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Date
Thursday, August 14, 2025 at 4:30 p.m. ET
Call participants
Chief Executive Officer — Ari Kahn
Chief Financial Officer — Thomas Windhausen
Operator
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Takeaways
Total revenue-- Total revenue was $3.8 million for fiscal Q3 2025 (quarter ended June 30, 2025), down from $3.9 million in the prior-year period, with subscription license revenue (GAAP) rising but services revenue declining.
Subscription license revenue-- $3.1 million for fiscal Q3 2025, up from $3.0 million in the prior-year period, representing 81% of total revenue.
Services revenue-- Services revenue was $700,000 for fiscal Q3 2025, down from $900,000 in the prior-year period, accounting for 19% of total revenue.
Cost of revenue-- Cost of revenue was $1.3 million for fiscal Q3 2025, up from $1.2 million in the prior-year period, resulting in a gross profit of $2.5 million and a gross margin of 66%.
Subscription license gross margin-- 70%, down from 72% in the prior-year period.
Services gross margin-- 50%, down from 58% in the prior-year period.
Operating expenses-- Operating expenses were $3.2 million for the quarter ended June 30, 2025, up from $3.1 million in the prior-year period.
Net loss-- Net loss (GAAP) was $800,000 for fiscal Q3 2025, up from $300,000 in the prior-year period.
Adjusted EBITDA-- Adjusted EBITDA was negative $330,000 for fiscal Q3 2025, compared to positive $3,000 in the prior-year period.
Cash balance-- Over $2.1 million as of June 30, 2025, with accounts receivable at $1.4 million; total debt under $348,000, with no remaining earn-outs from prior acquisitions.
Contract bookings-- $1.7 million in contracts signed for fiscal Q3 2025, adding $600,000 in ARR for fiscal 2025; year to date, $6 million in contracts with over $2 million in ARR year to date.
Hawk Search revenue contribution-- Now over 60% of total quarterly revenue.
Customer expansion-- More than 20 new customers acquired in fiscal 2025, and over 30 licenses sold to existing customers.
Average deal size for Hawk Search-- Initial $25,000 ARR contract, with average expansions adding $50,000 in ARR.
Analyst recognition-- Gartner ranked Hawk Search as the number one B2B search software provider this quarter.
Marketing investment-- Quarterly ad spend increased from $250,000 to $500,000 in fiscal Q3 and Q4 2025, funded by a March capital raise; with some resales closing in less than 60 days.
Product innovation-- Launched Do It Best Hardware as a client with Hawk Search powering over 3,000 stores; released Model Contacts Protocol (MCP) enabling advanced AI-agent search management and real-time analytics for B2B clients.
Customer concentration-- No Hawk Search customer contributes 5% or more of revenue, though certain partners like Hewlett Packard and Consolidated Electrical Distributors play important strategic and innovation roles.
Pipeline mix-- About 60% of sales booked to existing customers, and management expects this dynamic to continue as product adoption expands.
Professional services outlook-- Management guided services revenue to remain near $750,000 per quarter for fiscal 2025 and fiscal 2026 with 50% gross margin, as license growth remains the core strategy.
Capital structure-- 12.1 million shares outstanding at quarter-end, with 862,000 warrants and 1.8 million options detailed in the cap table.
Summary
Bridgeline Digital(BLIN -3.03%) reported growth in subscription license revenue and a reduction in services revenue for fiscal Q3 2025. The company prioritized expanded marketing spend and achieved increased lead generation and a shorter sales cycle, reduced from 125 days to 112 days, following its March capital raise. Hawk Search is now the leading contributor to revenue, supported by high net revenue retention, major contract wins, and independent analyst recognition. Product advancements such as Model Contacts Protocol are contributing to customer expansion and higher deal sizes, while the company guides toward steady services revenue and increased license adoption moving forward.
Thomas Windhausen said, "For the previous six quarters [fiscal Q1–Q3 2024 and Q4 2024–Q2 2025], our non-personnel lead generation spend was budgeted at $250,000 per quarter, totaling $1 million a year. And then we did a $2 million capital raise in at the March. And those funds are almost all dedicated towards increasing that marketing spend."
CEO Ari Kahn stated, "Our net revenue retention for Hawk Search is 114%."
Ari Kahn said, "Gartner ranked Hawk Search as the number one B2B search software provider above all of our competitors."
Thomas Windhausen confirmed, "About 60% of our sales have been to existing customers, and this is a healthy and great thing."
Industry glossary
ARR (Annual Recurring Revenue): The value of recurring subscription revenue normalized for a single year, used as a key growth metric in SaaS businesses.
