PART I—FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements](index=5&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) Bridgeline Digital, Inc.'s unaudited condensed consolidated financial statements and notes for periods ended June 30, 2025, and September 30, 2024 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric (in thousands) | June 30, 2025 | September 30, 2024 | Change | % Change | | :-------------------- | :------------ | :----------------- | :----- | :------- | | Total Assets | $16,148 | $15,602 | $546 | 3.5% | | Total Liabilities | $6,199 | $5,596 | $603 | 10.8% | | Total Stockholders' Equity | $9,949 | $10,006 | $(57) | -0.6% | - Cash and cash equivalents increased by **$713 thousand** from **$1,390 thousand** as of September 30, 2024, to **$2,103 thousand** as of June 30, 2025[14](index=14&type=chunk) - Accounts receivable, net, increased by **$113 thousand** from **$1,288 thousand** as of September 30, 2024, to **$1,401 thousand** as of June 30, 2025[14](index=14&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (Three Months Ended June 30, 2025 and 2024, in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Total Net Revenue | $3,846 | $3,936 | $(90) | -2.3% | | Gross Profit | $2,548 | $2,706 | $(158) | -5.8% | | Loss from Operations | $(689) | $(383) | $(306) | 79.9% | | Net Loss | $(789) | $(305) | $(484) | 158.7% | | Basic Net Loss Per Share | $(0.07) | $(0.03) | $(0.04)| 133.3% | Condensed Consolidated Statements of Operations (Nine Months Ended June 30, 2025 and 2024, in thousands) | Metric (in thousands) | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- |\ | Total Net Revenue | $11,512 | $11,495 | $17 | 0.1% | | Gross Profit | $7,699 | $7,782 | $(83) | -1.1% | | Loss from Operations | $(1,945) | $(1,537) | $(408) | 26.5% | | Net Loss | $(2,153) | $(1,529) | $(624) | 40.8% | | Basic Net Loss Per Share | $(0.23) | $(0.15) | $(0.08)| 53.3% | [Condensed Consolidated Statements of Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Condensed Consolidated Statements of Comprehensive Loss (Three Months Ended June 30, 2025 and 2024, in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Net Loss | $(789) | $(305) | $(484) | 158.7% | | Net change in foreign currency translation adjustment | $(40) | $11 | $(51) | -463.6% | | Comprehensive Loss | $(829) | $(294) | $(535) | 182.0% | Condensed Consolidated Statements of Comprehensive Loss (Nine Months Ended June 30, 2025 and 2024, in thousands) | Metric (in thousands) | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Net Loss | $(2,153) | $(1,529) | $(624) | 40.8% | | Net change in foreign currency translation adjustment | $22 | $(14) | $36 | -257.1% | | Comprehensive Loss | $(2,131) | $(1,543) | $(588) | 38.1% | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Condensed Consolidated Statements of Stockholders' Equity Highlights (in thousands) | Metric (in thousands) | As of Oct 1, 2024 | As of June 30, 2025 | Change | % Change | | :-------------------- | :---------------- | :------------------ | :----- | :------- | | Total Stockholders' Equity | $10,006 | $9,949 | $(57) | -0.6% | | Common Stock Shares Outstanding | 10,417,609 | 12,112,068 | 1,694,459 | 16.3% | | Accumulated Deficit | $(91,538) | $(93,691) | $(2,153)| 2.4% | - The company redeemed all **350 shares** of Series C Convertible Preferred Stock on March 5, 2025, for **$331 thousand**, which was recognized as a reduction in additional paid-in capital[60](index=60&type=chunk)[61](index=61&type=chunk) - Issuance of common stock, net of offering costs, contributed **$1,983 thousand** to additional paid-in capital during the nine months ended June 30, 2025[23](index=23&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (Nine Months Ended June 30, 2025 and 2024, in thousands) | Metric (in thousands) | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Net Cash Used in Operating Activities | $(759) | $(982) | $223 | -22.7% | | Net Cash Used in Investing Activities | $(12) | $(24) | $12 | -50.0% | | Net Cash Provided by (Used in) Financing Activities | $1,475 | $(189) | $1,664 | -880.4% | | Net Increase (Decrease) in Cash and Cash Equivalents | $713 | $(1,177) | $1,890 | -160.6% | | Cash and Cash Equivalents at End of Period | $2,103 | $1,200 | $903 | 75.3% | - Cash provided by financing activities significantly increased due to **$1.983 million** from common stock issuance, partially offset by Series C Preferred Stock redemption and long-term debt payments[27](index=27&type=chunk)[153](index=153&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [1. Description of Business](index=11&type=section&id=1.%20Description%20of%20Business) - Bridgeline Digital is an AI-powered marketing technology company offering cloud-based SaaS and perpetual licensing software products like HawkSearch, Celebros Search, Woorank, Unbound, TruPresence, and OrchestraCMS[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk) - The company has historically incurred operating losses and relies on cash on hand and financing activities to fund operations and product development, maintaining tight control over discretionary spending for fiscal year 2025[34](index=34&type=chunk) - The company completed a registered direct offering in March 2025, issuing **1,000,000 shares** of common stock for gross proceeds of approximately **$1.5 million** (**$1.3 million** net), and a private placement of **473,979 unregistered shares** for gross proceeds of approximately **$720 thousand** (**$700 thousand** net)[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk) [2. Summary of Significant Accounting Policies](index=13&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) - The condensed consolidated financial statements are prepared in accordance with U.S. GAAP and include all adjustments necessary for fair presentation, with operating results for the interim periods not necessarily indicative of the full fiscal year[40](index=40&type=chunk) - The company is evaluating the impact of recently issued ASUs on Segment Reporting (ASU 2023-07), Income Taxes (ASU 2023-09), and Expense Disaggregation Disclosures (ASU 2024-03), expecting enhanced disclosures[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) [3. Accounts Receivable](index=14&type=section&id=3.%20Accounts%20Receivable) Accounts Receivable, Net (in thousands) | Metric (in thousands) | As of June 30, 2025 | As of September 30, 2024 | Change | % Change | | :-------------------- | :------------------ | :----------------------- | :----- | :------- | | Accounts receivable | $1,710 | $1,551 | $159 | 10.3% | | Allowance for credit losses | $(309) | $(263) | $(46) | 17.5% | | Accounts receivable, net | $1,401 | $1,288 | $113 | 8.8% | Allowance for Credit Losses Activity (in thousands) | Allowance for Credit Losses Activity (in thousands) | :----- | | :------------------------------------ | :----- | | Balance as of October 1, 2024 | $263 | | Credit loss expense (recovery) | $135 | | Write-off/adjustments | $(89) | | Balance as of June 30, 2025 | $309 | [4. Fair Value Measurement and Fair Value of Financial Instruments](index=14&type=section&id=4.