Bridgeline Digital, Inc. (NASDAQ:BLIN) Q2 2023 Earnings Conference Call May 15, 2023 4:30 PM ET Company Participants Thomas Windhausen - Chief Financial Officer and Treasurer Ari Kahn - President and Chief Executive Officer Operator Good day, and thank you for standing by. Welcome to the Bridgeline Digital Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instruction ...

Form 10-Q OR Bridgeline Digital, Inc. 100 Sylvan Road, Suite G700 Woburn, Massachusetts 01801 (Address of Principal Executive Offices) (Zip Code) Securities registered pursuant to Section (12)b of the Act: Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files ...

4. Fair Value Measurement and Fair Value of Financial Instruments Level 3—Valuations are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Inputs reflect management's best estimate of what market participants would use in valuing the asset or liability at the measurement date. BRIDGELINE DIGITAL, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share data) The Co ...

Financial Data and Key Metrics Changes - Bridgeline Digital reported a 27% increase in total revenue for fiscal 2022, reaching $16.8 million, up from $13.2 million in the previous year [7][22] - Subscription and license revenue grew by 36% to $13.6 million, representing over 80% of total revenue for the year [7][9] - The company ended fiscal 2022 with a net income of over $2 million and adjusted EBITDA of $196,000, with gross margins at 75% [9][28] Business Line Data and Key Metrics Changes - Subscription and license revenue for Q4 2022 was $3.4 million, accounting for 82% of total revenue, while services revenue remained stable at $0.8 million [22][24] - Gross profit for Q4 2022 increased by 7% to $3 million, with a gross profit margin of 71%, up from 68% in the prior year [25][26] Market Data and Key Metrics Changes - Bridgeline secured $1 million in new license annual recurring revenue (ARR) from 28 sales in Q4 2022, indicating strong market demand [8] - The company reported a 94% customer subscription renewal rate, highlighting customer satisfaction and retention [14] Company Strategy and Development Direction - Bridgeline aims to leverage its cross-sell strategy to enhance revenue growth by selling additional products to existing customers [36] - The company is focusing on partnerships, with over 80% of new deals being associated with partners, which is crucial for its growth strategy [37][40] - Bridgeline plans to increase its sales and marketing expenditure to capitalize on product demand while being cautious of macroeconomic conditions [46] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the MarTech industry's growth, noting that even in a challenging economy, the market remains robust [50] - The company is actively seeking acquisition opportunities, particularly targeting firms that align with its strategic goals and can enhance its product offerings [54] Other Important Information - Bridgeline introduced a rapid UI framework for HawkSearch, which is expected to accelerate sales cycles and reduce customer costs [18][19] - The company expanded its executive team with the appointment of John Murcott as EVP of Products and Strategy, bringing significant industry experience [20][21] Q&A Session Summary Question: What kind of traction is being seen from TruePresence? - TruePresence has gained traction in the franchise market, with significant deals that can scale as customers grow [31][32] Question: How important is growing the customer base and selling back into it? - Selling to existing customers significantly reduces customer acquisition costs, making it a key strategy for growth [34][35] Question: How important are partners for growth? - Partnerships have become essential, with over 80% of new deals linked to partners, enhancing the company's market reach [37][40] Question: What is the impact of the economy on the business pipeline? - The MarTech industry is still growing, and the company has not yet felt any significant headwinds from the economy [50][51] Question: What is the current status of M&A activities? - The company remains interested in acquisitions, focusing on targets that can enhance revenue growth and align with its strategic goals [54]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 2022 OR ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission File Number 333-139298 Bridgeline Digital, Inc. (Exact name of registrant as specified in its charter) State or other jurisdiction ...

