Thank you for standing by, welcome to the Bridgeline Digital, Inc. Q4 2022 earnings call. At this time, all participants are in listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question at that time, please press star one one on your touch-tone telephone. As a reminder, today's conference is being recorded. I will now turn the call to your host, Mr. Thomas Windhausen, CFO. Sir, you may begin.
Thank you very much. Thank you, and good afternoon, everyone. Thank you for joining us today. My name is Thomas Windhausen. I am Bridgeline's Chief Financial Officer. I am pleased to welcome you to our fiscal 2022 Q4 conference call. On the call this afternoon is Ari Kahn, Bridgeline's President and CEO, who will begin with a discussion of our business highlights. I will then update you on our financial results for the quarter, and we'll conclude by taking questions.
Before we begin, I'd like to remind listeners that during this conference call, comments that we make regarding Bridgeline 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 Exchange 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 expressly disclaim and assume no obligation to inform you if they do. The results we report today will not be considered as an indication of future performance.
Changes in economic, business, competitive, technological, regulatory, and other factors, such as the impact of public health measures, 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 this afternoon, we'll discuss some non-GAAP financial measures when commenting on the company's financial performance. We provide a reconciliation of our GAAP financials to these non-GAAP measures 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, Tom. Good afternoon, everyone. This year, Bridgeline delivered 27% top-line revenue growth, a $3.6 million increase in revenue to end of year with $16.8 million in total revenue. Most of our revenue growth was in subscription and license, which increased by 36% to $3.6 million to $13.6 million. Subscription and license revenue was over 80% of total revenue for the Q4 and the year. In the Q4 , we booked $1 million of new licensed ARR from 28 sales, with $340,000 in ARR annual recurring revenue. Our cross-sale strategy remained strong and drove 13 license sales to existing customers on top of 15 newly won customers.
Existing Bridgeline customers, including HP, 7-Eleven, and Sage Publishing, expanded their commitment to Bridgeline this quarter with further investments in Bridgeline software and services. We ended fiscal 22 with over $2 million in net income and $196,000 in adjusted EBITDA, driven primarily by our subscription and license revenue, which comprised over 80% of our total revenue, with gross margins of 75%. We ended our fiscal year with $2.9 million in cash, that being after a prepayment of $1.7 million in the Q4 relating to a negotiated $600,000 discount to the earn-out working capital adjustment on the HawkSearch acquisition in consideration for just a six-month early payment. Our cash and projected revenue positions us well to continue our investments in sales and marketing and innovation without additional capital for operations.
Our 28 sales in our Q4 included a top distributor who committed to more than a quarter million dollar multiyear license for Bridgeline's TruPresence and HawkSearch products to power their site search and recommendation. HawkSearch's AI site search technology was identified to help grow the distributor's massive online catalog with 700 sites, 5 million products, and 15 million monthly queries. A major Asia Pacific retailer with 150 brands and 2,600 locations selected Bridgeline to power 10 of its brands, including New Balance, Reebok, Converse, Skechers, and Foot Locker. A leading plumber supplier has committed to a more than $60,000 license for Bridgeline's HawkSearch to power personalized recommendations and data quality enhancement capabilities.
The supplier will use HawkSearch to power site search for their 28 distributor locations, 15 appliance stores, and distribution for their catalog of over 200,000 products. A garden and pet supply market leader has committed to a more than $80,000 license for Bridgeline HawkSearch to power personalized recommendations and data quality enhancement capabilities. The supplier will use HawkSearch to power site search functionality for two leading websites with millions of search inquiries each month. In addition to our new customer wins, we also had outstanding customer subscription renewals with more than 100 renewing customers, including Caterpillar, AstraZeneca, Hammacher Schlemmer, and Coca-Cola Europacific Partners. As a percentage of revenue, customer subscription renewals were 94%. Partners are an important part of our growth, especially for driving HawkSearch sales.
