Bridgeline Digital Announces Second Quarter and First Six Months of Fiscal 2016 Financial Results

Company Reports Positive Adjusted EBITDA for the Third Consecutive Quarter ~ Gross Margin Improved to 53% in the Second Quarter of Fiscal 2016

Burlington, MA | May 12, 2016

Bridgeline Digital, Inc. (NASDAQ:BLIN), The Digital Engagement Company™, today announced financial results for its second quarter ended March 31, 2016.

“Bridgeline is well positioned to expand market share and drive innovative value for our customers”, said Ari Kahn, Bridgeline’s President and Chief Executive Officer.  “Our products are driving the Company’s transformation to a financially stronger SaaS business model with higher license revenue and recurring revenue.  We are also pleased to have generated positive Adjusted EBITDA for the third consecutive quarter and are focused on continuing to increase shareholder value.”

Second Quarter Highlights:

  • Adjusted EBITDA improved by $1.2 million to $25 thousand in the second quarter of fiscal 2016, compared to loss of ($1.2) million in the second quarter of fiscal 2015.
  • Subscription and perpetual license revenue increased 12% to $1.5 million in the second quarter of fiscal 2016, compared to $1.4 million in the second quarter of fiscal 2015.
  • License and hosting revenue combined in the second quarter of fiscal 2016 make up 44% of total revenue, compared to 36% of total revenue in the second quarter of fiscal 2015.
  • Recurring revenue increased 13% to $1.8 million in the second quarter of fiscal 2016, compared to $1.6 million in the second quarter of fiscal 2015.
  • Gross profit increased $506 thousand to $2.2 million in the second quarter of fiscal 2016, compared to $1.7 million in the second quarter of fiscal 2015.
  • Gross margin improved to 53% in the second quarter of fiscal 2016, from 36% in the second quarter of fiscal 2015.
  • Operating expenses were reduced by 24% (excluding restructuring charges) to $2.7 million in the second quarter of fiscal 2016 from $3.6 million in the second quarter of fiscal 2015.

Other Highlights

  • Today the Company announced that the Bridgeline Digital Board of Directors appointed Ari Kahn as President and CEO, effective immediately.  Ari is an industry veteran of the content and digital experience market and a co-founder and former Chief Technology Officer of FatWire, sold to Oracle in 2011.
  • On April 29, 2016, the stockholders of the Company approved the issuance of common stock to convert up to $6 million of the outstanding debt into equity.  The Company expects to complete this conversion process in the third quarter of fiscal 2016.
  • Also on April 29, 2016, the Company’s stockholders approved the issuance of convertible term notes that mandatorily convert into common stock in the amount of up to $2 million to provide additional working capital for the Company.

Conference Call Information

Bridgeline Digital will host a conference call to discuss second quarter 2016 results at 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, amortization of intangible assets, stock-based compensation, restructuring charges, preferred stock dividends and any related tax effects.  

Adjusted EBITDA and Adjusted EBITDA per diluted share are defined as earnings before interest, taxes, depreciation and amortization, stock-based compensation charges, restructuring charges, preferred stock dividends and any related tax effects. Bridgeline uses non-GAAP adjusted net income and Adjusted EBITDA 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”).

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 financial performance.

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 measures. As a result 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.

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," or 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 weakness in the U.S. and international economies on our business, our inability to manage our future growth effectively or profitably, fluctuations in our revenue and quarterly results, our license renewal rate, the impact of competition and our ability to maintain margins or market share, the limited market for our common stock, the volatility of the market price of our common stock, the ability to maintain our listing on the NASDAQ Capital market, the effect of the delisting of our common stock from the NASDAQ Capital Market, the performance of our products, our ability to respond to rapidly evolving technology and customer requirements, our ability to protect our proprietary technology, the security of our software, our dependence on our management team and key personnel, our ability to hire and retain future key personnel, 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. We expressly disclaim any obligation to update any forward-looking statement.

