Bridgeline Digital Inc (BLIN) 2021 Q2 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Bridgeline Digital, Inc. Second Quarter 2021 Earnings Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

I would now like to hand the conference over to your speaker today, Mark Downey, CFO. Please go ahead.

Thank you, and good afternoon, everyone. My name is Mark Downey, and I am the Chief Financial Officer for Bridgeline Digital. I am pleased to welcome you to our fiscal 2021 second quarter conference call. On the call this afternoon is Ari Kahn, Bridgeline Digital President and CEO, who will begin with a discussion of our business highlights. I'll then update you on our financial results for the quarter and we'll conclude by taking questions.

On May 12, Bridgeline announced that it had entered into an agreement to acquire HawkSearch, the intelligent product search and recommendation engine. HawkSearch's AI-powered technology helps online retailers engage customers and convert more sales with personalized site search and intelligent recommendations that connect customers with hyper-relevant products and boost online revenue.

Additionally, Bridgeline closed, on May 14, a registered direct offering priced at the market of 1,060,000 shares of its common stock at a price of $2.28 per share for gross proceeds of approximately $2.4 million, and a securities purchase agreement with certain institutional investors in connection with a private placement of 2,700 shares of its Series D Convertible Preferred Stock at a price of $1,000 per share. The company expects to receive gross proceeds from this private placement of approximately $2.7 million. Joseph Gunnar & Co., LLC acted as lead placement agent, and Taglich Brothers, Inc. as co-placement agent. If you would like a copy of these press releases, you can access it on our website, bridgeline.com.

Before we begin, I would like to remind listeners that during this conference call, comments that we make regarding Bridgeline that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934 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. The internal projections and beliefs upon which we base our expectations today may change over time and we expressly disclaim and assume no obligation to inform you if they do. Results that 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 the COVID-19 pandemic and related public health measures, could cause Bridgeline's actual results to differ materially from those expressed or implied by the projections or forward-looking statements made today. 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 Bridgeline Digital with the Securities and Exchange Commission.

Also, please note that on the call this afternoon, we 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 obtain a copy of our earnings release by visiting our website.

I would now like to turn the call over to Ari Kahn, our President and CEO.

Thank you, Mark, and good afternoon, everyone. It certainly is an exciting time for Bridgeline's shareholders and our customers.

After evaluating dozens of strategic opportunities, we've been fortunate to find 2 acquisitions that fit perfectly into our eCommerce360 strategy. In eCommerce360, we focus on helping our customers grow their online revenue with turnkey apps that drive traffic, boost conversion and raise average order value. eCommerce360 leads us to develop and acquire complementary apps that help drive online revenue from these 3 dimensions. Our intelligent dashboard, powered by Woorank, is being trained to understand which of our apps can make the biggest impact on your eCommerce360 revenue drivers and provide recommendations as to which of our products can make the greatest impact to your website.

eCommerce360 apps are out of the box, enabling them to be sold with a touchless sales process for a fast sales cycle with low sales and marketing expenses. Our recommendation dashboard will further reduce sales costs by cross-selling the best apps at the right time to help our customers. Because our apps are out of the box, we can increase our gross margin as a more significant percentage of our revenue is subscription and license versus professional services.

eCommerce360 guides our M&A focus towards apps that can drive traffic, boost conversion or raise average order value. It also transforms Bridgeline's relationship with content management businesses from that of a competitor to a partner whose products complement their tools as it repositions our technology to be synergistic with other commerce and content platforms.

In March, we acquired Woorank SRL, and this month, we acquired HawkSearch. The combination of Bridgeline with Woorank and HawkSearch positions Bridgeline for strong growth in 2021 with a unique product suite that will help our customers increase their online revenue with stronger traffic, conversion and average order value.

Woorank is off to a strong start, delivering 10 new customers per day, 1,500 qualified sales leads per month, strong gross margins and exciting capabilities that all of our customers need to drive more traffic to their websites. Woorank will become a foundation for us to offer SEO packages to our customers, generate new customers who can benefit from our other products, and it gives us a recommendation dashboard that can drive cross-sales throughout our customer base.

Woorank also reinforces our commitment to the franchise market with SEO enhancements for each franchisee to drive traffic to their local pages and into their store. Last month, we launched WooRank Assistant. WooRank Assistant allows marketers to evaluate and improve their website traffic without ever leaving their platform and brings identification aspect to Woorank that increases engagement with the product.

