Q2 2024 Bridgeline Digital Inc Earnings Call
Okay.
Thank you for standing by and welcome to Bridge line Digital's second quarter 'twenty 'twenty four earnings conference call. At this time, all participants are in a listen only mode.
After the speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone to remove yourself from the cheer you May press star one again.
I would now like to hand, the call over to Thomas warehouses, Chief Financial Officer. Please go ahead.
Yeah.
Thank you and good afternoon, everyone. Thank you for joining US today. My name is Thomas when housing I'm, the Chief Financial Officer of British one.
I'm pleased to welcome you to our fiscal 2024 second quarter conference call on the call on the call with US. This afternoon as Ari Kahn breakdowns, President and CEO will begin the call with a discussion of business highlights.
Roger E. Kahn: Update you our financial results for the quarter will conclude by taking questions.
Before we begin I'd like to remind listeners that during the conference call comments that we make regarding bridge line that are not historical facts are forward looking statements within the meaning of section 27 of the Securities Act of 1933 and section 21 E of the Securities Act by 234.
The 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.
Speaker Change: All projections and beliefs upon which we base our expectations today may change over time.
Speaker Change: We disclaim assume no obligation to inform you if they do.
Also we report today should not be considered as an indication of future performance.
Changes in economic business competitive technological regulatory and other factors could cause <unk> actual results to differ materially from those expressed or implied by the projections or any forward looking statements made today.
For more detailed information about these factors and other risks that may have an impact on our business. Please review the reports and documents filed from time to time, but Bridgepoint digital with the Securities and Exchange Commission.
Bridgepoint Digital: Also please note that on the call. This afternoon, we'll discuss some non-GAAP financial measures when commenting on the company's financial performance.
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 website.
Speaker Change: I would now like to turn the call over to Ari Kahn Bridge lines, President and CEO Alright. Thank you Tom good afternoon, everyone.
This is another exciting quarter for bridge line with outstanding clock search Seo innovations in artificial intelligence and excellent recognition and sales and key partnerships.
Search is the best site search product on the market with the strongest artificial intelligence capabilities for product discovery, because our platform partners see us as.
Instrumental to their customers' success, we've been they have embraced talk searches are must have app for their commerce sites they power.
Our consolidated numbers include the legacy customers on legacy products, but the underlying demand for Hawk search smart search and our strengthened partnerships with platforms are making that's absolutely. The most exciting time bridge line has seen and our momentum continues to grow.
Today search is nearly 60% of subscription revenue and we expect that percentage to go up even further.
We sold nearly 50 licenses et cetera.
With over $4 million in total contract value.
We're launching a new customer every single week this month.
We expect to launch nearly 10 customers with each launch we have more references and recognition as leaders in the site search sector.
Speaker Change: Many of our customers have extensive product catalog such as voltage with 80000 products and are building a supply chain that selected hot search for its 40000 product catalog.
Hawk search: Several customers select hot search for AI capabilities with smart search others chose us because of our seamless integration into our platform partner with connectors that allowed them to easily upgrade to Hawk search.
Hawk search: Our marketing campaigns include a narrow focus on specific industries in Colombia to be construction sectors like electrical and plumbing supplies.
Hawk search: By building a strong preference in these categories, we have accelerated our sales cycle and reduced our customer acquisition costs.
Speaker Change: Two important platform partners that we expect to continue to generate new customers for Hawk search or optimize Lee and big Commerce.
Big Commerce: Big Commerce Hawk search is featured on the first page of their website at store E. Commerce has 60000 customers generating $350 million.
Big Commerce: Our per barrel and 20% of their customers have more than 250 products. This 20% is a great total addressable marketplace for us and they see hot search and the top page of their own App store and Big Commerce and as a result, our lead generation and credibility and big the Big Commerce.
Big Commerce: Ecosystem is outstanding.
Big Commerce: Big Commerce partnered with HOK search at the <unk> Mine Chicago Conference. This month to help their customers understand how hot search can increase online sale and we continue to see outstanding lead Gen.
Big Commerce: Big Commerce ecosystem.
Big Commerce: Hock search now has a one click install for optimize late.
optimize Lee: As recognized by optimize Lee as a top paid apps and their app store.
Hock Search: <unk> search and optimizing a partnered with several online webinars and have launched many customer websites recently Hawk searches now in a unique position to improve site search for more than 1000 optimize Lee configured commerce customers with several already purchasing licenses today.
Hawk: Furthermore, in the IP ecosystem.
ex engage: We partnered with a system integrator ex engage with an ex who is an expert in optimizing and they help build the optimizing connector. This opens the door for even more sales.
Hawk: Overall, our pipeline is larger than 35% odd has 35% more traffic and 66% more conversion from lead generation than it did last year.
Speaker Change: We're seeing excellent reviews, and analysts recognition that generate leads and expand credibility against our competitors.
info tech: We're recognized by copying analysts such as info tech as leaders in the marketplace technology sector.
info tech: Rich lines also recognized as one of the top 20 ecommerce solution providers of 2024 by icon outlet Tech magazine.
