Greetings, and welcome to the Bazaarvoice Fourth Quarter Fiscal 2016 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Linda Wells. Thank you. You may begin.

Good afternoon and welcome to today’s conference call to discuss Bazaarvoice financial results for the fiscal fourth quarter and full year ending April 30, 2016. I am joined today by Gene Austin, Chief Executive Officer and Jim Offerdahl, Chief Financial Officer. Following the prepared remarks, we will have a question-and-answer session. Please note that we are simultaneously webcasting this call on our Investor Relations website at investors.bazaarvoice.com. The earnings release with our results for the fourth quarter and full year of ‘16 was issued after the market closed today. Certain statements made during this call, including those concerning our business outlook and guidance, growth plans and opportunities, potential acquisitions, outlook on legal matters, sales execution and the ability to capitalize on our opportunities are all forward-looking statements. Forward-looking statements are subject to a number of risks, uncertainties and assumptions that are described in our SEC filings, including the Risk Factors section of our Form 10-K for the fiscal year ended April 30, 2015 filed with the SEC on June 25, 2015. Additional information will also be set forth in our future quarterly reports on our Form 10-Q, annual reports on our Form 10-K and other filings that we may make with the SEC. Should any of the risks or uncertainties materialize or should any of our assumptions prove to be inaccurate, actual results could differ materially and adversely from those anticipated or implied in these forward-looking statements. We do not intend or undertake no duty to release publicly any update or revisions to any forward-looking statements made during this call. The divestiture of PowerReviews was completed on July 2, 2014. As a result of this, PowerReviews revenues, related expenses and loss on disposal net of tax are components of loss from discontinued operations in the condensed consolidated statements of operations since our fourth quarter of fiscal 2014 and all comparative fiscal quarters presented. The statement of cash flows is reported on the combined basis without separately presenting cash flows from discontinued operations for all periods presented. Some of the numbers that we will discuss today during this call will be presented on a non-GAAP basis. Today’s press release, together with the accompanying tables, contains the calculations of these non-GAAP financial measures and a full reconciliation between the corresponding measure, the GAAP measure and the non-GAAP measure, including the reconciliation of GAAP to non-GAAP operating results from continuing and discontinued operations. I would now like to turn the call over to Gene.

Thank you, Linda and thank you all for joining the call today. For the fourth quarter, we reported revenue above our guidance and adjusted EBITDA near the high end of our range. But more importantly, we saw solid improvement in most aspects of our business. Revenues for the quarter were $50.7 million, up 5% year-over-year. Adjusted EBITDA finished at $277,000, our third straight quarter of positive adjusted EBITDA performance. 2016 was clearly a transition year for Bazaarvoice as we worked hard to both stabilize our large and strategic reviews business, as well as launch a number of new initiatives to position the company for profitable growth. As we enter our new year, I believe our strategy is sound and that over time, we will return Bazaarvoice to stronger revenue growth while simultaneously driving improved operating margin performance. Less than 2 years ago, we launched our strategy to transform Bazaarvoice away from solely a ratings and review platform provider to a company with a powerful shopping network rich in consumer-generated content, content that creates greater consumer confidence and converts shoppers to buyers. At the same time, we invested in monetizing the shopping behavior in data we gather each and every day. We embarked on these initiatives all while our core reviews business underwent pricing pressure that was exacerbated by the unique circumstances surrounding our settlement with the Department of Justice. Years from now, when we look back on Bazaarvoice’s fiscal 2016, we will see it as one of the toughest years in the company’s history, but also the year where its new future anchored in profitable growth began. Let me outline some of our key achievements last year. We invested in improving overall customer satisfaction to drive improved dollar retention among our clients. All year, client satisfaction has been rising. And…

Thank you, Gene and thank you to everyone who joined the call today. Today, we are reporting results for our fiscal fourth quarter and full year 2016 ended April 30, 2016. As Gene mentioned, we have made significant strides in building a strong financial foundation for Bazaarvoice throughout 2016, especially in terms of adjusted EBITDA and cash flow. We are pleased to have achieved our first full year of positive adjusted EBITDA of $1.2 million, a significant improvement from a loss of $8.7 million last year, driven primarily by continued improvement in our operating efficiencies and tightly managing our headcount. We are also pleased to achieve our first full year of positive cash flow from operations of $19.4 million, a year-over-year improvement of $36 million. This is a result of the improved profitability as well as very strong working capital management, especially in receivables. We ended the year with DSOs of 70, our best end-of-year performance in 3 years. We have come a long way in just 2 years, from nearly $22 million of adjusted EBITDA loss to over $1 million positive and from negative operating cash flow of $43 million to positive $19 million. This financial performance provides Bazaarvoice with a solid foundation upon which to support our future growth strategies that Gene outlined. Total revenue for fiscal 2016 was $199.8 million and SaaS revenue is $191.5 million, up 4% and 5% respectively from last year. Advertising revenue was $8.3 million, down 9% from last year. Our GAAP loss per share improved to $0.30 in fiscal 2016 from a loss of $0.44 last year. Our non-GAAP loss per share also improved from $0.19 last year to a loss of $0.05 in fiscal 2016. Now, let me turn to our financial results for the fourth quarter. We achieved total revenue…

