Bridgeline Digital Inc (BLIN) 2010 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Bridgeline Software first-quarter 2010 earnings call. (Operator Instructions). As a reminder, this program is being recorded.

I would now like to introduce your hosts for today's program, Mr. Thomas Massie, Chairman and CEO, and Mr. Ron Levenson, Chief Financial Officer. Gentlemen, you may begin.

Thank you, Jonathan. Good afternoon, everybody, and thank you for taking the time to join us today.

Before we begin, our attorney asked us to remind everyone that all statements made on this afternoon's call are protected by the Safe Harbor statements under the Private Securities Litigation Reform Act of 1995.

Bridgeline is pleased that we have delivered yet another profitable quarter and that we continue to see ongoing sequential quarterly increases in iAPPS software licensing. However, we are disappointed with a 15% year-over-year decline in our revenue.

We believe that business fundamentals of our 2010 operating plan continue to be very solid in terms of embracing strong expense management, a very good sales pipeline process, and efficient AR collections. Yet we remain very realistic, observant, and cautious with the manic state of our economy.

I'd like to share a few key insights with you about our business. First, with a solid recurring revenue base, a very high percentage of booked engagements as we enter each quarter, and a diversified customer base with a high fixed-cost structure, we believe we have good visibility into our business model.

Second, our unique value proposition provides deeply integrated Web solutions that quickly provide productivity gains and cost efficiencies, which in turn enables us to continue to win new customers and retain existing ones.

Lastly, we believe our continued disciplined investments in our longer-term growth and scale will provide us differentiation and important competitive advantages with our customers and future customers, while still generating positive financial results.

We believe all of this, coupled with our stable financial position on solid operating cash flows, will help us emerge from the economic downturn as a stronger Company. Let's jump into some of the high-level results, and then I'll turn it over to Ron for some additional insights into our Q1 2010 financial results.

For our first quarter in fiscal 2010, Bridgeline achieved revenues of approximately $5.5 million, representing a sequential quarterly increase of 3% compared to our revenues in Q4 2009 and a 15% decrease in revenues when compared to revenues in Q1 2009. Year over year, software licenses and subscription revenues increased 8%.

Our qualified pipeline is at record levels. However, for the past few months we've seen the ongoing macroeconomic uncertainties cause some of our customers to stall their planned spending with Bridgeline. This, combined with unwanted delays of some of our current deployment timelines by our customers, have caused a 15% reduction in year-over-year revenue.

Bridgeline has 651 customers, of which 491, or 75%, paid a monthly subscription fee or a monthly managed service fee. This continues to create a strong customer traction model for the Company.

In our first quarter of fiscal 2010, the Company generated $321,000 of positive cash from operations. In Q1 2010, we're pleased to report Bridgeline created $416,000, or $0.04 a share, in non-GAAP net income and $242,000, or $0.02 a share, in GAAP income.

In our first quarter of fiscal 2010, Bridgeline generated $688,000 of EBITDA for the three-month period, representing $0.06 a share and positive EBITDA per share for the quarter.

Our balance sheet remains strong with $25.5 million of total assets, only $5.2 million in total liabilities.

At this time, I'll turn the call over to our Chief Financial Officer, Ron Levenson, who will provide you with greater detail of our financial performance. Ron?

Thank you, Thomas, and good afternoon, everyone. I would like to review the results of operations for the quarter ended December 31, 2009.

First, our revenue was $5.5 million, compared with $6.5 million for the same quarter of the prior fiscal year, a decrease of 15%. This decrease is attributable to the following.

Revenue from web application development services decreased to $4.6 million for the quarter, compared with $5.5 million for the same quarter of the prior year, or by 17%. This decrease is attributable to the Company focusing its marketing and new business development efforts to its more iAPPS-related opportunities.

This decrease is also attributable to general economic conditions, which have resulted in a reduced level of spending from certain customers that generated revenue in the prior period.

Revenue from managed service hosting decreased to $494,000 for the quarter, from $563,000 for the same period of the prior year, or by 12%. This decrease was also attributable to the Company focusing its marketing and new business developed efforts towards more iAPPS-related opportunities.

Additionally, there have been some customer attrition as a result of our efforts to engage with larger organizations as opposed to some of the smaller customers obtained through acquisitions.

And revenue from subscription and perpetual licenses increased to $372,000 for the quarter, compared with $362,000, or by 3%, for the same period of the prior year. This increased revenue was attributable to increased license revenue related to our iAPPS product suite.