About Bridgeline Digital

Bridgeline Digital, The Digital Engagement Company™, helps customers maximize the performance of their full digital experience – from websites and intranets to online stores and campaigns. Bridgeline’s iAPPS® platform deeply integrates Web Content Management, eCommerce, eMarketing, Social Media management, and Web Analytics to help marketers deliver digital experiences that attract, engage and convert their customers across all channels. Headquartered in Burlington, Mass., Bridgeline has thousands of quality customers that range from small- and medium-sized organizations to Fortune 1000 companies.  To learn more, please visit www.bridgeline.com or call (800) 603-9936.

                       
      BRIDGELINE DIGITAL, INC.  
      RECONCILIATION OF GAAP TO NON-GAAP RESULTS  
    (Dollars in thousands, except per share data)  
                       
                       
        Three Months Ended   Six Months Ended  
        March 31,   March 31,  
          2016       2015       2016       2015    
  Reconciliation of GAAP net loss to                   
  non-GAAP adjusted net loss:                  
    GAAP net loss   $ (1,037 )   $ (2,103 )   $ (2,417 )   $ (4,234 )  
    Amortization of intangible assets     108       154       215       306    
    Stock-based compensation     60       73       132       162    
    Restructuring charges     194       -       780       -    
    Preferred stock dividends     32       30       64       51    
    Non-GAAP adjusted net loss   $ (643 )   $ (1,846 )   $ (1,226 )   $ (3,715 )  
                       
                       
  Reconciliation of GAAP net loss per share to                  
  non-GAAP adjusted net loss per share:                  
    GAAP net loss per share   $   (0.20 )   $   (0.49 )   $   (0.46 )   $   (0.98 )  
    Amortization of intangible assets       0.02         0.04         0.04         0.07    
    Stock-based compensation       0.01         0.02         0.03         0.05    
    Restructuring charges       0.04         -          0.15         -     
    Preferred stock dividends       0.01         -          0.01         -     
    Non-GAAP adjusted net loss per share   $   (0.12 )   $   (0.43 )   $   (0.23 )   $   (0.86 )  
                       
  Reconciliation of GAAP net loss to Adjusted EBITDA:                  
    GAAP net loss   $   (1,037 )   $  (2,103 )   $   (2,417 )   $   (4,234 )  
    Provision for income tax       32         28         38         63    
    Interest expense, net       296         203         579         366    
    Amortization of intangible assets       108         154         215         306    
    Depreciation       208         277         439         556    
    Restructuring charges       194         -         780         -    
    Other amortization       132         164         260         310    
    Stock-based compensation       60         73         132         162    
    Preferred stock dividends       32         30         64         51    
    Adjusted EBITDA   $   25     $  (1,174 )   $   90     $   (2,420 )  
                       
                       
  Reconciliation of GAAP net loss per share to                   
  Adjusted EBITDA per share:                  
    GAAP net loss per share   $   (0.20 )   $   (0.49 )   $   (0.46 )   $   (0.98 )  
    Provision for income tax       0.01         0.01         0.01         0.01    
    Interest expense, net       0.05         0.05         0.10         0.09    
    Amortization of intangible assets       0.02         0.04         0.04         0.07    
    Depreciation       0.04         0.06         0.08         0.13    
    Restructuring charges       0.04         -          0.16         -     
    Other amortization       0.03         0.04         0.05         0.07    
    Stock-based compensation       0.01         0.02         0.03         0.05    
    Preferred stock dividends       0.01         -          0.01         -     
    Adjusted EBITDA per share   $   0.01     $   (0.27 )   $   0.02     $   (0.56 )  
                       
                       

 

                       
  BRIDGELINE DIGITAL, INC.  
  CONSOLIDATED STATEMENTS OF OPERATIONS  
  (Dollars in thousands, except share and per share data)  
  (Unaudited)  
                       
          Three Months Ended   Six Months Ended  
          March 31,   March 31,  
            2016       2015       2016     2015    
  Revenue:                
    Digital engagement services   $   2,389     $   3,057     $   4,762   $   6,271    
    Subscription and perpetual licenses       1,522         1,359     $   3,045       2,755    
    Managed service hosting       320         371         667       773    
      Total revenue       4,231         4,787         8,474       9,799    
                       