MCP (Model Contacts Protocol): A Bridgeline Hawk Search feature allowing AI agents and human teams to jointly manage and optimize search functionality across websites in real time.
Net revenue retention: A metric reflecting expansion, renewals, and contraction within the customer base, indicating the percentage of recurring revenue retained and expanded from existing customers over a period.
Full Conference Call Transcript
Ari Kahn: Thank you, Tom. Good afternoon, everybody. In our fiscal year 2025, we signed $1.7 million in contracts, which added $600,000 in ARR to our subscription revenue. Year to date, we have booked $6 million in contracts with over $2 million in ARR. This brings revenue from our core products to more than 60% of our total revenue with double-digit growth from Hawk Search. This year, we have added more than 20 new customers in addition to more than 30 licenses sold to existing customers. Our customers love Hawk Search. Our net revenue retention for Hawk Search is 114%. In fact, our average sale of expansion products to existing customers is double the size of our initial sale to new customers.
On average, customers are starting with a $25,000 ARR contract for Hawk Search, and then adding another $50,000 ARR above and beyond the $25,000 for advanced features such as our AI-powered smart search. After they are live, there's no greater demonstration of value that we deliver to our customers than them buying additional products from us. Hawk Search has an outstanding position in the market with huge customer successes as well as accolades from partners and analysts. This quarter, Gartner ranked Hawk Search as the number one B2B search software provider above all of our competitors.
Our number one ranking in B2B is driven by a number of factors, including our quantity of live customers using Hawk AI, our ability to solve complex sites at scale, and the out-of-the-box value Hawk delivers to B2B customers. This week, we launched Do It Best Hardware. Do It Best is using Hawk Search to power over 3,000 stores with real-time inventory and AI-enhanced search results. Only Hawk Search offers multisite management so franchises and chains with large numbers of sites can centrally manage search results, which can be set up to be impacted by live inventory. Our sales success has been driven by a modest marketing budget.
And in March, we made a small capital raise to expand that budget for lead generation. We doubled our ad spend from $250,000 a quarter to $500,000 a quarter. We're seeing excellent results from this investment with qualified lead generation more than doubling. Our sales cycle is also contracting and has reduced from 125 days down to 112 days, with resales this quarter having less than 60 days between the initial introduction to signing a contract. The increased marketing budget, faster sales cycle, and analyst recognition are expected to fuel even stronger growth in upcoming quarters. As part of our investment in lead generation, this quarter, we have expanded our lead gen programs through strategic partnerships.
Insight 25, our first Hawk Search virtual summit, drew 400 registrants and featured partners, including Hewlett Packard, BigCommerce, XEngage, and Crescent Electric. And at B2B Online in Chicago, we hosted a live river cruise dinner with Pemberley, Chronix, and DDS. These co-hosted events generate more leads per marketing dollar and produce more qualified leads with faster sales cycles than we could do by ourselves. Hawk Search leads the market in AI-powered product discovery with new capabilities that give customers more control and insight than ever before. This quarter, we added Model Contacts Protocol, also known as MCP.
We added MCP to Hawk Search, which allows AI agents to help manage Hawk Search alongside the human merchandising team that typically runs a website. Our tailored AI approach expands our customers' existing teams so they can leverage AI agents today without having to blindly assume the AI is going to do everything for them correctly, which happens with many of the other AI products. In essence, we are treating AI as a team member, not a replacement to our customer's marketing program. MCP also allows merchandisers and developers to control search results with natural language, to boost key products, prioritize categories, and target campaigns with precision.
In fact, they can even ask complex questions to the MCP component of Hawk Search and get visual results, graphs, tables, and other information to help them understand the performance of their own website and their sales processes. Together with advanced analytics, these enhancements provide deeper performance insights, integrate with business intelligence tools, and make enterprise-grade AI more accessible and impactful. A few examples of this quarter's business development successes include a Fortune 100 tech company signing a Hawk Search agreement to optimize global e-commerce search across high-volume, multi-region sites. One of the nation's largest electrical distributors selected Hawk Search to power AI-driven search across more than 70 storefronts.
The implementation integrates with both Sitecore and Salesforce Commerce Cloud, to unify product and content discovery. A top five US electrical distributor expanded its Hawk Search license to support hundreds of e-commerce portals using our multi-engine management to launch test personalized experiences. Ivystone Group deployed Hawk Search across five e-commerce sites with multisite management, concept search recommendations, and merchandising to improve intent matching and buyer engagement. And a leading Jansen distributor renewed its partnership to leverage semantic search and personalized e-commerce, boosting both conversion rates and average order value. Hawk Search is fueling Bridgeline's growth.