We also added new features to address Google's upcoming Core Web Vitals update, where we check for 3 critical metrics that Google will be measuring and impacting search rankings with, Cumulative Layout Shift, First Input Display (sic) [First Input Delay] and Largest Contentful Paint.

Woorank also launched DataBravo this year. DataBravo helps marketers identify new sales opportunities and understand their prospects' digital footprint by harnessing the power of Woorank's web data, artificial intelligence and machine learning. DataBravo is bringing new revenues to Bridgeline that were not even part of our original projections.

Last week, we announced the acquisition of HawkSearch. HawkSearch springs Bridgeline forward in both the e-commerce and enterprise site search market. Site search is our strongest segment in the marketing technology market, winning a customer per week with our Celebros product line. HawkSearch brings new capabilities to Bridgeline that will drive even more online revenue for our customers with enhanced merchandising capabilities, product recommendations, personalization and data-rich search analytics.

I have to say, it also brings a really awesome team. I met with everybody last week and the energy at HawkSearch is infectious. It's great.

We intend to accelerate the HawkSearch road map with Bridgeline's eCommerce360 technologies, including natural language processing, instant search and our new Woorank SEO recommendation dashboard. These combined technologies and the larger engineering teams will help HawkSearch customers grow online revenue even faster from their HawkSearch software.

HawkSearch brings hundreds of new customers and thousands of new sites to the Bridgeline family, strong revenues and gross margins, an excellent sales pipeline and great, great, great partnerships with world-class digital agencies as well as leading e-commerce and CMS vendors. It's really a great time for Bridgeline right now.

At this time, I'd like to turn the call over to our Chief Financial Officer, Mark Downey. Take it away.

Thanks, Ari.

I'm very excited to share the positive financial results for the second quarter of fiscal 2021 ended March 31, 2021, with you this afternoon. Total revenue, which is comprised of licenses and services revenue, was $2.9 million for the quarter ended March 31, 2021, as compared to $2.7 million for the same period in 2020.

The following are the various components of revenue: subscription and licenses revenue, which is comprised of SaaS licenses, maintenance and hosting revenue and perpetual license revenue increased 8% to $2 million for the quarter ended March 31, 2021, from $1.8 million from the same period in 2020. As a percentage of total revenue, subscription and licensing revenue increased 2% to 69% of total revenue for the quarter ended March 31, 2021, compared to 67% for the same period in 2020. This increase is attributed to significant multiyear license renewals across our diverse portfolio of Fortune 500 companies and the inclusion of 1 month of Woorank revenue.

Services revenue decreased 2% or $14,000 to $885,000 for the quarter ended March 31, 2021, as compared to $899,000 for the same period in 2020. As a percentage of total revenue, services revenue accounted for 31% of total revenue for the quarter ended March 31, 2021, compared to 33% for the same period in 2020. Bridgeline's overall strategy, as Ari has mentioned, called eCommerce360 has been on increasing recurring subscription 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 our subscription licenses to services revenue ratio.

Gross profit increased 16% or $254,000 to $1.8 million for the quarter ended March 31, 2021, as compared to $1.6 million for the same period in 2020. Cost of revenue decreased 10% or $118,000 to $1.1 million for the quarter ended March 31, 2021, compared to $1.2 million for the same period in 2020. This decrease is attributed to a reduction within our fixed costs to operate our cloud-based hosting model and variable internal supporting costs.

Gross margin increased to 63% for the quarter ended March 31, 2021, compared to 57% for the same period in 2020. Subscription and license and gross margin were 70% for the 3 months ended March 31, 2021, as compared to 60% for the same period in 2020. Services gross margin were 46% for the 3 months ended March 31, 2021, as compared to 49% for the same period in 2020.

Operating expenses decreased 24% or $616,000 to $1.9 million for the quarter ended March 31, 2021, from $2.6 million for the same period in 2020. Included within the quarterly totals as of March 31, 2021, are 1 month of Woorank costs and acquisition charges of $84,000, offset by a reduction within our fixed costs to operate our cloud-based hosting model with Amazon Web Services and variable internal supporting costs.

