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Bridgeline Digital, Inc (NASDAQ:BLIN)

Q1 2013 Earnings Call

February 14, 2013 4:30 pm ET

Executives

Kimberly Brown - Director of Investor Relations

Thomas L. Massie - Founder, Chairman, Chief Executive Officer and President

Michael D. Prinn - Chief Financial Officer, Chief Accounting Officer and Executive Vice President

Analysts

Howard Halpern - Taglich Brothers, Inc., Research Division

Mark Stafford - Stafford Holdings Ltd.

Jason Revland

Brian G. Swift - Security Research Associates, Inc.

Walter Christopher Ramsley - Walrus Partners, LLC

Eric Duncan

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Bridgeline Digital First Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce our host for today, Ms. Kim Brown, Director of Investor Relations. Ma'am, please go ahead.

Kimberly Brown

Thank you. Good afternoon, everyone. I am pleased to welcome you to our 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 in talking about 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. I would also like to remind you that the audio and the transcript of this call will be available for replay. You can find that information on the Investors section of our website.

At this time, I would like to turn the call over to Bridgeline Digital's President and CEO, Thomas Massie.

Thomas L. Massie

Thank you, Kim. During the first quarter, Bridgeline continued to execute against its long-term strategic plan to grow our iAPPS business model.

Before I walk through some of our business accomplishments, I would like to review our first quarter of fiscal 2013 financial results at a high-level. We did generate $6.2 million of revenue, compared to $6.5 million in the first quarter of 2012. However, our iAPPS-related revenue grew a healthy 17% when compared to Q1 of last year, and iAPPS-related revenue is now 69% of our total quarterly revenue compared to 55% in the first quarter of last year.

I'm happy to report that in the first quarter, we sold 96 new iAPPS licenses. As of December 31, Bridgeline sold a total of 791 enterprise licenses, and we have deployed 636 of these licenses.

As of December 31, we have sold 1,550 iAPPS ds licenses. In addition, licensing revenue in Q1 increased 33%, and recurring revenue increased 20%. Our continued progress of growing our iAPPS-related business is what's going to drive and enhance our shareholder value. The continued adoption of iAPPS is enabling Bridgeline to build a more predictable and profitable business model that offers significant customer traction and recurring revenue and scale.

As we mentioned on our last earnings call, we did anticipate that our overall first quarter revenue would be lower, and that the top line would ramp quarter-to-quarter throughout the fiscal year. Multiple factors contributed to the small year-over-year revenue decrease, including: Hurricane Sandy negatively impacted some of our Northeast customers and various billable resources that reside in Bridgeline's Northeast office locations. These unexpected delays of active engagements negatively impacted Q1 revenue by a few hundred thousand dollars.

Historically, we've had approximately 50% of our iAPPS license sales booked as SaaS licenses, and approximately 50% as perpetual licenses. Revenue recognition of perpetual licenses is typically recorded much faster than SaaS licenses. In the first quarter of 2013, we experienced approximately 80% of our iAPPS licenses booked were SaaS licenses, versus the traditional 50%. While this improves Bridgeline's backlog and our deferred revenue, it delayed expected revenue recognition and gross profit by close to $200,000 in the first quarter as well.

We've recently been signing, also, larger engagements. In fact, in Q1, we saw our average initial engagement size more than double. While this is good news on the surface, and it does build our backlog, this also extends our implementation and revenue recognition timeframes, further delaying revenue. Unfortunately, also, our new bookings in Q1 were back-end loaded, whereby close to 50% of our new bookings came in the first -- came in during the last month of the quarter.

And lastly, our first iAPPS ds customer accelerated the timeframe of their franchise launches, at which we launched thousands of their websites onto our iAPPS ds platform in a significantly reduced period of time. As you can imagine, a lot of our professional services team members were called upon to support this effort. Strategically, this is the right decision for the company, as iAPPS ds is a very important initiative and will significantly increase our recurring revenue and improve our profitability in future quarters. I'll talk a little bit more about iAPPS ds in a moment.

For the second straight quarter, I'm pleased to report that we achieved strong bookings of $8 million. This is a 45% increase in bookings, compared to Q1 of last year. Given the qualified pipeline we currently have in place, we anticipate strong new bookings to continue throughout fiscal 2013.