%20Fair%20Value%20Measurement%20and%20Fair%20Value%20of%20Financial%20Instruments) - The company's warrant liabilities are measured at fair value using Level 3 inputs and a Monte Carlo option-pricing model, considering volatilities of comparable public companies and company-specific volatility[51](index=51&type=chunk) Warrant Liabilities (in thousands) | Warrant Liabilities (in thousands) | As of June 30, 2025 | As of September 30, 2024 | Change | % Change | | :--------------------------------- | :------------------ | :----------------------- | :----- | :------- | | Montage | $4 | $10 | $(6) | -60.0% | | Series D | $150 | $88 | $62 | 70.5% | | Total Warrant Liabilities | $154 | $98 | $56 | 57.1% | Change in Fair Value of Warrant Liabilities (in thousands) | Change in Fair Value of Warrant Liabilities (in thousands) | :----- | | :------------------------------------------------- | :----- | | 3 Months Ended June 30, 2025 Gain | $31 | | 3 Months Ended June 30, 2024 Gain | $88 | | 9 Months Ended June 30, 2025 Loss | $(58) | | 9 Months Ended June 30, 2024 Gain | $81 | [5. Intangible Assets](index=16&type=section&id=5.%20Intangible%20Assets) Intangible Assets, Net (in thousands) | Intangible Assets, Net (in thousands) | As of June 30, 2025 | As of September 30, 2024 | Change | % Change | | :------------------------------------ | :------------------ | :----------------------- | :----- | :------- | | Domain and trade names | $532 | $572 | $(40) | -7.0% | | Customer related | $2,669 | $3,048 | $(379) | -12.4% | | Technology | $158 | $288 | $(130) | -45.1% | | Balance at end of period | $3,359 | $3,908 | $(549) | -14.1% | - Total amortization expense for intangible assets was **$549 thousand** for the nine months ended June 30, 2025, a decrease from **$796 thousand** in the prior year, primarily due to certain intangible assets becoming fully amortized[54](index=54&type=chunk)[139](index=139&type=chunk) [6. Accrued Liabilities](index=17&type=section&id=6.%20Accrued%20Liabilities) Accrued Liabilities (in thousands) | Accrued Liabilities (in thousands) | As of June 30, 2025 | As of September 30, 2024 | Change | % Change | | :--------------------------------- | :------------------ | :----------------------- | :----- | :------- | | Compensation and benefits | $712 | $405 | $307 | 75.8% | | Professional fees | $247 | $268 | $(21) | -7.8% | | Insurance | $34 | $- | $34 | N/A | | Other | $197 | $315 | $(118) | -37.5% | | Balance at end of period | $1,190 | $988 | $202 | 20.4% | [7. Long-term Debt](index=18&type=section&id=7.%20Long-term%20Debt) Long-term Debt (in thousands) | Long-term Debt (in thousands) | As of June 30, 2025 | As of September 30, 2024 | Change | % Change | | :---------------------------- | :------------------ | :----------------------- | :----- | :------- | | Term loan payable | $277 | $325 | $(48) | -14.8% | | Seller's note payable | $71 | $201 | $(130) | -64.7% | | Total debt | $348 | $526 | $(178) | -33.8% | | Less: current portion | $(156) | $(282) | $126 | -44.7% | | Long-term debt, net of current portion | $192 | $244 | $(52) | -21.3% | Future Maturities of Long-term Debt (in thousands) | Future Maturities of Long-term Debt (in thousands) | :----- | | :-------------------- | :----- | | Fiscal year 2025 (remaining) | $93 | | Fiscal year 2026 | $85 | | Fiscal year 2027 | $85 | | Fiscal year 2028 | $85 | | Total long-term debt | $348 | [8. Stockholders' Equity](index=18&type=section&id=8.%20Stockholders'%20Equity) - On March 5, 2025, the company redeemed all **350 shares** of Series C Preferred Stock, along with placement agent warrants and stock options, for an aggregate purchase price of **$332.5 thousand**, resulting in no Series C Preferred Stock outstanding as of June 30, 2025[60](index=60&type=chunk)[61](index=61&type=chunk) Stock-based Compensation Expense (in thousands) | Stock-based Compensation Expense (in thousands) | :----- | | :-------------------------------- | :----- | | 3 Months Ended June 30, 2025 | $274 | | 3 Months Ended June 30, 2024 | $127 | | 9 Months Ended June 30, 2025 | $488 | | 9 Months Ended June 30, 2024 | $421 | - As of June 30, 2025, there were **1,799,477 stock options** outstanding and **861,533 stock warrants** outstanding, with **208 thousand shares** available for future issuance under the 2016 Stock Incentive Plan[62](index=62&type=chunk)[75](index=75&type=chunk) [9. Net Loss Per Share Attributable to Common Shareholders](index=23&type=section&id=9.%20Net%20Loss%20Per%20Share%20Attributable%20to%20Common%20Shareholders) Net Loss Per Share Attributable to Common Shareholders (Three Months Ended June 30, 2025 and 2024, in thousands, except per share data) | Metric (in thousands, except per share data) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change | % Change | | :------------------------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Net loss applicable to common shareholders | $(789) | $(305) | $(484) | 158.7% | | Basic net loss per share | $(0.07) | $(0.03) | $(0.04)| 133.3% | | Diluted net loss per share | $(0.07) | $(0.03) | $(0.04)| 133.3% | Net Loss Per Share Attributable to Common Shareholders (Nine Months Ended June 30, 2025 and 2024, in thousands, except per share data) | Metric (in thousands, except per share data) | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | Change | % Change | | :------------------------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Net loss applicable to common shareholders | $(2,484) | $(1,529) | $(955) | 62.5% | | Basic net loss per share | $(0.23) | $(0.15) | $(0.08)| 53.3% | | Diluted net loss per share | $(0.23) | $(0.15) | $(0.08)| 53.3% | - Potential common stock equivalents, including stock options and warrants, were excluded from diluted net loss per share computation for both periods as their inclusion would have been anti-dilutive[76](index=76&type=chunk)[77](index=77&type=chunk) [10. Revenues and Other Related Items](index=23&type=section&id=10.%20Revenues%20and%20Other%20Related%20Items) Revenue by Geography (Three Months Ended June 30, 2025 and 2024, in thousands) | Revenue by Geography (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change | % Change | | :---------------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | United States | $3,221 | $3,236 | $(15) | -0.5% | | International | $625 | $701 | $(76) | -10.8% | | Total | $3,846 | $3,936 | $(90) | -2.3% | Revenue by Type (Three Months Ended June 30, 2025 and 2024, in thousands) | Revenue by Type (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change | % Change | | :----------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Subscription | $2,573 | $2,666 | $(93) | -3.5% | | Maintenance | $104 | $105 | $(1) | -1.0% | | Hosting | $445 | $242 | $203 | 83.9% | | Digital engagement services | $724 | $923 | $(199) | -21.6% | | Total | $3,846 | $3,936 | $(90) | -2.3% | - Deferred revenue (current portion) decreased from **$2,189 thousand** as of October 1, 2024, to **$2,176 thousand** as of June 30, 2025[83](index=83&type=chunk) [11. Income Taxes](index=25&type=section&id=11.