Bridgeline Digital Reports Financial Results for the First Quarter of Fiscal 2012

Burlington, MA | February 14, 2012

Bridgeline Digital, Inc. (NASDAQ: BLIN), developer of the award-winning iAPPS web experience management (WEM) product suite and related interactive business technology solutions, today announced financial results for its first quarter of fiscal 2012 ended December 31, 2011.

Highlights from Q1 Fiscal Year 2012 include:
  • Revenue in the first quarter of 2012 was $6.5 million, compared to revenue of $6.5 million in the first quarter of 2011.
  • Recurring revenue increased 32% in the first quarter to $1 million, compared to $771 thousand in the first quarter of 2011.
  • iAPPS revenue increased 28% in the first quarter to $3.6 million, compared to $2.8 million in the first quarter of 2011.
  • Subscription, perpetual licenses and managed services revenue increased 23% to $1.2 million in the first quarter, compared to $985 thousand in the first quarter of 2011.
  • Total gross margin increased to 53% in the first quarter compared to 49% in the first quarter of 2011.
  • Adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization and stock-based compensation) was $428 thousand compared to $485 thousand in the first quarter of 2011.
  • Non-GAAP net income was $73 thousand compared to $167 thousand in the first quarter of 2011.
  • Bridgeline Digital was ranked the 21st fastest growing Internet and Software Services Company, Globally, by the International Business Times.
One-Time, Non-Cash Impairment Charge

In the first quarter of fiscal 2012, the Company recorded a one-time, non-cash impairment charge to operations of $281 thousand related to an asset assumed in a 2010 acquisition. Due to the Company's decision in the first quarter to discontinue servicing low margin, non-iAPPS development services related to government contracts, it was determined that a portion of an intangible asset was impaired. The one-time, non-cash impairment charge is included in operating expenses for the first quarter.

Fiscal 2012 Outlook

Bridgeline Digital expects Fiscal 2012 revenue to be in the range of $27 million to $29 million. The Company's revenue strategy will continue to focus on higher gross margin iAPPS driven opportunities, while discontinuing relationships with lower margin based customers, and this strategy will reflect a reduction of approximately $2.5 million in fiscal 2012 from existing customer relationships.

In addition the Company expects to continue to generate positive non-GAAP income and positive Adjusted EBITDA for fiscal 2012.

Bridgeline Digital recently signed an agreement with a strategic Fortune 500 Company. We believe this alliance will be a significant catalyst for iAPPS and Bridgeline for years to come. Due to the nature of iAPPS integration lead times, Bridgeline does not believe it will see a financial impact of the newly formed iAPPS alliance until its fiscal fourth quarter of 2012. Bridgeline plans to announce the details of the powerful iAPPS alliance in mid 2012.

Conference Call Today at 4:30pm EST

Bridgeline Digital will host a discussion of its first quarter results at approximately 4:30 p.m. ET today. To listen to the conference call, please dial (877) 837-3910 within the U.S. or (973) 796-5077 for international callers.

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 are defined as earnings before interest, taxes, depreciation and amortization and before stock compensation and impairment charges. 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 is 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 their usefulness as 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.



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

Three Months Ended
December 31
    2011   2010
Reconciliation of GAAP net loss to non-GAAP adjusted net income
   GAAP net loss $ (463) $ (156)
   Amortization of intangible assets 195 208
   Impairment of intanglible assets 281 -
   Stock-based compensation 60 115
   Non-GAAP adjusted net income $ 73 $ 167
Reconciliation of GAAP loss per diluted share to non-GAAP adjusted earnings per diluted share
   GAAP net loss per share $ (.04) $ (.01)
   Amortization of intangible assets .02 .01
   Impairment of intanglible assets .02 -
   Stock based compensation .01 .01
   Non-GAAP adjusted net income $ .01 $ .01
Reconciliation of GAAP net loss to Adjusted EBITDA
   GAAP net loss $ (463) $ (156)
   Provision for income tax 21 21
   Interest expense (income) net 64 51
   Amortization of intangible assets 195 208
   Impairment of intangible assets 281 -
   Depreciation 220 162
   EBITDA   318   286
   Other amortization 50 84
   Stock based compensation   60   115
   Adjusted EBITDA $ 428 $ 485
Reconciliation of GAAP net loss per diluted share to Adjusted EBITDA per diluted share
   GAAP net loss per share $ (.04) $ (.01)
   Provision for income tax - -
   Interest expense (income) net .01 -
   Amortization of intangible assets .02 .02
   Impairment of intangible asset .02 -
   Depreciation   .02   .02
   Other amortization - .01
    Stock based compensation - .01
   Adjusted EBITDA $ .03 $ .05