In the first quarter, Bridgeline won a dozen new iAPPS engagement, with premier brands, including McGraw-Hill, NewsGator and PODS. McGraw-Hill is currently using 6 different platforms for each of its business units to manage their company's Internet and deflected [ph] iAPPS platform to streamline and power unified Internet for the entire company. McGraw-Hill chose iAPPS for its scalability and its state-of-the-art Web Engagement Management functionality.

NewsGator is an enterprise class social business software company, and they represent a very nice win win for Bridgeline in our technology sector. They selected iAPPS over the competition, since our platform was the most robust, provided deep integration across multiple categories, and that it's highly scalable. NewsGator has aggressive growth plans over the next 5 years, and they required a strong platform with advanced functionality that could support this growth and their digital marketing strategies. In addition, some of their growth will come from overseas, and iAPPS stood out as being the best platform to support multiple languages in these different regions.

With $500 million in annual revenues, PODS is a global leader in providing innovative mini storage containers that are mobile and convenient. PODS selected iAPPS Web Engagement platform to power their next-generation, mission-critical website. They chose iAPPS for its deep integration of content management, eMarketing and analytics, and for its ease-of-use. Once implemented, the PODS marketing team will have complete control of content changes in their marketing campaigns.

Now let me update you on our strategic eCommerce partnership with UPS logistics. As most of you know, we have a multiyear partnership in place with UPS to sell our integrated, all-inclusive, B2C and B2B eCommerce solution for mid-market and large market organizations. UPS logistics conducted a search for the best eCommerce platform, and they ultimately selected iAPPS Commerce as its partner of choice, providing enormous validation for the iAPPS Commerce value proposition.

We launched our marketing efforts and began building our qualified pipeline in June 2012 with UPS logistics. I want to remind you that our traditional sales cycles for eCommerce opportunities are 9 to 12 months. To date, we have closed and we are launching multiple sites with UPS logistics, including companies like GE Healthcare and Triumph Motorcycles. Triumph is one of the fastest motorcycle brands in the United States and they needed to expand their sales by offering B2C channel to augment their already thriving brick-and-mortar dealerships.

The new iAPPS-driven eCommerce web store, which was launched in a very tight timeframe, complements and strengthens iAPPS' network of over 200 dealerships across North America and drives a true multichannel experience for the customers. They need a powerful end-to-end eCommerce solution and UPS logistics and iAPPS Commerce quickly became the best choice to meet their demanding requirements. Triumph's excited about the power of the iAPPS Commerce suite and the fact that they can leverage the platform to drive incremental revenue and attract new customers. In addition, Triumph's going to be launching its own B2B website on the iAPPS platform in the coming months, which will be streamlined and provide a holistic view of all of their eCommerce initiatives.

UPS logistics and Bridgeline has launched a number of enhanced marketing initiatives. Our multimillion-dollar qualified pipeline continues to grow, and we look forward to sharing more wins with you in the coming quarters.

Turning to iAPPS ds, which ds stands for digital subscriptions, as most of you know, iAPPS ds has been specifically developed for franchises and large dealer networks. We need to provide superior website tools to their numerous franchises and dealers, while maintaining content and brand control.

iAPPS ds enables corporate franchises to provide a centralized, digital marketing structure for their franchisees and dealers. And it's a cloud-based multi-tenant SaaS solution that's highly scalable. We believe that there's not another web platform solution in the franchise marketplace that can truly compete with the quality, the value proposition and scale of iAPPS ds.

From a financial perspective, iAPPS ds has the potential to significantly increase Bridgeline's recurring revenue and profitability. This subscription-based model would require each franchise owner or dealer to pay a monthly subscription fee of $40 to $100 per month, depending on the total volume of the franchise organization. For this, each franchise would receive a self-serviced, pre-templated website that includes iAPPS Content Manager, Analytics and Marketier.

iAPPS Commerce is available for an additional, incremental monthly fee. We previously disclosed that the UPS Store is, in fact, our first iAPPS ds customer, with 4,300 franchise locations across the United States. Bridgeline Digital won this business as a result of the strength and the value proposition of iAPPS ds, and not as a result of our partnership with UPS logistics. They're both 2 very separate business units that reside within the UPS' $60 billion umbrella.

