Ladies and gentlemen, thank you for standing by, and welcome to Bridgeline Digital Third Quarter 2020 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 Instructions] Please be advised that today's conference maybe recorded. [Operator instructions] I would now hand the conference over to Mark Downey, Chief Financial Officer of Bridgeline Digital. 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 third 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 within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934, 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 expressively disclaim as 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 such as the impact of the COVID-19 pandemic and related public health measures could cause Bridgeline's actual results to different from those express 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 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 R.E Kahn, our President and CEO.

Thank you, Mark, and good afternoon, everyone. Bridgeline delivered 22% growth in recurring revenue, positive operating income and positive adjusted EBITDA in our third quarter. In Q4, we expect continued growth in recurring revenue and a repeat our bottom-line performance with positive operating income and positive adjusted EBITDA again. Q3 closed more sales than we had in our previous two quarters combined. Q4 is off to a great start, and so far we've closed more sales than the first half of our Q4 than we did in our prior third quarter. Many of our new customers are online retailers in the United States and Europe. We recently launched a newly designed e-commerce site for global consumer electronics manufacturer that enables them to sell direct-to-consumer, while also continuing to support their traditional B2B channel of dealers and distributors. We've seen significant investments from the healthcare industry with hospitals, enhancing their websites to incorporate virtual events as well as implementing messaging systems in response to the COVID-19 pandemic. Recently, two top regional healthcare networks extended their professional services retainers for ongoing enhancements to their websites. We've also had several online pharmacies who sell protective personal equipment, acquire Celebros licenses to improve search and conversion for their e-commerce sites. We even had a veterinary pharmacy buy licenses just this month to further improve its online sales. We've recently won an eyeglasses manufacturer with operations in Europe and in the United States. We also won a sale with the sporting goods retailer in Asia with more than 2,300 retail stores. In our third quarter, we had sales in three continents and across several verticals, including healthcare, pharmaceutical, education, franchise and manufacturing. The value we deliver to our customers is more relevant than ever. Several of our customers renewed their subscription agreements for multi-year terms,…

Thanks, R.E. Today I will review our financial results for the third quarter of fiscal 2020 ended June 30, 2020. As I mentioned on our previous earnings call in March 2020, the World Health Organization declared COVID-19 as a pandemic. And while we anticipated our operations in all locations to be affected, we were not adversely impacted. In fact, our productivity increased and our robust business continuity plan was tested in real time, even as the virus continues to spread. We have adjusted certain aspects of our operations to protect employees and customers, while still meeting customer needs for mission critical technology, including quick responses to address customer needs in light of COVID-19. We continue to monitor the ever fluid situation closely. And it's possible that we may implement further measures to address the needs of our staff customers. Total revenue for the quarter ended June 30, 2020, which is comprised of license and services revenue was $2.6 million for the quarter ended June 30, 2020, as compared to $2.7 million for the same period in 2019. Falling on various components of revenue. Subscription and license revenue, which is comprised of SaaS licenses, maintenance and hosting revenue and propetual license revenue, increased 22% for the quarter ended June 30, 2020 to $1.9 million from $1.6 million for the same period in 2019. This increase is attributed to more for renewals across the diverse portfolio of customers, including retail, healthcare, financial services, franchise, education, manufacturing and multiyear license renewals from Fortune 500 pharmaceutical, industrial manufacturing and global energy companies. As mentioned in prior earnings call, deferred revenue accounting rules associated from our 2019 acquisitions dictated a full-contracts are not recognized upon acquisition, but only a portion of those revenues associated with OrchestraCMS can be reflected. We are now able as of…

Thank you. [Operator Instructions] First question is from Howard Halpern with Taglit Brothers. Please go ahead.

So, year-to-date, how many new customers have you gotten there? Are most of them in the Celebros product category?

Most of them are in Celebros in terms of quantity. Celebros is really selling quick, and it's the model that we're going to be using to sell all of our software. Last quarter alone, we had 8 licensed sales and six of them were Celebros. I don't know – I don’t remember what the previous two quarters were, but I think they ended up to 7. And I missed Revenue 360. Revenue 360 is, it's not a marketing term, although I like the term and we might start use it in marketing side. It really describes our strategy where we're taking Unbound and we're taking Orchestra, which our platform that traditionally would require a bunch of professional services to customize in order to implement some of the online store and pulling the components out of those, that directly impact revenue, wrapping them up so that they can be sold just like Celebros without requiring a bunch of professional services and making them compatible with all of our competitor platforms like Magento and Shopify and so forth. And this has been enabling us to expand our perspective customer base to anyone regardless of what they've got a competitive platform to Unbound or not should have our sales be fully telephonic and ultimately completely touchless where you would just be able to buy our software through our website for faster sales cycle, lower cash. It's really off to a great start.

If I come in initial product license, whether sort of one of the [indiscernible] offerings. How do you guys perhaps yourselves interacting with [Technical Difficulty] based to offer different essentially [Technical Difficulty] sell to your new client base as they become -- for initial purchase?

