Bridgeline Digital, Inc.

Good afternoon, ladies and gentlemen, and welcome to BridgeLine Digital, Inc., second quarter 2020 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touchtone telephone. As a reminder, this conference may be recorded. I would now like to turn the conference over to your host, Mr. Mark Downey, Chief Financial Officer for Bridgeline Digital. Sir, please go ahead.

Thank you and good afternoon, everyone. My name is Mark Downey and I am the Chief Financial Officer for Bridgeline Digital. I am pleased to welcome you to our fiscal 2020 second quarter conference call. Before we begin, I would like to remind listeners that during this conference call, comments that we make regarding Bridgeline Digital that are not historical facts or forward-looking statements and are subject to risks and uncertainties that could cause such statements to differ materially from actual future events or results. These statements are made persuading to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The internal projections and beliefs upon which we base our expectations today may change over time and we undertake no obligation to inform you if they do. Results that we report today should not be considered as an indication of future performance. Changes in economic, business, competitive, technological, regulatory, and other factors could cause Bridgeline's action results to differ materially from those expressed or implied by the projections or forward-looking statements made today. For more detailed information about these factors and other risks that may impact our business, Please review the reports and documents filed from time to time by BridgeLine Digital with the Securities and Exchange Commission. Also, please note that on the call today, we will discuss some non-GAAP financial measures when discussing the company's financial performance. We provide a reconciliation of these non-GAAP measures to our GAAP financials in our earnings release. You can obtain a copy of our earnings release by visiting our website. I would now like to turn the call over to Eric Kahn, our president and CEO. Eric?

Thank you, Mark, and good afternoon, everyone. Bridgeline continues to see growth in subscription and license revenue, as well as improvement to our bottom line. Revenue increased 20 percent over this quarter last year, and license and subscription recurring revenue is up 42 percent. Customer renewals for licenses and subscriptions are the foundation for the future growth and remain strong today. An important focus for the business is its bottom line, which has also improved. Our strategic goal for this year remain on track, and specifically our profitability expectations have not changed. Net income is strong, but includes several non-cash adjustments. Adjusted EBITDA is a better metric for profitability, which we expect to be positive in the second half of this year. My heart goes out to all those hurt by the COVID-19 pandemic, which is first and foremost a health issue, but also an economic one. The pandemic will create predictable and several unpredictable challenges as well as opportunities. One challenge and opportunity is that both commerce and community will become even more enabled through the online world. This is Bridgeline's expertise, and we're here to help our customers and other businesses get the most out of their online stores and employee portals. We can expect elongated sales cycles and delays in team coordination that impact implementation timelines as businesses adjust. I expect Bridgeline to come out of this crisis even stronger than we were when we entered it with a more healthy bottom line, deep strategic value demonstrated to our customers and an efficient sales organization. I'll take a few minutes to share the impact we have seen due to the COVID-19 outbreak, the actions we've taken, and how it relates to our longer-term strategic plans. BridgeLine's operations have supported remote work for years, which is common for software companies. Our processes and culture continue to operate as efficiently today as our workforce at home as they did prior to the outbreak. We conduct daily video conferences, regular internally, as well as with our customers. And in fact, this afternoon, we have a company-wide Zoom scheduled, which helps maintain a strong teamwork and internal communications. We did cancel our biannual customer conference and have focused instead on one-on-one customer communications, including video conferences to maintain strong relationships. BridgeLine supports these customers by empowering their online commerce, enabling online communication with their customer and employees, and providing internal portals for their teams to collaborate. These capabilities are increasingly critical to our customers during the COVID-19 outbreak. We've participated in strategic conversations with our customers to ensure we can support their needs and to make suggestions on additional capabilities that we can provide to them that they may not be using already. This has resulted in some new sales within our existing customer base that may not have occurred had we not been in this outbreak. Some of our customers are impacted more greatly than we are, especially those with brick-and-mortar operations like restaurant chains, franchises of gyms and salons. In a few instances, our customers have requested extended payment terms, and in the spirit of compassion and partnership, we've worked with them in this regard, but this has been an exception Our DSO remains strong, so our customers have been able to make payments on time, and we don't expect that to become an issue. The primary economic impact to Bridgeline are slowdowns in implementations and enhancements to our customers' online stores as they reorganize themselves for remote work within their operations. Bridgeline's professional services team typically collaborates closely with our customers on these projects, so when our customer is not available for certain parts of the project must go on hold. Since these projects are billed time material basis, the delays impact services revenue and we saw this in March. We have not seen customer projects canceled and in fact, there's likely pent up demand but we have seen delays and with the summer upon us, we expect project delays to continue. So we've made some team adjustments that allow us to remain on track and achieve our profitability goals. throughout the rest of this year, we are structured to maintain strong professional services, gross margins, and also are prepared to respond to an uptick when our customers are ready to focus on their implementations and customizations. Again, we have not experienced and do not expect the COVID-19 outbreak impact subscription renewals, which account for the majority of our gross profit and revenue. In general, Customers have expressed that Bridgeline powered portals and web stores are expected to be an even more strategic part of their businesses going forward. They continue to renew their subscriptions to our software with several customers choosing multi-year renewal contracts to lock in pricing for 2021 and beyond. Furthermore, the upfront investment and collaboration required to replatform makes continued partnership with Bridgeline even more attractive for our customers during uncertain times. Our strongest demand is in our Celebros product line. Celebros provides immediate measurable growth in online revenue for our customers through its intelligent search capabilities. We recently published a study where Celebros helped the customer grow revenues by more than 30%. New engagements with Celebros do not require customization services, and therefore, Celebros has a more rapid sales cycle without the requirement of in-person meetings. Our Unbound and Orchestra product lines have several features that are out-of-the-box like Sellebrosis, such as online recommendation engines, marketing automation, campaign management, as well as coupons and promotion engines. Historically, those capabilities were bundled with our platform systems that require personalized services. We are separating these capabilities into independent product modules or bundling them with Celebros so that we'll be able to grow customer base through online and telephonic sales for these products as we do with Celebros. This is intended to reduce our customer acquisition costs and further increase subscription revenue relative to services revenue for the business. We announced this strategy prior to COVID-19 outbreak and structured the business around these types of inside sales. But from a new customer acquisition perspective, it is very much aligned with growth given the new constraints created by the pandemic. We have rebuilt our sales team around telephonic sales and are conserving much of our marketing budget until later in the year as we expect buying decisions to be a little bit slower this spring as companies adjust to the crisis. New customer acquisition in our second quarter included businesses in the U.S., Europe, and in Asia. The breadth of this geography is based on our out-of-the-box strategy and go-to-market strategy around telephonic sales. One of our recent wins was a retailer with over 2,300 stores. With the decline in foot traffic, our online commerce solution becomes even more strategic to their business. We recently launched an online site for a manufacturing business, offering office and safety products, including personal protection equipment, such as disposable face shields and social distancing markers for retail stores. Bridgeline helps this manufacturer increase online traffic by 65%. Bridgeline had 90 renewals for the quarter, booking over $1.5 million in subscriptions. Renewals include multinational biopharma company, an international chain of convenience stores with more than 50,000 locations, and a chain of pharmacies with nearly 10,000 locations. Overall, Bridgeline is structured to be a successful business during this downturn based on its existing customers and subscription contracts. We've been fortunate in that the strategic changes that we made to our R&D efforts prior to the outbreak and some changes to our sales structure are compatible with the different economic and social environment that we're in today. And the strategic value we provide to our customers positions us well for success in the long term. At this time, I'd like to turn over the call to our Chief Financial Officer, Mark Downey, to speak to the specifics in finance.