%20Income%20Taxes) - The provision for income taxes remained consistent at **$5 thousand** for the three months ended June 30, 2025 and 2024, and **$15 thousand** for the nine months ended June 30, 2025 and 2024[84](index=84&type=chunk) - The company maintains a valuation allowance against its net deferred tax assets, as net operating loss carryforwards are estimated to offset potential taxable income[84](index=84&type=chunk)[145](index=145&type=chunk) [12. Leases](index=25&type=section&id=12.%20Leases) Net Lease Costs (Three Months Ended June 30, 2025 and 2024, in thousands) | Net Lease Costs (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change | % Change | | :----------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Operating lease cost | $45 | $50 | $(5) | -10.0% | | Variable lease cost | $17 | $16 | $1 | 6.3% | | Sublease income, net | $(18) | $(18) | $0 | 0.0% | | Total | $44 | $48 | $(4) | -8.3% | - Cash paid for lease liabilities was **$113 thousand** for the nine months ended June 30, 2025, compared to **$140 thousand** in the prior year[88](index=88&type=chunk) - As of June 30, 2025, the weighted average remaining lease term was **2.2 years** with a weighted average discount rate of **10.9%**[88](index=88&type=chunk) [13. Commitments and Contingencies](index=27&type=section&id=13.%20Commitments%20and%20Contingencies) - The company provides warranties for its technology solutions, but its estimate of exposure to warranty-related claims is immaterial as of June 30, 2025, and September 30, 2024[91](index=91&type=chunk)[92](index=92&type=chunk) - The company's agreements generally include indemnification clauses for third-party intellectual property infringement and product liability, but no significant claims or losses have been experienced[93](index=93&type=chunk) - As of June 30, 2025, the company was not involved in any material legal proceedings beyond those previously disclosed[94](index=94&type=chunk)[183](index=183&type=chunk) [14. Related Party Transactions](index=28&type=section&id=14.%20Related%20Party%20Transactions) - Brandon Ross, a Class III Director and Head of Placements at WestPark Capital, Inc., was designated warrants to purchase **28,000 shares** of common stock in March 2025[95](index=95&type=chunk)[96](index=96&type=chunk) - Michael Ketslakh, a Class II Director, participated in a private placement and purchased **394,736 unregistered shares**[98](index=98&type=chunk)[99](index=99&type=chunk) - Michael Taglich resigned from the Board of Directors on February 10, 2025, preceding the redemption of Series C Preferred Stock[97](index=97&type=chunk) [15. Subsequent Events](index=28&type=section&id=15.%20Subsequent%20Events) - The company evaluated subsequent events through the filing date and found no material events requiring adjustment or disclosure in the interim condensed consolidated financial statements[100](index=100&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, results of operations, liquidity, and capital resources for the three and nine months ended June 30, 2025 [Overview](index=29&type=section&id=Overview) - Bridgeline Digital is an AI-powered marketing technology company offering SaaS and perpetual license software products designed to increase online revenue for businesses[103](index=103&type=chunk)[104](index=104&type=chunk) - The company's product suite includes HawkSearch, Celebros Search, Woorank, Unbound, TruPresence, and OrchestraCMS, catering to various digital engagement needs[104](index=104&type=chunk) - Bridgeline operates globally with its corporate office in Woburn, Massachusetts, and subsidiaries in India, Canada, and Belgium[105](index=105&type=chunk)[106](index=106&type=chunk) [Customer Information](index=30&type=section&id=Customer%20Information) - The company currently serves over **2,000 active customers**[107](index=107&type=chunk) - No single customer accounted for more than **10% of total revenue** for the three and nine months ended June 30, 2025 and 2024[107](index=107&type=chunk) [Results of Operations for the Three and Nine Months Ended June 30, 2025 compared to the Three and Nine Months Ended June 30, 2024](index=31&type=section&id=Results%20of%20Operations%20for%20the%20Three%20and%20Nine%20Months%20Ended%20June%2030%2C%202025%20compared%20to%20the%20Three%20and%20Nine%20Months%20Ended%20June%2030%2C%202024) [Revenue](index=32&type=section&id=Revenue) Revenue by Source (Three Months Ended June 30, 2025 and 2024, in thousands) | Revenue Source (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change | % Change | | :---------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Subscription and perpetual licenses | $3,122 | $3,013 | $109 | 3.6% | | Digital engagement services | $724 | $923 | $(199) | -21.6% | | Total Net Revenue | $3,846 | $3,936 | $(90) | -2.3% | Revenue by Source (Nine Months Ended June 30, 2025 and 2024, in thousands) | Revenue Source (in thousands) | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | Change | % Change | | :---------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Subscription and perpetual licenses | $9,222 | $9,109 | $113 | 1.2% | | Digital engagement services | $2,290 | $2,386 | $(96) | -4.0% | | Total Net Revenue | $11,512 | $11,495 | $17 | 0.1% | - Digital engagement services revenue decreased for the three months ended June 30, 2025, primarily due to additional services volumes, including a large customer project, in the prior year period[116](index=116&type=chunk) [Cost of Revenue](index=32&type=section&id=Cost%20of%20Revenue) Cost of Revenue by Source (Three Months Ended June 30, 2025 and 2024, in thousands) | Cost of Revenue (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change | % Change | | :----------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Subscription and perpetual licenses | $934 | $846 | $88 | 10.4% | | Digital engagement services | $364 | $384 | $(20) | -5.2% | | Total Cost of Revenue | $1,298 | $1,230 | $68 | 5.5% | Cost of Revenue by Source (Nine Months Ended June 30, 2025 and 2024, in thousands) | Cost of Revenue (in thousands) | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | Change | % Change | | :----------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Subscription and perpetual licenses | $2,694 | $2,533 | $161 | 6.4% | | Digital engagement services | $1,119 | $1,180 | $(61) | -5.2% | | Total Cost of Revenue | $3,813 | $3,713 | $100 | 2.7% | - The increase in cost of subscription and perpetual licenses is primarily due to higher server costs, while the decrease in cost of digital engagement services is mainly due to lower personnel