During the first quarter, the UPS Store significantly accelerated the timeframe by which they needed to transition their sites over to the iAPPS ds platform. Given the tremendous financial benefits iAPPS ds provide for Bridgeline, we are certain that it's the right decision to focus our efforts on this migration. A couple of thousand of UPS Store websites are currently running on the iAPPS ds premium platform, and we expect to transition many other UPS Stores onto the iAPPS ds platform throughout the course of 2013. The UPS store, right now, is extremely pleased with iAPPS ds platform. This is a major upgrade for them in terms of functionality, ease-of-use, quality and scale.

iAPPS ds has a unique advantage in the franchise market, which is currently voided by providing franchisees and local dealers with access to robust Web Engagement Management tools at a relatively low monthly cost. Bridgeline has the opportunity to aggressively fill this void, while dramatically increasing our subscription-based recurring revenue.

Our sales and marketing initiatives are well underway. And we are excited, and I'm pleased to report that iAPPS ds is being extremely well-received, and our qualified pipeline of iAPPS ds opportunities is growing rapidly.

We are very excited about the future of Bridgeline Digital. Our iAPPS ds related business continues to grow rapidly and in our most recent 2 quarters, we've experienced strong bookings, with a growing qualified pipeline. We believe the opportunities we have with UPS logistics partnership and iAPPS ds are considerable. We expect these initiatives will begin to yield more meaningful financial results in the second half of 2013 and beyond.

At this time, I'd like to turn the call over to Mike Prinn, Bridgeline Digital's Chief Financial Officer, where Mike's going to provide you more details on our Q1 financials. Mike?

Michael D. Prinn

Thanks, Thomas, and good afternoon, everyone. I'll review the results of operations for the first quarter ended December 31, 2012.

First quarter revenue was $6.2 million, compared to $6.5 million in Q1 of last year. As we anticipated, revenue came in lower than the prior period, as a result of the multiple factors that Thomas just highlighted, including project delays and our focus on the iAPPS ds implementation for the UPS Store. We

are fully committed to transitioning our model and growing our iAPPS related business.

In the first quarter of 2013, we shed approximately $1 million of non-iAPPS legacy revenue, compared to the first quarter of 2012. We're very pleased with our growth in recurring revenue and our iAPPS related business. So our recurring revenue, which again consists of SaaS licenses, annual maintenance on perpetual licenses and hosting, increased 20% in the first quarter of 2013 to $1.2 million, as we continue to see an increased demand for our iAPPS Product Suite and the benefit of our first iAPPS ds customer.

I would also like to highlight that our deferred revenue on the balance sheet grew 150% year-over-year to just under $3 million, representing a significant increase and is indicative of our growth in iAPPS recurring revenue. Of that, majority of this deferred revenue is high-margin that will be recognized over the next 12 months.

Our iAPPS-related revenue increased 17% to $4.2 million in the first quarter of 2013, and that's compared to $3.6 million in the first quarter of 2012. iAPPS-related revenue was 69% of our total revenue in the first quarter of 2013, and that's compared to 55% in the year-ago quarter. As you can see, the increase in iAPPS-related revenue is significant, as almost all of our new business development opportunities are focused on iAPPS engagements.

One additional comment about our top line and specifically our iAPPS revenue, so like Thomas mentioned, we're starting to see that our iAPPS engagements are expanding in both scope and size. So historically, we've reported that our average initial engagement is approximately $120,000. However, over the past quarter, we've seen the average iAPPS engagement increase to $250,000, and as a result, the delivery cycle for these engagements is a little bit longer. We estimate that this negatively impacted our Q1 revenue by close to $200,000.

And finally, we're pleased to report that we sold 96 new enterprise iAPPS licenses and 1,550 iAPPS ds licenses in the first quarter.

So turning to gross margin. Our gross profit for the first quarter was 52%, compared to 53% in the year-ago quarter. The small year-over-year decrease can be attributed to overall lower revenue, due to project delays and lower number of iAPPS perpetual revenue in the quarter. We believe this is a minor setback, and that the gross margin improvements we saw in 2012 will continue in the second half of 2013, as our revenue increases and billable resource utilization improves. In addition, as iAPPS ds revenue recognition increases, our gross profit margin will be positively impacted.