Bridgeline announced in October a new partnership with Niteco, the world's largest Optimizely agency, which services 500 customers in 30 countries, including customers such as Panasonic, Heineken, and Electrolux. This partnership is focused on selling and implementing HawkSearch, which is Optimizely's first non-native site search integrated with both their B2B and their B2C platforms. In addition, Bridgeline partnered with Thanx Media, who's a systems integrator that services Fortune 500 customers such as PayPal, Target, and Ulta Beauty. Thanx Media is certified in both the Optimizely and BigCommerce platforms and it has extensive experience with HawkSearch. This partnership helped Bridgeline sell HawkSearch licenses within the first month after signing. Further, BigCommerce has expanded the availability of Bridgeline HawkSearch connector to their multi-storefront users, including leading brands such as Ted Baker, Vandy Group, and AeroFit B2B.
This strategy has continually led to a strong growth rate and more online revenue for Bridgeline's customers. In our Q4 , we released the Rapid UI framework for HawkSearch. This release speeds the time to market for our customers and reduces their total cost of ownership. It also accelerates Bridgeline's sales cycle, which in turn improves our win ratio. The solution is built on a JavaScript script framework called Handlebars that embeds an entire search experience directly into the website, including the search bar, intelligent auto-complete, and the full search results page. Sales and demo experiences are improved because our sales team can demo HawkSearch within the prospect's website rather than with the generic demo site. We plan to extend the framework to include additional HawkSearch components such as recommendation and landing pages. Bridgeline expanded its executive team with John Murcott joining the company as EVP of Products and Strategy.
Mr. Murcott brings more than 20 years of experience in the MarTech sector to Bridgeline. He was a founding member of my first MarTech company, FatWire, which he helped build into an industry leader in content management before it was acquired by Oracle in 2011. All of these coming together leaves us really excited for fiscal 2023. At this time, I'd like to turn the call over to our Chief Financial Officer, Cameron Housen. Take it away, Cam.
Thanks, Ari. I'm excited to share with you this afternoon our positive financial results for the Q4 of fiscal 2022, which ended September 30th, 2022. Our total revenue for the quarter ended September 30th, 2022, was $4.2 million, an increase of 3% as compared to $4.1 million in the prior year period. Looking at each component of revenue, our subscription and license revenue, which is comprised of SaaS licenses, maintenance, hosting revenue, and perpetual license revenue, increased 3% for the quarter, ended September 30th, 2022, to $3.4 million. As a percentage of total revenue, our subscription and license revenue was 82% of total revenue for the quarter ended September 30th, 2022.
Our services revenue was $0.8 million for the quarter ended September 30th, 2022, up slightly from the $0.8 million in the prior year Q4 . As a percentage of total revenue, services revenue accounted for 18% of total revenue for the quarter ended September 2022. Our cost of revenue decreased 6% or $0.1 million to $1.2 million for the quarter, compared to $1.3 million in the prior year period. As a result, our gross profit increased 7% or $0.2 million to $3 million for the quarter ended September 30th, 2022, as compared to $2.8 million for the prior year period.
Overall, our gross profit margin increased to 71% for the quarter ended September 30, 2022, compared to 68% in the prior year period. Our subscription and license gross margin was 76% for the quarter ended September 2022, as compared to 75% in the prior year period. Our services gross margin were 47% for the quarter ended September 2022, compared to 37% in the same period in 2021. Our operating expenses slightly decreased to $3.4 million for the quarter ended September 2022 from $3.4 million in the prior year period. Within operating expenses, we increased our spending in sales and marketing, supporting our current and future growth.
Our net loss was $0.5 million for the quarter ended September 30th, 2022, as compared to a net loss of $1.4 million in the prior year period. Moving to EBITDA, as Ari mentioned, our adjusted EBITDA for the quarter ended September 2022 was $0.1 million compared to $0.2 million for the prior year period. Moving to our balance sheet, as of September 30th, we had $2.9 million of cash and $1.2 million of accounts receivable. As of September 30th, 2022, our total assets were twenty-seven and a half million, and our total liabilities were $7.2 million. Bridgeline looks forward to continued success in fiscal 2023 and beyond as we continue our focus on revenue growth, product innovation, expanding customer success, and delivering shareholder value.
Thank you for joining us on the call today. At this time, we'd like to open the call to questions and answers. Moderator?
Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star one one on your touchtone telephone. Again, to ask a question, please press star one one. One moment please for our first question. Our first question comes from the line of Howard Halpern of Taglich Brothers. Your line is open.
Hi, Ari. This is Howard.
Hi, Howard.
Hi, Chris.