[Operator Instructions] Our first question comes from Scott Berg from Needham & Company. Please go ahead.

Hi, Gene and Jim. Sorry about the little bit of background noise where I am at, but congrats on a good quarter. Couple of quick ones for me is – and I am sorry, I am trying to avoid this noise. Now, it’s going away. That’s better. Sorry about that. I guess, the first is on the attrition side. You talked about attrition improving, but I get how that works to the model a little bit next year and we are not getting revenue growth on a substantial basis. Can you give a little bit more color on what you are seeing on the attrition side to give some comfort that it clearly is kind of a rearview mirror issue?

Yes. Scott, is that your only question? I thought you said you had two or is that only one?

Yes, I got a follow-up to that one when you are done.

Okay. So I mean, I think the – one of the things about hindsight being 20/20 is we can clearly see the bubble we have had in elevated churn based on the Department of Justice settlement and the unique environment we have had. And in Q4, we saw significantly down client dollar churn. And as we look into Q1, we see a similar trend. And when you start looking at the PowerReviews specific churn results, you are seeing dramatic improvement in our ability to both compete on new business. And I think that’s frankly us getting used to the fact that we have a much broader set of solutions, a better story. And at the same time, we are competing much better on the services side when it comes to servicing our clients. So, we are going to continue to have a competitive environment, obviously. And PowerReviews still has points in the settlement that they have access to our network for another couple of years. But we really think that our ability to compete and effectively win is much higher. And the impact of the settlement on churn when you look back now is much lower. In fact, I think this will probably be the last call that we spend any time on this settlement as a part of our business, because as we go forward, we see a new normal of competing. We see a new normal of growth and being effective in our marketplace.

Got it, okay. And I guess my follow-up question then is moving to the advertising business. When we look back a year ago you guided to the ad business up 60% year-over-year in ‘16 over ‘15 and obviously that come in this year for different reasons. You sound as excited about the ad business as I have heard in a couple of quarters. But trying to understand what gives you a little bit more confidence in that segment heading into this year relative to the last couple of quarters. It sounds like the legacy business is stabilized. We are just trying to make sure that, for lack of a better term, ‘17 doesn’t give us a little bit of a head fake in the advertising segment like it did last year? Thank you.

Yes. And I mean, Scott, we are measurably more confident in our advertising business than we were 6 months ago. I think it comes from both significant additions to the team. It comes from ginormous growth in our targetable shoppers, up over 100 million in targetable shoppers. And we are seeing that – and that growth is coming from significant customers of ours buying into the strategy, right. Remember that they have to give us data rights and they know why they are giving us data rights, because they believe in what we are trying to do. It also comes from the fact that we are seeing people vote with their dollars. Now obviously, there is risk to it. And so you can see that reflected in our guide. And we are trying to be smart about how we set up and talk about ‘17 on the guidance side, because we want to be – we want to make everybody responsible about how we look at the year going forward. But we are feeling good about where we are with our advertising business. I am very pleased with Q1 so far in our shopper advertising. I think we have made great progress just in this quarter alone. So – and I think one other thing I want to say is for all of you that the data side of our business is going to be a significant advertising opportunity. But now that we are starting to get critical mass, we see SaaS opportunities as well and that’s something that we want to talk to you all more about in coming calls.

Great, that’s all I have. Thanks for taking my questions. Congrats.

You bet.

Our next question comes from Kevin Liu from B. Riley. Please go ahead.

Hi, good afternoon.

Hi, Kevin.

You have talked about the sales productivity starting to improve here and kind of your willingness to add additional headcount on the sales side. Maybe talk about what sort of percentage increase you might anticipate in sales reps over the course of this year? And with the renewed bookings growth that you would expect, can you give us a sense for whether you think to get back to this 15% to 20% aspiration growth rates in ‘18 or would it take a bit longer than that?