Bridgeline generated $50,000 of adjusted EBITDA in Q1, compared to $428,000 for the year-ago quarter. Our non-GAAP adjusted net loss was $359,000 or a loss of $0.02 per share, compared to net income of $73,000 or $0.01 per diluted share in the first quarter of last year. Our GAAP net loss in Q1 2013 was $642,000 in the first quarter, compared to $463,000 in Q1 of last year. I'm also very pleased to report that cash flow generated from operations was $386,000 in the first quarter, compared to $95,000 in the prior period.

Turning to a review of our balance sheet, at December 31, the company had total assets of $34.7 million; cash of $2.4 million; and receivables of $4.5 million. In Q1, our DSO was 54 days. This is 2 weeks better than industry average, and is a testament to the health of our blue-chip customer base. The company had approximately $4.4 million outstanding under its credit line at December 31, 2012.

Turning to our guidance and our fiscal 2013 outlook. We expect fiscal 2013 revenue to be approximately $27 million to $28 million. We expect fiscal 2013 iAPPS-related revenue to be approximately $21 million, and that's up from $16.5 million in fiscal 2012. This revenue projection also includes a projected reduction of non-iAPPS-related legacy revenue of approximately $3.5 million.

In addition to revenue guidance, we also expect to generate positive adjusted EBITDA for fiscal 2013. I'd like to point out that it's a core value of Bridgeline to generate positive EBITDA and positive cash flow from operations. Our commitment to this core value has caused us to delay some near-term hiring, but we believe it is important to maintain this discipline.

At this time, I'd like to open up the call for Q&A and just make sure -- make the audience aware that Thomas is conducting the call remotely, and I'm in our headquarters in Burlington, Mass, so we apologize in advance if we step over each other a little bit in Q&A. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Howard Halpern from Taglich Brothers.

Howard Halpern - Taglich Brothers, Inc., Research Division

Mike, if you could, could you walk me through the process of the actual SaaS sales model, and how it breaks out between -- say, you have now a higher level of engagement at $250,000, how does that break out to, I guess, the revenue recognition that gets split between the income statement and the deferred revenue?

Michael D. Prinn

Sure. So I'll just use some round numbers. So if we sign a SaaS engagement and it's $200,000 in services and $50,000 in license revenue, the $200,000 is obviously recognized on a percent complete basis, and that will, traditionally, be over a 6-month period. And then for the SaaS engagement, it is a monthly -- from a revenue perspective, it's recognized monthly as the services are provided. And then in terms of what's on the balance sheet, that's really the difference between what they paid and what's been recognized. So typically, if someone signs a 2- or 3-year SaaS subscription and pays for 1 year, you'll have a year on the balance sheet, and that will go down over time. And some customers choose to pay for 1-year or 2-year, whatever sort of they prefer.

Howard Halpern - Taglich Brothers, Inc., Research Division

So, really, I should look at iAPPS sales, even though it would be more of a non-GAAP measure, is really some deferred revenue along with the revenue we see on the top line, which would bring it closer, I guess, to your prior estimate that you gave in the fourth quarter towards that 40% area. Am I correct in that assumption?

Michael D. Prinn

Sorry, Howard. Can you walk me through that again?

Howard Halpern - Taglich Brothers, Inc., Research Division

In your prior call, you had estimated iAPPS rep sales of 40% year-over-year for '13. So now, down somewhat, but is that difference, really, the money or the dollars that are going into the deferred revenue?

Michael D. Prinn

Oh sure. Yes. So the iAPPS revenue -- we gave guidance that it'd be $21 million. Obviously, we are increasing the deferred revenue, which is really all-iAPPS revenue. And really based on timing and rev rec, you'll see that deferred revenue increase, and we'll take that, really, over the next 12 months.

Howard Halpern - Taglich Brothers, Inc., Research Division

Okay. And how many ds deployments are you on schedule to complete, I guess, in Q2?

Michael D. Prinn

So we -- as of December, we had 1,550. We are progressing in Q2. I don't think, right now, we want to give guidance to how many stores we'll ramp up onto the platform. But this one customer we said has over 4,000 stores, and we're actively working to sign up as many as we can for the remainder of the year.

Howard Halpern - Taglich Brothers, Inc., Research Division

Okay. And how would you say the experience is going with your workforce and was it all accelerated? And how much easier is it going to be to do the, I guess, the next round and then the next customer?