Hi. Great year. Looking forward to the upcoming year. You talked about in, I guess, you know, in your prepared remarks, you mentioned TruPresence. What kind of traction are you seeing from there? What kind of opportunities do you see over the next couple of years for that product?
Well, TruPresence is our brand that focuses specifically on the franchise market. This is a very tight market. We've got great traction in it with customers like UPS, AlphaGraphics, Sport Clips. We've taken every single one of our products and created a TruPresence version of it. Now from an entree point in terms of becoming a TruPresence customer for Bridgeline, we can help you increase your traffic with WooRank. We can increase your conversion with our HawkSearch TruPresence product. We can increase your average order value with our recommendations product and so forth. We think this is gonna continue to be a big part of our growth. Each TruPresence deal, they tend to be significantly larger than other deals, and they grow as our customers grow.
For instance, we won an electrical distributor with 700 locations, and that's, you know, it's essentially like selling 700 licenses all at once. As that distributor grows and opens new locations, the license fee grows proportionately, and we don't have to do any work for that. It's a very important part of our model.
Okay. In terms of, and you talked a little bit about this in the press release, how important is it, you know, your customer base, growing your customer base, and then selling back into your customer base, more offerings?
Well, you know, for SaaS software companies like us, the customer acquisition cost is a major impediment to growth. A lot of times for a SaaS company, it can take 15 months just to break even on your customer acquisition costs. However, if you've got multiple products and you can sell a product into an existing customer, those customer acquisition costs are substantially lower. For instance, there's basically no advertisement budget needed to sell to your existing customer base. Your commissions to your existing sales reps can be much lower. You don't need to have high-level executive sales reps to sell to an existing customer because you're not dancing with a new partner, so to speak. It's less sophisticated.
What our strategy is to grow more quickly on a per sales and marketing dollar basis by in addition to winning new customers, selling to existing customers. That's where important new products that we're innovating and releasing internally, as well as looking for acquisitions and acquiring new products come into play. We're going to continue to focus on that throughout 2023, both on the acquisition and the innovation side.
How important are your partners now for growth over the next few years?
HawkSearch was a game changer for Bridgeline in terms of its go-to-market strategy. Before HawkSearch, we really didn't have any partners that were making a significant impact on our growth. Today, thanks to the partners that came with HawkSearch, we have partners attached to more than 80% of our new deals. We classify our partners into two groups. We have what we call ISV partners, independent software vendor partners. These are generally platform companies like Optimizely, BigCommerce, Sitecore, Salesforce. We also have a second class of partners, which are agencies. Agencies are systems integrators that are implementing MarTech solutions. Our partnerships with the ISVs generally are around making our software out-of-the-box compatible with each of those ISVs so that their customers can just turn us on with a flip of a switch.
That is huge because each of these ISVs have typically thousands of existing customers that once we establish a partnership and are compatible with their software, can be sold our software in the same low-cost customer acquisition cost model that we do in terms of selling into our own customers. You're gonna continue to see press releases from Bridgeline about partnerships. You're gonna see us at all of our ISV partners conferences that we can attend. I expect that 80% ratio of new customer wins being attached to a partner is gonna remain.
Just one last one about, you know, acquisitions. When you're looking for an acquisition or are you getting customer feedback on maybe products or offerings that they would like to see Bridgeline Digital have within the portfolio? Are you looking for just a potential larger customer base that you could sell into?
Mm-hmm. Yeah. Yeah. You know, we've had instances where we've had customers explicitly say, "Hey, here is a particular product that we love. We know that you guys are acquisitive. You should consider buying that company." We haven't pulled the trigger on any of those. That's happened, however. We look at both our target acquisition software and its customer base. We wanna be able to cross-sell into that customer base. That's hugely valuable. Of course, the software is important, and it's gotta be able to sell into our customer base as well as win new customers. We're different than other companies that you see in the MarTech space that are doing roll-ups of apps. Those companies are often purely financially modeled, and they're buying an app, and they're stripping costs, and that's the end of their strategy.