Rich Lines: We expect additional analysts recognition this year that will serve as further regeneration.
Rich Lines: Affirmation.
Rich Lines: Which lines recognized as a leader in AI powered site search you have deep expertise expertise in AI in fact, I have a ph D N a university of Chicago.
Our teams: Our teams deep understanding in this field allows us to recognize new capabilities as soon as they become mature to more quickly include them in our software and make our customers even more successful.
Speaker Change: In March we launched.
Speaker Change: This release for our AI powered smart search.
Speaker Change: Smart search introduced two new ways to search concept search and image search. These change this changes how customers interact with search leading to increased engagement and revenue for businesses.
Speaker Change: Smart search uses AI models vector databases, and large language models to process customer queries, whether tight through images.
Speaker Change: And then search allows customers to upload an image of a product in hot search with shelf similar items for purchase.
Smart search: Concept search let's use it described their needs in natural language and the system find relevant products or information.
Speaker Change: Ads generative AI to summarize search results for online shoppers and improved confidence was better search engine optimization.
Smartcards: Smartcards has already been implemented on several customer sites such as staffing it.
Sandler: Sandler, Yes, nail gun depot, Max warehouse and Rainbow resource with several new sites slated to launch in the upcoming weeks.
Sandler: This is driving our growth and the primary focus for the company overall.
Thomas R. Windhausen: At this time I'd like to turn the call over to our Chief Financial Officer, Tom warehouses.
Thomas R. Windhausen: Uh huh.
Thomas R. Windhausen: Thanks, Alright, I'll provide an update of our financial results for the second quarter of fiscal 2024, which ended March 31 2024.
Thomas R. Windhausen: Total revenue for the quarter ended March 31, 24 was $3 8 million compared to $4 1 million in the prior year period.
Thomas R. Windhausen: Now going into each component of revenue our subscription and license revenue, which is comprised of SaaS licenses maintenance and hosting revenue for the quarter ended March 31, 24 was $3 million compared to $3 3 million in the prior year period.
Thomas R. Windhausen: As a percent of total revenue subscription and license revenue was 79% of total revenue for the quarter ended March 2024.
Speaker Change: Our services revenue was 794000 for the quarter ended March 31, 2024, a decrease from 821000 in the prior year second quarter.
Speaker Change: As a percentage of total revenue services revenue accounted for 21% of total revenue for the quarter ended March 31 2024.
Speaker Change: Our cost of revenue for the quarter ended March 24 was $1 3 million consistent with $1 3 million in the same comparable prior year period and as a result gross profit was $2 5 million for the quarter ended March 31, 2024, compared to $2 8 million in the prior year period.
Speaker Change: Our overall gross profit margin was 66% for this quarter ended March 24, compared to 69% from the prior year period.
Speaker Change: Our subscription and license gross margins were 71% for the quarter compared to 74% in the prior year period, and our services gross margin was 47% in the quarter compared to 49% in the prior year same period.
Speaker Change: Operating expenses were $3 million for the quarter ended March 31, 24, compared to $3 5 million in the prior year period, a decrease in expenses of 500000.
Speaker Change: Moving to below Opex the change in fair value of our liability classified warrants resulted in a noncash loss of 25000 in the quarter compared to income of 171000 in the prior year period.
Speaker Change: On the bottom line, our net loss was 602000 for the quarter ended March 31, 2024 compared to a net loss of 511000 in the prior year period.
Speaker Change: Our adjusted EBITDA for the quarter ended March 31, 2024 was 83000 compared to.
Speaker Change: It was a negative 83000 compared to a negative 144000 in the prior year period.
Speaker Change: Moving onto our balance sheet at March 31, 2024, we at $1.3 million of cash and $1 $5 million of accounts receivable.
Speaker Change: Our total debt outstanding as of March 31, 2024 was 567000 euros are approximately 600000 U S dollars.
Speaker Change: Weighted average interest rate on that was four 6% and those principal payments are spread throughout now through 2028.
Speaker Change: We have no other debt remaining are announcing any previous acquisitions can make them.
Speaker Change: And at March 31, 2024, and our total assets were $16 3 million and total liabilities were $5 8 million.
Speaker Change: Finally to give an update on our cap table at March 31, 2024, our cap table included $10 4 million shares issued and outstanding.
Speaker Change: 39000 shares from our series C preferred stock kind of asking ported basis, $1 7 million warrants outstanding and $2 1 million options outstanding.
Speaker Change: Of those warrants nearly 900000, whose exercise prices $4 will expire in September 2024.
Speaker Change: After that we will have approximately 800000 warrants, primarily including 180000 warrants with $2 85.
Speaker Change: Exercise price, which expire in May 2026, and 592000 warrants with a $2 51 extra size price, which expired in November 2026.
Speaker Change: Personally I look forward to continued growth and success in fiscal 2024 and beyond as we continue our focus on revenue growth product innovation customer success and delivering shareholder value.
Moderator: Thank you for joining the call today and at this time, we'd like to open up the call to questions and answers moderator.