Thomas L. Massie

I think that exponentially gets easier to scale, Howard. We -- frankly, we're not prepared to -- our original plan was to deploy a couple thousand of these iAPPS ds customers through the UPS Store between October 1 and June. And of course, that has accelerated dramatically. And I think the good news is, iAPPS scaled very nicely, and everything worked just fine. And it's meeting, if not exceeding, all the performance metrics that we had for it. So we know we can scale it and end up -- our goals to end up having 20,000, 30,000, 40,000 franchises put on iAPPS ds over time. So we know it can scale and scale with quality through all these stores. So it's just going to get easier as we add more customers.

Howard Halpern - Taglich Brothers, Inc., Research Division

Okay. And do you have franchises that are actively testing it or kicking new tires on it?

Thomas L. Massie

We have multiple franchise opportunities in our qualified pipeline right now. I think the real thing that -- you picked up Howard, which is true, he's really taking a hard look at how that deferred revenue number is growing and what that means for the future quarters, because that will be recognized over the next 12 months.

Howard Halpern - Taglich Brothers, Inc., Research Division

Yes. And that should -- actually that -- one more question. That deferred revenue should continue to grow as time goes on?

Thomas L. Massie

That's correct.

Howard Halpern - Taglich Brothers, Inc., Research Division

As long as -- you're seeing the customers at generally more interested now in the SaaS model than the perpetual license model?

Thomas L. Massie

Well, 2 things. One, on our enterprise engagements, which is iAPPS that we developed, complete websites or web stores around the iAPPS platform, as you know, in the last 3 years, we have seen a 50-50 split between SaaS and perpetual, and that's been consistent every quarter for the last 3 years. In Q4, 80% of those enterprise licenses were SaaS. Now we don't have enough data. We'll see what happens at this quarter to see if it starts to become a trend. But last quarter, 80% of those enterprise licenses were SaaS versus perpetual. Then the second part to that answer to your question is iAPPS ds is 100% SaaS only. There's not a perpetual offering for ds, so that alone is going to start pushing more and more of our deferred revenue up, as well as our licensing sales would be more skewed towards SaaS than perpetual because of ds.

Howard Halpern - Taglich Brothers, Inc., Research Division

And as the deferred revenue becomes recognized that will drive up -- should drive up gross margin, obviously?

Thomas L. Massie

That's correct. That -- all the $3 million of deferred revenue is, for the most part, very tight [ph] software margin

Operator

And our next question comes from the line of Mark Stafford from MGS [ph].

Mark Stafford - Stafford Holdings Ltd.

Did I catch at the end of the remarks, you're delaying hiring people? Was that what was said?

Thomas L. Massie

That's correct.

Mark Stafford - Stafford Holdings Ltd.

Okay. And that's just to offset until these other revenues come in?

Thomas L. Massie

Until we start recognizing more of the deferred revenues. I think we're an organization, as our core values, as Mike said, we believe in positive EBITDA and generating positive cash flow from operations. So we're always going to stay true to that core value, which could -- we get a lot of questions a lot of times, a lot of investors say, "Jeez, why don't you just raise more money and then hire a bunch of salespeople and really try to push the top line?" We believe in managing the business prudently and fiscally responsibly to still drive growth, and we're doing that, we're driving -- we're outstripping the industry growth by almost double and -- if not, some quarters triple on the iAPPS side. And so I think that's our statement to respond to valued shareholders. I think we should potentially drive the company into a negative cash situation and try to push for faster top line growth.

Michael D. Prinn

And Mark, let me just add onto that, too. We obviously -- based on our margin and utilization, right now, we have the people that can drive the higher revenue number. And we'll get there first, and then focus our efforts on higher earnings.

Thomas L. Massie

I think, Mike -- Mike, that's a great point. So we're now -- our capacity with our current staffing, Mark, is we can drive over $7 million a quarter of revenue with our current team. So until we reach that point, I think that's a really good statement that Mike just made. So we're going to get to that $7 million quarter first before we start adding more people.

Mark Stafford - Stafford Holdings Ltd.

Okay. And then along with that, I take it, you're not looking at any more acquisitions like you have in the last couple of years?

