Bridgeline Announces Financial Results for the Third Quarter of Fiscal 2023

Bridgeline Digital, Inc. (NASDAQ: BLIN), a marketing software solutions provider, today announced financial results for its fiscal third quarter ended June 30, 2023.

“Bridgeline’s core products are growing by over 15% CAGR led by HawkSearch which signed over $1 million in new customer contracts this quarter,” said Ari Kahn, Bridgeline’s President and Chief Executive Officer. “Our core products have grown to over 44% of our overall revenue and will begin to dominate our topline as they surpass our legacy products which declined in revenue this year.”

Financial Highlights – Third Quarter of Fiscal Year 2023

• Total revenue was $3.9 million, compared to $4.2 million in the prior year period.
• Subscription and licenses revenue was $3.2 million, compared to $3.4 million in the prior year period.
• Gross profit was $2.6 million, compared to $2.9 million in the prior year period.
• Gross margin was 68%, compared to 70% in the prior year period.

Financial Highlights – First 9 Months of Fiscal Year 2023

• Total revenue was $12.1 million, compared to $12.6 million in the prior year period.
• Subscription and licenses revenue was $9.7 million, compared to $10.1 million in the prior year period.
• Gross profit was $8.3 million, compared to $8.7 million in the prior year period.
• Gross margin was 68%, compared to 69% in the prior year period.

Business Highlights

Sales 

• Signed over $1.2 million in new sales, including $600 thousand in license contracts, adding over $200 thousand in annual recurring revenue and more than $600 thousand in professional services.
• HawkSearch announced new licenses with Aaron Equipment, Seattle Aviation Solutions, Valken Sports, Designerie, Loyola Press, an institutional accreditor and a renowned luxury jewelry retailer.
• Other new wins include Paul Byron Shoes and Voltus GmbH.
• In partnership with Duda, Bridgeline sold more than 500 WooRank licenses to Repli who will use them to provide in-depth SEO analysis to their customers.

Partnerships

• Bridgeline continues to win sales through partnerships with BigCommerce, Salesforce, and Optimizely.
• Bridgeline announced a partnership with oBundle, an eCommerce agency specializing in BigCommerce. With over 500 successful BigCommerce implementations, oBundle is positioned to introduce Hawksearch to its existing customer base as well as new customers it obtains.
• Bridgeline recently sold over 500 WooRank licenses to Repli, a property technology company, to power SEO for 500 new websites.

Customer renewals

• Over 200 of Bridgeline’s customers whose subscription was eligible for renewal this quarter, renewed totaling over $1 million in licenses. Our Core Product customers renewed at over 98%.

Financial Results – Third Quarter of Fiscal Year 2023

• Total revenue, which is comprised of Licenses and Services revenue, was $3.9 million for the quarter ended June 30, 2023, as compared to $4.2 million for the same period in 2022.
• Subscription and licenses revenue, which is comprised of SaaS licenses, maintenance and hosting revenue and perpetual licenses revenue was $3.2 million for the quarter ended June 30, 2023, compared to $3.4 million for the same period in 2022. As a percentage of total revenue, Subscription and licenses revenue was 81% of total revenue for the quarter ended June 30, 2023, consistent with 81% for the same period in 2022.
• Services revenue was $0.7 million for the quarter ended June 30, 2023, compared to $0.8 million for the same period in 2022. As a percentage of total revenue, Services revenue accounted for 19% of total revenue for the quarter ended June 30, 2023, consistent with 19% for the same period in 2022.
• Cost of revenue was $1.3 million for the quarter ended June 30, 2023, compared to $1.3 million for the same period in 2022.
• Gross profit was $2.6 million for the quarter ended June 30, 2023, as compared to $2.9 million for the same period in 2022.
• Gross margin was 68% for the quarter ended June 30, 2023, compared to 70% for the same period in 2022. Subscription and licenses gross margin were 73% for the quarter ended June 30, 2023, as compared to 75% for the same period in 2022. Services gross margins were 44% for the quarter ended June 30, 2023, as compared to 46% for the same period in 2022.
• Operating expenses of $3.3 million for the quarter ended June 30, 2023, was consistent with $3.3 million for the same period in 2022.
• Operating loss for the quarter ended June 30, 2023, was $0.7 million, as compared to $0.4 million for the same period in 2022.
• The warrant liability revaluation resulted in a $0.1 million non-cash loss attributable to the change in the fair value of the warrant liabilities for the quarter ended June 30, 2023. This compares to a net gain from revaluation of $0.8 million for the same period in 2022.
• Net loss for the quarter ended June 30, 2023, was $0.8 million, compared to net income of $0.4 million for the same period in 2022.

