Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Bridgeline Digital Incorporated First Quarter 2019 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. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's presentation, Ms. Carole Tyner. Ma'am, please begin.

Thank you, Howard, and good afternoon, everyone. My name is Carole Tyner, I'm the Chief Financial Officer for Bridgeline Digital. I am pleased to welcome you to our first fiscal 2019 first 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 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 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 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 financial measures in our earnings release. You can obtain a copy of our earnings release by visiting our website. I'd now like to turn the call over to Ari Kahn, our CEO and President.

Thank you, Carole, and good afternoon, everyone. [Audio Gap] 2019 strategy to reduce customer acquisition costs and improve our bottom-line by taking advantage of the crowded marketing technology space in which we operate. There are over 5,000 martech companies, many of which are too small or needs to operate independently, but have excellent customer bases and technologies. Combining with the right business can enable cross-sale opportunities, synergies and delivery expenses for stronger gross profit, faster sales cycles and differentiation in the breadth of our product suite. We've reviewed dozens of businesses, and I'm excited to announce that this week, Bridgeline entered into an asset purchase agreement with SeeVolution, Inc. that includes a Celebros search products line and more than 80 ecommerce customers across the Americas and Europe. Celebros is an ecommerce search platform with artificial intelligence, natural language processing and machine learning that helps companies increase revenues by allowing products to be better found on their websites by improving search engine results and by enabling marketers to more easily promote key products. Celebros’ revenue, its high margin SaaS and the technology is based on the same Microsoft platform [Audio Gap] which creates synergies in the delivery of our combined product suite and opportunities for greater gross margins. The sales cycle for Celebros is much shorter than Bridgeline’s. And in fact Celebros signed multiple new customers in January this year alone. Each Celebros customer is a candidate for Bridgeline software, and most of the Bridgeline customers are candidates to buy Celebros. Celebros sales are often generated from its partnered network, which can greatly reduce our customer acquisition costs in addition to the improvements we expect from cross-sale between the combined customer bases. This quarter's revenues include the impact of the license nonrenewal we discussed in December of approximately $375,000 a quarter.…

Thanks, Ari. Today, I will review the financial results, as Ari said, for the first quarter of fiscal 2019 for the period ended December 31, 2018. Total revenue for the first quarter of fiscal 2019 was $2.4 million, compared to $4 million in the first quarter of the last year. The Company adopted the new revenue recognition standard in the first quarter of 2019. However, the adoption had an immaterial impact on the revenue recorded for the quarter. The following are some details of various components of revenue that I'd like to discuss with you today. Total license revenue [Audio Gap] based licenses or SaaS licenses and perpetual licenses decreased to $1 million for the first quarter of fiscal 2019, compared to $1.6 million in the first quarter of fiscal 2018. The decrease in revenue was primarily from a large decrease in our delivered subscription SaaS product offset by an increase for a perpetual license sales on this quarter. SaaS revenue was $764,000, in the first quarter of fiscal 2019, compared to $1.5 million in the first quarter of fiscal 2018. The primary reason for the decline are due to the loss of a few large customers for various reasons. In one case, a large customer chose not to renew their subscription. In another case, our customer was acquired and therefore it was not able to renew contract. Also contributing to the decline was the price reduction for another large customer contract due to a change in their business model. Our hosting revenue decreased from $303,000 in the first quarter of 2018 to $257,000 in the first quarter of this year. The decrease in revenue was primarily due to the larger customer who's not renewed their contract. Our recurring revenue, which consists of SaaS licenses, annual maintenance on perpetual licenses,…

[Operator Instructions] Our first question or comment comes from the line of Howard Halpern from Taglich Brothers. Your line is open.

What type of gross margin are we looking at for the revenue from the acquisition?

Sure. Yes. So, the company that we bought is named SeeVolution and they -- their product line is Celebros. And, this is SaaS software, very little professional services associated with it, that is in the high 70% gross margin range. And one of the great things -- that's good margin in the space is that their technology is based on the same stack that ours is. So, we're available to merge infrastructures, and that's going to allow us to have economies of scale and improve both there's and our gross margin even further.

Okay. And this is just really a product and customer acquisition, so operating expenses except for maybe one-time to hit acquire the assets. Is that all we're looking at?

That's what we did is we did an asset purchase. And so, we’ve purchased contracts for over 80 customers, all of the intellectual property, and we’ll continue to service those. The employees of Celebros are now employees of Bridgeline. There's no other significant...

How many new employees will you have?

Only 10.

Okay. And I don't know if you had mentioned this, of the 80 customers, what type of industries are there? And what kind of opportunities does that give you in the cross-sell?

Okay. So, the customers for Celebros are all ecommerce sites. So, they're all transactional. And about half of them are in the United States and half of them are in Europe, a couple of in Australia as well. But that's for the bookmark as U.S. The companies tend to be smaller than the Bridgeline company. So, Bridgeline’s customers generally are falling in the $200 million to $2 billion range, more or less. And here, I would say, the fees [ph] are broadly in the $50 million to $200 million range with some outliers there. And, we expect that we'll be able to have faster sales cycles with the Celebros products. So, this is a software that sells much quicker than the full deeper platform. We expect that all of the Celebros customers and the new customers will come on-board with Celebros, will look at the Bridgeline suite when it's the right time in their own business cycles to replatform their website. And that will allow us to -- in addition to our current marketing efforts, have .faster and lower customer acquisition costs on the cross-sales. In addition to all of that, Celebros has a great partner network that brings -- leads, and this is something that we have as a strategic initiative for 2019 to create partner network. So, this bootstraps that initiative and allows us to come out of the gate with momentum.

And one last one, you talked about you've got some Celebros contracts already in January. Do you have visibility as to a monthly uptake or quarterly uptake of new customers that might be in the pipeline?

We do have good visibility of the pipeline, and we're expecting that we're going to continue to see multiple new customers coming in every quarter, if not every month. We don't have any specific details on that pipeline to share on this call. But, it operates at a -- there is smaller deals, but they are still much faster and there’s going to be a much larger volume of them.

Okay. I’ll look forward to seeing how it incorporates in the future. Thanks.

Great. Thank you, Howard.

[Operator Instructions] I'm showing no additional audio questions in the queue at this time, sir.

Great. Okay. Well, thank you. We appreciate the support, patience of our shareholders, and it's our goal to continue building a scalable business model which in turn will build shareholder value. Thank you for joining us today. We’ll look forward to speaking again on our second quarter 2019 conference call. Have a great day everybody.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.