Thomas L. Massie

We always keep our ears open for strategic opportunities. But currently, we do not. We're not looking at any acquisitions right now.

Operator

And our next question comes from the line of Jason Revland from Blueprints Capital.

Jason Revland

Just a question about the small reduction in revenue guidance. Is it fair to categorize that as being entirely about deferred revenues? In other words, so that revenue will eventually be recognized, it might just get pushed into 2014. Or is there any sort of industry softness that we should be concerned about?

Thomas L. Massie

No industry softness as evident of our 2 most recent bookings -- record bookings quarters, right? So we've had 2 $8 million back-to-back new bookings quarters, as well as we ended both the last 2 quarters with record qualified pipeline levels as well. I think you're absolutely right. It's a combination of 2 things, Jason. It's not only the deferred revenue number growing dramatically, which does push it out, but also because of the -- of what happened in Q1. There were several hundred thousand dollars of, I think, anticipated revenues on our end that we anticipated for Q1 that did not materialize for the various reasons that we spoke about earlier on the call. So you take a combination of that $700,000 of revenue that, for the most part, did get pushed. But when you have a service capacity to it, you -- that's your inventory, and that inventory can't get -- you can't make that up once time passes. So that combination of that $700,000 of revenue slippage in Q1 along with the dramatic increase in deferred revenue, is where that realigning guidance a bit comes into play.

Jason Revland

If I may ask a follow-up on iAPPS ds. It's great to hear that you've made progress there, and that they're happy with how that has both played out and how it's functioning. Do you think that's just -- we'll get any kind of news flow on the iAPPS ds side over the next quarter or 2, as you close maybe 1 other larger deal? We could expect that?

Thomas L. Massie

We do. And I think to put an exclamation point on how iAPPS ds is working it. It not only is working it, it is really performing phenomenally. It's beyond our expectations to be able to scale and launch close to a couple of thousand sites within 3 months was a real big step for us. And we're -- it's definitely a great product that's going to provide a lot of value to the company.

Operator

And our next question comes from the line of Brian Swift from Security Research.

Brian G. Swift - Security Research Associates, Inc.

You stated in the last 2 quarters, your bookings have been $8 million. And can you give a little idea about how the revenue recognition would be on those bookings going forward? How much has already been recognized? And how much is in that deferred revenue number? And how much might be just in neither place?

Thomas L. Massie

Michael, why don't you take that?

Michael D. Prinn

Yes, sure. So Brian, so we don't typically break out all the pieces. But I think what I can say, at a high-level the last 2 quarters of $8 million, we are seeing more subscription-based revenue, which goes out over 12 to 24 months. And we're seeing, as you mentioned, expanded deals in both size and scope. So even services that instead of recognized over a 4- to 6-month period, we're seeing larger projects that are more of 9 to 12 months. So at a high-level, we're seeing a much larger piece of that $8 million be layered into our backlog and come in, in months 6 through 12, where historically, our bookings number mostly used to be recognized sort of in the first 6 months.

Operator

And our next question comes from the line of Walter Ramsley from Walrus Partners.

Walter Christopher Ramsley - Walrus Partners, LLC

A couple of follow-ups here. The -- talk about Brian's question a little further. The bookings, out of that $8 million, can you tell us, more or less, what the UPS and the ds components were? And how much those new product lines, the $8 million -- of the $8 million they represented?

Thomas L. Massie

We can't. I think, we got to be cautious, Walter, on what we can disclose without, obviously, we don't want to violate any of our agreements with any of our customers. So I think -- I think the last 2 quarters of $8 million in bookings, I think it's safe to say that the UPS Store component of it was not material to the last 2 quarters.

Walter Christopher Ramsley - Walrus Partners, LLC

Okay. Okay. So that actually sounds very encouraging. The business must be pretty strong. Talking about that part for a second, can you just kind of update everybody on the competitive situation? Is there anything new developing there with Oracle and IBM and whoever else you're competing with?

