Bridgeline Digital(BLIN) - 2025 Q2 - Earnings Call Transcript

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]