For the quarter ended March 31, 2021, the warrant liability independent revaluation, which considers the overall change in our closing market share price as of March 31, 2021, of $2.89 from the previous quarter's closing market share price of $2.58 resulted in a $430,000 (sic) [$418,000] noncash derivative loss attributable to the change in the fair value of the warrant liabilities as compared to a $1.8 million noncash derivative gain for the same period in 2020. Offsetting this warrant liability loss for the quarter ended March 31, 2021, is Series B Convertible Warrants with a fair market value of $210,000, which represents 2,556,875 shares expiring worthless as of March 12, 2021.

Net loss applicable to common shareholders for the quarter ended March 31, 2021, is $556,000 compared to net income applicable to common shareholders of $795,000 for the same period in 2020. Adjusted EBITDA for the quarter ended March 31, 2021, is a gain of $235,000 or $0.05 per diluted share compared to a loss of $331,000 or $0.08 per diluted share for the same period in 2020. Our non-GAAP adjusted net loss for the quarter ended March 31, 2021, is $211,000 or $0.04 per diluted share compared to an adjusted net income of $1.5 million or $0.33 per diluted share for the same period in 2020.

On March 1, 2021, the company persuaded to a shared purchase agreement, acquired all of the issued and outstanding shares of Woorank, an entity located in Belgium. The company acquired for the Woorank transaction as a [business combination]. We determined that the fair value of the gross assets acquired is not concentrated in a single identifiable asset or a group of similar assets. Assets acquired and liabilities assumed have been recognized at their estimated fair values as of the acquisition date.

The purchase price consisted of cash paid to closing, deferred cash payable and installments postclosing, a seller note issued to one of the selling shareholders and amounts payable to 1 selling shareholder as consideration for assistance with certain matters related to the acquisition for a period of 1 year from the closing date of the acquisition. The purchase agreement also provides for additional consideration in the event of achievement of certain revenue targets and operational goals to selling shareholders persuading to 3 separate earn-out provisions.

At March 31, 2021, the company had cash of $3.5 million and accounts receivable net of $717,000 as compared to September 30, 2020, where the company had cash of $861,000 and accounts receivable net of $665,000. Total days sales outstanding for the quarter ended March 31, 2021, is 42.7 days as compared to 45.3 days for the same period in 2020. The primary reason for these improvements can be attributed to our exceptional strong customer relationships and consistent conversion of accounts receivable into cash.

In March 31, 2021, as a result of the Woorank acquisition, we had a purchase price and contingent consideration payable of $2 million and debt of $2.12 million, respectively. As of March 31, 2021, we have 5,391,548 shares of common stock and 350 shares of the Series C Convertible Preferred Stock, when converted, equals 38,889 shares of common stock. Our total assets are $17.9 million and our total liabilities are $6.5 million.

Bridgeline looks forward to continued success in 2021 by delivering shareholder value and expanding our customer success with exciting technical innovations.

Thank you all for listening. And at this time, we would like to open up the call to Q&A.

(Operator Instructions) Your first question comes from the line of Howard Halpern from Taglich Brothers.

Congratulations. Solid quarter, solid quarter. Start off with Woorank. What type of impact do you see it having in terms of being -- you being able to leverage that within your eCommerce360? And how are you kind of integrating that into your operations?

Well, Woorank is interesting because it comes at eCommerce360 from a lot of different angles. First of all, it's a traffic app. It helps companies drive more traffic to their website. That is square in the middle of the value proposition that we have in eCommerce360, help companies grow revenue.

Second of all, the way that it helps businesses drive more traffic is through an intelligent dashboard that can make recommendations. This moves us forward in our ability to create a more intelligent dashboard, can not only make recommendations like Woorank does to improve your traffic but to make recommendations for improving your conversion and improving your average order value and selecting the best Bridgeline product to add to your website. So it moves us forward on the technical front.

And then thirdly, it also is a lead generation machine. We get 10 new customers every single day. We get 1,500 customers per -- well, leads per month, who are qualified enough leads to enter a credit card number to start a free trial. Now those customers, those 1,500 leads, they may or may not end up launching Woorank, but now we've got contact information. We can help them understand HawkSearch, our other products, and find the right product for them to start their Bridgeline relationship. So it moves us forward in all 3 of those directions.

And then a nice bonus is that Woorank launched DataBravo. So databravo.com is a new product that helps marketers research sales leads and competitive websites. And this wasn't even part of our revenue forecast and it's selling quite well. So we're very excited about that, too.

Okay. Now has HawkSearch officially joined Bridgeline, starting to generate revenues for the company? Or is it still pending?