Financial Data and Key Metrics Changes - Company reported a 22% revenue growth in Q3 2022, totaling $4.2 million compared to $3.4 million in the same quarter last year [7][18] - Subscription and license revenue increased by 29% to $3.4 million, now representing over 80% of total revenue [7][19] - Gross profit rose by 30% to $2.9 million, with gross margin percentage increasing to 70% from 65% in the prior year [7][22] - Net income was positive at $0.4 million, a significant improvement from a net loss of $3.6 million in the prior year [24] Business Line Data and Key Metrics Changes - Subscription and license revenue accounted for 81% of total revenue, up from 76% in the prior year [19] - Services revenue remained flat at $0.8 million, constituting 19% of total revenue [21] - Subscription license gross margins improved to 75% from 72% in the prior year [22] Market Data and Key Metrics Changes - Growth observed in finance, automotive, retail, and manufacturing sectors [10] - New customer acquisitions included notable names such as Bristol-Myers Squibb, 7-Eleven, Shell Oil, and Triumph Motorcycles [12] Company Strategy and Development Direction - Company focuses on revenue growth, product innovation, and expanding customer success [26] - Strategic acquisitions are being evaluated, with a focus on opportunities that can be financed accretively [16][17] - The eCommerce360 strategy aims to enhance growth by winning new customers and selling new products to existing customers [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued success and growth prospects for the final quarter of fiscal '22 and beyond [26] - The company is adapting its sales structure to improve customer acquisition costs through partnerships [32] Other Important Information - Company ended the quarter with $3.9 million in cash after financing activities related to acquisitions [9][25] - Adjusted EBITDA for the quarter was $0.1 million, down from $0.3 million in the prior year [25] Q&A Session Summary Question: What kind of deployment timeline are we looking for with the new TruPresence customer? - Management indicated that the new customer can use the product immediately with no services required, representing a 100% software sale [27] Question: Is there a pipeline developing for other potential customer wins for TruPresence? - Management confirmed a strong pipeline for TruPresence, particularly with the DataBravo product, which addresses SEO weaknesses across franchisee websites [28] Question: How are customer acquisition costs trending? - Management reported improving customer acquisition costs, currently in the 2.9 range of lifetime value to CAC, with expectations for further improvement [30] Question: Are you still seeing the same kind of traffic rent that generates customer leads from WooRank? - Management noted that traffic generation remains consistent and is expanding partnerships to enhance distribution [31] Question: What does the deferred partnership mean for the company in the long term? - Management explained that the new structure of the sales team, with direct salespeople managing partnerships, is expected to lower CAC and enhance product sales [32]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission File Number 333-139298 Bridgeline Digital, Inc. (Exact name of registrant as specified in its charter) Delaware 52-2263942 Stat ...

Bridgeline Digital, Inc. (NASDAQ:BLIN) Q2 2022 Earnings Conference Call May 12, 2022 4:30 PM ET Company Participants Ari Kahn - President & CEO Thomas Windhausen - CFO & Treasurer Conference Call Participants Howard Halpern - Taglich Brothers Walter Ramsley - Walrus Partners Operator Good day and thank you for standing by. Welcome to Bridgeline Digital Inc. Second Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers presentation, there will be a question-a ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission File Number 333-139298 Bridgeline Digital, Inc. (Exact name of registrant as specified in its charter) Delaware 52-2263942 Sta ...

[PART I—FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Condensed Consolidated Financial Statements](index=5&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income/(loss), stockholders' equity, and cash flows, along with detailed notes explaining accounting policies, financial instruments, debt, equity, and recent acquisitions [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheets (in thousands) | ASSETS / LIABILITIES & EQUITY | Dec 31, 2021 | Sep 30, 2021 | Change (Dec 21 vs Sep 21) | | :---------------------------- | :----------- | :----------- | :------------------------ | | **ASSETS** | | | | | Cash and cash equivalents | $6,356 | $8,852 | $(2,496) | | Total current assets | $8,015 | $10,418 | $(2,403) | | Intangible assets, net | $7,354 | $7,755 | $(401) | | Goodwill | $15,985 | $15,985 | $0 | | Total assets | $32,158 | $34,967 | $(2,809) | | **LIABILITIES** | | | | | Total current liabilities | $6,018 | $8,335 | $(2,317) | | Warrant liabilities | $1,963 | $4,404 | $(2,441) | | Total liabilities | $12,605 | $17,390 | $(4,785) | | **STOCKHOLDERS' EQUITY** | | | | | Total stockholders' equity | $19,553 | $17,577 | $1,976 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section outlines the company's financial performance over a period, including revenue, expenses, and net income or loss Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | YoY Change ($) | YoY Change (%) | | :---------------------------- | :------------------------------ | :------------------------------ | :------------- | :------------- | | Total net revenue | $4,286 | $2,836 | $1,450 | 51% | | Gross profit | $3,006 | $1,879 | $1,127 | 60% | | Total operating expenses | $3,485 | $1,700 | $1,785 | 105% | | Income (loss) from operations | $(479) | $179 | $(658) | (368%) | | Change in fair value of warrant liabilities | $2,441 | $(1,441) | $3,882 | 269% | | Net income (loss) | $1,872 | $(1,162) | $3,034 | 261% | | Basic net income (loss) per share | $0.18 | $(0.26) | $0.44 | 169% | | Diluted net income (loss) per share | $0.06 | $(0.26) | $0.32 | 123% | [Condensed Consolidated Statements of Comprehensive Income/(Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%2F%28Loss%29) This section reports the company's total comprehensive income or loss, including net income and other comprehensive income items Condensed Consolidated Statements of Comprehensive Income/(Loss) (in thousands) | Metric | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | | :------------------------------------ | :------------------------------ | :------------------------------ | | Net income (loss) | $1,872 | $(1,162) | | Foreign currency translation adjustment | $41 | $10 | | Comprehensive income (loss) | $1,913 | $(1,152) | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section details changes in the company's equity accounts, including common stock, additional paid-in capital, and accumulated deficit Condensed Consolidated Statements of Stockholders' Equity (in thousands, except share data) | Metric | Oct 1, 2021 Balance | Stock-based Compensation | Net Income | Foreign Currency Translation | Dec 31, 2021 Balance | | :------------------------------------ | :------------------ | :----------------------- | :--------- | :--------------------------- | :------------------- | | Common Stock (Shares) | 10,187,128 | - | - | - | 10,204,276 |\n| Common Stock (Amount) | $10 | - | - | - | $10 |\n| Additional Paid-in Capital | $100,207 | $63 | - | - | $100,270 |\n| Accumulated Deficit | $(82,287) | - | $1,872 | - | $(80,415) |\n| Accumulated Other Comprehensive Loss | $(353) | - | - | $41 | $(312) |\n| Total Stockholders' Equity | $17,577 | $63 | $1,872 | $41 | $19,553 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes the cash inflows and outflows from operating, investing, and financing activities over a period Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | YoY Change ($) | | :------------------------------------ | :------------------------------ | :------------------------------ | :------------- | | Net cash provided by operating activities | $79 | $451 | $(372) | | Net cash used in investing activities | $(64) | $(41) | $(23) | | Net cash used in financing activities | $(2,504) | $0 | $(2,504) | | Net increase (decrease) in cash and cash equivalents | $(2,496) | $416 | $(2,912) | | Cash and cash equivalents at end of period | $6,356 | $1,277 | $5,079 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [1. Description of Business](index=10&type=section&id=1.%20Description%20of%20Business) This note describes Bridgeline Digital's core business as a marketing technology software company and its key product offerings - **Bridgeline Digital** is a marketing technology software company focused on growing online revenue and sharing information[27](index=27&type=chunk) - Key products include: **Unbound platform**, **Unbound Franchise**, **OrchestraCMS**, **Celebros Search**, **Woorank**, and **Hawk Search**[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) - Most software is offered via a **cloud-based Software as a Service (SaaS) model**; Unbound and Hawk Search also offer traditional perpetual licensing[33](index=33&type=chunk) [2. Summary of Significant Accounting Policies](index=10&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and new standards impacting the company's financial statement preparation - Financial statements are prepared in accordance with **U.S. GAAP** and Form 10-Q instructions, including all necessary recurring adjustments[39](index=39&type=chunk) - The Company is evaluating the impact of new accounting standards: **ASU No. 2016-13 (Credit Losses)**, **ASU No. 2020-06 (Debt with Conversion and Other Options)**, and **ASU No. 2021-08 (Business Combinations - Contract Assets/Liabilities)**[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) [3. Accounts Receivable](index=12&type=section&id=3.