Well, I think the thing to realize as we look at ‘17 from the SaaS basis is each year, our sales performance is stair stepped, right. The lowest is usually Q1, the highest is normally Q4. And so coming off of a tough ‘16 from basically a higher churn dampened bookings performance, while we are starting to see the type of sales productivity in this new world, if you will, that we want to see, it is going to be a stair step process on the sales front. So that’s why when you take the dampened performance in ‘16 and you take our normal first half sales ramp, that’s why the growth in ‘17 is – really doesn’t start to pick up till the end of the year. We don’t really talk about sales capacity additions. And so we are not really at liberty to kind of talk about that, but we will be making selective additions in both U.S. and EMEA. We're beginning to look at additional countries than our classic countries of France, Germany and the UK. We are actively in the Nordics now and we are looking at other areas. We think the brand opportunity in the U.S. remains good for our SaaS solutions and gets even better when we talk about shopper advertising and then we think the retail opportunity worldwide remains good. So my point is that we have had a big downgrade in ASPs as an organization. And adjusting to selling into that world and also at the same time trying to sell a bigger portfolio of solutions has taken time. But I feel much more comfortable about our ability to carry that message, win business. I mean, we are starting to see the win rates that I want to see over and over again. And so generally feeling like the SaaS business continues to turn the corner.

Understood. And just from a modeling perspective, you talked about kind of the 25% growth rate expected for advertising. Obviously, the comparisons are a little bit easier in the second half of ‘17 than the first half. So, is that something we should take into consideration or do you feel like your shopper advertising initiative is taken off enough to the point where you could start to see strong growth right out of the gate?

Yes, I mean, in the fourth quarter, we had some pretty good shopper advertising business. So, we expect that to ramp throughout FY ‘17. But clearly, the second half is a stronger half. And not only driven by the momentum around the targetable shoppers, but just a general ramp in repeat business we are starting to see. So we see that ramping throughout the year. And of course, Q3 is typically our strongest quarter because of the holiday season.

I think the thing that we see on the shopper business is that we – our legacy advertising business is stabilized, but we were not – we don’t believe it’s growing. We think it’s going to be flat, perhaps maybe a little down. And so when you look at that 20 to 30 number, we expect shopper advertising to exceed that by quite a bit. So that’s kind of the mix that we have got going on our advertising business.

Got it. And just lastly for me, you guys did some restructuring within the quarter. Have we already seen a full quarter’s worth of savings there or should we expect the Q1 expense rate to step down a little bit?

Yes, I think in general, in my remarks for the years, sales and marketing is – we are expecting more from there as well. But from a quarterly perspective, it will be felt a little bit more in Q1 than it was in Q4.

Got it. Congratulations on a strong quarter.

Good. Thank you.

Our next question comes from Nandan Amladi from Deutsche Bank. Please go ahead.

Hi, good afternoon. Thanks for taking my questions. So Gene, in your prepared remarks, you talked about how consumer generation content, I think contributed 33% of bookings from ‘15 a year ago. What are your expectations for this year just more broadly for new products contributing to bookings rather than to the core ratings and reviews, which also I guess last year didn’t have much bookings growth? So if you look ahead, what sort of expectations do you have?

Right. Yes, I mean, ratings and reviews has been a tough bookings environment for us, mostly due to ASPs. We continue to see a lot of transactions, which is good. There is lots of demand for what we do. But the ASP market for – the ASP situation has been fairly tough. The number actually, Nandan, was 23% for FY ‘16, up from 15%. And that’s excluding a product that we discontinued in February of this year, calendar year called BV Local. The news on our mix is that North America is way ahead of that number. And Europe is far behind on that 23%. So, we have an opportunity on – to get Europe to a much healthier place and a plan in place to do so. And in North America, I am pretty pleased, to be honest with you, I think we are doing a good job of representing our full portfolio. I think the product that we still have work to do to get more penetration on with CGC is what we call Spotlight. It’s turning out to be a fairly important product for us. It’s also the deal sizes are fairly large, but it is in the area of SEO, which is a new area for us, but one that I think we are ramping well. We have added resources to our SEO bench, and the clients that are on Spotlights have seen some pretty impressive results. Again, Spotlights is designed to allow our clients review content and other content to perform stronger in search engine optimization arena. So generally speaking, I am happy with the new products. Obviously, I have got more plans in place. So, we continue to worry about how do we continue to scale our portfolio in a scalable way? But now that we have a critical mass of data, I think some of the SaaS offerings that we are looking at for the second half of the year open up even a brighter SaaS portfolio for our bookings growth. So right now, we feel pretty good about how we are positioned.