So what we're doing is there are hundreds of implementations on our platform that have each one dozens of unique ways that they implement revenue enhancements, they might send out coupons. They might have special artificial intelligence systems that recognize most important keywords and register them with Google. They might have recommendation engines, and we're taking those best practices from all those different customers and bundling them off. This gives us cross sale opportunities where we're now going into our own customer base and saying, “Hey, here's something that we did for another customer”. We've got it bundled up, you can just buy it directly without a big complicated them expensive implementation process. And selling it throughout our own customer base, and then of course, also selling out to the rest of the world. And we believe that the what's called marketplaces, where platforms like Magento for instance, allow other companies to sell their Magento compatible products on these marketplaces will be a significant distribution point for us. And we've already got sales from the Hybris marketplace, the Magento marketplace, the Shopify marketplace actually.

Any type of that can be received, I guess new Celebros customers specially in terms of the machine AI technologies that are in that offering?

Right. So a lot of our AI technology came from the Celebros product line. And this artificial intelligence is able to understand the patterns in which people behave on your website. Which ones are those patterns turn into actual purchases. And we're leveraging that capability with some other newer AI that we've developed to be able to put the right product in front of the right person at the right time when they visit an online store, those include the ability to do recommendations, people who bought this also buy that even to be able to register products as individual one click purchase pages that are registered with Google.

Thank you. And our next question is from [Ben Crissy]. Please go ahead.

Hey, R.E, this is Ben. I've spoken to you before. So, I wanted to topic a little bit from the financial side to the technical side. And as you know, like, I think you mentioned Shopify as a competitor. And technology changes really fast, right. And a lot of your competitors are heavily invested in technology. They're building new, they're doing a lot of R&D new programming languages, all that kind of thing. And I was wondering, you have these acquisitions, and how is the integration going? And are you able to sort of build out modular systems so that you can help out in one side with another platform? And I think, based on your career site, it's kind of like a dotnet shop. Is that kind of where you see yourself investing heavily continuously forever?

Right. Well, those are great questions. And they've been huge advances in system integrations over the last 10 years with what are called restful API's and also what's often called headless CMS. And the gist of both of these system is that you can have components that are running in different languages and different servers and communicate quickly enough to be able to pass information back and forth with reasonable standards to act like they're on a single system. And this is really what's allowing us to be successful with our current system. So, we communicate with Unbound platforms with a Magento platform with an FAP, ERP, an Amazon personalization engine continuously and provide a single seamless output is all running on one servers. We've been doing this now for a little bit over a year. It's working really well. And I think it's the standard that's getting better every day and it's maturing. So that problem that you just pointed out, which has pledged computer scientist forever, and it's a tough one, is one that in our particular industry is pretty mature and we're leveraging that to move quick.

Okay. Cool. And then, like, in terms of like doubling down in like dotnet, are you like switching one team dotnet or it sounds like you guys have a lot of different languages that you have to work with. You've got to work on lightning, you got to work on Magento's kind of specific staff, you've got PHP. Does that end up reducing velocity? And I think also like, test coverage, are you able to keep the bugs down as you guys are kind of scrolling out into a lot of features now. So, are you able to focus in and make sure that you don't ship regressions and hurt your net retention ratio?

Sure, Right. So on the language side, most of our technology is enlightening in dotnet and our engineers generally will also have a lot of experience with some of the usual suspects with PHP and Ruby and Java. And as we integrate with more and more system, I expect some of those languages to become a bigger part of our engineering team. But because most of our integration is happening in restful API, we don't get too caught up in and having to do too many things outside of the standard languages that we're accustomed to because they all have a restful interface. Now on the regression in QA, this is something that's near and dear to my heart. We care a lot about that. And what we do is not only are we building unit tests and automation suites and integration tests and all the good stuff on our own software, but whenever we do an implementation for customer, we create a test suite for each of our customers, and that goes into our R&D team. And every time they create a patch, they first run it across all of our customers test suite. A lot of those are built on like essentially, I'm trying to remember which technology were used at, blanking right now, but screen recorders that are simulating clicks through on their website, for example, and we'll have a stage version of their site running with recording at it and make sure that the click through analysis works. In other cases with some of our bigger customers will actually have a deeper integration tests that are running our unit tests, that are running inside of their suite. But we run that across all of our customers on every patch. So that's how we're approaching that QA issue.

[Operator Instructions] Ladies and gentlemen, I'd like to turn the call back to management for their final remarks. Roger Kahn Thank you. And thank you all for listening. We appreciate the support and patience of all of you, our shareholders and our partners. And our goal to continue to build a scalable business model, which in turn will bring shareholder value. We've reached very important milestones just now. We have positive operating income, positive adjusted EBITDA. We've got a subscription license growth, new products that are being released. It's a very exciting time and really looking forward to sharing our Q4 results with you on our next conference call. Stay healthy and be well.

Thank you, ladies and gentlemen. This concludes today's conference call. You may now disconnect. Have a wonderful day.