Thomas L. Massie

Well, we're in a very strong competitive situation, both from a price -- value-add price functionality ratio perspective. We are typically -- as a product, we have a much stronger value proposition as a solution. We're the only company in the world that has all 4 categories integrated into 1 platform. We're the only company in the world that can offer both SaaS and perpetual. And on the ds side, we have a significant advantage over anything that's out there in benefits, features, price and scale. So we're really excited about where ds is positioned competitively. I think the good news is Bridgeline has a very strong selling methodology and very strong selling disciplines. And we consistently win 65% to 70% of the proposals that we submit to our prospective customers. And of the 30% that we lose, a lot of times, the projects are canceled or delayed. But less than 10% of the actual total losses is actually to competitors. A lot of times, they're -- we lose opportunities because budgets get canceled or pushed out completely. So I feel that -- if we look at the data, we're pretty big data hounds, we watch it closely. We're pretty excited about our competitive positioning. I think, you're going to see a lot more social stuff coming out with iAPPS ds. We're excited about where we're going on the social front with iAPPS and iAPPS ds. And I think our competition, like Adobe, is -- they are looking at integrating other categories into their product, but it's not a clean integration. They typically will buy it and then try to bolt it on, which then causes problems with the way the data is used and how clean and elegant and one point of entry the system is. So -- but we're pretty excited about our competitive positioning.

Walter Christopher Ramsley - Walrus Partners, LLC

That sounds pretty good, the 65% especially, and the new social media idea sounds like a smart move. The UPS business itself, first of all, in the logistics operations, does UPS use any other eCommerce software besides Bridgeline's? Do they have other companies that they've tried out before and still use or have their own in-house systems?

Thomas L. Massie

They have a partnership with SAP on the very, very high end. So for the very large enterprise-class customers that are typically 7-digit type engagements, they have an integration with SAP on that end. But Bridgeline is its only middle market and in small, large market players. So we can handle eCommerce engagements that can range between $100,000 and $0.5 million or more, very rarely do we ever get into the 7-digit level like an SAP does.

Walter Christopher Ramsley - Walrus Partners, LLC

Okay. And the UPS Stores, did they ever use like a different kind of software before and found that unacceptable?

Thomas L. Massie

They did. They used a competing solution that they found unacceptable and they put out an RFP. They did a complete, very thorough competitive bid and -- which came down to 2 companies, and Bridgeline was selected, iAPPS was selected.

Walter Christopher Ramsley - Walrus Partners, LLC

So did you have to kind of root that out? Or is that just gone now? Did they just clean it out for you?

Thomas L. Massie

It's gone. We took it all out. And that's one of the reasons why we excelled. We didn't anticipate to take it out so quick, but we did. And the president of the UPS Stores, Tim Davis, wanted to move a lot faster in replacing -- because he sees the benefits that iAPPS ds brings his franchises.

Walter Christopher Ramsley - Walrus Partners, LLC

Just one last thing about the software. The SaaS model, are you able to update all the different locations at once? Or do you have to like kind of go one by one and kind of do it individually?

Thomas L. Massie

No. They're located, they're all updated at once. It's a true SaaS multi-tenant model.

Walter Christopher Ramsley - Walrus Partners, LLC

Good. Okay. And just one last thing for Mike, I guess. The breakeven point now for adjusted EPS, what do you think the -- with a higher software component building in, what do you think the revenue is necessary to get to an adjusted EPS of breakeven?

Michael D. Prinn

So Walter, we've always said that when we get to $7.5 million, we think we can be breakeven. I mean, I think, it changes...

Thomas L. Massie

Mike, I think Walter's asking non-GAAP.

Walter Christopher Ramsley - Walrus Partners, LLC

Yes. No, right. That's correct.

Thomas L. Massie

We say we break even at $7.5 million GAAP, right?

Michael D. Prinn

True. So probably closer to $7 million. And the software and the ds component will obviously help it. But a lot of that has been layered into when we've been giving our -- sort of our guidance and saying that maybe at $7 million, we would be.

Walter Christopher Ramsley - Walrus Partners, LLC

Yes. So, okay. And I mean, this quarter, you basically did $6.5 million minus, I guess you're saying, $700,000 that got pushed out one way or another. So more or less, like on a going forward basis, kind of pushing $7 million now? I mean, it looks like it by your guidance, anyway.

Thomas L. Massie

Yes, we're going to -- you're going to see -- the future core [ph] is, Walter, it's going to get incremental growth from Q1. And we all know, all of us are very focused on us achieving and exceeding that $7 million quarter mark. So we're definitely pushing for that this fiscal year.

