Bridgeline Digital, Inc. (BLIN) on Q1 2021 Results - Earnings Call Transcript

Operator: Good afternoon, ladies and gentlemen, and welcome to the Bridgeline Digital First Quarter 2021 Earnings Call. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Mark Downey, Chief Financial Officer. Sir, please go ahead. Mark Downey: 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 first quarter conference call. On the call this afternoon is Ari Kahn, Bridgeline’s 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. Ari Kahn: Thank you, Mark and good afternoon everyone. Thanks to our eCommerce360 strategy, we’re delivering another quarter with operating profit and 15% growth in subscription license revenue. Previously, I’ve called our eCommerce360 strategy, Revenue 360. Our new marketing team has refined the naming, so it’s eCommerce360 going forward. eCommerce360 has several components that have boosted the trajectory for Bridgeline’s accelerate sales, reduce costs and guide strategic growth through M&A. In eCommerce360, we focus our business on guiding companies to grow their online revenue with apps that drive traffic, boost conversion and raise average order value. eCommerce360 leads us to develop and acquire many apps that increase online revenues from these three dimensions. All apps have a shared dashboard that evaluates the strength of your e-commerce site to make recommendations for the multiple apps we have that will help you grow. eCommerce360 apps are out of the box, enabling them to sell with a touchless sales process for faster sales cycles, with lower sales and marketing expenses. The recommendation dashboard further reduces sales costs by cross-selling the best app at the right time to help our customers. Because our apps are out of the box, we can increase our gross margins as a more significant percentage of our revenue in subscription and license versus services. eCommerce360 guides our M&A focus towards apps that can drive traffic, boost conversion and raise average order value. The dashboard simplifies the integration of new products and accelerates cross-sales across acquired customer bases. We recently made a huge step forward in eCommerce360 with the acquisition of Woorank SRL. Woorank is an app that drives traffic with a recommendation dashboard powered by an artificial intelligence engine that evaluate your search engine optimization relative to your competitors and identifies areas of opportunity. It is smart enough to recognize the quick wins and the most complicated changes you can implement to drive more traffic. Checkout woorank.com, give it a try. It’s really excellent. Woorank has a gold mine of data behind its AI dashboard that includes analysis of 50 million websites over the past 10 years. We intend to combine this data with the data we’ve accumulated about e-commerce to enrich the recommendation engine even further. Woorank will become the heart of our dashboard for all of our apps, we will expand its recommendation capabilities to identify traffic improvements and identify which of our apps can boost conversion and raise average order for our value best. Woorank not only gives us traffic app, a dashboard and big data, it is a lead generating machine. Woorank.com receives over 1 million monthly visits and creates hundreds of new accounts each day. Mark Downey: Thanks, Ari. I’m very excited to share the positive financial results for the first quarter of fiscal 2021 ended December 31, 2020 with you this afternoon. Total revenue for the quarter ended December 31, 2020, which is comprised of licenses and services revenue was consistent at $2.8 million for the quarters ended December 31, 2020, and 2019. The following are the various components of revenue. Subscription and licenses revenue, which is comprised of the SaaS licenses, maintenance and hosting revenue and perpetual license revenue increased 15% for the quarter ended December 31, 2020 to $2 million from $1.7 million for the same period in 2019. As a percentage of total revenue subscription and licensed revenue increased 9% to 70% of total revenue for the quarter ended December 31, 2020 compared to 61% for the same period in 2019. This increase is attributed to significant multi-year license renewals across our diverse portfolio of Fortune 500 companies. Services revenue decreased $259,000 to $837,000 for the quarter ended December 31, 2020 as compared to $1.1 million for the same period in 2019. As a percentage of total revenue, services revenue accounts for 30% of total revenue for the quarter ended December 31, 2020 compared to 39% of total revenue for the same period in 2019. Operator: You have a question from Howard Halpern from Taglich. Your line is open. Howard Halpern: Hi guys. Nice solid quarter. Good recurring revenue growth. Ari Kahn: Thank you, Howard. Howard Halpern: In terms of – now that we’re entering into the second quarter, how many customers did you acquire in the first quarter? And what is the trend in so far in Q2? Ari Kahn: All right, we picked up I think it was 12 customers in the first quarter, something in that range. And that’s pretty consistent for the first half of Q2 as well. Now that we’ve got this huge lead base coming in with Woorank, we expect that to accelerate significantly. The big challenge that we’ve had in customer acquisition has been just our brand equity, right, I mean, not that many people know who Bridgeline is, we only have so many leads coming in and that has moved up two orders of magnitude overnight for us. That lead generation was one of the very attractive things for us as we were evaluating Woorank. First and foremost, we look at technology after that we look at the customer base, make sure that the customers are not leaving and that we can cross-sell and deliver more value to them. But the huge bonus here, I mean, just giant one was the tremendous lead generation that we have. And Woorank standalone was – did didn’t have a broad enough product suite to be able to monetize that lead base, as well as we’ll be able to, so we’re going to do great things thus. Howard Halpern: Okay. So that, I guess brings me to a series of questions. Do you – what kind of revenues they generated last year? Do you have a rough