Q3 2024 Bridgeline Digital Inc Earnings Call

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Moderator: Good day, and thank you for standing by. Welcome to the Bridgeline Digital 3rd quarter of 2024, earnings conference hall. At this time, participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded.

Operator: Good day, and thank you for standing by. Welcome to the Bridgeline Digital Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you that your hand is raised.

Speaker Change: Good day, and thank you for standing by welcome to the bridge.

Speaker Change: 2024 earnings conference call at this time, all participants are in a listen only mode. After the speech.

Speaker Change: Presentation, there will be a question and answer session to ask a question. During this session you will need to press star one on your telephone.

Speaker Change: [noise] admitted message advising you you're having just raised to withdraw your question. Please press star one again.

Operator: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Tom Windhausen, Chief Financial Officer. Please go ahead.

Speaker Change: Today's conference is being recorded I would now like to hand, the conference over to your speaker today, Tom When housing Chief Financial Officer. Please go ahead.

Thomas Windhausen: I would now like to hand the conference over to your speaker today, Tom Windhausen, Chief Financial Officer. Please go ahead. Thank you and good afternoon, everyone. Thank you for joining us today. My name is Thomas Windhausen, and I'm the Chief Financial Officer of Bridgeline Digital.

Thomas Windhausen: Thank you and good afternoon, everyone. Thank you for joining us today. My name is Thomas Windhausen, and I'm the Chief Financial Officer of Bridgeline Digital. I'm pleased to welcome you to our fiscal 2024 third 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.

Thomas Warehousing: Thank you and good afternoon, everyone. Thank you for joining US today. My name is Thomas warehousing I'm, the Chief financial officer of personalized digital.

Thomas Windhausen: I'm pleased to welcome you to our fiscal 2024 3rd quarter conference call. On the call of this, 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.

Thomas Warehousing: I'm pleased to welcome you to our fiscal 2024 third quarter conference call on the call with US. This afternoon as Ari Kahn, President and CEO will begin the call with a discussion of our business highlights.

Thomas Warehousing: I'll then update you on our financial results for the quarter will conclude by taking questions.

Thomas Windhausen: Before we begin, I'd like to remind listeners that during this conference call, comments that we made 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 results, events, or results. These statements are made pursuant to the safe harbor prohibition of the Private Securities Litigation Reform Act of 1995. The national projections and beliefs upon which we base our expectations today may change over time, and we express the disclaimer: assume no obligation to inform you if they do.

Thomas Windhausen: 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.

Speaker Change: To begin I'd like to remind listeners that during this conference call comments that we make regarding <unk> that are not historical facts are forward looking statements within the meaning of section 27, a security back to like 233 and section 21 E.

Speaker Change: Of the Securities Act of 1934 that are subject to risks and uncertainties that could cause such statements to differ materially from actual future results events or results.

Speaker Change: Statements are made pursuant to the safe Harbor provision of the private Securities Litigation Reform Act of 1995.

Thomas Windhausen: The initial 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 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 forms of the statements made today.

Speaker Change: So projections and beliefs upon which we base our expectations today may change overtime as expressly disclaim assume no obligation to inform you if they do.

Thomas Windhausen: The result for your report today should not be considered as an indication of future performance. Change is an 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 forms of statements made today.

Speaker Change: Don't forget court today should not be considered as an indication of future performance.

Changes in economic business competitive technological regulatory and other factors could cause <unk> actual results could differ materially from those expressed or implied by the projections or forward looking statements made today.

Thomas Windhausen: For more detailed information about these factors and other risks that may have impact on our businesses and our business, please review the reports and documents filed from time to time by Bridgeline Digital for the Securities and Exchange Commission.

Thomas Windhausen: For more detailed information about these factors and other risks that may have an impact on our businesses, 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 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 gap financials to these non-gap measures in our earnings release, and you can take a copy of that on 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, everyone.

Speaker Change: More detailed information about these factors and other risks that may have impact on our businesses.

Speaker Change: Please review the reports and documents filed from time to time, but Richland digital for the Securities and Exchange Commission.

Thomas Windhausen: Also, please know on the call this afternoon we will discuss some non-GAAP financial measures from commenting on the company's financial performance. We provide a reconciliation of our GAAP financials to these non-GAAP measures in our earnings release, and you can take a copy of that on our website.

Also please note on the call. This afternoon, we will discuss some non-GAAP financial measures.