  Cost of revenue:                
    Digital engagement services       1,435         2,513         2,889       5,076    
    Subscription and perpetual licenses       474         463         1,032       893    
    Managed service hosting       79         74         156       148    
      Total cost of revenue       1,988         3,050         4,077       6,117    
      Gross profit       2,243         1,737         4,397       3,682    
                       
  Operating expenses:                
    Sales and marketing       1,247         1,534         2,315       3,344    
    General and administrative       764         1,136         1,626       2,129    
    Research and development       377         467         718       1,069    
    Depreciation and amortization       338         442         694       894    
    Restructuring charges       194         -         780       -    
      Total operating expenses       2,920         3,579         6,133       7,436    
  Loss from operations       (677 )       (1,842 )       (1,736 )     (3,754 )  
    Interest expense, net       (296 )       (203 )       (579 )     (366 )  
  Loss before income taxes       (973 )       (2,045 )       (2,315 )     (4,120 )  
    Provision for income taxes       32         28         38       63    
  Net loss     $   (1,005 )   $   (2,073 )   $   (2,353 ) $   (4,183 )  
  Dividends on convertible preferred stock       (32 )       (30 )       (64 )     (51 )  
  Net loss applicable to common shareholders   $   (1,037 )   $   (2,103 )   $   (2,417 ) $   (4,234 )  
  Net loss per share attributable to common shareholders:              
    Basic and diluted   $   (0.20 )   $   (0.49 )   $   (0.46 ) $   (0.98 )  
  Number of weighted average shares outstanding:                
    Basic and diluted       5,267,584         4,271,508         5,216,197       4,307,265    
                       
                       

 

                 
  BRIDGELINE DIGITAL, INC.  
  CONSOLIDATED BALANCE SHEETS  
  (Dollars in thousands, except share and per share data)  
  (Unaudited)  
                 
    ASSETS             
          March 31,   September 30,  
            2016       2015    
  Current Assets:          
    Cash and cash equivalents   $   154     $   337    
    Accounts receivable and unbilled revenues, net       2,239         2,463    
    Prepaid expenses and other current assets       522         680    
    Total current assets         2,915         3,480    
  Equipment and improvements, net       869         1,315    
  Intangible assets, net       813         1,028    
  Goodwill       12,641         12,641    
  Other assets       498         723    
    Total assets     $   17,736     $ 19,187    
                 
                 
     LIABILITIES AND STOCKHOLDERS' EQUITY            
                 
  Current liabilities:          
    Accounts payable   $   1,258     $   1,626    
    Accrued liabilities       1,442         1,046    
    Accrued earnouts, current       226         468    
    Debt, current       5,315         92    
    Capital lease obligations, current       115         320    
    Deferred revenue       1,610         1,542    
    Total current liabilities         9,966         5,094    
  Debt, net of current portion       2,931         7,695    
  Other long term liabilities       715         726    
    Total liabilities       13,612       13,515    
                 
  Commitments and contingencies          
                 
  Stockholders' equity:          
    Preferred stock - $0.001 par value; 1,000,000 shares authorized;          
    214,614 and 208,222, issued and outstanding, respectively (liquidation preference $2,178)         -         -    
    Common stock - $0.001 par value; 50,000,000 shares authorized;          
    5,434,306 and 4,637,684 shares issued and outstanding, respectively         5         5    
    Additional paid-in-capital       51,300         50,434    
    Accumulated deficit       (46,828 )       (44,411 )  
    Accumulated other comprehensive loss       (353 )       (356 )  
    Total stockholders' equity         4,124         5,672    
    Total liabilities and stockholders' equity     $   17,736     $   19,187    
                 
                 
Contact: Bridgeline Digital, Inc.
Michael D. Prinn
Executive Vice President & Chief Financial Officer
781.497.3016
mprinn@bridgeline.com