Bridgeline Digital’s Earnings Call: A Mixed Bag

Bridgeline Digital ((BLIN)) has held its Q2 earnings call. Read on for the main highlights of the call.

Bridgeline Digital’s recent earnings call painted a mixed picture, with strong sales performance for its HawkSearch products and strategic marketing investments, yet overall revenue growth remained stagnant due to declines in noncore revenue. The company also faced increased operating expenses and net losses, adding complexity to its financial landscape.

Strong Sales for HawkSearch Products

Bridgeline Digital reported a robust performance for its HawkSearch products, signing 20 licensed sales in Q2 FY ’25. This achievement added $1.7 million in new contracts and $700,000 in annual recurring revenue. The sales cycle was noted to be 120 days with a 19% win rate on qualified leads, indicating a healthy demand for these products.

Capital Raise for Marketing Expansion

The company successfully completed a $2.2 million capital raise aimed at expanding its sales and marketing efforts. With plans to double ad spend and increase lead generation, Bridgeline is positioning itself to capture more market share and drive future growth.

Core Revenue Growth

Core products, which account for 60% of Bridgeline’s subscription revenue, exhibited double-digit growth. The net revenue retention rate stood at an impressive 113%, underscoring the strength and stickiness of its core offerings.

HawkSearch Product Development

Bridgeline launched new features for its HawkSearch product, including Smart Conversation and Smart Response, enhancing its AI capabilities. These developments are expected to solidify its position as a leader in AI-powered e-commerce search solutions.

Partnerships and Global Expansion

Strategic partnerships with Shopware and Groove Commerce have expanded HawkSearch’s reach in global and B2B markets. These alliances are crucial for Bridgeline’s growth strategy and market penetration.

Increase in Subscription and License Revenue

The company saw a slight increase in subscription and license revenue, rising to $3.1 million from $3.0 million in the prior-year period. This growth reflects the ongoing demand for Bridgeline’s digital solutions.

Improved Gross Margins

Bridgeline’s overall gross profit margin improved to 68% from 66% in the prior-year period, indicating better cost management and operational efficiency.

Flat Total Revenue

Despite the positive developments, total revenue was $3.9 million, only a marginal increase from $3.8 million in the previous year. This stagnation was primarily due to declines in noncore revenue.

Increased Operating Expenses

Operating expenses rose to $3.4 million from $3 million in the prior-year period, driven by additional marketing spend and restructuring expenses. This increase contributed to the company’s net loss.

Net Loss and Negative Adjusted EBITDA

Bridgeline reported a net loss of $700,000, worsening from a $600,000 net loss in the prior-year period. Additionally, the adjusted EBITDA was negative $239,000 compared to negative $83,000 in March ’24, reflecting ongoing financial challenges.

Forward-Looking Guidance

Looking ahead, Bridgeline Digital provided guidance that underscores its strategic focus on core revenue growth and marketing expansion. The company expects its recent $2.2 million capital raise to positively impact Q4 bookings and Q1 FY ’26 revenue. With core products like HawkSearch and WooRank leading the charge, Bridgeline anticipates that core growth will outpace declines in noncore revenue by FY ’26.

In conclusion, Bridgeline Digital’s earnings call highlighted a company in transition, with strong performances in its core products and strategic investments in marketing. However, challenges remain, particularly with flat overall revenue growth and increased operating expenses. Investors will be keenly watching how Bridgeline navigates these challenges while capitalizing on its strengths in AI-powered solutions and global partnerships.