Walter Christopher Ramsley - Walrus Partners, LLC

And Sandy business, I mean, is that all in the rearview mirror now? Or you still have to deal with some of that?

Thomas L. Massie

No, it's all in rearview mirror. It pretty much shut down New York completely, Bridgeline New York and all our New York-based customers for almost 2 weeks. And a little bit of Boston impact, a little bit of Bridgeline Baltimore impact. But that's all behind us.

Operator

And our next question comes from the line of Eric Duncan from Moloney Securities.

Eric Duncan

I apologize, but I missed the first 30 seconds or so of the call, and it sounded like you discussed some of the reasons for the revenue in this quarter, I gather from the last caller, obviously, some of it had to do with Hurricane Sandy, which you intimated to us on the fourth quarter. Some of it had to do with an increase in the deferred revenues, which is certainly understandable. Was there something else I missed in there? Or did I just cover that? Is that mainly it, the $700K that you're talking about here?

Thomas L. Massie

Well, a couple hundred thousand came from -- a couple hundred thousand dollars of revenue, close to it, was -- we estimated was because of Sandy. We also talked about how we had an anomaly. We don't know if it's an anomaly, we hope it continues, actually. In Q1, our average engagement size doubled, compared to what it's been for the last 3 years.

Eric Duncan

Which was really, yes, I'm glad to learn that.

Thomas L. Massie

And -- but while that's good news, it builds our backlog, but it also extends our implementation and our revenue recognition timeframes, right? So that pushed out and we believe that caused another -- close to another $200,000 of revenue push. And then when the UPS Stores called to really dramatically accelerate the launch of their platform, that probably cost us a little more than $100K impact, because we had to pull qualified, billable resources away to handle that ramp and that demand. So it's another thing that pushed us in the quarter. And also, I think, we talked about -- I don't know if it was because Sandy or what happened in November, we right at the end of -- we had a backloaded bookings quarter. Even though we had an $8 million bookings quarter and we're ecstatic to have 2 of those put together, and we see strong bookings going forward, 50% of our backlog came in the month of December. So we -- that impacts revenue capabilities in November and in the first half of December. In fact, I think, a lot of that came in the last 10 days of December, which was -- obviously, we had a great December, but it -- the first couple of weeks of December, we're a little panicked.

Eric Duncan

Sure. Fair enough. And on the backlog, I believe in the last quarter, last conference call, it was $14 million. Did you give that number here or...

Thomas L. Massie

It's a little bit north of that.

Eric Duncan

Okay. And can you help me understand your difference in your terminology and relative to bookings versus backlog, and how you view that? Obviously, we've discussed bookings a little bit here on this call, but...

Thomas L. Massie

Well, bookings is a complete, contractual order. So it's a completely signed contractual signed in the house. Backlog is what is our qualified pipeline. It's not a funnel. It is a qualified pipeline, which means we're talking to the decision-maker, the pain and need that the customer has or the prospect has is a great match for the solutions that Bridgeline Digital provides.

Eric Duncan

Got it. Okay. Good to understand that. What was the last question here? So the push out on your engagement size getting larger, is that -- am I right in thinking that, that increases your deferred revenue line item?

Michael D. Prinn

Yes, it does. Absolutely. As the engagement size gets bigger and they put down customer deposits depending on payments, obviously, that helps push up the deferred revenue as well.

Eric Duncan

Okay. And then on the new licenses, which certainly seem attractive, even on the enterprise licenses, 96 new licenses in the quarter. What was that number last quarter or last year? What's in perspective on the...

Thomas L. Massie

Well, we have put in perspective -- it's a great question. We sold a total of, I think, just around 270 total enterprise licenses all of last year.

Eric Duncan

Okay. Good. And when you talk about your average engagement, I'm assuming that's on this enterprise license, is that correct?

Thomas L. Massie

That's correct.

Operator

And I see no additional questions at this time.

Thomas L. Massie

Okay. Thank you very much, Karen. We appreciate all the support that our valued shareholders give to Bridgeline. If you have any additional questions or if you want to discuss the Bridgeline business model more in detail, please feel free to give myself or Mike a call at any time. We can walk you through maybe some more detailed questions or the model that you may have. Thanks again for tuning in on the call today, and have a great week. Bye-bye.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may now disconnect. Everyone have a good day.

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