Bridgeline Digital(BLIN) - 2021 Q3 - Quarterly Report

Part I - Financial Information Item 1. Condensed Consolidated Financial Statements Unaudited condensed financial statements for June 30, 2021, show significant asset and liability growth driven by acquisitions, resulting in a $5.3 million net loss Condensed Consolidated Balance Sheets Total assets grew to $32.1 million by June 30, 2021, from $10.7 million, driven by acquisitions, while liabilities increased to $23.7 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 | September 30, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $4,768 | $861 | | Total current assets | $7,082 | $1,905 | | Goodwill | $15,961 | $5,557 | | Intangible assets, net | $8,159 | $2,617 | | Total assets | $32,063 | $10,660 | | Liabilities & Equity | | | | Total current liabilities | $12,837 | $3,605 | | Warrant liabilities | $8,823 | $2,486 | | Total liabilities | $23,729 | $6,304 | | Total stockholders' equity | $8,334 | $4,356 | Condensed Consolidated Statements of Operations Q3 2021 revenue rose 31% to $3.4 million, but net loss widened to $3.6 million due to warrant liabilities Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Total net revenue | $3,445 | $2,632 | $9,155 | $8,202 | | Gross profit | $2,252 | $1,553 | $5,939 | $4,580 | | Income (loss) from operations | ($615) | $150 | ($563) | ($1,808) | | Change in fair value of warrant liabilities | ($4,161) | ($1,843) | ($6,020) | $1,078 | | Net loss | ($3,609) | ($1,701) | ($5,327) | ($742) | | Net loss per share (Basic & Diluted) | ($0.61) | ($0.44) | ($1.04) | ($0.97) | Condensed Consolidated Statements of Cash Flows Net cash from operations improved to $338,000, with $8.0 million from financing activities, increasing cash to $4.8 million Cash Flow Summary for the Nine Months Ended June 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $338 | ($227) | | Net cash used in investing activities | ($4,440) | $0 | | Net cash provided by financing activities | $7,966 | $1,048 | | Net increase in cash and cash equivalents | $3,907 | $869 | | Cash and cash equivalents at end of period | $4,768 | $1,165 | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail business, accounting policies, and significant events, including acquisitions and equity financings - The company helps customers maximize their digital experience through its Bridgeline Unbound platform (a cloud-based SaaS), OrchestraCMS (native on Salesforce), Celebros Search (commerce-oriented site search), Woorank (SEO audit tool), and Hawk Search (search and personalization platform)[32][34][35] - In February 2021, the company raised approximately $2.5 million in net proceeds from a registered direct offering of 880,000 common shares at $3.10 per share[45][110] - In May 2021, the company raised an aggregate of $4.6 million in net proceeds through a registered direct offering of common stock and a private placement of Series D Convertible Preferred Stock and warrants[42][43][90] - The company acquired Woorank SRL on March 1, 2021, and Hawk Search, Inc. on May 28, 2021 These business combinations were funded with cash, stock, deferred payments, and contingent consideration[154][156] Acquisition Consideration (in thousands) | Consideration Type | Woorank | Hawk Search | Total | | :--- | :--- | :--- | :--- | | Cash paid at closing | $285 | $4,800 | $5,085 | | Future deferred payments | $426 | $2,000 | $2,426 | | Stock (Common & Preferred) | $99 | $930 | $1,029 | | Seller's note | $352 | $0 | $352 | | Contingent consideration | $1,617 | $2,190 | $3,807 | | Total consideration | $2,779 | $9,920 | $12,699 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q3 2021 revenue growth, improved gross margin, operating loss, and strengthened liquidity from equity offerings Results of Operations Q3 2021 revenue increased 31% to $3.4 million, with gross margin expanding to 65% Revenue Comparison for the Three Months Ended June 30 (in thousands) | Revenue Source | 2021 | 2020 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Digital engagement services | $821 | $713 | $108 | 15% | | Subscription and perpetual licenses | $2,624 | $1,919 | $705 | 37% | | Total net revenue | $3,445 | $2,632 | $813 | 31% | - The increase in subscription and license revenue for the three and nine months ended June 30, 2021, was primarily due to significant multi-year license renewals and the inclusion of revenue from the Company's fiscal 2021 acquisitions[191] - Gross profit margin increased to 65% for the nine months ended June 30, 2021, from 56% in the prior year, mainly due to decreases in headcount, reduced use of third-party consultants, and a higher proportion of license revenue[192] - Restructuring and acquisition-related expenses were $862,000 for the nine months ended June 30, 2021, compared to $373,000 in the prior-year period, reflecting costs from the Woorank and Hawk Search acquisitions[199][200] Adjusted EBITDA Adjusted EBITDA for the nine months ended June 30, 2021, was $1.2 million, a significant improvement Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Line Item | Nine Months Ended June 30, 2021 | Nine Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net loss | ($5,327) | ($742) | | Provision for (benefit from) income tax | ($1,175) | $9 | | Interest expense, net | $7 | $3 | | Government grant income | ($88) | - | | Change in fair value of warrants | $6,020 | ($1,078) | | Amortization of intangible assets | $726 | $678 | | Depreciation | $38 | $40 | | Restructuring and acquisition related charges | $862 | $373 | | Stock-based compensation | $133 | $133 | | Adjusted EBITDA | $1,209 | ($571) | - The year-over-year increase in Adjusted EBITDA is primarily attributable to increases in revenues and cost control measures[211] Liquidity and Capital Resources Liquidity significantly enhanced by $8.0 million cash from financing activities, funding acquisitions and working capital - Cash from financing activities for the nine months ended June 30, 2021, was $8.0 million, mainly from $8.5 million in proceeds from stock/warrant issuances, offset by debt repayments[214] - Subsequent to the quarter end, in July 2021, the company received approximately $7.4 million in cash from the exercise of Series A Warrants[216] - Acquisitions in fiscal 2021 created significant payment obligations, including a $2.0 million deferred payment due by Dec 31, 2021, and assumed long-term debt of $2.1 million[219][221] Item 3. Qualitative and Quantitative Disclosures About Market Risk This section is not required for the company - As a smaller reporting company, Bridgeline Digital, Inc. is not required to provide disclosures about market risk[248] Item 4. Controls and Procedures Disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2021[250] - No changes occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[251] Part II - Other Information Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings - As of the filing date, the company is not engaged in any material legal proceedings beyond those previously disclosed[255] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity securities were sold during the nine months ended June 30, 2021 - There were no sales of unregistered equity securities in the nine months ended June 30, 2021[256] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including agreements and required certifications