Q2 Fiscal 2016 Financials

May 12, 2016 Quinn Murphy 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 2016BURLINGTON, Mass., May. 12, 2016 (GLOBE NEWSWIRE) -- Bridgeline Digital, Inc. (NASDAQ:BLIN), a provider in cloud-based Web Content Management, eCommerce and Marketing Automation software, 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 HighlightsToday 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 InformationBridgeline 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 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, 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 and charges on conversion of debt, 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 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," 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 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 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 About 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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