costs[120](index=120&type=chunk)[124](index=124&type=chunk) [Gross Profit](index=34&type=section&id=Gross%20Profit) Gross Profit (Three Months Ended June 30, 2025 and 2024, in thousands) | Gross Profit (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change | % Change | | :-------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Gross Profit | $2,548 | $2,706 | $(158) | -5.8% | | Gross Profit Margin | 66% | 69% | -3% | -4.3% | Gross Profit (Nine Months Ended June 30, 2025 and 2024, in thousands) | Gross Profit (in thousands) | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | Change | % Change | | :-------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Gross Profit | $7,699 | $7,782 | $(83) | -1.1% | | Gross Profit Margin | 67% | 68% | -1% | -1.5% | [Operating Expenses](index=34&type=section&id=Operating%20Expenses) Operating Expenses (Three Months Ended June 30, 2025 and 2024, in thousands) | Operating Expense (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change | % Change | | :------------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Sales and marketing | $1,297 | $949 | $348 | 36.7% | | General and administrative | $774 | $878 | $(104) | -11.8% | | Research and development | $961 | $1,008 | $(47) | -4.7% | | Depreciation and amortization | $195 | $201 | $(6) | -3.0% | | Restructuring and acquisition related expenses | $10 | $53 | $(43) | -81.1% | | Total Operating Expenses | $3,237 | $3,089 | $148 | 4.8% | Operating Expenses (Nine Months Ended June 30, 2025 and 2024, in thousands) | Operating Expense (in thousands) | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | Change | % Change | | :------------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Sales and marketing | $3,355 | $2,803 | $552 | 19.7% | | General and administrative | $2,343 | $2,425 | $(82) | -3.4% | | Research and development | $3,144 | $3,138 | $6 | 0.2% | | Depreciation and amortization | $585 | $885 | $(300) | -33.9% | | Restructuring and acquisition related expenses | $217 | $68 | $149 | 219.1% | | Total Operating Expenses | $9,644 | $9,319 | $325 | 3.5% | - Sales and marketing expenses increased due to higher marketing spend on leads and conferences, and higher personnel costs for the nine-month period[129](index=129&type=chunk)[130](index=130&type=chunk) - Depreciation and amortization decreased for the nine-month period primarily because certain intangible assets became fully amortized[139](index=139&type=chunk) [Loss from Operations](index=36&type=section&id=Loss%20from%20Operations) Loss from Operations (Three Months Ended June 30, 2025 and 2024, in thousands) | Loss from Operations (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change | % Change | | :---------------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Loss from Operations | $(689) | $(383) | $(306) | 79.9% | Loss from Operations (Nine Months Ended June 30, 2025 and 2024, in thousands) | Loss from Operations (in thousands) | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | Change | % Change | | :---------------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Loss from Operations | $(1,945) | $(1,537) | $(408) | 26.5% | [Interest expense and other, net](index=36&type=section&id=Interest%20expense%20and%20other%2C%20net) Interest Expense and Other, Net (Three Months Ended June 30, 2025 and 2024, in thousands) | Interest Expense and Other, Net (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change | % Change | | :--------------------------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Interest expense and other, net | $(126) | $(5) | $(121) | 2420.0% | Interest Expense and Other, Net (Nine Months Ended June 30, 2025 and 2024, in thousands) | Interest Expense and Other, Net (in thousands) | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | Change | % Change | | :--------------------------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Interest expense and other, net | $(135) | $(58) | $(77) | 132.8% | - The increase in interest expense and other, net, is primarily due to stock-based compensation from restricted stock issued to board members in the three months ended June 30, 2025[143](index=143&type=chunk) [Change in fair value of warrant liabilities](index=36&type=section&id=Change%20in%20fair%20value%20of%20warrant%20liabilities) Change in Fair Value of Warrant Liabilities (in thousands) | Change in Fair Value of Warrant Liabilities (in thousands) | :----- | | :------------------------------------------------- | :----- | | 3 Months Ended June 30, 2025 Gain | $31 | | 3 Months Ended June 30, 2024 Gain | $88 | | 9 Months Ended June 30, 2025 Loss | $(58) | | 9 Months Ended June 30, 2024 Gain | $81 | [Provision for Income Taxes](index=36&type=section&id=Provision%20for%20Income%20Taxes) - The provision for income taxes remained constant at **$5 thousand** for the three months and **$15 thousand** for the nine months ended June 30, 2025 and 2024, respectively[110](index=110&type=chunk)[145](index=145&type=chunk) - The company maintains a valuation allowance against its net deferred tax assets due to sufficient net operating loss carryforwards to offset potential taxable income[145](index=145&type=chunk) [Adjusted EBITDA](index=36&type=section&id=Adjusted%20EBITDA) Adjusted EBITDA (Three Months Ended June 30, 2025 and 2024, in thousands) | Adjusted EBITDA (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change | % Change | | :----------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Adjusted EBITDA | $(330) | $3 | $(333) | -11100.0%| | Net Loss | $(789) | $(305) | $(484) | 158.7% | Adjusted EBITDA (Nine Months Ended June 30, 2025 and 2024, in thousands) | Adjusted EBITDA (in thousands) | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | Change | % Change | | :----------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Adjusted EBITDA | $(762) | $(197) | $(565) | 286.8% | | Net Loss | $(2,153) | $(1,529) | $(624) | 40.8% | - Adjusted EBITDA is a non-GAAP measure used by management and investors to evaluate operating performance, excluding items like interest, taxes, depreciation, amortization, and stock-based compensation[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) Cash Flows (Nine Months Ended June 30, 2025 and 2024, in thousands) | Cash Flows (in thousands) | 9 Months Ended June 30, 2025 | 9 Months Ended June 30, 2024 | Change | % Change | | :------------------------ | :--------------------------- | :--------------------------- | :----- | :------- | | Operating Activities | $(759) | $(982) | $223 | -22.7% | | Investing Activities | $(12) | $(24) | $12 | -50.0% | | Financing Activities | $1,475 | $(189) | $1,664 | -880.4% | - Cash provided by financing activities significantly increased due to **$2.0 million** from common stock issuance, partially offset by Series C Preferred Stock redemption and long-term debt payments[153](index=153&type=chunk) - The company maintains tight control over discretionary spending and