As of this quarter, Hawk Search is more than 60% of our total quarterly revenue, is growing at a double-digit pace, is being recognized by top analysts as a number one solution, and has outstanding customer satisfaction with a 114% net revenue recognition. The development and introduction of new features into Hawk Search is resulting in customers tripling their initial investment by adding new features like our AI capabilities and smart search. We have doubled our lead budget to capitalize on this momentum and are already seeing economies of scale.
That, along with the sales cycle of only 112 days, will soon make Hawk Search growth shine into our consolidated financials so that you can see overall growth for the whole company at the level in which Hawk Search is growing today. Now I'll turn the call over to our Chief Financial Officer, Thomas Windhausen, so he can share some additional details with you. Tom?
Thomas Windhausen: Thanks, Ari. I'll provide an update on our financial results for the 2025, which ended 06/30/2025. Total revenue for the quarter ended 06/30/2025 was $3.8 million as compared to $3.9 million in the prior year period. Looking at each component of revenue, our subscription license revenue, which is comprised of SaaS licenses, maintenance, and hosting revenue, for the quarter ended 06/30/2025 was $3.1 million as compared to $3 million in the prior year period. As a percentage of total revenue, subscription and license revenue was 81% of total revenue for the quarter ended 06/30/2025. Services revenue was $700,000 for the quarter ended 06/30/2025 compared to $900,000 in the prior year period.
As a percentage of total revenue, services revenue accounted for 19% of total revenue for the quarter ended 06/30/2025. Our cost of revenue was $1.3 million for the quarter ended 06/30/2025 compared to $1.2 million in the prior year period. And as a result, our gross profit was $2.5 million for the quarter ended 06/30/2025. Our overall gross profit margin was 66% for the quarter ended 06/30/2025, with our subscription license gross margins of 70% for the quarter June 25 compared to 72% in the prior year period. Our services margins of 50% for the quarter ended 06/30/2025 compared to 58% in the same period in 2024.
Our operating expenses were $3.2 million for the quarter ended June 30, compared to $3.1 million in the prior year period. And our net loss was $800,000 for the fiscal quarter ended 06/30/2025 compared to a net loss of $300,000 in the prior year period. Our adjusted EBITDA for the quarter ended 06/30/2025 was negative $330,000 compared to positive $3,000 in the prior year comparable three-month period. Moving to our balance sheet. On 06/30/2025, we had cash of over $2.1 million and accounts receivable of $1.4 million. Our total debt outstanding as of 06/30/2025 was under €300,000, approximately $348,000 US dollars, with a weighted average interest rate of 3.4% and principal payments due through 2028.
We have no other debt or remaining earn-outs from any other previous acquisitions. And at 06/30/2025, our total assets were $16.1 million with total liabilities of $6.2 million. Finally, with an update of our cap table, at June 30, it included 12.1 million shares outstanding, 862,000 warrants, and 1.8 million options. The 862,000 warrants consist primarily of 167,000 warrants with a $2.85 exercise price expiring in May 2026 and 592,000 warrants with a $2.51 exercise price which expire in November 2026. Bridgeline looks forward to continued growth and success in fiscal 2025 and beyond as we continue our focus on revenue growth, product innovation, customer success, and delivering shareholder value. Thank you for joining us on the call today.
At this time, I'd like to open the call to questions and answers. Moderator?
Operator: Thank you. At this time, we will be conducting our question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. And you may press 2 if you would like to remove your question from the queue. Handset before pressing the star keys. One moment, please, while we poll for questions. While we do that and get that set up, I do have a couple of questions that were sent in advance. So we will go through those. We have some questions from Howard Halpern at Taglich Brothers. Howard has three questions here.
Number one, how has your customer acquisition strategy evolved? Can you guys hear me alright?
Thomas Windhausen: Oh, sorry. I was on mute, and I'm back. Oh, alright. Okay. So the question was, how is our customer acquisition?
Howard Halpern: Yeah. How has our customer acquisition strategy evolved?
Thomas Windhausen: Great. So we're very analytical in marketing, and we track all of our leads so that we know which marketing event was the lead's first touch point and that we also know which marketing campaigns were follow-on influencing touch points. With this information, we're able to increase investments in campaigns that generate the best leads or have the biggest impact on lead conversion. Today, we have sufficient history and analytics to know where most of our new leads are coming from. A year ago, we were experimenting with two-thirds of our budget and investing one-third towards known lead sources. And today, I'd say that ratio has really flipped, where we are experimenting with a third.