BRIDGELINE DIGITAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share and per share data)

Three Months Ended
December 31
    2011   2010
Revenue:
   Web application development services $ 5,308 $ 5,544
   Managed service hosting 616 466
   Subscription and perpetual licenses 593 519
     Total revenue 6,517 6,529
Cost of revenue:
   Web application development services 2,855 3,014
   Managed service hosting services 106 146
   Subscription and perpetual licenses 120 182
     Total cost of revenue 3,081 3,342
    Gross profit 3,436 3,187
Operating expenses:
   Sales and marketing 1,715 1,644
   General and administrative 1,000 897
   Research and development 403 382
   Depreciation and amortization 415 348
   Impairment of intangible asset 281 -
     Total operating expenses 3,814 3,271
Loss from operations (378) (84)
   Interest income (expense) net (64) (51)
Loss before income taxes (442) (135)
   Provision for income taxes 21 21
Net Loss $ (463) $ (156)
Net Loss per share:
   Basic and diluted $ (0.04) $ (0.01
Number of weighted average shares:
   Basic and diluted 12,319,643 11,883,860

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

ASSETS
    Dec 31, 2011   Sep 30, 2011
Current assets:
   Cash and cash equivalents $ 1,684 $ 2,528
   Accounts receivable and unbilled receivables, net 4,132 4,274
   Prepaid expenses and other current assets 712 494
     Total current assets 6,528 7,296
Equipment and improvements, net 2,218 1,779
Intangible assets, net 1,461 1,527
Goodwill 20,727 20,122
Other assets 704 685
     Total assets $ 31,638 $ 31,409
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
   Accounts payable $ 872 $ 1,291
   Accrued liabilities 853 1,081
   Accrued Earnouts, current 572 295
   Debt, Current 667 1,750
   Capital lease obligations, current 235 216
   Deferred revenue 1,533 1,169
     Total current liabilities 4,732 5,802
   Accrued Earnouts, net of current portion 1,122 772
      Debt, net of current portion 4,098 3,017
Capital lease obligations, net of current portion 209 215
Other long term liabilities 529 395
     Total liabilities $ 10,690 $ 10,201
Commitments and contingencies
Stockholders’ 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; 12,472,873 and 12,306,207 shares issued and outstanding, respectively 12 12
   Additional paid-in capital 38,292 38,083
   Accumulated deficit (17,233) (16,770)
   Accumulated other comprehensive income (123) (117)
     Total stockholders’ equity 20,948 21,208
     Total liabilities and stockholders’ equity $ 31,638 $ 31,409



About Bridgeline Software

Bridgeline Digital is a developer of an award-winning Web Experience Management (WEM) product suite named iAPPS® and award-winning interactive technology solutions that help organizations optimize business processes. Bridgeline's iAPPS product suite combined with its interactive development capabilities assists customers in maximizing revenue, improving customer service and loyalty, enhancing employee knowledge, and reducing operational costs by leveraging web based technologies.

Bridgeline Digital's iAPPS product suite provides solutions that deeply integrate Web Content Management, eCommerce, eMarketing, and web Analytics capabilities within the mission critical website, on-line stores, intranets, extranets, or portals in which they reside; enabling business users to enhance and optimize the value of their web properties. Combined with award-winning interactive development capabilities, Bridgeline helps customers cost-effectively accommodate the changing needs of today's rapidly evolving web properties.

The iAPPS product suite is delivered through a Cloud-based SaaS business model, whose flexible architecture provides customers with state of the art deployment providing maintenance, daily technical operation and support; or via a traditional perpetual licensing business model, in which the iAPPS software resides on a dedicated server in either the customer's facility or Bridgeline's co-managed hosting facility.

Bridgeline Digital is headquartered near Boston with additional locations in Atlanta, Baltimore, Chicago, Denver, New York, Philadelphia, Tampa, and Bangalore, India. Bridgeline Digital has hundreds of customers ranging from middle market organizations to divisions within Fortune 1,000 companies that include: L'Oreal, Sun Chemical, Honeywell, Blue Cross Blue Shield, Novartis, Shaw Flooring, Marriott International, Berkshire Life, Tosoh, Dover, ViaWest, PODS, Budget Rent-a-Car, AARP, Cadaret, Grant & Co., CFO Magazine, and the American Academy of Pediatrics. To learn more about Bridgeline Digital, please visitwww.bridgelinedigital.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 the risks described in our filings with the Securities and Exchange Commission that 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.