believes future revenues and cash flows will support working capital and revenue growth, despite historical operating losses[154](index=154&type=chunk) - The company has an effective shelf registration statement to offer up to **$50 million** in debt or equity securities, but there are no active offerings as of the filing date[155](index=155&type=chunk) [Critical Accounting Policies](index=39&type=section&id=Critical%20Accounting%20Policies) - Key accounting policies requiring significant judgment include revenue recognition, accounts receivable valuation, goodwill and intangible asset accounting, business combinations, common stock purchase warrants, and stock-based compensation[161](index=161&type=chunk)[165](index=165&type=chunk) - Revenue is recognized using a five-step model when control of services is transferred to customers, with estimates for variable consideration[163](index=163&type=chunk)[166](index=166&type=chunk) - Stock-based compensation expense is recognized over the vesting period using the Black-Scholes-Merton option valuation model, with subjective estimates for stock price volatility, expected life, and forfeiture rates[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk) [Item 3. Qualitative and Quantitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Qualitative%20and%20Quantitative%20Disclosures%20About%20Market%20Risk) No qualitative and quantitative disclosures about market risk are required for this quarterly report - No qualitative and quantitative disclosures about market risk are required for this report[177](index=177&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[178](index=178&type=chunk) - There were no material changes to the internal control over financial reporting during the most recent fiscal quarter[179](index=179&type=chunk) - Management acknowledges that any control system provides reasonable, but not absolute, assurance of achieving objectives and cannot guarantee prevention or detection of all misstatements[180](index=180&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) No material legal proceedings are currently active beyond those disclosed in the Annual Report on Form 10-K - The company is not currently involved in any material legal proceedings beyond those previously disclosed in its Annual Report on Form 10-K for the fiscal year ended September 30, 2024[183](index=183&type=chunk) [Item 1A. Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors previously described in the Annual Report on Form 10-K have occurred - No material changes to the risk factors described in the Annual Report on Form 10-K for the fiscal year ended September 30, 2024, have occurred[184](index=184&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds are reported for the period - There were no unregistered sales of equity securities and use of proceeds to report[185](index=185&type=chunk) [Item 3. Defaults Upon Senior Securities](index=43&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities are reported for the period - There were no defaults upon senior securities[187](index=187&type=chunk) [Item 4. Mine Safety Disclosures](index=43&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable[188](index=188&type=chunk) [Item 5. Other Information](index=43&type=section&id=Item%205.%20Other%20Information) No other information is reported for the period - There is no other information to report[190](index=190&type=chunk) [Item 6. Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, certifications, and XBRL data - Exhibits include Amended and Restated Certificate of Incorporation, By-laws, Certificates of Designations for Series A and B Convertible Preferred Stock, and CEO/CFO certifications[192](index=192&type=chunk) - XBRL (Extensible Business Reporting Language) information is furnished but not filed for purposes of certain sections of the Securities Act of 1933 and Securities Exchange Act of 1934[193](index=193&type=chunk) [Signatures](index=45&type=section&id=Signatures) The report is signed by Bridgeline Digital, Inc.'s President and CEO, Roger Kahn, and CFO, Thomas R. Windhausen, on August 14, 2025 - The report is signed by Roger Kahn, President and Chief Executive Officer, and Thomas R. Windhausen, Chief Financial Officer, on August 14, 2025[196](index=196&type=chunk)

Group 1: Company Overview - Assertio (ASRT) is a specialty pharmaceutical company focused on branded prescription medications for neurology, inflammation, and pain [1] - Bridgeline Digital (BLIN) operates as a digital engagement company, offering a platform that integrates Web Content Management, e-commerce, e-marketing, Social Media management, and Web Analytics [2] - Booz Allen Hamilton (BAH) provides management and technology consulting, analytics, engineering, digital solutions, mission operations, and cyber expertise to governments, corporations, and not-for-profit organizations [3] Group 2: Earnings Estimates - The Zacks Consensus Estimate for Assertio's current year earnings has been revised downward by 83.3% over the last 60 days [1] - Bridgeline Digital's current year earnings estimate has been revised downward by almost 47.1% over the last 60 days [2] - Booz Allen Hamilton's current year earnings estimate has been revised downward by 6.8% over the last 60 days [3]

Financial Performance - Bridgeline Digital's Q1 FY25 revenue was $3.791 million, a 1% increase compared to $3.755 million in Q1 FY24 [72] - The company's subscription and license revenue in Q1 FY25 was $3.048 million, a 1% decrease compared to $3.086 million in Q1 FY24 [72] - Adjusted EBITDA for Q1 FY25 was $(193) thousand, compared to $(117) thousand in Q1 FY24, representing a 65% change [72] - Core Net Revenue Retention (NRR) was 107% [13] - Subscription Gross Margin (GM) was 71% [13] Business Highlights - Bridgeline powers 350 companies [25] - The company is launching more than 1 new site per week [26, 32] - Bridgeline drives $1 million per hour for HP.com [33, 37] - Bridgeline manages 750 CED sites [38] - Sales Total Contract Value (TCV) was $2.7 million [13] Market & Technology - The marketing technology market has over 14,000 players [17] - Bridgeline released 5 AI products in 2024 [67] - Core Compound Annual Growth Rate (CAGR) is 10% [13, 73] Capitalization - Total outstanding shares are 13,326,790, including common stock (10,442,609 shares), warrants (804,533 shares), and stock options (2,079,648 shares) [78]