You always want to experiment in the marketing world. And then investing two-thirds of our budget towards known campaigns, campaigns that we know win or influence. These can be conferences, online ad sources, partnerships, and other events. Because of the outstanding recognition that we've gotten from analysts like Gartner and softwarereviews.com and G2 Crowd, and customer satisfaction, we're also now bringing both customers and analysts to the sales cycle to provide references and other details that help our prospective customers more quickly make their decisions. Great.
Howard Halpern: Great. Thanks, Ari. Another question. Where does our pipeline stand in regards to reaching new customers or expanding within existing customers?
Thomas Windhausen: So this year, we have more bookings to existing customers than to new customers, both in quantity and in booking size. About 60% of our sales have been to existing customers, and this is a healthy and great thing. This tells us that we have a product line that delivers tremendous value to our customers. And we need to increase awareness with a larger marketing megaphone, so to speak, a larger ad spend budget so that the rest of the world can find out why customers are staying with Bridgeline and doubling down and increasing their investment in Bridgeline.
With 114% net revenue retention, we expect existing customers to continue to represent probably 60% of licenses even though we're expanding our marketing budget. So we're going to win more customers with a larger budget, but our existing customers are even more rapidly expanding their investment by buying products like our SmartSearch, the AI-driven products, and advanced analytics. We have hundreds of customers who still have products that they can buy from Bridgeline. So this is a great trend. It reduces our overall customer acquisition costs. And these sales make Bridgeline a healthier company.
Less marketing dollars produce longer customer lifetimes, and it often results in innovations with new features coming from customers and driving additional sales into our customer base.
Howard Halpern: Excellent. I do have one more. Are you getting any customer feedback about the new technology enhancements, and how could they always be deployed to expand revenue?
Thomas Windhausen: Okay. Well, most nearly all of our products released in 2024 and 2025 were driven by customers. So structurally, we've got a professional services division that helps our customers both implement our products and provide consultative advice to them as to how to better run their own websites. And then we've also got a sales team, our customer success team, which is helping our customers understand what other products we have and figure out when the right time is for them to buy one of our other products. These two teams are always getting feedback, bringing that into our product management department run by John Murcott, and several other people in the team.
And a lot of times, those are producing ideas as to products that we should have and we don't have. We'll see two or three or four of our customers asking for something that's very similar. We figure out what the general generalizations are between all of those customers. And then rather than our customer having to build and maintain a bespoke implementation, something custom just to themselves, they get to just buy a license for something that we maintain and, of course, sell to our other customers. So multisite management platform, an example that was driven by customers. Our advanced analytics was driven by customers.
Of course, all of the SmartSearch AI stuff was driven both by huge advances in large language models and neural nets and by customers as well.
Howard Halpern: Excellent. Thanks. Moderator, do we have anyone who is on the phone line for Q&A?
Operator: Yes, sir. We have a question on the line from Casey Ryan of Westpark Capital.
Casey Ryan: Alright, Tom. Thanks for the update today. It's encouraging.
Thomas Windhausen: Thank you, Casey.
Casey Ryan: Yeah. You bet. So I had a few questions. So sales and marketing has sort of ticked up over the last couple of quarters, which I think has been encouraging. And I think you're speaking to the fact that conversions are going well and that you're working in that area. Should we continue that absolute dollar level to kind of continue to tick up as we go through the end of the fiscal year and into FY '26? Is my first question.
Thomas Windhausen: Okay. Great. Great. And that's a very important question. It really drives our momentum. So for the previous six quarters, our lead gen spend, this is non-personnel, lead gen spend was budgeted at $250,000 per quarter, a million dollars a year. And then we did a $2 million capital raise in at the March. And those funds are almost all dedicated towards increasing that marketing spend. Right now, we've increased it from $250,000 to $500,000. So our third quarter was at a solid $500,000. Fourth quarter is at a solid $500,000. And we expect our first quarter, which will be October to December, to continue at the $500,000 level. Then we'll reevaluate it along the way.
But we've got enough gas in the tank to stay at that level for a long time. And it is producing results.
Casey Ryan: That's excellent. I'm really happy to hear that you guys are actually pegging that at the high end. Because I think previously, we talked about you were targeting kind of $250,000 to $500,000, but the fact that you're committing $500,000 suggests that results are pretty good, in terms of what you're seeing in terms of pipeline development. Tell me, I'm curious, and it's hard to get information about this from our side all the time. You know, as Hawk Search is having success, what are competitors doing who may not have the same technology or the same ability as Hawk Search? Are they cutting prices? Are they trying to bundle new services?