Thank you.

Our next question comes from Jeff Houston from Northland Securities. Please go ahead.

Hi, guys. Thanks for taking my questions. Jim, I was hoping you could – it sounds like a lot of the upside at least on the – for revenue in the quarter came from a few one-time items. Could you – you talked about it briefly in your prepared remarks, but can you elaborate a bit more on those? I think you said it was $1.6 million that drove some of the upside, just breakdown a bit of what that was.

Sure. About $900,000, that was an out-of-period revenue. We had some errors in the timing of a rev rec and where the services was performed and the cash was collected and it was getting hung up in deferred. That was $900,000. Another 600 – and it’s clearly nonrecurring. Another $600,000 was from – basically better operating process. We have been working on that and certainly it’s shown up in bad debt expense – favorable bad debt expense this year. But when we have revenue on hold for nonpayment, if they don’t pay us, if they are more 90 days past due, we put it on hold. And of course, if a client does not renew on a timely basis, then we put that on hold until we get a new contract in place. Both those numbers came down in Q4 basically releasing about $600,000 in revenue. That’s a little bit more – that’s more than usual and that happened in Q4, but that’s a result of our processes just continue to get better internally.

Great. And then I guess shifting over to the number of targetable shoppers, could you provide some more color? I think you said before, you are looking at your – how many of your customers currently share their data – the rights to share their data. How should we think about that? How it’s – it’s clearly at a place where you can monetize it at this point But how should we look at that progressing as we go through your fiscal ‘17 and the targetable shopper number that you provided should – what are you expecting in that to grow at in fiscal ‘17?

Yes. I mean, the way to look at the targetable shopper, we have a couple of numbers we throw out. One is 700 million shopping devices. Those are actually your laptop, your phone, your iPad, what have you. So you could have multiple devices per individual. And then we have the 100 million targetable shoppers. These are individuals, right? And so I think the best way – I mean – to give you what I think is going to happen in ‘17 is kind of hard at this point. I think the most important thing is we have reached critical mass. We do expect the number to go higher. My understanding is the number at Amazon is about 180 million, which would be the only comp I could give you. So, I think we are in pretty good shape. I think our focus now is to add shoppers in the European arena. And that’s going to be a big part of ‘17. We are going to continue as we renew clients. We are going to continue to add shopper data rights on our – in the U.S., we are going to try to – we are going to push ahead on data rights in Europe. But I am not as worried about that total number now as I am about getting the innovation around those – that data asset right, meaning making sure our shopper advertising remains compelling and some of the new SaaS offerings that we are talking about later on this year. So, a little bit of a shift from data rights acquisition into execution on that data rights. It’s everything from selling to innovating and making sure we make that asset as valuable as we know it is.

Got it. Alright, thank you.

Our next question comes from Stephen Ju from Credit Suisse. Please go ahead.

Hi, guys. This is Chris on for Stephen. On the shopper advertising piece, can you walk us – me through mechanically, how you guys are selling your ad inventory to brands right now?

I mean, we are – we walk into the brand and we basically can quickly show the brand how effectively they are competing and who are they competing against based on who is reading what content about each brand? And then we devise what is the segment that they want to go after. Maybe they want to go after those that are not looking at their brand and only looking at the competition or those that are perhaps looking at two or three brands. We devise that segment and conceptually saying, I want to talk – I want to be – I want to put an advertising campaign in front of someone who has looked at my reviews or competition’s reviews in the last x days, right? And then we execute an advertising campaign. The creative – we know the creatives that have consumer-generated content in them perform even better than just kind of standard creative. But once a creative is done, we execute and we buy inventory on the web just like any other advertising ad tech play – ad tech company would. So, there is nothing magical about how our inventory works. The magic is about how we target shoppers that are in market based on certain qualifications.

Okay. Thanks, guys.

[Operator Instructions] And our next question comes from Ilya Grozovsky from National Securities. Please go ahead.

Thanks. I just had a clarification. I don’t think you guys mentioned the client retention rate in the quarter, what was the percentage?

Yes, it was 95.7%, I believe. That’s the best quarter we have had all year.

Perfect. Okay, thanks guys.

And if there are no further questions, I would like to turn the floor back over to management for any closing remarks.

Okay, thank you all very much. A reminder of our October 6 Investor and Analyst Day and look forward to seeing you all there. So thank you, again.

This concludes today’s teleconference. Thank you for your participation. You may disconnect your lines at this time.