Speaker Change: A company's financial performance, we provide a reconciliation of our GAAP financials to get to non-GAAP measures in our earnings release, and you can see a copy of that.

Ari Kahn: I'd now like to turn the call over to Aritone, Bridgeline's President and CEO. All right. Thank you, Tom. Good afternoon, everyone. Recent advances in AI, especially large language models from Gen AI, are revolutionizing e-commerce and reshaping online shopping expectations. As a result, nearly every e-commerce site will upgrade their site search to be both intelligent and conversational. This shift is disrupting the billion-dollar site search market, forcing everyone to reconsider their search provider. Hawk Search is uniquely positioned displaced competitors. Our team has a deep history in AI and is approaching the site search market in a more meaningful way than anyone else.

Speaker Change: Right.

Speaker Change: I'd like to turn the call over to Ari Kahn fridges.

Speaker Change: Bridge lines, President and CEO alright. Thank.

Ari Kahn: Thank you Tom good afternoon, everyone.

Ari Kahn: Recent advances in AI, especially large language models and Gen AI, are revolutionizing e-commerce and reshaping online shopper expectations. As a result, nearly every e-commerce site will upgrade their site search to be both intelligent and conversational. This ship is disrupting the billion-dollar site search market, forcing everyone to reconsider their search provider. Park Search is uniquely positioned to displace competitors.

Speaker Change: Recent advances in AI, especially large language model from Jenny.

Speaker Change: Our revolutionizing e-commerce, and reshaping online shopper expectations.

Speaker Change: As a result, nearly every ecommerce site upgrade their site search to be both intelligence and conversation.

Speaker Change: This shift is just.

Speaker Change: Wrapping the billion dollar site search market.

Speaker Change: Everyone to reach et cetera, their search provider.

Ari Kahn: Our team has a deep history in AI and is approaching the site search market in a more meaningful way than anyone else. This gives us an opportunity to take a disproportionate share of the market during this turbulent time. We're the only AI company offering merchandising AI agents that work directly with our customers' marketing team to continuously tune their site search as a result. This capability, known as tailored AI, is already positioning us as a leader in the market.

Speaker Change: Search is uniquely positioned just place competitors.

Speaker Change: Our team has a deep history in AI and is approaching the site search market in a more meaningful way than anyone else.

Ari Kahn: This gives us an opportunity to take a disproportionate share of the market during this turbulent time. We are the only AI company offering merchandising AI agents that work directly with our customers' marketing team to continuously tune in their site search as results. This capability, known as Tailored AI, is already positioning us as a leader in the market. Tailored AI has helped double the average hawk search sales size when new customers every week secure top-tier partnerships and gain recognition from leading analysts like Gartner. We have truly taken a different approach to AI that is providing collaborative agents rather than a black box one-size-fits-all solution.

Speaker Change: This gives us an opportunity to take a disproportionate share of the market. During this turbulent time.

Speaker Change: We are the only AI company operating merchandising AI teacher that work directly with our customers marketing team to <unk>.

Speaker Change: Continuously turn their site search its results.

Speaker Change: This capability known as tailored.

Speaker Change: It's already positioning echo.

Speaker Change: Leader in the market.

Ari Kahn: Taylor Dei has helped double the average hawk search sales size when attracting new customers every week, secure top-tier partnerships, and gain recognition from leading analysts like Gartner. We have truly taken a different approach to AI, providing collaborative agents rather than a black box, one-size-fits-all solution.

Speaker Change: AI has helped double the average hot search sale size win new customers every week secure top tier partnerships and gain recognition from leading analysts like Gartner.

Speaker Change: We have truly taken a different approach to AI by providing collaborative agents rather than a black box one size fits all solution.

Ari Kahn: Our competition only allows customers to enable AI, and as soon as they should, then be hands-off as AI powers their site regardless of their corporate goals. With Tailored AI, we deliver AI agents that collaborate with our customers' marketing teams to optimize their site. Our customers are empowered to continually tune and train the AI agents based on their ever-changing goals, inventory, and market demands. We are moving fast in AI innovation. This year we launched Concept Search. We launched Image Search, Visual Search, Conversation Search, and now Smart Response. No other platform has moved this quickly to seize the tailored AI opportunity in site search.

Ari Kahn: Our competition only allows customers to enable AI and assumes they should then be hands-off as AI powers their site regardless of their corporate goals. With tailored AI, we deliver AI agents that collaborate with our customers' marketing teams to optimize their sites. Our customers are empowered to continually tune and train the AI agents based on their ever changing goals, inventory, and market demand. We're moving fast in AI innovation; this year we launched Concept Search; we launched Image Search, Visual Search, Conversation Search, and now Smart Response.