estimate? Ari Kahn: Yes. Woorank was not an audited company and we’re auditing the financials for them, after an acquisition gets 70 days to do the audit. They’re about $2 million company, standalone profitable. And there were a few synergies that make it even more profitable while combined with Bridgeline. Howard Halpern: Okay. And what type of I guess incremental G&A cost might there be from the acquisition during the last part of the year? Do you have a rough estimate? Ari Kahn: Sure. So Woorank it’s a Belgium company and we’re going to have some additional going forward, finance costs just in terms of managing the books and so forth for the entity. And they’re not big, even when it was standalone, it was not a significant amount. So going forward, it’s not going to make a significant difference. We do have costs that we’ll have for the due diligence and for doing the deal that’ll come into this quarter. And those are going to be around $100,000 and we’ll continue to be posting positive operating income, I think we’re like $650,000 positive operating income this quarter. And we can be even stronger with Woorank. Howard Halpern: Now you talked about the big lead generation, is that going to require additional personnel to run down those leads or is that going to be part of an automated process that you’re going to develop? Ari Kahn: Well, it will have more people. Now there’s a lot of automation. And one of the great things that Woorank has is they’ve got the ability to connect incoming leads with databases to recognize the size of the company that the leads coming from and revenue and in personnel to sector and so forth and automatically categorize it based on that information. But we are going to be investing in additional sales people. These are all touchless sales and we’ll be – we raised $2.7 million not to acquire Woorank, we had cash on hand for that to follow-up on those leads in a large part. Howard Halpern: And are those leads, do you know or have a sense of what the breakdown might be between the U.S. and outside the U.S.? What are the breakdown of those lead generations are? Ari Kahn: Sure. Yes. So Woorank has never been geographically focused in its marketing. Just in terms of the way that the economies of the world are split up. They’re slightly heavier in the U.S. just use round numbers, probably 60% U.S., 40% Europe. There’s really nothing coming in through Asia. And that’s because the products aren’t localized in the Chinese or Japanese. But there are Australian leads. Howard Halpern: And how long do you think the integration might be with the dashboard getting all that stuff squared away? Do you think by the second half – entering the second half, we should expect a unified product or unified dashboard? Ari Kahn: Yes, it will be by the second half. It’s great. The way that the Woorank dashboard is structured is that it’s got AI system where you can – it can learn different patterns and make recommendations. And we’re just going to expand that recommendation set that’s already exists from an infrastructure perspective to include recommendations about our products that improve conversion and improve average order value. So the product itself is completely teed up for eCommerce360. We’re very fortunate to have met the Woorank. Howard Halpern: And will your current customers be – will that be like a second generation product for them that they’ll see? Ari Kahn: It will, it will. So Woorank adds value for every single one of Bridgeline customers, there’s not a single customer that can't drive value from Woorank, and they're all going to get a free trial for it. And I think a lot of them are going to become long-term customers. Howard Halpern: Okay. And one last one, I might've missed it. The warrants could you just breakdown again, is it March that half the warrants are gone? Which will limit the warrant liability going forward? Ari Kahn: That's right. That's right. Yes. So there are approximately 5.4 million warrants with us, the cash warrants. So we'll receive cash when they exercise and they have a strike price of $4. 5.5 million warrants, half of those warrants expire in one month on March 12, I believe. So we're looking great. Maybe they'd be in the money by then. That'll be nice. Again, the other half will expire in 2024. Howard Halpern: Okay. Okay. And I guess, maybe I'll get ahead of myself a little bit, but you talked about, do you have a robust or a growing pipeline of acquisition candidates that would even that we should be looking forward to seeing sometime this year or next year? Ari Kahn: Okay. That's the important question, right. It's a big part of our strategy with eCommerce360 is to rapidly grow our product suite. So we have more products to cross-sell and to rapidly grow our customer base. So we have more customers that we can show our products to. The cost of selling a license to an existing customer is much lower than finding a new customer. So strategic growth, M&A is an important part of our strategy. We've been very patient and careful. We've looked at multiple opportunities every single month. We wanted to get the perfect one to kick it off. And Woorank is the perfect one. And we've got a backlog of other opportunities that we're talking to. And in the same way that we were so careful with Woorank, we're going to be careful with those. But my hope is that we can integrate multiple companies in 2021. Howard Halpern: Okay. Well, I look forward to the upcoming year and keep up the good work. Ari Kahn: Thank you, Howard. It's going to be exciting. Operator: There are no further questions at this time. I would now like to turn the conference back to the Mr. Ari Kahn, President & CEO. Ari Kahn: Thank you, Ren. We look forward to continued success in 2021. We're off to a great start. Woorank is excellent, and we have lots of different ways that we're going to deliver value for our shareholders by expanding our customer base, by expanding our product line. It's going to be very exciting year. Thank you all for listening, and have a wonderful 2021. Be safe. Operator: Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.
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Bridgeline Digital, Inc. Earnings Report Summary

