Bridgeline Digital, Inc.

Thank you for standing by, and welcome to Bridgeline Digital's first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. To remove yourself from the queue, please press star 1-1 again. I would now like to hand the call over to CFO Tom Windhausen. Please, go ahead.

Thank you, and good afternoon, everyone. Thank you for joining us today. My name is Tom Windhausen, and I'm the Chief Financial Officer of Bridgeline Digital. I'm pleased to welcome you to our fiscal 2024 first quarter conference call. On the call with us this afternoon is Ari Kahn, Bridgeline's President and CEO, who will begin the call with a discussion of our business highlights. I will then update you on our financial results for the quarter, and we will conclude by taking questions. Before we begin, I'd like to remind listeners that during this conference call, comments that we make regarding Bridgeline that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934 and are subject to risks and uncertainties that could cause such statements to differ materially from actual future events or results. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The internal projections and beliefs upon which we base our expectations today may change over time. and we expressly disclaim and assume no obligation to inform you if they do. The results that we report today should not be considered as an indication of future performance. Changes in economic, business, competitive, technological, regulatory, and other factors could cause Bridgeline's actual results to differ materially from those expressed or implied by the projections or forward-looking statements made today. For more detailed information about these factors and other risks that may have an impact on our business, please review the reports and documents filed from time to time by BridgeLine Digital with the Security and Exchange Commission. Also, please note that on the call this afternoon, we will discuss some non-GAAP financial measures when commenting on the company's financial performance. We provide a reconciliation of our GAAP financials to these non-GAAP measures in our earnings release. You can obtain a copy of our earnings release by visiting our website. I would now like to turn the call over to Ari Kahn, BridgeLine's President and CEO. Ari? Thank you, Tom.

