Good afternoon ladies and gentlemen. And welcome to the Bridgeline Digital, Inc., First Quarter 2020 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 is being recorded. I would now like to hand the conference to your host, Mr. Mark Downey, Chief Financial Officer of Bridgeline Digital Inc. Please go ahead, sir.

Thank you and good afternoon, everyone. My name is Mark Downey, and I am the Chief Financial Officer for Bridgeline Digital. I am pleased to welcome you to our fiscal 2020 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, 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 financials in our earnings release. You can obtain a copy of our earnings release by visiting our website. I would now like to turn the call over to Ari Kahn, our President and CEO. Ari?

Thank you, Mark, and good afternoon, everyone. In 2019, Bridgeline acquired two new product lines; Celebros Search and OrchestraCMS. These product partnership with Salesforce.com and also artificial intelligence enterprise search technologies for our software suite. These are proven to be great differentiators that accelerate our sales cycle. Thanks to these acquisitions, our sales cycle is improved by a factor of three from over 175 days down to approximately 60 days on average. New sales also have a much stronger license to professional services ratio with nearly 72% of new sales consisting of license and only 28% professional services. Today, over 60% of our revenue is subscription and license and this ratio is expected to continue to grow as new customers are acquired. Two important measurements of success of these acquisitions are customer retention and sales volume. I'm happy to report that our newly acquired customers are renewing at even stronger rates than Bridgeline has seen in the past. Customers are also signing multiyear renewals now prior to last year, we generally only had single year renewals. We are winning more new customers than ever before, with more than three times the new customer acquisitions in 2019 than we had in 2018. In this fiscal year alone, we have already closed six license sales, five of which were new customers. This is a rate of nearly 1.5 per month. Recently acquired customers include B2B manufacturers, global e-commerce retailers, and healthcare and biopharmaceuticals, technology, instruments manufacturers, lifestyle and sporting goods retailers, clothing and footwear retailers and regional grocery superstores. Thanks to our partner network, which includes Salesforce.com, UPS, Magento, Shopify, Magico and Active Flow. We are adding new customers across the globe. We have recently won new customers in the United States, Ireland, Germany, Indonesia and Australia. Our multilingual capabilities just this…

Thanks, Ari. Today I will review our financial results for the first quarter fiscal 2020 ended December 31 2019. Total revenue for the quarter ended December 31 2019, increased 19% to $2.8 million, compared to $2.4 million for the same period last year. Following all the various components of revenue. Recurring revenue, which is comprised of SaaS licenses, maintenance and hosting revenue, increased 51% to $1.7 million for the quarter ended December 31 2019, from $1.2 million for the same period last year. As mentioned in prior earnings calls deferred revenue accounting rules associated from our 2019 acquisition dictate that full contracts are not recognized upon acquisition, but only a portion of builds revenues associated with OrchestraCMS can be reflected. We are now able upon the first annual license payment after acquisition to recognize the full value of these acquired contracts. Subscription and license revenue, which is comprised of recurring revenue and perpetual license revenue, increased 33% as of December 31 2019, to $1.7 million from $1.3 million for the prior year. Services revenue was consistent at $1.1 million for the quarters ended December 31 2019, and '18 respectively. As a percentage of total revenue, services revenue decreased 39% of total revenue for the quarter ended December 31 2019, compared to 45% for the same period last year. Bridgeline’s focus is on increasing licensed revenue with some of our newer products such as the Celebros product line, which require little or no services to implement. This focus along with the company's new partnerships and customs ability for self-service are expected to further increase our license service ratio overtime. Total revenues from our two acquired businesses comprised approximately 35% of the total revenues for the quarter ended December 31 2019. As mentioned earlier, this would not represent a full normalized quarter…

[Operator Instructions] Our first question comes from Pearl Lee of Accord Partners. Your line is open.

This is actually William Urschel from Accord Partners. Congratulations guys. What is it clear evidence that the acquisitions are paying off. I see the shorter sales cycle which is wonderful. And I certainly like the shift from services to licenses. But how are you measuring bottom line the success of the acquisition. It's hard because of the revenue recognition rules for us on the outside to really track it. So what are the numbers?

