Bridgeline Reports Financial Results for the Second Quarter and for First Six Months of Fiscal 2010

May 17, 2010

Woburn, MA, May 14, 2010- Bridgeline Digital, Inc. (NASDAQ: BLIN), a developer of award winning web application management software and award-winning interactive technology solutions, today announced financial results for its second quarter and six month period ended March 31, 2010.

Highlights from the second quarter of fiscal 2010 include:
  • iAPPS Content Manager won the 2010 CODiE Award as the Best Web Content Management Product. The CODiE awards are recognized as one of the best-established and most comprehensive technology awards in the world.
  • Bridgeline had 636 customers, of which 490 or 77% of these customers paid a monthly subscription fee or a monthly managed service fee.
  • Non-GAAP adjusted net income of $166 thousand
  • Income from operations of $30 thousand and net income of $20 thousand
  • Adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization) and before stock compensation of $528 thousand
  • A balance sheet at March 31, 2010 with total assets of $25.4 million and only $5.1 million in total liabilities.
  • Bridgeline acquired TMX Interactive in May 2010, expanding its presence into the Philadelphia marketplace.
Highlights from the first six months of fiscal 2010 include:
  • Non-GAAP adjusted net income of $637 thousand
  • Income from operations of $272 thousand and net income of $240 thousand
  • Adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization) and before stock compensation of $1,216

“While our pipeline remained strong over the past 6 months we have seen consistent macroeconomic uncertainties cause a lot of our customers to delay their planned spending," stated Thomas Massie, Chairman and Chief Executive Officer of Bridgeline. “However, we have recently begun to see our customer decision-making speed up and we are excited about the outlook for the remaining two quarters of 2010."

Recurring Revenue Trends

Of Bridgeline’s 636 customers as of March 31, 2010, 490 or 77% paid either a monthly subscription license fee or a managed service fee. Bridgeline’s retention rate of recurring revenue customers for the three months ended March 31, 2010 was 70%.

On an annualized basis, recurring revenue for the quarter ended March 31, 2010, was $3.2 million, compared with annualized recurring revenue of $3.4 million for the same period of the prior year. Annualized recurring revenue is derived by multiplying the actual results for the quarter by four.



  Three Months Ended March 31
  2010 2009
Annualized Recurring Revenue $3,223,000 $3,368,000
Year over Year Change % (4%)  
Retention Rate 70%

Annualized recurring revenue, exclusive of managed service hosting, was $1.2 million for the three months ended March 31, 2010, compared with $1.1 million for the same period one year ago, an increase of 9%.

Results of Operations for the Three Months Ended March 31, 2010, Compared to March 31, 2009

For the three months ended March 31, 2010, our revenue was $5.4 million compared with $6.1 million for the same period of 2009, a decrease of 11%. Gross profit was $2.8 million compared with $3.4 million for the same period of 2009, representing a decrease of 18%. Gross profit margins were 51.8% compared with 56.0% for the same period of 2009. Income from operations was $30 thousand compared with $251 thousand for the same period of 2009. Net income for the three month period was $20 thousand compared with $218 thousand in the same period of 2009. Earnings per diluted share were $-0- compared with $.02 for the same period of the prior year. Non-GAAP adjusted net income was $166 thousand and non-GAAP adjusted earnings per diluted share was $.01 for the three months ended March 31, 2010, compared with $393 thousand and $.03 for the corresponding period of 2009.

Results of Operations for the Six Months Ended March 31, 2010, Compared to March 31, 2009

For the six months ended March 31, 2010, our revenue was $10.9 million compared with $12.6 million for the same period of 2009, a decrease of 13%. Gross profit was $5.8 million compared with $7.0 million for the same period of 2009, representing a decrease of 17%. Gross profit margins were 53.6% compared with 55.6% for the same period of 2009. Income from operations was $272 thousand compared with $438 thousand for the same period of 2009. Net income for the six month period was $240 thousand compared with $383 thousand in the same period of 2009. Earnings per diluted share were $.02 compared with $.04 for the same period of the prior year. Non-GAAP adjusted net income was $637 thousand and non-GAAP adjusted earnings per diluted share was $.05 in for the six months ended March 31, 2010, compared with $874 thousand and $.08 for the corresponding period of 2009.

For further information, please refer to our quarterly report on Form 10-Q for the period ended March 31, 2010 as filed with the Securities and Exchange Commission.

Non-GAAP Financial Measures

This press release contains the following non-GAAP financial measures: non-GAAP adjusted net income, non-GAAP adjusted earnings per diluted share, Adjusted EBITDA and Adjusted EBITDA per diluted share.