%20Accounts%20Receivable) This note details the company's accounts receivable, including the allowance for doubtful accounts and customer concentration Accounts Receivable (in thousands) | Metric | Dec 31, 2021 | Sep 30, 2021 | | :---------------------------- | :----------- | :----------- | | Accounts receivable | $1,324 | $1,403 | | Allowance for doubtful accounts | $(62) | $(33) | | Accounts receivable, net | $1,262 | $1,370 | - As of December 31, 2021, **one customer represented approximately 23% of accounts receivable**; no customers exceeded 10% of total revenues for the three months ended December 31, 2021[46](index=46&type=chunk) [4. Fair Value Measurement and Fair Instruments](index=12&type=section&id=4.%20Fair%20Value%20Measurement%20and%20Fair%20Value%20of%20Financial%20Instruments) This note describes the fair value measurement of financial instruments, particularly warrant liabilities and contingent consideration - Financial instruments include accounts receivable, accounts payable, **warrant liabilities**, **contingent consideration**, and long-term debt, with warrant liabilities and contingent consideration measured at fair value using **Level 3 inputs**[47](index=47&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk)[53](index=53&type=chunk) - The Company recognized a **gain of $2,441 thousand** for the three months ended December 31, 2021, from the change in fair value of warrant liabilities, contrasting with a **loss of $1,441 thousand** in the prior year[52](index=52&type=chunk) Fair Value of Liabilities (in thousands) | Liabilities (Level 3) | Dec 31, 2021 | Sep 30, 2021 | | :------------------------------- | :----------- | :----------- | | Total warrant liabilities | $1,963 | $4,404 | | Contingent consideration obligations | $3,210 | $3,649 | | Total Liabilities | $5,173 | $8,053 | [5. Intangible Assets](index=14&type=section&id=5.%20Intangible%20Assets) This note provides a breakdown of the company's intangible assets and their associated amortization expense Intangible Assets, Net (in thousands) | Component | Dec 31, 2021 | Sep 30, 2021 | | :-------------------- | :----------- | :----------- | | Domain and trade names | $720 | $732 | | Customer related | $5,201 | $5,465 | | Technology | $1,433 | $1,558 | | Total | $7,354 | $7,755 | - Total amortization expense for intangible assets was **$401 thousand** for the three months ended December 31, 2021, an increase from **$218 thousand** in the prior year[56](index=56&type=chunk) [6. Accrued Liabilities](index=14&type=section&id=6.%20Accrued%20Liabilities) This note details the composition of the company's accrued liabilities at specific reporting dates Accrued Liabilities (in thousands) | Component | Dec 31, 2021 | Sep 30, 2021 | | :------------------------ | :----------- | :----------- | | Compensation and benefits | $621 | $541 | | Professional fees | $119 | $81 | | Taxes | $72 | $84 | | Insurance | $134 | $0 | | Other | $115 | $202 | | Total | $1,061 | $908 | [7. Long-term debt](index=14&type=section&id=7.%20Long-term%20debt) This note outlines the company's long-term debt obligations, including various loan types and future maturity schedules Long-term Debt (in thousands) | Debt Type | Dec 31, 2021 | Sep 30, 2021 | | :------------------------ | :----------- | :----------- | | Vendor loan payable | $676 | $718 | | Term loan payable (Oct 2022) | $269 | $362 | | Term loan payable (Apr 2027) | $453 | $466 | | Seller's note payable | $344 | $383 | | Total debt | $1,742 | $1,929 | | Less: current portion | $(609) | $(732) | | Long-term debt, net | $1,133 | $1,197 | Future Maturities of Long-term Debt (in thousands) as of Dec 31, 2021 | Fiscal Year | Amount | | :----------------- | :----- | | 2022 (remaining) | $609 | | 2023 | $470 | | 2024 | $218 | | 2025 | $218 | | 2026 | $82 | | Thereafter | $145 | | Total debt | $1,742 | [8. Stockholders' Equity](index=15&type=section&id=8.