Financial Results – First 9 Months of Fiscal Year 2023

• Total revenue, which is comprised of Licenses and Services revenue, was $12.1 million for the nine months ended June 30, 2023, as compared to $12.6 million for the same period in 2022.
• Subscription and licenses revenue, which is comprised of SaaS licenses, maintenance and hosting revenue and perpetual licenses revenue was $9.7 million for the nine months ended June 30, 2023, compared to $10.1 million for the same period in 2022. As a percentage of total revenue, Subscription and licenses revenue was 80% of total revenue for the nine months ended June 30, 2023, consistent with 80% for the same period in 2022.
• Services revenue was $2.4 million for the nine months ended June 30, 2023, compared to $2.5 million for the same period in 2022. As a percentage of total revenue, Services revenue accounted for 20% of total revenue for the nine months ended June 30, 2023, consistent with 20% for the same period in 2022.
• Cost of revenue was $3.8 million for the nine months ended June 30, 2023, compared to $3.9 million for the same period in 2022.
• Gross profit was $8.3 million for the nine months ended June 30, 2023, compared to $8.7 million for the same period in 2022.
• Gross margin was 68% for the nine months ended June 30, 2023, compared to 69% for the same period in 2022. Subscription and licenses gross margin were 74% for the nine months ended June 30, 2023, as compared to 75% for the same period in 2022. Services gross margin was 48% for the nine months ended June 30, 2023, as compared to 46% for the same period in 2022.
• Operating expenses of $10.0 million for the nine months ended June 30, 2023, were lower than the $10.2 million for the same period in 2022.
• Operating loss for the nine months ended June 30, 2023, was $1.7 million, as compared to an operating loss of $1.5 million for the same period in 2022.
• The warrant liability revaluation resulted in a $0.4 million non-cash gain attributable to the change in the fair value of the warrant liabilities for the nine months ended June 30, 2023. This compares to a net gain from revaluation of $3.7 million for the same period in 2022.
• Net loss for the nine months ended June 30, 2023, was $1.4 million, compared to net income of $2.6 million for the same period in 2022.

Conference CallBridgeline Digital, Inc. will hold a conference call today, August 11, 2023, at 4:30 p.m. Eastern Time to discuss these results. The Company’s President and Chief Executive Officer, Ari Kahn, and Chief Financial Officer, Thomas Windhausen, will host the call, followed by a question and answer period.

The details of the conference call and replay are as follows:

Bridgeline Digital Third Quarter 2023 Earnings Call

Friday, August 11, 2023, at 4:30 p.m. ET

https://register.vevent.com/register/BI470fec2c685c4c5d88bf7c3f2e6a064f

Participants can register for the conference call using the above URL above. Once registered, participants will receive dial-in numbers and unique PIN number.

Replays of the conference call will be available through the following link:

https://edge.media-server.com/mmc/p/fhumgqw4

Non-GAAP Financial MeasuresThis press release contains the following Non-GAAP financial measures: Adjusted EBITDA, Non-GAAP adjusted net income (loss), and Non-GAAP adjusted net earnings (loss) per diluted share.

Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, stock-based compensation expense, impairment of goodwill and intangible assets, non-cash warrant related income/expense, changes in fair value of contingent consideration, restructuring and acquisition-related costs, amortization of debt discounts, preferred stock dividends and any related tax effects. Bridgeline uses Adjusted EBITDA and Non-GAAP adjusted net income (loss) as supplemental measures of our performance that are not required by, or presented in accordance with, accounting principles generally accepted in the United States ("GAAP").

Non-GAAP adjusted net income (loss) and Non-GAAP adjusted net income (loss) per diluted share are calculated as net income (loss) or net income (loss) per share on a diluted basis, excluding, where applicable, amortization of intangible assets, change in fair value of warrants, stock-based compensation, restructuring and acquisition-related costs, goodwill impairment charges, preferred stock dividends and any related tax effects.

