Bridgeline Digital (BLIN) Q2 2025 Earnings Call May 15, 2025 04:30 PM ET Company Participants Thomas Windhausen - CFO & TreasurerAri Kahn - President & CEOCasey Ryan - Director - Institutional Research Operator Please note this conference is being recorded. I will now turn the conference over to your host, Tom CFO. The floor is yours. Thomas Windhausen Excellent. Thank you. Good afternoon, everyone. Thanks for joining us today. My name is Tom Windhauser, and I'm the chief financial officer of Bridgeline Dig ...

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]