It's pending. We signed a definitive agreement to acquire HawkSearch last week. And the closing will be later this month as we round out some of the HR details and other administrative details behind closing the actual acquisition.

And HawkSearch, this really reinforces our commitment to the site search industry. This is our -- fastest-growing part of our business with Celebros. And Hawk has a ton of capabilities that are above and beyond anything that Celebros had, and we'll be able to offer those to our Celebros customer base.

And Celebros has some capabilities like natural language processing, for example, that add a ton of value to Woorank. Bringing these 2 products together truly makes us a leader in site search. It gives us great momentum and a fantastic customer base to build off of.

And how many new people are you bringing on board with the HawkSearch acquisition?

Okay. The HawkSearch team has -- we're bringing in about 15 people. And HawkSearch was -- one of its owners was a really strong agency. A lot of people -- you have probably heard of Americaneagle.com, one of the leading agencies in the world, I would say, Chicago-based, they've got offices everywhere. And so we worked closely with them to find the right people to join the Bridgeline team. It was -- the whole overall Hawk team was great and then other people from Hawk moved into Americaneagle. So it really became a win-win, and I'm excited about our relationship with Americaneagle.com now. I think that, that's going to really add a lot of value to Bridgeline.

Do you have any kind of numbers that it might have generated in 2020?

We're not publishing those numbers at this time. We do, of course, internally, but not for the public.

Okay. And for HawkSearch, I know you talked about Woorank, but what do you envision the number of, I mean, customers a day, customers a month? What is your, I guess, plan going into see for that HawkSearch?

Sure, sure. Yes. Well, we're seeing HawkSearch having -- currently, it has over 350 customers. And it is bringing in probably a customer a week, which is similar to what Celebros is doing. The customers from Woorank -- from HawkSearch are oftentimes larger and have more sophisticated needs, in some cases, especially when it comes to personalization, which is a very new and upcoming aspect to the site search space that HawkSearch will excel at.

And is this going to carry a little higher gross margin than Celebros?

It does. Well, in terms of the gross margin as a percentage, it's probably similar to the Celebros' GM, which is strong. I mean we're talking the high 70s, 70% range.

Okay. And just in general, just as the environment has been changing and evolving, what general kind of activity are you seeing for Celebros and all your products in general, just from a high-level view?

Well, sales certainly picked up for better and worse during the last year. I don't know how much of it was because of just general growth online and to the fact that Bridgeline as a company has been maturing. And now that we've got so many more leads coming in, great partnerships, including the partnerships that came along with HawkSearch, we're expecting that to grow. Our big mantra we've set our Board meeting on Friday, just a few days ago, is it is time for us to be a growth company. We expect to see great top line results.

Okay. Well, keep up the great work, guys.

Your next question comes from the line of Alex Silverman from AWM Investment.

You guys have had a busy few months here. Howard asked any number of questions that I had as well, so I'm really just left with a couple. Can you tell us what 1 month of Woorank generated for you in the -- from -- in terms of revenue and what it added -- what Woorank added to your SG&A?

Sure. So Woorank produced about $150,000 in revenue for its first month. On the SG&A side, so -- I'm not sure exactly. It's going to be like $100,000. Woorank, overall, is profitable as a stand-alone entity. It even covers its own earnout and acquisition costs. So it's generating leads for us, it's growing our top line and it's growing at the bottom line.

Okay. Great. And that "150,000," is that euros or is that dollars?

That's dollars. So -- actually, you know what, it's a little bit higher than $150,000, so it's between $150,000 and $200,000.

Okay. Great. And did you say Hawk should likely close by the end of May?

That's what we expect, for it to close -- probably not this week but next week.

Okay. So in theory, you should have maybe a month of Hawk in the second quarter?

Exactly. Exactly. I think that it would be very convenient from an accounting perspective to close Hawk on May 31 and then have a solid June for Hawk. So that gives us 1 month of Woorank last quarter, 3 months of Woorank this quarter plus 1 month of Hawk next quarter, 3 months of each of them.

There are no further questions at this time. You may continue, presenters.

Everyone, we really appreciate the support and patience of all of you and our other shareholders. It's our goal to continue to deliver a buildable, scalable business model, which in turn will build shareholder value. Thank you for joining us today. We look forward to speaking to you again on our Q3 fiscal '21 conference call. Stay healthy and well.

This concludes today's conference call. Thank you for participating. You may now disconnect.