Bridgeline Digital, Inc.

Greetings and welcome to the Bridgeline Digital third quarter 2025 earnings call. At this time, all participants are on a listen-only mode and a question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. And please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Thomas Wynhausen, Chief Financial Officer for Bridgeline Digital. Sir, the floor is yours.

Great, thank you. Thank you and good afternoon, everyone. Thank you for joining us today. My name is Thomas Wynhausen. I'm the Chief Financial Officer of Bridgeline Digital Inc. I'm pleased to welcome you to our fiscal 2025 third quarter conference calls. On the call with us this afternoon is Ari Kahn, BridgeLine's president and CEO. We'll 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 report today should not be considered as an indication of future performance. Changes in economic business, competitive, technological, regulatory, or 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 our detailed information about these factors and other risks that may have impact on our business, please review the reports and documents filed from time to time by Bridgeline Digital with the Securities and Exchange Commission. Also, please note that on the call this afternoon, we'll discuss some non-GAAP financial measures when commenting on the company's performance. We provide a reconciliation of our GAAP financials to these non-GAAP measures in our earnings release. You can obtain a copy of the earnings release by visiting our website. I'd now like to turn the call over to Ari Kahn, BridgeLine's president and CEO. Ari?

Thank you, Tom. Good afternoon, everybody. In our Q3 of FY25, fiscal year 25, 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, primarily from customers adding Hawk AI to their websites. We do see some decline in our legacy products, which flattens our overall revenue, and we expect HawkSearch to continue to grow and outshine this dampening as early as Q1 of 2026. Our customers love HawkSearch. Our net revenue retention for HawkSearch is 114%. In fact, our average sale of expansion products products from 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 HawkSearch and then adding another 50,000 ARR above and beyond the 25 for advanced features such as our AI-powered SmartSearch after they are live. There's no greater demonstration of value that we deliver to our customers than them buying additional products from us. HawkSearch has an outstanding position in the market with huge customer successes as well as accolades from partners and analysts. This quarter, Gartner ranked HawkSearch 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 multi-site management, so franchises and chains with large number 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 three sales 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 talk 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. HawkSearch 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 Context Protocol, also known as MCP. We added MCP to HawkSearch, which allows AI agents to help manage HawkSearch 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 TalkSearch 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 U.S. electrical distributor expanded its TalkSearch 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 multi-site management, concept search recommendations, and merchandising to improve intent matching and buyer engagement. And the leading Jansan distributor renewed and expanded its partnership to leverage semantic search and personalized e-commerce, boosting both conversion rates and average order value. HawkSearch is fueling Bridgeline's growth. As of this quarter, HawkSearch 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 114% net revenue recognition. Our constant development introduction of new features into Hawk Search is resulting in customers tripling their initial investment by adding new features like our AI capabilities in 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 HawkSearch growth shine into our consolidated financials so that you can see overall growth for the whole company at the level in which HawkSearch is growing today. Now, I'll turn the call over to our Chief Financial Officer, Tom Lundhausen, so he can share some additional details with you.