Speaker Change: Our competition only allows customers to enable AI and the survey should then be hands off.

Speaker Change: Powers their site, regardless of their corporate goals.

Speaker Change: With tailored AI, we deliver AI agent collaborate with our customers marketing teams to optimize their sites. Our customers are empowered to continually turn in training the AI agents based on their ever changing gold inventory and market demands.

Speaker Change: Moving fast and AI innovation. This year, we launched concept search we want.

Speaker Change: Image search visual search conversation search and now Smart response no. Other platform move this quickly to seize the tailored AI opportunity in site search.

Ari Kahn: No other platform has moved this quickly to see the Taylor Day Eye Opportunity and Flight. As we continue to innovate, we expect these advancements to accelerate our growth and solidify our leadership in a market where search now drives 60% of our subscription revenue. This quarter, we sold 23 licenses with $420,000 in ARR and $1.4 million in TCV. That brings us to 70 licenses totaling $1.7 million in ARR and $5.1 million in total contract value this fiscal year.

Ari Kahn: As we continue to innovate, we expect these advancements to accelerate our growth, solidify our leadership in a market where search now drives 60% of our subscription revenue. This quarter, we sold 23 licenses with 420,000 an ARR, 1.4 million, and TCV. That brings us to 70 licenses, totally 1.7 million an ARR, 5.1 million, and total contract value, that's 50 years. Hawk Search was a lion's share of these sales. Importantly, our investments in partner connectors accelerate sales by allowing customers to launch Hawk Search with the click of a button. We're launching multiple customers every single week. Our Tailored AI approach also accelerates sales because our customers know that they can continually refine search results based on their merchandising goals.

Speaker Change: As we continue to innovate we expect these advancements to accelerate our growth solidify our leadership in a market where search now drive 60% of our subscription revenue.

Speaker Change: This quarter, we sold 23 licenses with 420000.

Speaker Change: Our $1 4 million in GCB.

That brings us to 70 licenses totaling $1 7 million and $5 1 million and total contract value this fiscal year.

Ari Kahn: Park Search accounted for a lion's share of these sales. Importantly, our investments in partner connectors accelerate sales by allowing customers to launch hot surges with the click of a button. We're launching multiple customers every single day. Our tailored AI approach also accelerates sales because our customers know that they can continually refine search results based on their merchandising goals. And this is different than competitors who simply have an AI button that puts the site on autopilot with no ability for ongoing tuning and therefore significant Q&A review before the launch.

Speaker Change: Hot search was the lion's share of these sales.

Speaker Change: Importantly, our investments in partner connectors, and accelerate sales by allowing customers to launch Hawk search with the click of a button.

Speaker Change: We're watching multiple customers every single week.

Our tailored AI approach also accelerate sales because our customers know that they can continually refined search results based on their merchandising goals.

Ari Kahn: This is different than competitors who simply have an AI button that puts the site on autopilot with no ability for ongoing tuning and therefore significant Q&A review before the launch. With each launch, we have more references and further recognition as leaders in the site search sector. Analysts continue to recognize Hawk Search for its advancements in AI, and this is driving demand and average sales price. Gartner recognized Hawk Search and its Magic Quadrant for search and product discovery, highlighting Hawk Search and strength in both artificial intelligence and the B2B market. Info Tech Research Group awarded Hawk Search as a champion in enterprise search and recognized Hawk Search as a top rated software within the category.

Speaker Change: It's different than competitors definitely have an AI button that puts the site on auto pilot with no ability for ongoing term tuning and therefore significant Q&A.

Speaker Change: A review before the launch.

Ari Kahn: With each launch, we have more references and further recognition as leaders in the site search sector. Analysts continue to recognize Hawk Search for its advancements in AI, and this is driving demand and average sales price. Gartner recognized Hawk Surgeon's magic quadrant for search and product discovery, highlighting Hawk Surgeon's strengths in both artificial intelligence and the B2B market. Infotech Research Group awarded HawkSearch as a champion in enterprise search and recognized it as a top-rated software within the category; featured customers listed Hawk Search as the top performer in the summer 2024 customer success report for enterprise search software.

Speaker Change: With each launch we have more references and further recognition as leaders in the site search sector.