Moderator: Thank you Sir as a reminder to ask a question you will need to press star one one on your telephone to remove yourself from the question queue. You May Press Star one again, please standby, while we compile the Q&A roster.
Moderator: Okay.
Moderator: We have some questions that were submitted that we will we will for those that couldn't attend.
Moderator: We'll go through some of those questions and you will get more responsive and then moderator will ask you to to check in with US for the rest of the group, but we will continue on with the Q&A moderated by ourselves here.
Moderator: Okay cool well Howard Halpern.
Howard Allen Halpern: Quick question, who is unable to join US today and the first one was.
Howard Allen Halpern: When will revenue from Hawk search began to show the real revenue growth of the company.
Howard Allen Halpern: Fox searches approaching 60% of subscription revenue as such we expect to see FY 'twenty four which begins in October.
Fox: Subscription revenue dominated by Hough search and that's really when it's going to.
Speaker Change: Drive past all of our other products combined rapid UI and our connectors to platforms like Big Commerce, and optimizing make Oxford largely out of the box.
Speaker Change: So we're not expecting a subscription so we're not expecting services revenue to be dominated in services revenue.
Us: Mostly dominated by unbound as opposed to Hawk search and that is strategic for US we want Hawk search to be as much out of the box as possible and for the company to continue to grow its approximately 80% of our revenue is subscription right now for that trend to continue.
Us: Second question why.
Us: Thank you your AI smart search technology have applications beyond your customer base.
Us: How are your customers embracing this new offering.
The interviewer: So our historical focus has largely been an E. Commerce site. This is going to continue to be primary business driver in both <unk> and BDC.
Speaker Change: Smart searches also expanding our presence in content websites and even intranet towards generative AI enabled a summarized and combine multiple articles to provide tailored search results that directly speak to the query while leaving out the purple that's information that may be an underlying darkness.
Analyst: Next question to provide some color on the company's thinking on product mix on a go forward basis.
Speaker Change: How does the company's what's the company's view on how to maintain a diverse product base, while huck searches scaling up.
Per Jacobson: Alright, I went from per Jacobson.
Per Jacobson: Pierre.
Pierre: Bridge lines E. Commerce, 360 strategy allows us to grow through acquisition.
Pierre Jacobson: But hock search such.
Per Jacobson: Such a strong sales trajectory, especially with smart search that's dominating our focus for this year and likely for the next year as well.
Pierre Jacobson: In terms of innovation, we're expanding hot search with AI capabilities connectors to partner platforms and performance improvements.
Speaker Change: We're focusing sales on partnerships on Hawk search with assigned resources to key partners like Big Commerce and optimize line in particular.
Speaker Change: And we're leading with Hawk search and our marketing conference presence.
Speaker Change: Search is fully integrated with unbounded well rank.
Nai: And celebrate merged with merging with Hawk search for anyone using those products benefits from all of our innovation Nai.
Speaker Change: Of course, all of our products are important because hawks search is growing at a substantially faster rate than anything else.
Speaker Change: Nominate our mix in the foreseeable future.
Speaker Change: Alright follow on question. There can you provide a rough breakdown on revenue and margin sources.
Speaker Change: I'll take that so our largest contributors to revenue and margin are unbound, and we just talked about in search.
Speaker Change: Being about 60% of services and 20% of subscription.
Speaker Change: In search being 30% of services at 60% of them.
Speaker Change: Friction.
Speaker Change: Both unbalance search deliver similar gross margins of 40%, 45% for services and 7% to 75%.
Speaker Change: Margins for subscription.
Speaker Change: Yes.
Speaker Change: And finally, we had a question about some insight into cash burn and projected cash position to the end of the year going into next year.
Speaker Change: As a rule of thumb, we manage our financials, we could generate cash we need to reduce non personnel marketing spending we can buy 150000 to 250000 per quarter.
Speaker Change: At this time, our marketing is generating great subscription sales for long term ROI and we'll continue to make those investments even though it may lead to immediate.
Speaker Change: Negative cash flow negative EBIT like we've seen.
Speaker Change: The last couple of quarters 84080, 3000 this quarter.
Speaker Change: We expect our low water mark to cash to be around $1 million.
Speaker Change: And we can adjust that <unk> spend and we do not intend to do with stockholders in order to generate cash.
Speaker Change: Okay.
Speaker Change: Moderator is there any other questions out there.
Moderator: On the group.
Moderator: As shown on in queue Sir.
Moderator: Excellent.
Speaker Change: Great Okay.
Speaker Change: I'm sorry.
Management: I will turn the call back to management for remarks.
Management: There we are thank you sir thank.
Management: Thank you everybody for joining us today. We appreciate the continued support of all of our customers partners and our shareholders. We're really excited about our business and the ongoing growth prospects and we look forward to speaking with you again in our third quarter fiscal conference call in August 2024.
Management: Be well.
Management: And this concludes today's conference call. Thank you for participating you may now disconnect.
Management: Okay.
Management: [music].
Management: Okay.
Management: Okay.
Management: [music].