Good afternoon, everyone. Our first quarter of fiscal 2024 had the strongest subscription sales since I joined Bridgeline. We signed over $2.5 million in new customer contracts with 28 license sales, adding $750,000 in ARR, annual recurring revenue. Sales were driven by Hawk Search with the release of Smart Search and Rapid UI, creating demand that will continue to drive new sales in the future. Search is now well over 50% of subscription revenue for the company, and that percentage is expected to increase. Subscription revenue overall is 82% of our total revenue. Professional services revenue was down this quarter to $670,000, in part because we invested in making our products out of the box with the Rapid UI release last quarter that allows new customers to install Hawk Search with no implementation cost. This is a competitive advantage that shortens our sales cycle and increases our total addressable market. Rapid UI expands the total addressable market to include companies who seek to invest more of their budget into the subscription and to go to market more quickly than a custom implementation would allow. These customers can use the saved budget to purchase additional subscriptions from Bridgeline, such as our Smart Search product, or invest in custom enhancements in the future after they launch and go live. Smart Search is the most important product release we have ever made. It delivers a clear value proposition to our customers and increases their online revenue by allowing their customers to find products to buy that they may not have realized that they need or would not have found with traditional keyword-based search. 100% of BridgeLine's over 500 search customers can increase their online revenue with SmartSearch. Customers can add SmartSearch to their existing HawkSearch license for an additional subscription fee, which gives BridgeLine an opportunity to significantly grow our HawkSearch revenue from our current customer base above and beyond the fact that SmartSearch helps us win more new customers. Because along with RapidUI, it allows a new customer to make an immediate improvement to their own revenue. Smart Search is an AI-based enhancement to Hawk Search that allows the shopper to find products with more intelligent natural search. First, while shopping, you can take a photograph with your smartphone and find products on a Smart Search-powered website. Secondly, on a Smart Search-powered website, you can describe your goal to create to create a shopping list rather than have to specify the individual items that you want to buy. And thirdly, you can do all of this in more than 50 languages. Here's an example. Let's say that you have a camper planning a trip. That camper can simply ask the website, what should I bring on a two-week camping trip for cooking? Smart search response will include all the expected products such as a cooking stove and protein tank, and will also include products such as a meal-ready-to-eat food pouch that the camper may not have thought about in the first place. The camper may then see a person on the street with cool hiking boots that they like, and they can quickly snap a picture with their camera, and the SmartSearch-powered website can take that picture and immediately find those boots and allow that person to buy those search from the website. These experiences are not possible without Smart Search. Smart Search leverages the latest advancements in AI, including large language models, transformers, and vector databases to deeply understand your online catalog, including what products look like, how products can be used, and how products are related to each other. The future of online shopping is for websites to become intelligent sales advisors who can understand your needs and recommend solutions. SmartSearch empowers your site to see and converse with customers today to help them find products that they may not have even realized they needed. From a competitive point of view, SmartSearch offers natural and intelligent capabilities that do not exist elsewhere in the market. And along with rapid UI, it offers these abilities without the need to invest thousands of dollars and weeks of time in site redesigns or data integrations. Because SmartSearch is out of the box for existing HawkSearch customers, they can upgrade without a complicated technical investment or the politics that accompany changes to their customer experience and branding. HawkSearch sales are largely driven through our platform partnerships with BigCommerce, Salesforce, and Optimizely. We also have agency partners including XEngage and AmericanEagle.com that help drive HawkSearch sales. Sales in the first quarter include Shadler Yasco, an electrical distributor with 29 locations and 1,000 brands. Yasco chose HawkSearch for its unique part number search functionality that allows shoppers to make full and partial part number searches while automatically performing unit of measurement conversions. SmartSearch will go further for Yasgo and allow an electrician to take a picture of a part while on the job and immediately find that part in their catalog. Another electrical distributor selected SmartSearch to enhance their e-commerce bring over 700 to allow contractors to search for products with images or describe more complex needs to the site to find electrical components. The total contract value for this enhancement is more than $875,000. A leading national insurance provider selected HawkSearch for its custom research portal and smartphone app. The insurance company used rapid UI to immediately solve their clients' needs to find facts, policy information, and documents from the resource library. Savion, a leader in cloud identity and access governance, collected SmartSearch to help its customer support team to find information across several third-party knowledge bases. And this is an example of what is called federated search, where Hawk Search indexes information from multiple repositories. A retailer specializing in agriculture and farming products chose HawkSearch and SmartSearch to boost sales across their 25,000 product catalog. SmartSearch will analyze their brochures and images to allow shoppers to find products using photographs or natural language. The customer tested SmartSearch with hundreds of images taken in the field from a smartphone to ensure that their customers could find parts in the real-world scenario. A leading building materials retailer selected HawkSearch to enhance their e-commerce site, improving product discovery in their catalog of over 5,000 products. Rainbow Resource Center, a top educational retailer, selected HawkSearch to power their e-commerce site. HawkSearch's capability for keyword-triggered promotional campaigns will allow the retailer to highlight special offers and featured products. Nailgun Depot. A leading home improvement retailer chose Hawk Search to auto-complete and granular relevancy tuning that will grow its revenue significantly and streamline product discovery process for their large complex product catalog. Overall, our marketing and lead generation is focused on narrow industries, such as building supplies, where we can become the industry leader to make future sales even more efficient. We're also efficiently selling to our existing customers with products like SmartSearch to further drive revenue without incurring large marketing expenses. Although cumulative subscription revenue is flat due to legacy product burn, HawkSearch has outstanding customer retention, is winning new customers rapidly, and upsell opportunities within our customer base. And it continues to have double-digit growth. Our partnership with Optimizely and Xengage is an important part of our go-to-market strategy. In October, we joined Optimizely at their annual user conference where we announced HawkSearch's integration with Optimizely-configured commerce using the Xengage connector. This announcement was followed with online webinars to further promote sales. HawkSearch is now in a unique position to improve site search for more than 1,000 Optimizely-configured customers and several have already purchased the license. We recently announced a reseller partnership with AccessiBe, the market leader in web accessibility. AccessiBe helps over 180,000 companies, including PlayStation, Johnson & Johnson, and NBC, to improve compliance with the American Disability Act and similar legislation in Canada and Europe. Bridgeline will sell AccessiBe to our 600-plus customers, many of whom have an active interest in accessibility. which not only increases their online sales, but also reduces litigation risk with compliance legislation. HawkSearch has the only big commerce connector for search that supports multi-storefront. This is a big differentiator for our big commerce partnership. Multi-storefront gives HawkSearch an advantage in the franchise and chain store market. and recently led to a furniture store in Europe to select HawkSearch. The store will use HawkSearch's rapid UI to quickly go to market across multiple countries in Europe in multiple languages with a unique user experience where users can see different furniture colors in the auto-complete dropdown from HawkSearch's search bar. Bridgeline will showcase the latest versions of this connector in May with BigCommerce at the B2B Online Chicago Conference Going forward, we expect HawkSearch to drive much of the growth for Bridgeline with investments in AI to lead to new sales and upgrades in our existing customer base. SmartSearch has been especially strong with seven sales in just the last two months in a pipeline of more than 700,000 annual recurring revenue. Our go-to-market strategy relies on partnerships and targeting of narrow markets to maximize sales per marketing dollar. So at this time, I'd like to hand it off to our Chief Financial Officer, Tom Woodhausen. Tom?