Revenue Performance - Total revenue for Q2 FY2025 was $3.9 million, an increase from $3.8 million in the prior year period[6] - Subscription and licenses revenue for Q2 FY2025 was $3.1 million, up from $3.0 million in the prior year period, representing 79% of total revenue[11] - Total revenue for the first six months of FY2025 was $7.7 million, slightly up from $7.6 million in the same period last year[15] - Subscription and licenses revenue for the first six months of FY2025 was $6.1 million, consistent with the prior year period[15] - Total net revenue for the three months ended March 31, 2025, was $3,875 million, a slight increase from $3,804 million in the same period of 2024, reflecting a growth of 1.87%[31] Profitability Metrics - Gross profit for Q2 FY2025 was $2.6 million, with a gross profit margin of 68%, compared to 66% in the prior year period[11] - Gross profit for the six months ended March 31, 2025, was $5,151 million, compared to $5,076 million for the same period in 2024, indicating a growth of 1.48%[31] - The net loss applicable to common shareholders for the three months ended March 31, 2025, was $1,061 million, compared to a net loss of $602 million in the same period of 2024, representing an increase in loss of 76.17%[31] - Adjusted EBITDA for the three months ended March 31, 2025, was $(239) million, compared to $(83) million for the same period in 2024, indicating a worsening of 187.65%[33] Operating Expenses - Operating loss for Q2 FY2025 was $0.7 million, compared to a loss of $0.5 million in the prior year period[12] - Operating expenses for Q2 FY2025 were $3.4 million, compared to $3.0 million in the prior year period[11] - Research and development expenses for the three months ended March 31, 2025, were $1,110 million, compared to $1,037 million in the same period of 2024, an increase of 7.03%[31] Asset and Equity Changes - Total assets increased to $17,019 million as of March 31, 2025, up from $15,602 million on September 30, 2024, representing an increase of 9.05%[27] - Total current liabilities rose to $5,475 million as of March 31, 2025, compared to $4,728 million on September 30, 2024, marking an increase of 15.77%[28] - Total stockholders' equity increased to $10,590 million as of March 31, 2025, from $10,006 million on September 30, 2024, representing a growth of 5.83%[29] Business Development - Bridgeline sold 20 new subscription contracts in Q2 FY2025, adding over $700,000 in Annual Recurring Revenue[6] - Bridgeline plans to deepen its presence in B2B industries through targeted AI campaigns and events in 2025[6] Shareholder Information - The number of weighted average shares outstanding for basic shares was 10,507,720 as of March 31, 2025, compared to 10,417,609 for the same period in 2024, an increase of 0.86%[31]

Company Performance - Bridgeline Digital, Inc. reported a quarterly loss of $0.10 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.04, and compared to a loss of $0.02 per share a year ago, indicating an earnings surprise of -150% [1] - The company posted revenues of $3.88 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 0.90%, and this is a slight increase from year-ago revenues of $3.8 million [2] - Over the last four quarters, Bridgeline Digital has surpassed consensus EPS estimates two times and topped consensus revenue estimates three times [2] Stock Performance - Bridgeline Digital shares have increased approximately 20.6% since the beginning of the year, significantly outperforming the S&P 500's gain of 0.2% [3] - The current consensus EPS estimate for the coming quarter is -$0.04 on revenues of $3.96 million, and for the current fiscal year, it is -$0.17 on revenues of $15.7 million [7] Industry Outlook - The Internet - Services industry, to which Bridgeline Digital belongs, is currently ranked in the top 28% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% of industries [8]

Financial Data and Key Metrics Changes - Total revenue for Q2 FY2025 was $3.9 million, an increase from $3.8 million in the prior year period [22] - Subscription license revenue was $3.1 million, up from $3.0 million, accounting for 79% of total revenue [22] - Services revenue remained flat at $800,000, representing 21% of total revenue [23] - Gross profit increased to $2.6 million, with a gross profit margin of 68%, up from 66% in the prior year [23][24] - Net loss for the quarter was $700,000, compared to a net loss of $600,000 in the prior year [24] Business Line Data and Key Metrics Changes - Core revenue, primarily from ecommerce products like Hawk Search and WooRank, showed double-digit growth with a net revenue retention rate of 113% [12][16] - Noncore revenue has declined at a rate nearly equal to core revenue growth, resulting in relatively flat total revenue [13] - The company signed 20 license sales in Q2 FY2025, adding $1.7 million in new contracts and $700,000 in annual recurring revenue [6] Market Data and Key Metrics Changes - The company reported a 24% year-over-year increase in first-half license sales, reaching $1.6 million in annual recurring revenue [16] - Hawk Search is positioned as a leader in AI-powered ecommerce search, with significant growth potential in the B2B ecommerce market [11][18] Company Strategy and Development Direction - The company plans to increase investments in sales and marketing, funded by a $2.2 million capital raise, to enhance lead generation and expand its customer base [7][8] - The focus remains on organic growth through internal R&D, particularly in AI, while M&A opportunities are considered opportunistically [34][35] - The launch of new features like smart conversion and smart response aims to enhance customer engagement and drive revenue growth [14][20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth, citing strong demand for Hawk AI products and a favorable market environment [11][33] - The expectation is to see an increase in deal flow starting at the end of Q4 FY2025, leading to revenue impacts in Q1 FY2026 [30][32] - The company anticipates that core revenue will continue to grow, becoming a larger percentage of total revenue [36] Other Important Information - The company had cash of over $2.7 million and total assets of $17 million as of March 31, 2025 [25] - The weighted average interest rate on total debt was 3.8%, with no other debt or earn-outs from prior acquisitions [25] Q&A Session Summary Question: Are you at an inflection point to increase your sales efforts to bring in new customers? - Management indicated that both product competitiveness and market conditions justify increased sales investments, supported by a recent capital raise [29] Question: Do you have a handle on the return for every extra dollar spent on acquiring a new customer? - The company models customer acquisition costs and generally sees a three times value of the LTV to CAC ratio [31] Question: Is most of your product development internal or are there acquisition opportunities? - The company focuses on internal R&D for AI products, with potential acquisitions aimed at companies lacking AI capabilities [34] Question: When do you expect to see growth in top-line revenue? - Growth in top-line revenue is expected in Q1 FY2026, with core revenue becoming a larger percentage of total revenue [36] Question: What is the standard contract length currently? - The average initial contract length is approximately 30 months, with customers typically purchasing additional software over their lifespan [46]