Our gross profit decreased to $3 million for the quarter from $3.6 million for the same quarter of the prior year, or by 15%. Gross margin increased to 55.5% from 55.2%. The increase in gross margin for the quarter is attributable to the increase in gross margin from Web application development services related to our higher margin software-based solutions.

Our operating expenses as a percentage of revenue decreased to 51% in the quarter, compared with 52% for the same quarter of the prior year. Sales and marketing expenses decreased to 23% of total revenue for the quarter, from 25% of total revenue for the same quarter of the prior year. This decrease is primarily attributable to reduced staff for the quarter as compared with the same quarter of the prior year.

Our general and administrative expenses increased by $127,000, or by 12%, for the quarter compared with the same quarter of the prior year. The increase in general and administrative expenses is primarily related to the increase in the personnel.

Our research and development investments decreased -- sorry, research and development expenses decreased $276,000 for the quarter, or by 79%, compared with the same quarter of the prior year. During the quarter, we capitalized software development costs of $191,000, compared with zero for the same quarter of the prior year. Had such costs not been capitalized, research and development costs would have been $266,000, compared with $351,000 for the same quarter of the prior year.

The decrease in costs, exclusive of capitalized software costs, was related to the consolidation and relocation of R&D personnel to our corporate offices in Woburn from our subsidiary in India that occurred after December 31, 2008, and lower personnel costs in the December 31, 2009, period.

Our income from operations was $242,000 for the quarter, compared with $187,000 for the same quarter of the prior year. The improvement is principally the result of a reduction in operating expenses and capitalization of software development costs.

We generated $321,000 in cash flow from operating activities for the quarter.

And our non-GAAP measures, I'd like to talk about those for a second. We defined adjusted net income as net income before impairment charges, amortization of intangible assets, and amortization of stock compensation and related income tax effects. We define adjusted EBITDA as earnings before interest, taxes, depreciation, amortization, and before stock compensation and impairment charges.

Both adjusted net income and adjusted EBITDA are non-GAAP supplemental measures of our performance, and neither of these measures are required by or presented in accordance with U.S. generally accepted accounting principles.

Our adjusted net income was $416,000 for the quarter, compared with adjusted net income of $492,000 for the same quarter of the prior year. And our adjusted net income per diluted share was $0.04 for the quarter, compared with $0.05 for the same period of the prior year.

We generated $688,000 of adjusted EBITDA for the quarter, compared with (technical difficulty) thousand dollars for the same period of the prior year, a decrease of 10%, or $77,000. This decrease is related principally to a lower amount of non-cash expenses on a quarter-over-quarter comparative basis. And adjusted EBITDA per diluted share was $0.06 for the quarter, compared with $0.05 for the same period of the prior year.

Next, I would like to discuss Bridgeline's balance sheet. At December 31, 2009, the Company had total assets of $25.4 million with cash and receivables of $7.1 million and total liabilities of $5.2 million. Our working capital was $2.8 million at December 31, 2009, and we had a current ratio of 1.6 to 1.

At quarter end, the Company borrowed $1.3 million from its bank line of credit of $3 million, which was repaid in full in January 2010. At this time, I would like to turn the conference call back over to Thomas.

It goes without saying that despite the manic economy and the manic news that we hear daily, we remain cautiously bullish about Bridgeline's outlook. We are a profitable Company with continued increased sales and demand of our iAPPS product suite.

We have a strong pipeline in place and we are confident we will return to growth mode while continuing to increase our income and our operating cash flows.

With 75% of our customers paying Bridgeline a recurring monthly fee, we have developed an excellent customer traction model. Our SaaS-based Web application management software, iAPPS, is an extremely innovative software solution that deeply integrates Web content management, Web analytics, e-commerce, and e-marketing capabilities into the hearts of the websites' intranet and extranet that we develop.

Each quarter, we sell more and more iAPPS-driven web applications and, as a result, we will continue to strengthen our recurring revenue model.

Our customer base is strong and diversified. We only have a few customers who represent just about 5% of our total business, with the remaining balance being very diversified.

Jonathan, at this time we'd like to open up the line for any questions.

(Operator Instructions). I'm not showing any questions in the queue at this time.

Okay. So thanks to everybody for attending today's conference call. If you do find you have any questions after today, please do not hesitate to reach out to Ron or myself. Our contact information is available on the Bridgeline Software website.

A couple of things. On March 19, Bridgeline will be hosting -- holding its annual shareholder meeting in Burlington, Mass., and then on April 6, we will be attending the security research nanocap conference in San Francisco. So we hope to see you at one of the upcoming conferences or events. Thank you and have a great day.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.