Like, what are you seeing in response to that? Or maybe there isn't a consistent organized response from the competition.
Thomas Windhausen: Well, the one thing that we do consistently see, especially from a couple of competitors, is them throwing in free professional services to make up the difference between their capabilities and ours. So maybe they don't have something that is as out-of-the-box as us or doesn't connect to the underlying product information management system or something, and they'll just send a team of people in there to try to make up that difference, and they'll eat that cost. I don't think that's sustainable. I think they should just figure it out and put those things out of the box.
But we see that, and we have to answer it because they can say yes to anything if they're going to basically buy the customer. We've got to explain that if you build a custom solution, sooner or later, the honeymoon's over, and that custom solution is not going to be managed for free as opposed to if it was just part of a product. So that's our response there. But that's the most common thing we can do.
Casey Ryan: Okay. And so people have, you know, competitors have some ability to sort of offer that but that's not infinite, basically, because they're basically losing money on those tactics, I guess.
Thomas Windhausen: Yep.
Casey Ryan: Yeah. Okay. Terrific. And then I think this is part of the long-term shift in terms of revenue mix as well, but I think, in terms of digital engagement services, that number's kind of slowly ticking down. Like, I think, certainly as a percentage of total revenue, but even in terms of absolute dollars. And, like, I think that's intentional on your part as you drive the company forward. Should we expect sort of the pace that we've seen to be continued in that, or would there be something dramatic where you guys might exit a certain line or do something that's sort of bigger, you know, in terms of magnitude to that revenue line at some point in '26?
Thomas Windhausen: Yeah. I think that throughout the rest of 2025, so from now all the way through 2026, people should expect us to be at around $750,000 per quarter in professional services revenue with a 50% gross margin. Our partners, our agency partners like to do the services, and we partner with them, and they do a lot of the services with our guys really just coming in as the subject matter to do the really hard stuff, which is why we're at a higher margin. And our customers also like to see things out of the box, and we try to provide that for them, which is very valuable. So that's where you don't see that area expected to grow.
We're going to focus on growing the license and let our partners have some of that and us do the most complex components of an implementation.
Casey Ryan: Okay. Super. So potentially consistent dollar contribution, but as we expect growth from Hawk Search and kind of your core growth engines, shrinking as a percentage of the total.
Thomas Windhausen: That's right.
Casey Ryan: Yeah. Okay. That's terrific. And then the last question, and again, you know, I suspect maybe this is too granular. But, you know, within Hawk Search, do you guys have significant customers, I guess, or customer concentration in, like, I'm just trying to get a sense of if anyone's even contributing 5% of revenues in a given quarter or if everyone is sort of down lower towards 1% or sub 1% in terms of contribution.
Thomas Windhausen: Right. We do not have any 5% customers in Hawk Search, but we do have some guys that are significantly larger than other ones. And we speak about them a lot, and I'll tell you that Hewlett Packard is a partner, not just a customer, and has driven a lot of innovation with us. And we've got an outstanding relationship with them, and they participate in our conferences. And it's a very important relationship. And, also, consolidated electrical distributors, same thing. We've brought a lot of innovation, made great suggestions to us. But nobody is at 5%.
Casey Ryan: Okay. Okay. Great. Well, all really helpful. You know, it feels like the execution's really good, and I appreciate you taking my questions. And I appreciate the update. Thank you.
Thomas Windhausen: Thank you, Casey. Nice speaking.
Operator: Thank you. Once again, if you have any questions, please indicate so now by pressing star one on your telephone keypad. Okay. As we have no further questions in line at this time, I would like to hand it back over to management for any closing remarks.
Thomas Windhausen: Great. Thank you. Well, thank you, everybody, for joining us today. We very much appreciate your continued support of all of our investors and of our customers and of our partners. We're excited about our business and ongoing growth prospects. We think that we are in the sweet spot right now with respect to B2B companies coming online and us being the number one B2B search platform. We're in the sweet spot with respect to artificial intelligence and how the large language models that are driving this revolution really are tailored very well for the type of product that we have. And we're seeing Hawk Search grow.
I know that everyone is anxious to see that growth shine through, and we expect to see that in 2026. And this is an exciting time for the company. Thank you all. Our next conference call will be in December 2025. Until then, be well.
Operator: Thank you, ladies and gentlemen. This does conclude today's conference, and you may disconnect your lines at this time. And we thank you for your participation.