Michael Prinn - Chief Financial Officer Ari Kahn - President and Chief Executive Officer

Good day, ladies and gentlemen and welcome to the Bridgeline Incorporated Second Quarter Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host for today, Michael Prinn, Chief Financial Officer. You may begin.

Thank you and good afternoon everyone. I am pleased to welcome you to our 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 are 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 pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The internal projections and beliefs upon which we based 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 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 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’ll discuss some non-GAAP financial measures in talking with the company’s financial performance. We report our GAAP results as well as provide a reconciliation of these non-GAAP measures to GAAP financial measures in our earnings release. You can obtain a copy of our earnings release by visiting our website. Alright. So, before I turn the call over to Ari, I just like to highlight one significant change that we announced in the press release earlier this morning. Ari has been appointed by Bridgeline Board of Directors the role of President and Chief Executive Officer. As you know, Ari joined Bridgeline in September as the Chief Operating Officer and recently has been serving as the Interim Chief Executive Officer. Ari is an industry veteran who knows our space extremely well. He is very passionate about our ability to succeed and become a long-term leader in digital experience management space. So, I would like to congratulate Ari and let everybody know how excited I am for him to be moving into this new role and for the future success of Bridgeline Digital. I will now turn the call over to Ari.

Thank you, Mike and good afternoon everyone. Our SaaS software companies with solid financials often drive strong shareholder value. I am happy to report that we have delivered our third consecutive quarter of positive adjusted EBITDA and we are committed to continued focus on stronger financials. We are building long-term value and know that long-term success requires near-term fiscal strength. Bridgeline is financially a very different company today compared to fiscal 2015. Adjusted EBITDA improved from negative $1.2 million in Q2 2015 to positive 25k this quarter. Our high-margin license revenue increased 12% over Q2 2015 and license and hosting revenue are now 44% of total revenue compared to 36% in the second quarter of fiscal 2015. Bridgeline has made an important financial announcement recently as a result of our continued fiscal improvement and paves the way to future success. Bridgeline’s shareholders have approved the issuance of common stock to convert up to $6 million of outstanding debt to equity and approved raising up to $2 million in working capital. This reduces our interest expense and provides capital that will enable us to further invest in business development to drive stronger revenues and grow market share. It also signals the confidence as financial partners have in Bridgeline’s long-term prospects. When Mike goes over the financial highlights, he will give you more detail around this. I read an analyst analysis on TechCrunch this week that shows a 10-year average valuation for SaaS software companies of 5x revenue. Our stock is nowhere near that multiple. But again, Bridgeline is financially a very different company today compared to 2015 and I see this as an opportunity. With our stronger financials, conversion of debt and additional working capital and the expansion of our customer base, we can have a much stronger multiple and can…

Thanks, Ari. So, I will review the results of operations for the second quarter ending March 31, 2016. So revenue, second quarter revenue was $4.2 million compared to $4.8 million in the second quarter of last year. So, although this revenue number is lower than last year, as we mentioned in our previous call, we have been doing some rebuilding and we focused on higher margin revenue and on aligning our cost structure to our revenue forecast. So even though, our revenue was about $550,000 less in Q2 of this year compared to Q2 of last year, we generated over $1 million more of gross profit. So, I will get back to revenue now and I will visit gross profit, gross margin in a couple of minutes. I just want to make sure to highlight that significant improvement. You have also seen improvement to our bottom line, which I will talk about in more detail. So let me give some additional color around the various components of revenue. Our subscription and perpetual license revenue for the second quarter of fiscal 2016 increased 12% to $1.5 million compared to the second quarter of fiscal 2015. Our licensing and our hosting revenue combined for the second quarter now make up about 44% of our total revenue and that’s compared to about 36% of the total revenue in the second quarter of last year. This continued increase in our license and hosting revenue aligned with our improved cost structure, have enabled us to significantly improve our bottom line. As we have mentioned, our focus on quicker-to-market solutions to complement our existing enterprise business is what we believe will continue to drive a higher mix of license to service ratio and help transform Bridgeline to an improved SaaS business model in the future. Our…

Very good. Okay. Thank you, Sonya. Well, thank you everyone. We appreciate the support of our shareholders and it’s our goal to continue building a scalable business model, which in turn will build shareholder value. Thank you everyone for joining us today and very happy to have been appointed the CEO of Bridgeline. I look forward to stewarding your investment to great success. Thank you.

Thanks, everybody.

Ladies and gentlemen, thank you for participating in today’s conference. This concludes today’s program. You may all disconnect. Everyone have a great day.