Bridgeline is different because we're buying apps and we're buying customer bases. We're putting our dashboard on top of those apps so that the new customer base will immediately be able to see the strength of their website with regard to traffic conversion and average order value, and receive intelligent recommendations as to the other products that Bridgeline offers that can help them grow their own revenue. We have a much more strategic growth strategy from an inorganic perspective in not just looking at reducing costs, but instead looking at accelerating growth. We're doing that through our cross-sells with our dashboard and really leveraging that customer base.
I do have one more quick one. Sales and marketing expense, about $1.4 million a quarter. You're pretty happy with that level, or you think it might increase just a touch?
We're gonna increase our sales and marketing expense a little bit next year. 1.4 is approximately where we're at. We're going to accelerate that. We feel that we have to be careful about our bottom line in 2023. We think that the although we've not seen a slowdown in terms of our own sales yet, we're still in, we think, perilous waters from a macroeconomic perspective. Investing in sales and marketing, when you've got a product that has all the right features and people are really calling for it, you don't want time to slip by. We're moving fast on the sales front.
Okay. Keep up the great work. I look forward to 2023, and have a happy and healthy new year.
Thank you. Happy and healthy new year to you.
Thank you. One moment, please. Our next question comes from the line of Leo Carpio of Joseph Gunnar. Your line is open.
Hi. Good afternoon, Ari. I actually got 2 questions.
Hi, Leo.
Hi. The first question is regarding the economy. What's the economy's impact to your business pipeline right now? Is it serving as a headwind, tailwind, and is it focused on any particular product or industry you're seeing right now? I'll ask the second question as a follow-up.
Okay, great. You know, the market that we're in is so large relative to us, and even in a horrible economy, is still growing in the double digits by any real measurement, that we're fortunate that we've not felt any headwinds yet. Things could change, and we're cognizant of that and we're careful about it. As it stands right now, we think that the MarTech industry overall is growing. You know, one thing that we still see is challenges in terms of hiring. We're focused very much on our own R&D team on making sure that we treat them great and that they have room to innovate, because even with these headlines of layoffs at Facebook and so forth, it's a great job market for these guys.
That's a little bit of a challenge for us, but we have a really excellent team. They're coming out with new products left and right. Our sales team is winning deals. In fact, the bell rang earlier today. I'm looking forward to our next press release to tell everybody of our latest conquest.
Thanks. The follow-up question is regarding M&A. You talked about in the past being, you know, you having your criteria of companies that you wanna acquire, market conditions, are a bit choppy for acquisitions. Just give us, like, an update in terms of how what tech you may be interested in and how it has related to market conditions in terms of, are you still just waiting the sidelines or more of wait 'til 2023 for more stability?
We're still very interested in acquisitions. We think that that's an important part of FY '23 for us. The private markets held pretty strong relative to the public markets last year in terms of the targets that we spoke to, who started last year looking for as a multiple of revenue 3 or 4 or 5 times revenue, and ended the year still at 2 or 3 times revenue. We think that there's opportunity for them to be a little bit cheaper next year. We're focused on apps that help companies grow revenue that are active in our most critical ISV partners. That means Optimizely, Sitefinity, BigCommerce, Salesforce, CloudCraze.
We're looking for companies that are between $3 million to $6 million in revenue that we can pick up for 2x revenue or less with the right payment terms and earn-out. Typically, an earn-out directly proportional to retained revenue over the first two years, and initial payment of 50%, with 50% being the earn-out. Those are the terms that we think make sense. It's a little bit of a challenge for us because our market cap to revenue is not at 2x, so we have to really structure the deal right to make sure that it's accretive, which is one of the reasons that we've not done a deal in the last couple of quarters.
We're still seeing companies come to us, every month, and I feel like we're gonna find the right, the right targets in 2023.
All right. Well, thanks, Ari, and congrats on the quarter.
Thank you, Leo. Happy holidays.
Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star one one on your touchtone telephone. Again, to ask a question, please press star one one. One moment, please. I'm showing no further questions at this time. Let's turn the call back over to management for any closing remarks.
Great. Well, thank you everybody for joining us today. We really appreciate all of the support from you, our shareholders, as well as from our customers and our partners. We're excited about our business and the ongoing growth prospects for 2023, and we look forward to speaking to you again on our Q1 of FY '23 conference call in February. Stay healthy and well. Happy holidays.
Thank you. Ladies and gentlemen, this does conclude today's conference. You may all disconnect. Have a great day.