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Bridgeline Digital Reports Financial Results For The Fourth Quarter And Year Ended September 30, 2010

Bridgeline's management does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded in the Company's financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expenses and income are excluded or included in determining these non-GAAP financial measures. In order to compensate for these limitations, Bridgeline management presents non-GAAP financial measures in connection with GAAP results. Bridgeline urges investors to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures, which is included in this press release, and not to rely on any single financial measure to evaluate Bridgeline's business.

Our definitions of non-GAAP adjusted net income and Adjusted EBITDA may differ from and therefore may not be comparable with similarly titled measures used by other companies, thereby limiting their usefulness as a comparative measure. Because of the limitations that non-GAAP adjusted net income and Adjusted EBITDA have as an analytical tool, investors should not consider them in isolation, or as a substitute for analysis of our operating results as reported under GAAP.

BRIDGELINE DIGITAL, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
 (Dollars in thousands, except share and per share data)
         
  Three Months Ended September 30, Year Ended September 30,
   2010 2009 2010 2009
Reconciliation of GAAP net (loss) income to non-GAAP adjusted net income        
GAAP net income   $ (652) $197  $ (377) $758
Acquisition, integration and other one-time costs 305 522
Amortization of intangible assets 188 141 619 517
Stock based compensation 162 75 449 538
Tax effect of non-GAAP adjustments (48) (40)
Non-GAAP adjusted net income $3 $413 $1,165 $1,773
         
Reconciliation of GAAP (loss) earnings per diluted share to non-GAAP adjusted (loss) earnings per diluted share          
GAAP earnings per diluted share  $ (0.06) $0.02  $ (0.03) $0.07
Acquisition, integration and other one-time costs 0.03 0.05
Amortization of intangible assets 0.02 0.01 0.05 0.04
Stock based compensation 0.01 0.01 0.04 0.05
Tax effect of non-GAAP adjustments (0.01)
Non-GAAP adjusted earnings per diluted share $—  $0.04 $0.10 $0.16
         
Reconciliation of GAAP net (loss) income to Adjusted EBITDA          
 GAAP net income $(652) $197 $(377) $758
 Taxes 21 73 31
 Interest 48 5 65 40
 Amortization of intangible assets 188 141 619 517
 Depreciation 193 191 759 795
 EBITDA (202) 534 1,139 2,141
 Other amortization 85 18 271 180
 Stock-based compensation 162 75 447 538
 Adjusted EBITDA $45 $627 $1,857 $2,859
         
Reconciliation of GAAP net (loss) earnings per diluted share to adjusted EBITDA per diluted share          
  GAAP net earnings per diluted share  $ (0.06) $0.02  $ (0.03) $0.07
  Taxes
  Interest  —
 Amortization of intangible assets 0.02 0.01 0.06 0.05
 Depreciation 0.02 0.02 0.07 0.07
 EBITDA (0.02) 0.05 0.10 0.19
 Other amortization 0.01 0.03 0.01
 Stock-based compensation 0.01 0.04 0.05
 Adjusted EBITDA per diluted share $— $0.05 $0.17 $0.25
 
BRIDGELINE DIGITAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share and per share data)
         
  Three Months Ended September 30, Year Ended September 30,
  2010 2009 2010 2009
Revenue:        
 Web application development services $5,900 $4,426 $19,851 $20,272
 Managed service hosting 481 351 1,931 2,202
 Subscription and perpetual licenses 511 548 1,776 1,427
 Total revenue 6,892 5,325 23,558 23,901
Cost of revenue:        
 Web application development services 3,166 1,996 10,021 9,422
 Managed service hosting 221 144 603 595
 Subscription and perpetual licenses 105 110 583 516
 Total cost of revenue 3,492 2,250 11,207 10,533
 Gross profit 3,400 3,075 12,351 13,368
Operating expenses:        
 Sales and marketing 2,115 1,456 5,962 6,192
 General and administrative 1,170 953 4,416 4,001
 Research and development 342 153 926 1,124
 Depreciation and amortization 356 311 1,286 1,222
 Total operating expenses 3,983 2,873 12,590 12,539
(Loss) income from operations (583) 202 (239) 829
 Interest income (expense) net (48) (5) (65) (40)
(Loss) income before income taxes (631) 197 (304) 789
 Income taxes 21 73 31
Net (loss) income  $ (652) $197  $ (377) $758
         
Net (loss) income per share:        
 Basic  $ (0.06) $0.02  $ (0.03) $0.07
 Diluted  $ (0.06) $0.02  $ (0.03) $0.07
Number of weighted average shares:        
 Basic 11,188,208 11,151,614 11,186,187 11,008,879
 Diluted 11,188,208 11,550,283 11,186,187 11,272,190
 
BRIDGELINE DIGITAL, INC.
CONSOLIDATED BALANCE SHEETS
 (Dollars in thousands, except share and per share data)
     
     
ASSETS    
   September 30, 2010 September 30, 2009
Current assets:    
Cash and cash equivalents $3,045 $3,060
Accounts receivable and unbilled receivables, net 3,929 3,468
Prepaid expenses and other current assets 351 320
Total current assets 7,325 6,848
Equipment and improvements, net 1,171 1,448
Intangible assets, net 2,292 1,490
Goodwill 20,036 13,899
Other assets 900 570
Total assets $31,724 $24,255
        
        
LIABILITIES AND STOCKHOLDERS' EQUITY      
     
Current liabilities:      
Accounts payable $1,270 $714
Accrued liabilities 1,024 786
Accrued earnouts, current 900 408
Debt, current  2,475 1,000
Capital lease obligations, current  50 77
Deferred revenue 899 890
Total current liabilities 6,618 3,875
Long-term earnouts, net of current portion 1,073
Long-term debt, net of current portion  3,025
Capital lease obligations, net of current portion  11 62
Other long term liabilities 341 414
Total liabilities 11,068 4,351
     
Commitments and contingencies      
        
Stockholders' equity:      
Preferred stock — $0.001 par value; 1,000,000 shares  authorized; none issued and outstanding
Common stock — $0.001 par value; 20,000,000 shares authorized; 11,188,208 and 11,182,209 shares issued and outstanding, respectively  11 11
Additional paid-in capital 36,749 35,620
Accumulated deficit (15,988) (15,611)
Accumulated other comprehensive income (116) (116)
Total stockholders' equity 20,656 19,904
Total liabilities and stockholders' equity $31,724 $24,255

About Bridgeline Digital, Inc

Bridgeline Digital is a developer of an award-winning web engagement management software suite and interactive business technology solutions that help customers leverage best in class web-based technologies to achieve their business objectives. The iAPPS Product Suite is an innovative SaaS solution that deeply unifies web Content Management, eCommerce, eMarketing, and web Analytics capabilities into the heart of websites, online stores, intranets, extranets or portals -- enabling users to swiftly enhance and optimize the value of their web assets. iAPPS Content Manager is the recent winner of the 2010 CODiE Award for the Best Content Management Solution, globally.

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