Financial Data and Key Metrics Changes - Total revenue for Q2 FY 2025 was $3.9 million, an increase from $3.8 million in the prior year period [20] - Subscription license revenue was $3.1 million, up from $3.0 million, accounting for 79% of total revenue [20] - Services revenue remained flat at $800,000, representing 21% of total revenue [21] - Gross profit increased to $2.6 million, with a gross profit margin of 68%, up from 66% in the prior year [21] - Net loss for the quarter was $700,000, compared to a net loss of $600,000 in the prior year [22] Business Line Data and Key Metrics Changes - Core revenue, primarily from ecommerce products like Hawk Search, showed double-digit growth with a net revenue retention rate of 113% [11][12] - Noncore revenue has declined at a rate nearly equal to core revenue growth, resulting in relatively flat total revenue [12] - The company signed 20 license sales in Q2 FY 2025, adding $1.7 million in new contracts and $700,000 in annual recurring revenue [6] Market Data and Key Metrics Changes - The company is experiencing strong demand for its Hawk AI products, with a sales cycle of 120 days and a 19% win rate on qualified leads [6] - Year-to-date, the company booked $4.2 million in contracts, with $1.6 million in annual recurring revenue [7] Company Strategy and Development Direction - The company plans to increase investments in sales and marketing, funded by a $2.2 million capital raise, to expand lead generation efforts [8][10] - The focus is on enhancing core products and leveraging AI capabilities to drive growth in the ecommerce sector [10][17] - The company aims to maintain its leadership position in AI-powered ecommerce search and expects to see growth in 2026 [10][17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing strong market conditions and product competitiveness as reasons to increase sales efforts [27] - The expectation is for increased deal flow starting at the end of Q4 FY 2025, leading to revenue impacts in Q1 FY 2026 [28][30] - Management highlighted the importance of organic growth, with M&A being opportunistic rather than a primary focus [32] Other Important Information - The company has a cash balance of over $2.7 million and total assets of $17 million as of March 31, 2025 [23] - The average initial contract length is approximately 30 months, with customers typically purchasing additional software over their lifespan [45] Q&A Session Summary Question: Are you at an inflection point to increase your sales efforts to bring in new customers? - Management confirmed that both product competitiveness and market conditions justify increased sales investments, supported by a recent capital raise [27] Question: Does Bridgeline have a handle on the return for every extra dollar spent on acquiring a new customer? - Management indicated a strong LTV to CAC ratio of around 3:1, expecting significant increases in new customer acquisitions in Q1 FY 2026 [29][30] Question: Is most of the product development internal or are there acquisition opportunities? - Management stated that AI-based product development is primarily internal, with a focus on organic sales rather than acquisitions at this time [32] Question: When do you expect to see growth in top line revenue? - Management expects to see growth in core revenue starting in Q1 FY 2026, with a continued focus on core products [35] Question: Will sales and marketing expenses rise as a percentage of sales? - Management confirmed that sales and marketing expenses are expected to increase by $250,000 to $500,000 per quarter in the coming months [39] Question: How many languages can your products support? - Management stated that their default language model supports 50 languages, allowing for customization based on customer needs [49] Question: What is the standard contract length currently? - The average initial contract length is approximately 30 months, with customers typically purchasing additional software over time [45]

Financial Performance - Total net revenue for the three months ended March 31, 2025, was $3.9 million, consistent with the same period in 2024, while the net loss increased to $(0.7) million from $(0.6) million[112]. - For the six months ended March 31, 2025, total net revenue was $7.7 million, a slight increase from $7.6 million in 2024, with a net loss of $(1.4) million compared to $(1.2) million in 2024[113]. - Subscription and perpetual licenses revenue for the three months ended March 31, 2025, was $3.1 million, up from $3.0 million in 2024, representing 79% of total revenue[116][117]. - Digital engagement services revenue for the three months ended March 31, 2025, remained at $0.8 million, accounting for 21% of total revenue[118][119]. - Gross profit for the three months ended March 31, 2025, was $2.6 million, representing a gross margin of 68%, compared to 66% in 2024[114]. - Adjusted EBITDA for the three months ended March 31, 2025, was $(0.2) million, a deterioration from $(0.1) million in 2024, reflecting a 188% increase in losses[114]. - The loss from operations was $(0.7) million for the three months ended March 31, 2025, compared to $(0.5) million for the same period in 2024[145]. Revenue and Cost Breakdown - Total cost of revenue for the three months ended March 31, 2025, was $1.3 million, unchanged from the same period in 2024[121]. - The cost of subscription and perpetual licenses was 28% of the revenue for the three months ended March 31, 2025, consistent with the same period in 2024[122]. - Subscription and perpetual licenses cost increased to $1.8 million for the six months ended March 31, 2025, from $1.7 million for the same period in 2024, representing a 5.88% increase[123]. - The cost of subscription and perpetual licenses as a percentage of revenue was 29% for the six months ended March 31, 2025, compared to 28% for the same period in 2024[123]. - Digital engagement services cost remained consistent at $0.4 million for the three months ended March 31, 2025, and 2024, with a decrease in cost as a percentage of revenue from 53% to 48%[126]. Operating Expenses - Operating expenses for the three months ended March 31, 2025, increased by 10% to $3.4 million from $3.0 million in 2024[114]. - Sales and marketing expenses rose to $1.1 million for the three months ended March 31, 2025, from $0.9 million in 2024, with the expense as a percentage of total revenue increasing from 25% to 28%[132]. - Research and development expenses increased to $1.1 million for the three months ended March 31, 2025, from $1.0 million in 2024, with the percentage of total revenue rising from 27% to 29%[136]. Customer and Market Information - The company currently has over 2,000 active customers, with no single customer exceeding 10% of total revenue[111]. Cash Flow and Financing Activities - Cash used in operating activities decreased to $(0.2) million for the six months ended March 31, 2025, from $(1.0) million