Bridgeline's management does not consider these Non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these Non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in the Company's financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expenses and income are excluded or included in determining these Non-GAAP financial measures. To compensate for these limitations, Bridgeline management presents Non-GAAP financial measures in connection with GAAP results. Bridgeline urges investors to review the reconciliation of its Non-GAAP financial measures to the comparable GAAP financial measures, which is included in this press release, and not to rely on any single financial measure to evaluate Bridgeline's financial performance.

Our definitions of Adjusted EBITDA and Non-GAAP adjusted net income (loss) may differ from, and therefore may not be comparable with, similarly titled measures used by other companies, thereby limiting their usefulness as comparative measures. As a result of the limitations that Adjusted EBITDA and Non-GAAP adjusted net income (loss) have as an analytical tool, investors should not consider them in isolation, or as a substitute for analysis of our operating results as reported under GAAP.

Safe Harbor for Forward-Looking Statements Statement under the Private Securities Litigation Reform Act of 1995

All statements included in this press release, other than statements or characterizations of historical fact, are forward-looking statements. These “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, are based on our current expectations, estimates and projections about our industry, management’s beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “may,” “will,” “should,” “would,” “could,” “potential,” “continue,” “ongoing,” similar expressions, and variations or negatives of these words. These statements appear in a number of places in this press release and include statements regarding the intent, belief or current expectations of Bridgeline Digital, Inc. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions, including, but not limited to, business operations and the business of our customers, suppliers and partners; our ability to retain and upgrade current customers, increasing our recurring revenue, our ability to attract new customers, our revenue growth rate; our history of net loss and our ability to achieve or maintain profitability, instability in the financial markets, including the banking sector; our liability for any unauthorized access to our data or our users’ content, including through privacy and data security breaches; any decline in demand for our platform or products; changes in the interoperability of our platform across devices, operating systems, and third party applications that we do not control; competition in our markets; our ability to respond to rapid technological changes, extend our platform, develop new features or products, or gain market acceptance for such new features or products, particularly in light of potential disruptions to the productivity of our employees resulting from remote work; our ability to manage our growth or plan for future growth, and our acquisition of other businesses and the potential of such acquisitions to require significant management attention, disrupt our business, or dilute stockholder value; the volatility of the market price of our common stock, the ability to maintain our listing on the NASDAQ Capital Market, or our ability to maintain an effective system of internal controls, as well as other risks described in our filings with the Securities and Exchange Commission. Any of such risks could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement. Bridgeline Digital, Inc. assumes no obligation to, and does not currently intend to, update any such forward-looking statements after the date of this release, except as required by applicable law.

About Bridgeline DigitalBridgeline is a marketing software solutions provider that offers a suite of products that help companies grow online revenue by driving more traffic to their websites, converting more visitors to purchasers, and increasing average order value.

To learn more, please visit www.bridgeline.com or call [phone].

Contact:

Bridgeline Digital, Inc.Thomas R. WindhausenChief Financial [e-mail]

BRIDGELINE DIGITAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(Unaudited)
				Three Months Ended								Nine Months Ended
				June 30,								June 30,
					2023				2022				2023				2022
Revenue:
	Subscription and perpetual licenses			$	3,168			$	3,394			$	9,670			$	10,117
	Digital engagement services				742				812				2,417				2,492
		Total revenue			3,910				4,206				12,087				12,609
Cost of revenue:
	Subscription and perpetual licenses				848				835				2,549				2,532
	Digital engagement services				419				436				1,259				1,353
		Total cost of revenue			1,267				1,271				3,808				3,885
		Gross profit			2,643				2,935				8,279				8,724
Operating expenses:
	Sales and marketing				1,197				1,382				3,792				3,880
	General and administrative				779				812				2,367				2,460
	Research and development				936				771				2,609				2,495
	Depreciation and amortization				384				373				1,143				1,213
	Restructuring and acquisition related expenses				12				-				57				164
		Total operating expenses			3,308				3,338				9,968				10,212
Loss from operations					(665	)			(403	)			(1,689	)			(1,488	)
	Change in fair value of contingent consideration, interest expense and other, net				-				(8	)			(19	)			427
	Change in fair value of warrant liabilities				(107	)			818				361				3,693
Income (loss) before income taxes					(772	)			407				(1,347	)			2,632
	Provision for income taxes				9				4				25				12
Net income (loss)				$	(781	)		$	403			$	(1,372	)		$	2,620
Net income (loss) per share attributable to common shareholders:
	Basic net income (loss) per share			$	(0.07	)		$	0.04			$	(0.13	)		$	0.26
	Diluted net income (loss) per share			$	(0.07	)		$	0.04			$	(0.13	)		$	0.25
Number of weighted average shares outstanding:
	Basic				10,417,609				10,217,609				10,417,609				10,203,570
	Diluted				10,417,609				10,269,752				10,424,187				10,364,902