Yeah. So some of the key things that we focus on are first and foremost, is customer retention, right? We not only brought some great technology, but we brought a great customer base. And the Celebros customers, I think there's 104 of those and the ones that have come up for renewal, we've had over 95% renewal rate with those. And in the sale of Orchestra customer base, we've had over 90% renewal rate. And all of the business customers are renewing. So that's huge. And also, the customers who are renewing are renewing for multiple years rather than single year. So that's really critical as well. The way that you see this from the outside really is through the quarter-over-quarter growth of our subscription and license revenue. The one year anniversary of the acquisitions is more or less today. And the customers and the Orchestra size, pay one year that they'll say for instance, they signed a three year subscription. They'll pay the first year up front, then it's the anniversary of that end of the year and so forth. And from the revenue recognition perspective, we're only recognizing that revenue technically speaking 85% of it or whatever when we actually collect the money on its first anniversary. So when you see our subscription license revenue increasing quarter after quarter after quarter, a good part of that is based on our ability to recognize the revenue because the customers renewed and they paid back that subscription payment. So that's a big part of it. On the more strategic side, what you should be looking for is product releases from us that bring traffic building and increasing of shopping cart capabilities into Celebros. So you'll see some analysis from those this year along the way. And that indicates that the technologies are melding well because strategically what we want to do is we want to have Celebros be our primary new logo leader. We're going to have technologies that are thin layers of our Unbound software and our Orchestra software included in Celebros to make it even more competitive, acquire lots of new logos. We've already sold, I think three brand new customers this month already. And it's only the 12th or 13th or something like that. And then we'll upgrade those to Unbound and Orchestra along the way. So those are two kind of leading indicators, William that you should watch for.

Thanks, Ari. In an earlier conference call you suggested, didn't promise but suggested that you guys would be hitting about a $5 million top end rate this quarter, probably breakeven this month. Is that still on track, do you think you need to mend that?

Well, $5 million is not where we're at. You mean for the half or for the quarter? For the half we're going to, we're tracking to be above $5 million. But for the quarter, it's about half that more in the $2.8 million range. And our goal is to reach profitability this year. I've got a couple of caveats there. So that's really a run rate. So it's going to happen towards the end of the year. And one thing that we need to account for is, are two things is that was revalued these warrants that impacts our net income in kind of random ways that we have out there. And also, depreciation of the software that we acquired is about $250,000 a quarter. So it's really on the adjusted EBITDA basis that that you should be watching for. And it's not going to be -- not going to happen all by itself. So just hedge that. But that is exactly what our goal is to end this year as a profitable business.

Thank you gentlemen. Really appreciate it.

Thank you.

[Operator Instructions] Our next question comes from Arvind Sing [ph] of [indiscernible]. Your line is open.

Hey, guys. My question is what are you guys doing to improve the stock price? Because it's been almost a year now stock is pretty much flat.

Yeah. I believe that that the heart of the stock price is going to be showing the market that we don't need to make dilutive raises. And then that's really all about achieving profitability. From an IR perspective, we'll go to some of the key conferences and Taglich Conference and will be perhaps in [Indiscernible] and a few others like LD Micro. But at the end of the day, the achieving profitability is going to be -- and demonstrating it repeatedly I think is going to be the main thing that's going to impact the stock price. Of course, top-line growth is important. And we strategically believe that we're in a space where acquisitions are an opportunity. And because we are a public company and have access to capital that private companies don't have, we're in a great position to do that. But those acquisitions will be opportunistic. And they will always be accretive for shareholders from a financial perspective.

Okay, thank you.

Thank you.

Our next question comes from Andy DeNato [ph] of CMS. Your line is open.

Yes. Thanks, guys and congratulations on the good results. I'm just thinking longer term. What type of growth rates would you really expect for the business? I think maybe over the year, but maybe even longer term? Thanks.

Sure. Okay, well, Andy, we believe that in terms of new deals that we will be able to be closing four new deals on a monthly basis by the end of this year and new deals have license have ARR. And this is Celebros deal in the $15,000 range. And that that's going to continue to accelerate. And long term, especially since we're in so many different markets now that it's hard to predict exactly where that goes, we want to be closing several deals per month. One of the great things, things that gets me excited about our product suite now is the fact that unlike a year ago, when all of our sales were $400,000, 175 day sales cycles that either hit or you didn't. Now we've got multiple deals per month. We don't have to go through the financial due diligence and so forth. There sometimes blew up deals for us at the last minute that we could have won otherwise, if we weren't public for instance. And it's going to be that smoother revenue, focusing on ARR and continual growth that we're shooting for.

Thank you. And once again, nice work.

Thank you Andy.

I am showing no further questions at this time. I would now like to turn that conference back to Mr. Ari Kahn, President and CEO of Bridgeline Digital.

Thank you, Mensch. And thank you, everybody. We really appreciate all your support and patience. And it's our goal to continue to build a scalable business which in return is going to build scalable shareholder value. Thanks for joining all of us today. We look forward to speaking you again on our Q2, 2020 conference call.

Ladies and gentlemen this concludes today's conference. Thank you for your participation. And have a wonderful day. You may now disconnect.