%20Stockholders'%20Equity) This note provides details on the company's equity structure, including preferred stock, common stock offerings, stock-based compensation, and warrants - As of December 31, 2021, **350 shares of Series C Preferred Stock** were outstanding, convertible into **38,889 common shares**[62](index=62&type=chunk) - In May 2021, the Company conducted a registered direct offering of **1,060,000 common shares** and a private placement of **2,700 Series D Convertible Preferred Stock units**, with all Series D Preferred Stock converted to common shares during Q4 fiscal 2021[63](index=63&type=chunk)[64](index=64&type=chunk)[71](index=71&type=chunk) - Stock-based compensation expense for the three months ended December 31, 2021, was **$63 thousand**, an increase from **$51 thousand** in the prior year[79](index=79&type=chunk) Total Warrants Outstanding as of December 31, 2021 | Type | Issue Date | Shares | Price ($) | Expiration | | :------------------------ | :--------- | :---------- | :-------- | :----------- | | Investors | 11/9/2016 | 4,271 | 175.00 | 5/9/2022 | | Financing (Montage) | 10/10/2017 | 1,327 | 132.50 | 10/10/2025 | | Investors | 10/19/2018 | 3,120 | 25.00 | 10/19/2023 | | Placement Agent | 10/16/2018 | 10,000 | 31.25 | 10/16/2023 | | Investors | 3/12/2019 | 41,621 | 4.00 | 10/19/2023 | | Investors | 3/12/2019 | 872,625 | 4.00 | 9/12/2024 | | Investors | 3/12/2019 | 13,738 | 0.05 | 9/12/2024 | | Placement Agent | 3/12/2019 | 11,992 | 4.00 | 9/12/2024 | | Placement Agent | 2/4/2021 | 31,564 | 3.88 | 2/4/2026 | | Investors | 5/14/2021 | 592,106 | 2.51 | 11/16/2026 | | Placement Agent | 5/14/2021 | 179,536 | 2.85 | 5/12/2026 | | **Total** | | **1,761,900** | | | [9. Net Income (Loss) Per Share Attributable to Common Shareholders](index=24&type=section&id=9.%20Net%20Income%20%28Loss%29%20Per%20Share%20Attributable%20to%20Common%20Shareholders) This note presents the computation of basic and diluted net income or loss per share for common shareholders Net Income (Loss) Per Share Computation (in thousands, except per share data) | Metric | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | | :-------------------------------------------- | :------------------------------ | :------------------------------ | | Net income (loss) - basic | $1,872 | $(1,162) | | Net income (loss) applicable to common shareholders – diluted | $625 | $(1,162) | | Weighted-average shares outstanding for basic EPS | 10,189,012 | 4,420,170 | | Weighted-average shares outstanding for diluted EPS | 10,625,617 | 4,420,170 | | Basic net income (loss) per share | $0.18 | $(0.26) | | Diluted net income (loss) per share | $0.06 | $(0.26) | - For the three months ended December 31, 2021, **244,348 stock options** and **976,520 warrants** were excluded from diluted EPS computation due to being anti-dilutive; all potential common stock equivalents were anti-dilutive in 2020 due to a net loss[96](index=96&type=chunk)[97](index=97&type=chunk) [10. Revenues and Other Related Items](index=24&type=section&id=10.%20Revenues%20and%20Other%20Related%20Items) This note provides a detailed breakdown of the company's revenue by geography and type, along with deferred revenue balances Revenue by Geography (in thousands) | Geography | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | YoY Change ($) | YoY Change (%) | | :------------ | :------------------------------ | :------------------------------ | :------------- | :------------- | | United States | $3,360 | $2,286 | $1,074 | 47% | | International | $926 | $550 | $376 | 68% | | Total | $4,286 | $2,836 | $1,450 | 51% | - The largest concentration within international revenue is **Canada**[101](index=101&type=chunk) Revenue by Type (in thousands) | Revenue Type | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | | :------------------------ | :------------------------------ | :------------------------------ | | Digital Engagement Services | $869 | $837 | | Subscription | $3,079 | $1,690 | | Maintenance | $117 | $92 | | Hosting | $221 | $217 | | Total | $4,286 | $2,836 | Deferred Revenue (in thousands) | Deferred Revenue | Oct 1, 2021 Balance | Increase (decrease) | Dec 31, 2021 Balance | | :--------------- | :------------------ | :------------------ | :------------------- | | Current | $2,097 | $(304) | $1,793 | | Long-Term | $418 | $(23) | $395 | [11. Income Taxes](index=25&type=section&id=11.%20Income%20Taxes) This note details the company's income tax expense or benefit and the utilization of net operating loss carryforwards Income Tax Expense (Benefit) (in thousands) | Period | Income Tax Expense (Benefit) | | :---------------------------- | :--------------------------- | | Three Months Ended Dec 31, 2021 | $3 | | Three Months Ended Dec 31, 2020 | $(6) | - Income tax expense consists of estimated state income taxes, with net operating loss carryforwards expected to offset potential taxable income[105](index=105&type=chunk) [12. Leases](index=25&type=section&id=12.