Q2 Fiscal 2010 Financials

May 17, 2010 Quinn Murphy Bridgeline Reports Financial Results for the Second Quarter and for First Six Months of Fiscal 2010 BURLINGTON, Mass., May 17, 2010 (GLOBE NEWSWIRE) -- Bridgeline Digital, Inc. (NASDAQ:BLIN), a provider in cloud-based Web Content Management, eCommerce and Marketing Automation software, 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 thousandIncome from operations of $30 thousand and net income of $20 thousandAdjusted EBITDA (Earnings before interest, taxes, depreciation and amortization) and before stock compensation of $528 thousandA 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 thousandIncome from operations of $272 thousand and net income of $240 thousandAdjusted 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 TrendsOf 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 2009Annualized Recurring Revenue $3,223,000 $3,368,000Year 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, 2009For 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, 2009For 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 MeasuresThis 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.Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995All 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 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 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, our ability to maintain an effective system of internal controls, or risks associated with our contracts with the U.S. federal government, 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. 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 31,2010200920102009Reconciliation 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$.08Reconciliation 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$1,464Reconciliation of GAAP net earnings per diluted share to Adjusted EBITDA per diluted share GAAP net earnings per diluted share$--$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$.10$.13BRIDGELINE DIGITAL, INC.CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except share and per share data) Three Months Ended March 31,Six Months Ended March 31,2010200920102009Revenue: 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 12,572Cost 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 6,992Operating expenses: Sales and marketing1,1701,6282,4203,258 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 6,554Income 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 20Net income$20$218$240$383Net income per share: Basic$--$0.2$0.2$.04 Diluted$--$.02$.02$.04Number 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 10,938,201BRIDGELINE DIGITAL, INC.CONSOLIDATED BALANCE SHEETS(Dollars in thousands, except share and per share data) March 31,2010September 30, 2009AssetsCurrent 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 6,848Equipment and improvements, net 1,210 1,448Intangible assets, net 1.207 1,490Goodwill, net 14,656 13,899Other 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 3,875Capital lease obligations, net of current portion 48 62Other long term liabilities 411 414 Total liabilities 5,069 4,351 Commitments and contingenciesShareholders’ 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$24,255About Bridgeline DigitalBridgeline 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 Unbound (formerly iAPPS®) platform deeply integrates Web Content Management, eCommerce, eMarketing, Social Media management, and Web Analytics to help marketers deliver digital experiences that attract, engage, nurture 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.

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