  • Bridgeline Digital, Inc. reported an EPS of -$0.05771, slightly beating the estimated -$0.06.
  • Revenue for the period was $3.8 million, missing the anticipated $4.22 million.
  • The company's focus on AI-powered marketing technology and strategic partnerships are key drivers for future growth.

On Tuesday, May 14, 2024, Bridgeline Digital, Inc. (NASDAQ:BLIN), a company specializing in AI-powered marketing technology, reported its earnings after the market closed. The earnings per share (EPS) stood at -$0.05771, slightly outperforming the estimated -$0.06. Despite this slight beat on EPS expectations, BLIN's revenue for the period was $3.8 million, which did not meet the anticipated $4.22 million. Bridgeline Digital operates in the competitive Internet services industry, focusing on enhancing eCommerce sites through advanced technologies like their AI-powered product discovery tool, Zeus, featuring Smart Search.

The company's quarterly loss of $0.02 per share exceeded the Zacks Consensus Estimate, which had predicted a loss of $0.06 per share. This performance indicates an improvement from the loss of $0.05 per share recorded a year ago, showcasing a 66.67% beat. However, Bridgeline Digital's revenue for the quarter ending March 2024 was below expectations, marking a decrease from the year-ago revenues of $4.09 million. This inconsistency in meeting revenue estimates, with only one success in surpassing consensus revenue estimates over the past four quarters, highlights the challenges BLIN faces in a highly competitive market.

The company's President and CEO, Ari Kahn, emphasized the significance of their Zeus product launch, which is expected to be a key sales driver in 2024 and beyond. The success of Zeus, with its Smart Search technology, is supported by strategic partnerships with platforms like Optimizely and Big Commerce. Despite these strategic moves, the company's total revenue of $3.8 million for the fiscal second quarter reflects a slight decrease from the previous year's $4.1 million, underscoring the competitive pressures and the need for continuous innovation in the industry.

BLIN's financial metrics reveal a mixed picture. With a price-to-sales ratio (TTM) of approximately 0.86 and an EV-to-sales ratio (TTM) of about 0.83, the company is valued relatively modestly in the market. However, its earnings yield (TTM) of -0.76% and a current ratio (TTM) of approximately 0.69 suggest challenges in profitability and liquidity. The low debt-to-equity ratio (TTM) of 0.08 indicates a conservative approach to leverage, which could be a stabilizing factor for the company amidst its financial challenges.

In summary, Bridgeline Digital's recent earnings report reflects the company's ongoing efforts to navigate the competitive landscape of the Internet-based services industry through innovation and strategic partnerships. Despite the challenges in meeting revenue expectations and maintaining liquidity, BLIN's focus on AI-powered solutions like Zeus could pave the way for future growth and stability.