%20Leases) This note provides information on the company's lease arrangements, including lease costs, terms, and future commitments Components of Net Lease Costs (in thousands) | Lease Cost Component | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | | :------------------------ | :------------------------------ | :------------------------------ | | Operating lease cost | $54 | $18 | | Variable lease cost | $14 | $14 | | Less: Sublease income, net | $(25) | $(25) | | Total | $43 | $7 | - As of December 31, 2021, the **weighted average remaining lease term was 3.1 years** and the **weighted average discount rate was 7.0%**[114](index=114&type=chunk) Future Minimum Rental Commitments (in thousands) as of Dec 31, 2021 | Fiscal year | Operating Leases | Receipts Subleases | Net Leases | | :----------------- | :--------------- | :----------------- | :--------- | | 2022 (remaining) | $130 | $76 | $54 | | 2023 | $173 | $101 | $72 | | 2024 | $116 | $34 | $82 | | 2025 | $69 | $0 | $69 | | 2026 | $7 | $0 | $7 | | Total lease commitments | $495 | $211 | $284 | [13. Commitments and Contingencies](index=28&type=section&id=13.%20Commitments%20and%20Contingencies) This note discusses the company's commitments and potential liabilities, including product warranties and indemnification obligations - The Company provides warranties for its technology solutions but has not paid any material amounts related to warranty claims[119](index=119&type=chunk)[120](index=120&type=chunk) - The Company indemnifies customers against third-party intellectual property infringement and product liability claims, with no significant claims outstanding[121](index=121&type=chunk) [14. Acquisitions](index=30&type=section&id=14.%20Acquisitions) This note details the company's recent acquisitions, including consideration transferred, goodwill recognized, and pro forma financial information - **Woorank Acquisition (March 1, 2021)** was for approximately **$2.4 million**, including cash, deferred cash, a seller note, common stock, and **$1.3 million in contingent consideration**[124](index=124&type=chunk)[129](index=129&type=chunk) - **Hawk Search Acquisition (May 28, 2021)** was for approximately **$9.9 million**, including cash, Series D Preferred Stock, deferred cash, and **$2.2 million in contingent consideration**[126](index=126&type=chunk)[129](index=129&type=chunk) Acquisition Date Fair Value of Consideration Transferred (in thousands) | Consideration Type | Woorank | Hawk Search | Total | | :---------------------------------- | :------ | :---------- | :------- | | Cash paid at or in close proximity to closing | $285 | $4,800 | $5,085 | | Future deferred payments | $376 | $2,000 | $2,376 | | Common stock | $99 | - | $99 | | Series D Convertible Preferred Stock | - | $930 | $930 | | Seller's note | $352 | - | $352 | | Contingent consideration (earn-outs) | $1,289 | $2,190 | $3,479 | | **Total consideration paid** | **$2,401**| **$9,920** | **$12,321**| - **Goodwill recognized totaled $10,428 thousand**, with **$2,888 thousand from Woorank** and **$7,540 thousand from Hawk Search**, attributed to expected synergies and cross-selling opportunities[130](index=130&type=chunk) Pro Forma Information (Unaudited) for Three Months Ended Dec 31, 2020 (in thousands, except per share data) | Metric | Three Months Ended Dec 31, 2020 | | :-------------------------------------------- | :------------------------------ | | Revenue | $4,471 | | Net income (loss) attributable to common shareholders - basic | $(1,687) | | Net income (loss) attributable to common shareholders - diluted | $(1,687) | | Basic EPS | $(0.38) | | Diluted EPS | $(0.38) | [15. Related Party Transactions](index=32&type=section&id=15.%20Related%20Party%20Transactions) This note discloses transactions with related parties, specifically involving a director and his affiliated investment banking firm - **Michael Taglich**, a director and shareholder, is Chairman and President of **Taglich Brothers, Inc.**, which provides advisory and investment banking services to the Company[134](index=134&type=chunk)[135](index=135&type=chunk) - **Taglich Brothers, Inc.** received warrants to purchase **82,945 common shares** with a weighted average exercise price of **$3.21** and a **5.0-year term** in connection with the February and May 2021 offerings[136](index=136&type=chunk) [16. Subsequent Events](index=32&type=section&id=16.%20Subsequent%20Events) This note confirms that no material subsequent events requiring adjustment or disclosure were identified through the filing date - No material subsequent events requiring adjustment or disclosure were identified through the filing date[137](index=137&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations, including an overview of the business, a detailed comparison of financial performance for the quarter, a discussion of non-GAAP Adjusted EBITDA, liquidity and capital resources, and critical accounting policies [Overview](index=33&type=section&id=Overview) This section provides an overview of Bridgeline Digital's business, product portfolio, and growth strategy, including recent acquisitions - **Bridgeline Digital** is a marketing technology software company aiming to grow online revenue and facilitate information sharing for clients[141](index=141&type=chunk) - The company's product portfolio includes the **Unbound Digital Experience Platform**, **OrchestraCMS**, **Celebros Search**, **Woorank**, and **Hawk Search**[141](index=141&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk) - Bridgeline's growth strategy involves expanding distribution and development through acquisitions, targeting new geographical opportunities, expanded customer/sales/developer bases, and consolidated operational expenses[153](index=153&type=chunk) - Recent acquisitions include **Woorank SRL (March 2021 for $2.4 million)** and **Hawk Search, Inc. (May 2021 for $9.9 million)**, expanding product offerings and customer base[154](index=154&type=chunk)[155](index=155&type=chunk) [Results of Operations for the Three Months Ended December 31, 2021 compared to the Three Months Ended December 31, 2020](index=35&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20December%2031%2C%202021%20compared%20to%20the%20Three%20Months%20Ended%20December%2031%2C%202020) This section analyzes the company's financial performance for the quarter, comparing key metrics year-over-year, including revenue, net income, and operating expenses Key Financial Highlights (in thousands, except per share data) | Metric | Dec 31, 2021 | Dec 31, 2020 | $ Change | % Change | | :---------------------------- | :----------- | :----------- | :------- | :------- | | Total net revenue | $4,286 | $2,836 | $1,450 | 51% | | Net income (loss) | $1,872 | $(1,162) | $3,034 | 261% | | Basic net income (loss) per share | $0.18 | $(0.26) | $0.44 | 169% | | Diluted net income (loss) per share | $0.06 | $(0.26) | $0.32 | 123% | - Net income for Q1 FY2022 was significantly impacted by a **$2.4 million gain** from the change in fair value of warrant liabilities, contrasting with a **$1.4 million loss** in the prior year[156](index=156&type=chunk) Revenue Breakdown (in thousands) | Revenue Source | Dec 31, 2021 | % of Total Revenue (2021) | Dec 31, 2020 | % of Total Revenue (2020) | $ Change | % Change | | :------------------------------ | :----------- | :------------------------ | :----------- | :------------------------ | :------- | :------- | | Digital engagement services | $869 | 20% | $837 | 30% | $32 | 4% | | Subscription and perpetual licenses | $3,417 | 80% | $1,999 | 70% | $1,418 | 71% | | **Total net revenue** | **$4,286** | **100%** | **$2,836** | **100%** | **$1,450** | **51%** | - Gross profit margin increased to **70% (from 66% YoY)**, primarily due to the higher proportion of license revenue, which generally has higher margins[158](index=158&type=chunk)[162](index=162&type=chunk) Operating Expenses (in thousands) | Operating Expense | Dec 31, 2021 | % of Total Revenue (2021) | Dec 31, 2020 | % of Total Revenue (2020) | $ Change | % Change | | :------------------------------ | :----------- | :------------------------ | :----------- | :------------------------ | :------- | :------- | | Sales and marketing | $1,231 | 29% | $444 | 16% | $787 | 177% | | General and administrative | $873 | 20% | $465 | 16% | $408 | 88% | | Research and development | $859 | 20% | $349 | 12% | $510 | 146% | | Depreciation and amortization | $424 | 10% | $232 | 8% | $192 | 83% | | Restructuring and acquisition-related expenses | $98 | 2% | $210 | 7% | $(112) | (53%) | | **Total operating expenses** | **$3,485** | **81%** | **$1,700** | **60%** | **$1,785** | **105%** | - Operating expenses increased significantly (**105% YoY**) primarily due to additional costs related to the fiscal 2021 business acquisitions[171](index=171&type=chunk) [Adjusted EBITDA](index=39&type=section&id=Adjusted%20EBITDA) This section defines and reconciles Adjusted EBITDA, a non-GAAP measure, to net income, explaining its use and key drivers - **Adjusted EBITDA** is a non-GAAP measure used by management and investors to evaluate operating performance, excluding items like interest, taxes, depreciation, amortization, stock-based compensation, and changes in fair value of warrant liabilities[176](index=176&type=chunk)[177](index=177&type=chunk)[178](index=178&type=chunk) Reconciliation of Net Income (Loss) to Adjusted EBITDA (in thousands) | Metric | Dec 31, 2021 | Dec 31, 2020 | | :-------------------------------------------- | :----------- | :----------- | | Net income (loss) | $1,872 | $(1,162) | | Provision for (benefit from) income tax | $3 | $(6) | | Interest expense and other, net | $87 | $(6) | | Government grant income | $0 | $(88) | | Change in fair value of warrants | $(2,441) | $1,441 | | Amortization of intangible assets | $401 | $218 | | Depreciation and other amortization | $23 | $14 | | Restructuring and acquisition related charges | $98 | $210 | | Stock-based compensation | $63 | $51 | | **Adjusted EBITDA** | **$106** | **$672** | - Adjusted EBITDA decreased year-over-year, primarily due to the **gain recognized from the change in fair value of