Non-GAAP adjusted net income and non-GAAP adjusted earnings per diluted share are calculated as net income or net income per share on a diluted basis, excluding, where applicable, impairment charges, amortization of intangible assets, stock based compensation and the related tax effects.

Adjusted EBITDA and Adjusted EBITDA per diluted share is defined as earnings before interest, taxes, depreciation and amortization and before stock compensation and impairment charges (“EBITDA”). Bridgeline uses Adjusted EBITDA as a supplemental measure of our performance that is not required by, or presented in accordance with, accounting principles generally accepted in the United States (“GAAP”).

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. In order 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 are included in this press release, and not to rely on any single financial measure to evaluate Bridgeline's business.

Our definitions of non-GAAP adjusted net income and Adjusted EBITDA may differ from and therefore may not be comparable with similarly titled measures used by other companies, thereby limiting its usefulness as a comparative measure. Because of the limitations that non-GAAP adjusted net income and Adjusted EBITDA 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.

Subsequent Event

On May 11, 2010 Bridgeline Digital announced the acquisition of selective assets of TMX Interactive expanding Bridgeline Digital’s presence into the Philadelphia region.

Founded in 1999, TMX Interactive was an award-wining interactive technology company that provided web application development, web design, usability, and content management system implementation services for its customers. In 2005, 2006, 2007, and 2008, TMX won numerous industry related awards and was recognized by the Internet Advertising Competition (IAC) as one of the top Interactive Companies in the United States. In 2009, Ektron, a developer of web content management software, recognized TMX as its “Rookie Partner of the Year”.

TMX Interactive had annual sales of approximately $2.4 million in 2009 and is headquartered just outside of Philadelphia, Pennsylvania servicing a .NET customer base that includes LG Electronics, Northwestern Mutual, PNC Bank, and Sony.

No revenue, gross profit margin, or income associated with the TMX acquisitions have been recorded in Bridgeline’s second quarter of 2010 results; however some related acquisition expenses are recorded in this period.

Bridgeline Digital acquired TMX Interactive for $1.7 million in a combination of cash, debt, earn out, and deferred revenue consideration.



BRIDGELINE DIGITAL, INC.

RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(Dollars in thousands, except share and per share data)

  Three Months Ended March 31, six Months Ended March 31,
2010 2009 2010 2009
Reconciliation of GAAP net income to non-GAAP adjusted net income
   GAAP net income $ 20 $ 218 $ 240 $ 383
   Amortization of intangible assets   142   44   283   234
   Stock based compensation   103   145   173   282
   Tax effect of non-GAAP adjustments   (99)   (14)   (59)   (25)
   Non-GAAP adjusted net income   166   393   637   874
 
Reconciliation of GAAP earnings per diluted share to non-GAAP adjusted earnings per diluted share                
   GAAP earnings per diluted share $ -- $ .02 $ .02 $ .04
   Amortization of intangible assets   .01   --   .02   .02
   Stock based compensation   .01   .01   .01   .02
   Tax effect of non-GAAP adjustments   (.01)   --   --   --
   Non-GAAP adjusted earnings per diluted share $ .01 $ .03 $ .05 $ .08
Reconciliation of GAAP net income to Adjusted EBITDA
   GAAP net income $ 20 $ 218   240   383
   Taxes   15   20   31   20
   Interest   (5)   13   1   35
   Amortization of intangible assets   142   44   283   234
   Depreciation   187   205   371   402
   EBITDA   359   500   926   1,074
   Other amortization   66   54   117   108
   Stock based compensation   103   145   173   282
   Adjusted EBITDA $ 528 $ 699 $ 1,216 $ 1,464
Reconciliation of GAAP net earnings per diluted share to Adjusted EBITDA per diluted share                
   GAAP net earnings per diluted share $ -- $ 0.2 $ 0.2 $ .03
   Taxes   --   --   --   .01
   Interest   --   --   --   .01
   Amortization of intangible assets   .01   .00   .02   .02
   Depreciation   .02   .02   .03   .03
   Other amortization   --   .01   .01   .01
   Stock based compensation   .01   .01   .02   .02
   Adjusted EBITDA per diluted share $ .04 $ .06 $ .10 $ .13



BRIDGELINE DIGITAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share and per share data)

