compliance and some other items and then leave the graphical and.
Look and feel more to agencies that do that work.
Okay and are you seeing any.
Growing traction for true presence is that pipeline growing is that a higher value.
Our value sale, but it is a longer sales cycle.
It is a longer sales cycle and it is a higher value sales. So we did a very large sale.
Hi, Jeff just recently with B to B electrical distributor one of the largest electrical distributors in America in the fall.
<unk> private company.
Fortune 100 list.
For 750 sites. So true presence allows all of our software, including Hawk search to be able to manage franchises and chains that have a large number of websites, but because the deals are so large and a lot of times. There are a lot of considerations of how to.
Coordinate in this instance, 750 site owners and profit centers and so forth.
They're more political and take more time.
Out of all of our products Orchestra.
Bound.
We rank to pressure presence and Celebrex and Hawk, Serge I'll mentioned, Sabra and Hawk search are essentially merged code basis, we sell both brands out there, but theyre really we treat them as one line the site search Celebrex and Hawk search is is by far the.
Strongest growth product line for us and either it is true presence form or in its regular form we had 18% CAGR in this quarter.
First quarter with.
Hawk and sell abroad.
And Hawkins celebrate us we have very strong renewal rates and as.
It grows as a larger percentage of our overall revenue.
The general characteristics of our.
Our financials will start to mirror that.
Set of growth and it's going to be very impressive I believe.
Okay.
One last one is.
As we always discuss I guess.
What are you seeing in terms of potential acquisitions out there in terms of adding customers already.
Complementary technology.
Yes, so what are you seeing out there.
We're still seeing companies that are.
Hi.
Fortunately looking for acquirers, but we haven't seen things slow down a little but Ed I think that a lot of companies that.
Yes.
This is just a difficult market to sell and so they are not hiring bankers and doing outbound research as much as they were for instance last year, we should probably smart actually and.
Therefore, we're doing more outbound research on our own side to look at.
Acquisitions and reach out to companies that we think would be good fit and it would be mutually beneficial to their shareholders are shareholders to bring them in.
Okay look forward to seeing what transpires.
Hey, guys keep up the good work. Thank you Howard.
Thank you.
And our next question comes from the line of Leo Carpio with Joseph Gunnar.
Hello, Good afternoon <unk>.
Good afternoon.
Two questions. The first question is what are you seeing in terms of the industry environment. Our people your customers still concerned about the economy and potential recession impact.
Is that affecting the pipeline and then the second question is also a follow up.
Okay, great great well.
Uh huh.
The market overall, we have not seen a.
A change one way or the other today versus 12 months ago.
In terms of the size of our pipeline, our customer acquisition costs or the length of our sales cycle.
Okay.
Our therefore, expanding our investment in sales and marketing, we do think that burning cash could be.
A bad idea. So we don't want to be a company that is losing a significant amount of money, but at the same time, especially in the light of some companies that we consider to be competitors, apparently pulling back on their efforts, we're going to push forward, we're seeing great conversion rates on our own sales.
And we think that this market is going to be fine for us and that might be because we are relatively small. So you can have a lot of big swings at the top end in terms of.
<unk>.
$101 billion market that we think that we live in and we're swimming underwater we don't notice the waves.
Okay.
One moment for our next question.
Okay.
And our next question comes from the line of Harvey <unk> with labor cost and Macinnis.
Yeah, all right how are you.
Hi, good year for you Harvey I hope all is well.
All of this volume.
I used to have one question can you in your presentation. You said you are off to a good start.
2023.
The numbers I don't understand what you are talking about what is the good start.
Fair enough fair enough. Good start is really about the 18% organic CAGR and our site search. So I did point to one thing I didn't want to dwell on it too much but we do have a fairly broad.
Our product line with some products that are legacy and they've got some long term great customer that have been using them for a long time, but are.
Declining in terms of the year.
So we had a significant customer that was paying $150000 in monthly recurring revenue restructured their own website in the context of them renewing their subscription for the ninth consecutive year.
$75000 in monthly recurring revenue. So this reset are.
Our SaaS revenue.
To a different level.
It's fine and natural but given our own site.
5% customer, but the very significant.
Puts us on that trajectory another thing that can be a little confusing with our own.
Revenues is that we do occasionally sell a perpetual license.
And we did that selling perpetual licenses this quarter so that is.
A difference between a year ago, but what I'm focused on.
Is the growth products that we have in particular hawk.
Search which is.
Now more than half of our overall revenue and is growing and it's going to.
Take a little bit of time for it to really shine through in there for everyone to see that growth. So admittedly it's off to escape by some of our other products and its taken over quickly.
Alright, alright, thank you great.
Great. Thank you.
Thank you.
I'm showing no further questions so with that I'll hand, the call back over to management for any.
Zero.
Great. Thank you for joining us today, we appreciate the continued support of our customers and our partners and our shareholders. We're excited about our business and ongoing growth prospects and we look forward to speaking with you again on our second quarter fiscal 'twenty three conference call in May.
Have a great day.
This concludes today's conference call. Thank you for participating and you may now disconnect.
Yeah.
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
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