warrants** and **additional costs from fiscal 2021 business acquisitions**[179](index=179&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash flow, working capital, and future contractual obligations, including debt and acquisition-related payments Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | | :------------------------------------ | :------------------------------ | :------------------------------ | | Net cash provided by operating activities | $79 | $451 | | Net cash used in investing activities | $(64) | $(41) | | Net cash used in financing activities | $(2,504) | $0 | - Cash used in financing activities significantly increased to **$2.5 million** in Q1 FY2022, primarily due to payments on liabilities from 2021 acquisitions[183](index=183&type=chunk) - The Company expects future revenues and cash flows to supplement working capital and believes its cost structure supports future revenue growth, despite historical operating losses[187](index=187&type=chunk) - Contractual obligations include **$284 thousand in net operating lease commitments** and **$1.8 million in debt payments**; **$3.2 million in contingent consideration** and **$0.3 million in deferred purchase price obligations** from 2021 acquisitions are expected in the next twelve months[189](index=189&type=chunk) [Critical Accounting Policies](index=41&type=section&id=Critical%20Accounting%20Policies) This section highlights the company's critical accounting policies that require significant judgment and estimation in financial reporting - The preparation of financial statements requires significant estimates and assumptions, which, if actual results differ, could materially affect operating results[191](index=191&type=chunk) - Key critical accounting policies include: **Revenue recognition**, **Allowance for doubtful accounts**, **Accounting for goodwill and other intangible assets**, **Accounting for business combinations**, and **Accounting for stock-based compensation**[193](index=193&type=chunk)[194](index=194&type=chunk)[197](index=197&type=chunk)[199](index=199&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk)[206](index=206&type=chunk) [Item 3. Qualitative and Quantitative Disclosures About Market Risk](index=44&type=section&id=Item%203.%20Qualitative%20and%20Quantitative%20Disclosures%20About%20Market%20Risk) This section states that the Company is not required to provide qualitative and quantitative disclosures about market risk - This item is not required for the Company[209](index=209&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of December 31, 2021, and reported no material changes in internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of December 31, 2021[211](index=211&type=chunk) - There were no material changes to internal control over financial reporting during the most recent fiscal quarter[212](index=212&type=chunk) [PART II – OTHER INFORMATION](index=46&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, exhibits, and official signatures [Item 1. Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to routine litigation but is not currently involved in any material legal proceedings beyond those previously disclosed - The Company is subject to routine litigation and claims but is not currently involved in any material legal proceedings beyond those previously disclosed in its Annual Report on Form 10-K[216](index=216&type=chunk) [Item 1A. Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) This section states that there have been no material changes to the risk factors previously described in the Annual Report on Form 10-K - There have been no material changes to the risk factors described in the Annual Report on Form 10-K for the fiscal year ended September 30, 2021[217](index=217&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company reports no unregistered sales of equity securities during the three months ended December 31, 2021 - There were no unregistered sales of equity securities during the three months ended December 31, 2021[219](index=219&type=chunk) [Item 6. Exhibits](index=47&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including organizational documents, employment agreements, and certifications - The report includes various exhibits such as Amended and Restated Certificate of Incorporation, By-laws, Certificates of Designations for Preferred Stock, Employment Agreement, and certifications (302 and 906)[222](index=222&type=chunk) [Signatures](index=48&type=section&id=Signatures) This section contains the signatures of the President and Chief Executive Officer, and the Chief Financial Officer, certifying the report - The report is signed by Roger Kahn, President and Chief Executive Officer, and Thomas R. Windhausen, Chief Financial Officer, on February 10, 2022[225](index=225&type=chunk)[226](index=226&type=chunk)