  Three Months Ended March 31, Six Months Ended March 31,
2010 2009 2010 2009
Revenue:
   Web application development services $ 4,525 $ 5,126 $ 9,138 $ 10,674
   Managed service hosting   506   656   1,000   1,254
   Subscription and perpetual licenses   356   317   728   644
    Total revenue   5,387   6,099   10,866   12,572
Cost of revenue:                
   Web application development services   2,273   2,364   4,451   5,005
   Managed service hosting services   159   171   288   305
   Subscription and perpetual licenses   167   147   300   270
     Total cost of revenue   2,599   2,682   5,039   5,580
     Gross profit   2,788   3,417   5,827   6,992
Operating expenses:
   Sales and marketing 1,170 1,628 2,420 3,258
   General and administrative   1,032   1,027   2,201   2,069
   Research and development   250   284   325   635
   Depreciation and amortization   306   227   609   592
    Total operating expenses   2,758   3,166   5,555   6,554
Income from operations   30   251   272   438
   Interest income (expense) net   5   (13)   (1)   (35)
Income before income taxes   35   238   271   403
   Income taxes   15   20   31   20
Net income $ 20 $ 218 $ 240 $ 383
Net income per share:                
   Basic $ -- $ 0.2 $ 0.2 $ .04
   Diluted $ -- $ .02 $ .02 $ .04
Number of weighted average shares:                
   Basic   11,186,145   11,012,808   11,184,156   10,891,537
   Diluted   11,755,919   11,058,933   11,650,060   10,938,201



BRIDGELINE DIGITAL, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share data)

  March 31,2010 September 30, 2009
Assets
Current assets:
   Cash and cash equivalents $ 3,293 $ 3,060
   Accounts receivable and unbilled receivables, net   3,724   3,468
   Prepaid expenses and other current assets   367   320
     Total current assets   7,384   6,848
Equipment and improvements, net   1,210   1,448
Intangible assets, net   1.207   1,490
Goodwill, net   14,656   13,899
Other assets   921   570
     Total assets $ 25,378 $ 24,255
 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:        
   Accounts payable $ 729 $ 714
   Accrued liabilities   756   786
   Accrued earnouts   287   408
   Line of credit   1,650   1,000
   Capital lease obligations, current   49   77
   Deferred revenue   1,139   890
     Total current liabilities   4,610   3,875
Capital lease obligations, net of current portion   48   62
Other long term liabilities   411   414
     Total liabilities   5,069   4,351
 
Commitments and contingencies
Shareholders’ equity:
   Preferred stock — $0.001 par value; 1,000,000 shares authorized;none issued and outstanding   --   --
   Common stock — $0.001 par value; 20,000,000 shares authorized; 11,188,208 and 11,182,209 shares issued and outstanding,respectively   11   11
   Additional paid-in capital   35,798   35,620
   Accumulated deficit   (15,371)   (15,611)
   Accumulated other comprehensive income   (129)   (116)
     Total stockholders’ equity   20,309   19,904
     Total liabilities and stockholders’ equity $ 25,378 $ 24,255



About Bridgeline Digital, Inc

Bridgeline is a developer of SaaS-based web application management software and award-winning interactive technology solutions that help organizations optimize business processes. The iAPPS Product Suite is an innovative SaaS solution that unifies Content Management, Analytics, eCommerce, and eMarketing capabilities – enabling business users to swiftly enhance and optimize the value of their web properties.

Combined with award-winning application development services by Microsoft Gold Certified development teams, Bridgeline helps customers to cost-effectively maximize the value of their rapidly changing web applications. Bridgeline's teams of developers specialize in web application development, usability engineering, SharePoint development, rich media development, and search engine optimization.

Bridgeline is headquartered near Boston with additional locations in Atlanta, Chicago, Cleveland, Denver, New York, Philadelphia, Washington, D.C., and Bangalore, India. Bridgeline currently has over 600 customers ranging from middle market organizations to divisions within Fortune 1,000 companies that include: Healthcore, Sun Chemical, Marriott International, Berkshire Life, PODS, Honeywell, Budget Rental Car, Washington Redskins, Berkshire Bank, National Financial Partners, The William T. Grant Foundation, DTCC, Cadaret, Grant & Co., National Insurance Crime Bureau, the American Academy of Pediatrics, and Shaw Industries (a Berkshire Hathaway company). To learn more about Bridgeline, please visit www.blinedigital.com.

Safe Harbor 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 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 forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions, including, but not limited to, the impact of the global financial deterioration on our business, our inability to manage our future growth effectively or profitably, our license renewal rate, the impact of competition and our ability to maintain margins or market share, the performance of our products, our ability to protect our proprietary technology, the security of our software, our ability to maintain our listing on the Nasdaq Capital Market, our dependence on our management team and key personnel, and our ability to hire and retain future key personnel, 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. We expressly disclaim any obligation to update any forward-looking statement.

 

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