in 2024[156]. - Cash provided by financing activities was $1.6 million for the six months ended March 31, 2025, primarily from common stock issuance[158]. - The Company issued 1,000,000 shares of common stock at an offering price of $1.50 per share, generating approximately $1.5 million in gross proceeds before expenses, with net proceeds of $1.3 million after deducting offering expenses[161]. - A separate private placement transaction sold 473,979 unregistered shares at $1.52 per share, resulting in gross proceeds of approximately $720,000 and net proceeds of $700,000 after expenses[162]. - The company plans to offer up to $50 million of debt or equity securities under its effective registration statement[160]. Accounting and Valuation Policies - Revenue is derived from Software Licenses and Digital Engagement Services, with revenue recognized when control of services is transferred to customers[167][168]. - The Company uses a five-step model for revenue recognition, which includes identifying customer contracts and performance obligations[171]. - Goodwill is tested for impairment annually, with potential impairment factors including operational and economic uncertainties[172][173]. - The Company allocates acquisition costs to assets and liabilities based on fair values, with excess purchase price allocated to goodwill[174]. - Stock-based compensation is recognized based on fair values, with expenses expected to vest over a service period, generally three years[178]. - The fair value of stock options is estimated using the Black-Scholes-Merton model, with subjective inputs affecting the valuation[179][180]. Lease and Debt Obligations - Total gross obligations for operating leases amount to $0.2 million, with obligations extending through January 2028, and debt payments total $0.4 million, of which $0.2 million is expected to be paid in the next twelve months[164]. - The Company has no off-balance sheet arrangements or relationships with unconsolidated entities[163].

Revenue Performance - Total revenue for the first quarter of fiscal 2025 was $3.8 million, unchanged from the same period in 2024[15] - Subscription and licenses revenue was $3.0 million, down 1% year-over-year, accounting for 80% of total revenue[15] - Services revenue increased by 11% to $0.7 million, representing 20% of total revenue[15] - Total net revenue for the three months ended December 31, 2024, was $3,791 million, a 1.0% increase from $3,755 million in the same period of 2023[26] - Gross profit for the same period was $2,535 million, slightly down from $2,552 million year-over-year[26] Operating Expenses and Profitability - Operating expenses decreased to $3.0 million from $3.2 million year-over-year[15] - Total operating expenses decreased to $3,046 million from $3,187 million, representing a 4.4% reduction[26] - The company reported a net loss of $0.6 million, consistent with the same period in 2023[15] - The net loss for the quarter was $634 million, compared to a net loss of $622 million in the prior year[26] - Adjusted EBITDA for the three months ended December 31, 2024, was $(193) million, worsening from $(117) million in the same period of 2023[32] Financial Position - Cash and cash equivalents increased to $1,483 million from $1,390 million quarter-over-quarter[28] - Total current assets rose to $3,127 million, up from $2,947 million in the previous quarter[28] - Total liabilities increased to $5,995 million from $5,596 million, reflecting a 7.1% rise[29] - The accumulated deficit grew to $(92,172) million from $(91,538) million, indicating a continued loss trend[30] - The number of weighted average shares outstanding remained constant at 10,417,609 for both basic and diluted shares[26] Business Development and Strategy - Net Revenue Retention (NRR) for core products was 107% for the quarter[7] - Bridgeline signed 28 new subscription contracts totaling $2.7 million, adding over $800,000 in Annual Recurring Revenue[7] - Bridgeline plans to deepen its presence in B2B industries through targeted partnerships and events in 2025[7] - HawkSearch will expand its product line with Agentic-AI innovations aimed at increasing online revenue for customers[7] Gross Margin - Gross margin for the quarter was 67%, slightly down from 68% in the prior year[15]

Financial Data and Key Metrics Changes - Total revenue for Q1 FY2025 was $3.8 million, unchanged from the prior year period [24] - Subscription license revenue was $3 million, down 1% from $3.1 million in the prior year [24] - Services revenue was $700,000, up 11% from the prior year [25] - Gross profit was $2.5 million, down 1% from around $2.6 million in the prior year [25] - Net loss was $0.6 million, consistent with the prior year [26] - Adjusted EBITDA was negative $193,000 compared to negative $117,000 in the prior year [26] Business Line Data and Key Metrics Changes - Core revenue from Hawk Search products was $2.1 million with double-digit growth and a net revenue retention of 107% [11][24] - Non-core products, including professional services, represent the balance of revenue [11] Market Data and Key Metrics Changes - The sales cycle is now 105 days with an 18% win rate on qualified leads, indicating a strong market position [9][50] - The company signed 28 license sales, adding $2.7 million in new contracts and $800,000 in annual contract value [8][13] Company Strategy and Development Direction - The company plans to reallocate resources from R&D to sales and marketing to capitalize on market demand [10][23] - Partnerships with platforms like BigCommerce and Salesforce are crucial for expanding market reach [20][63] - The focus will be on enhancing existing verticals while gradually migrating to new sectors [67] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the sales pipeline and the efficiency of customer acquisition costs [54][56] - The company is optimistic about growth prospects in 2025, driven by strong product demand and market conditions [29][75] Other Important Information - The company had cash of $1.5 million and total assets of $15.5 million as of December 31, 2024 [27][28] - Total liabilities were $6 million, with no remaining earnouts from previous acquisitions [28][29] Q&A Session Summary Question: Insights on core product revenue and services ratio - Management clarified that core product revenue is primarily subscription-based, with services making up about 19% of that revenue [36][39] Question: Lead generation and sales pipeline - Management noted that leads are coming in at a higher rate, with an efficient customer acquisition cost [42][44] Question: Shift in operating expenses towards sales and marketing - Management confirmed that operating expenses will remain stable while increasing investment in marketing [60] Question: Partnership opportunities and vertical expansion - Management discussed the importance of partnerships with ISVs and digital agencies for sales growth [62][64]