Bridgeline Digital, Inc.

Thank you for standing by, and welcome to Bridgeline Digital's third quarter 2023 earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. To remove yourself from the queue, you may press star 1-1 again. I would now like to hand the call over to CFO and Treasurer Thomas Windhausen. Please go ahead.

Thank you and good afternoon, everyone. Thank you for joining us today. My name is Thomas Windhouse and I'm the Chief Financial Officer at Bridgeline. I'm pleased to welcome you to our fiscal 2023 third quarter conference call. On the call with us this afternoon is Ari Kahn, Bridgeline's President and CEO, who will begin the call with a discussion of our business highlights. I'll then update you on our financial results for the quarter and we will conclude by taking questions. Before we begin, I'd like to remind listeners that during this conference call, comments that we make regarding bridge lines that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934 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 pursuant 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 expressly disclaim and assume no obligation to inform you if they do. The results of the 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 actual 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 have an impact on 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 this afternoon, we will discuss some non-GAAP financial measures when commenting on the company's financial performance. We provide a reconciliation of our gap financials to these non-gap measures in our earnings release. You can obtain a copy of our earnings release by visiting our website. I'd like now to turn the call over to Ari Kahn, Ridgeline's President and CEO. Thank you, Tom.

Good afternoon, everybody. In the third quarter, we made $1.2 million in new sales, including $600,000 in licenses, which will add $200,000 to our subscription license annual recurring revenue. Most new customers sign initial subscription terms for three years and typically renew for two successive one-year terms totaling five years worth of subscription. BridgeLine's core products, including Hawk Search and Recommendations, grew by over 15% CAGR and now account for 44% of our revenue. Our core products have over 98% revenue renewal. We also have legacy platform products, which we pivoted from in our E360 strategy as they had too expensive of a sales cycle and competed with companies like Salesforce, who we prefer to make a partner rather than a competitor. These products have great gross margins to fund innovation, but are not a focus of our company sales teams and declined this year with large customers reducing but not eliminating their licenses. Although this decline hits the growth of our core products, we expect our core products line to outstrip the decline of legacy products in the near future as its 15% CAGR will soon cause it to dominate our overall revenue, especially in license and subscription where nearly 50% of our revenue is already core. Not only will revenue soon be dominated by our growing core products, but that growth rate is expected to increase with some important upcoming events. Bridgeline will launch native integration with optimizely configured commerce in October. This integration allows for touchless sales to over a thousand optimizely customers where they can upgrade to HawkSearch with the click of a button. We already have eight pre-signed customers. And this will make us the only search product for the more than 1,000 Optimizely configured commerce customers. Many of these prospective customers are large businesses in need of our premier products. We will make a joint announcement with Optimizely at their October Optimizely user conference. Ridgeline's Bronco release is another important revenue driver for our core products that has already reduced our sales cycle from 12 weeks to less than 10 weeks and increases our total addressable market to now include companies who need a simple implementation without sacrificing features. Bronco accelerates sales with its out-of-the-box UI and its self-service portal. Another important core growth area that will be announced and released in November is our advanced analytics system, which is an upsell opportunity to our customers like Hewlett Packard who need more detailed information about the contribution of HawkSearch to their online revenue. Bridgeline will also release its Franchise Search Solution this year, making it the first site search provider to offer a site search product specifically for the franchise market. Bridgeline has already pre-signed its first customer with our Franchise Solution And with our deep experience in this segment, we expect to accelerate growth by being the only provider in this market. Hawk Search sales are largely driven through our platform partnerships with BigCommerce, Salesforce, and Optimizely. We also have agency partners, including XEngage and AmericanEagle.com, to drive new Hawk sales. This quarter, we announced the partnership with O-Bundle, a specialist in big commerce with over 500 big commerce customers who are now candidates to upgrade to Hawk Search. Sales in our third quarter included Aaron Equipment, one of the world's leading dealers in the packaging industry. Aaron Equipment selected Hawk Search for their B2B e-commerce site because of its real-time product indexing that allows customers to search and index data as it's being created or changed. We also signed Seattle Aviation, a worldwide aviation supplier who chose HawkSearch in partnership with Salesforce for personalized recommendations on its B2B commerce sites. Balkan Sports, a B2B paintball and sports retailer, selected HawkSearch to drive online business over its five e-commerce sites using HawkSearch multi-storefronts. Vulcan will be delivered in partnership with BigCommerce and O-Bundle. Designery, an importer and distributor of European designer-focused furniture, also purchased Hawk Search's multi-storefront to power multiple e-commerce sites powered with e-commerce. A big sale for this quarter included Repli, who is a property technology company that selected WooRank to power SEO for 500 websites, improve their keyword tracking, to analyze competitors, and report on core web vitals. Paul Byron Shue chose our AI-driven search to power its online business on the AV Commerce platform in partnership with Magico. Now we've got several Shue customers, including Converse, Reebok, Adidas, Foltest, an electrical online distributor, selected Bridgeline for its multilingual artificial intelligence and natural language processing search capabilities to power its online B2B catalog with over 80,000 products. And there were several other ones this quarter as well. Many of these new customers are the result of our go-to-market strategy that targets underservice verticals with Be Everywhere campaigns. And these verticals include B2B electrical supply, footwear, franchise, and B2B plumbing distribution. We recently announced a reseller partnership with AccessiBe, the market leader in web accessibility. AccessiBe helps over 180,000 companies, including PlayStation, Johnson & Johnson, and NBC, to identify and fix website compliance issues with the American Disability Act and similar legislation in Canada and Europe. BridgeLine will sell accessibility into our 600 customers, many of whom have active interest in accessibility, which not only increases their online sales ability, but also reduces litigation risk associated with compliance legislation. In the third quarter, BridgeLine delivered $3.9 million in revenue, including $3.2 million in subscription and license revenue and $700,000 in services. Subscription revenue was influenced this quarter by the full quarter reduction of a large customer we mentioned earlier, who's renewing for their ninth consecutive year on a legacy BridgeLine product, restructured their website, which reduced their subscription revenue. This quarter, over 200 of our customers whose subscription was eligible for renewal renewed, totaling $1 million in licenses. Our core product customers renewed at over 98%. Many customers renewed their subscription with a rate increase. Most customers start with a 36-month subscription, as mentioned earlier, and renew for two successive terms. Our subscription license revenue is 81% of total revenue for the quarter with new contracts in three years. At this time, I'd like to turn the call over to our Chief Financial Officer, Tom. Tom? Thanks, Ari.