BRIDGELINE DIGITAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(Unaudited)
			ASSETS
					June 30,				September 30,
						2023				2022
Current assets:
	Cash and cash equivalents				$	2,607			$	2,856
	Accounts receivable, net					1,005				1,182
	Prepaid expenses and other current assets					400				242
			Total current assets			4,012				4,280
Property and equipment, net						185				268
Operating lease assets						439				589
Intangible assets, net						5,236				6,268
Goodwill						15,985				15,985
Other assets						87				123
			Total assets		$	25,944			$	27,513
			LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Current portion of long-term debt				$	210			$	429
	Current portion of operating lease liabilities					167				199
	Accounts payable					1,138				972
	Accrued liabilities					862				995
	Current portion of purchase price and contingent consideration payable					-				250
	Deferred revenue					2,512				1,943
			Total current liabilities			4,889				4,788
Long-term debt, net of current portion						533				588
Operating lease liabilities, net of current portion						272				390
Warrant liabilities						388				749
Other long-term liabilities						644				646
			Total liabilities			6,726				7,161
Commitments and contingencies
Stockholders' equity:
	Preferred stock - $0.001 par value; 1,000,000 shares authorized;
		Series C Convertible Preferred stock: 11,000 shares authorized; 350 shares issued and outstanding at June 30, 2023 and September 30, 2022				-				-
	Common stock - $0.001 par value; 50,000,000 shares authorized;
		10,417,609 shares issued and outstanding at June 30, 2023 and September 30, 2022				10				10
	Additional paid-in-capital					100,980				100,704
	Accumulated deficit					(81,514	)			(80,142	)
	Accumulated other comprehensive loss					(258	)			(220	)
			Total stockholders' equity			19,218				20,352
			Total liabilities and stockholders' equity		$	25,944			$	27,513

BRIDGELINE DIGITAL, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(in thousands, except per share data)
			Three Months Ended								Nine Months Ended
			June 30,								June 30,
				2023				2022				2023					2022
Reconciliation of GAAP net income (loss) to Adjusted EBITDA:
	GAAP net income (loss)		$	(781	)		$	403			$	(1,372			)	$	2,620
	Provision for income taxes			9				4				25					12
	Change in fair value of contingent consideration, interest expense and other, net			-				(148	)			19					(583	)
	Change in fair value of warrants			107				(818	)			(361	)				(3,693	)
	Amortization of intangible assets			346				354				1,032					1,151
	Depreciation and other amortization			45				19				132					62
	Restructuring and acquisition related charges			12				-				57					164
	Stock-based compensation			99				249				276					364
	Adjusted EBITDA		$	(163	)		$	63			$	(192	)			$	97
Reconciliation of GAAP net income (loss) to non-GAAP
adjusted net income (loss):
	GAAP net income (loss)		$	(781	)		$	403			$	(1,372			)	$	2,620
	Change in fair value of warrants			107				(818	)			(361	)				(3,693	)
	Amortization of intangible assets			346				354				1,032					1,151
	Restructuring and acquisition related charges			12				-				57					164
	Stock-based compensation			99				249				276					364
	Non-GAAP adjusted net income (loss)		$	(217	)		$	188			$	(368	)			$	606
Reconciliation of GAAP net earnings (loss) per diluted share to
non-GAAP adjusted net earnings (loss) per diluted share:
	GAAP net income (loss) applicable to common shareholders		$	(0.07	)		$	0.04			$	(0.13	)			$	0.25
	Change in fair value of warrants			0.01				(0.08	)			(0.03	)				(0.36	)
	Amortization of intangible assets			0.03				0.03				0.10					0.11
	Restructuring and acquisition related charges			0.00				-				0.01					0.02
	Stock-based compensation			0.01				0.02				0.03					0.04
	Non-GAAP adjusted net income (loss) per diluted share		$	(0.02	)		$	0.02			$	(0.04	)			$	0.06