Speaker Change: Analysts continue to recognize talk search for advancements in AI and this is driving demand and average sales price.

Speaker Change: Gartner recognized talks search in its magic quadrant for research and product discovery, highlighting <unk> search and strength in both artificial intelligence and the <unk> market.

Speaker Change: Info Tech Research group awarded Hawks search isn't champion in enterprise search and recognized thought search as a top rated software within the category.

Ari Kahn: Featured Customers listed Hawk Search as a top performer in the Summer 2024 Customer's Success Report for enterprise search software. This quarter, Hawk Search launched the Gen-A Power Athena release, update features with smart response and conversational dialogues based on search queries, where prompts for follow-up questions and suggestions to imitate a personalized in-person conversation with the sales visits that are available. Two important platform partners that we expect to continue to generate new sales for Hawk Search are Optimizely in Big Commerce. Big Commerce is promoting Hawk Search ahead of all other search providers on the first page of the app store, providing tens of thousands of Big Commerce customers the ability to upgrade to Hawk Search's AI technology.

Speaker Change: Featured customers lifted hawk searches a top performer in the summer 2020 or customer success report for enterprise search software.

Ari Kahn: This quarter, HawkSearch launched the Gen A-powered Athena release update features with smart response and conversational dialogue based on search queries, where prompts for follow-up questions and suggestions to imitate a personalized in-person conversation with the sales assistant are available. Two important platform partners that we expect to continue to generate new sales for HawkSearch are Optimizely and BigCommerce. BigCommerce is promoting hawk search ahead of all other search providers on the first page of its app store, providing tens of thousands of BigCommerce customers the ability to upgrade to hawk search's AI technology. Hawk search offers a one-click install for optimizably and is recognized by Optimizably as a top paid app and in their app store on the very first page.

Speaker Change: This quarter <unk> launched the generated power Athena release update features.

Speaker Change: Smart response, and conversational dialogues based on search query, where perhaps for follow up questions and suggestions to imitate a personalized in person conversations with the sales assistant are available.

Speaker Change: Two important platform partners that we expect to continue to generate new sales for Hawk searcher optimize big Commerce.

Speaker Change: E Commerce is promoting Hawk search ahead of all other search providers on the first page of at that store, providing tens of thousands of big commerce customers the ability to upgrade the hawk searches AI technology.

Ari Kahn: Hawk Search offers a one-click install for Optimizably and is recognized by Optimizably as a top-paid app and their app store on the very first page. Hawk Search is now uniquely positioned to improve site search for more than a thousand optimizably configured commerce customers, with several already purchasing licenses. We partner with the system integrator and optimizably expert X Engage for our optimizably connector, which leads to even more sales. Hawk Search AI will be showcased at Opticon 2024 in San Antonio, Texas, this November with optimizably. At the Applied AI Conference in Chicago this past June, Moblico presented Hawk Search as a key AI-powered site search platform for mobile devices.

Speaker Change: Hot search offers a one click install for optimize land is recognized by optimizing at the top paid app in their app store on the very first page.

Ari Kahn: Hawk Search is now uniquely positioned to improve site search for more than 1000 optimizably configured cameras customers with several already purchasing lights. We partner with the system integrator and Optimizely expert, xEngage, for our Optimizely connector, which leads to even more sales. ArcSearch AI will be showcased at OptiCon 2024 in San Antonio, Texas, this November with OptiMind at the Applied AI Conference in Chicago this past June.

Speaker Change: Hock searches now uniquely positioned to improve site search for more than a powerful optimized really configured commerce customers with several already purchasing license.

Speaker Change: We partner with the system integrator and optimize the expert extra engaged for our optimized <unk> connector, which leads to even more sales.

Speaker Change: Our search AI will be showcased the optima at Arctic Cat 2024 in San Antonio Texas.

Speaker Change: November with optimized way.

Speaker Change: At the applied AI conference in Chicago This past June.

Ari Kahn: Moblico presented Hawk Search as a key AI-powered site search platform for mobile devices. This is a new market in which Hawk Search's concept search is particularly well suited to success, and here are a few of the wins that we've had this quarter. Colonial Electric Supply, a large electrical distributor, chose Bridgeline's Hawk Search to power product discovery for its optimized platformed e-commerce site. Colonial selected HawkSearch for its AI search capabilities and reputation in the electrical distributor sector.

Speaker Change: <unk> presented Hawk search as a key AI powered site search platform for mobile devices.

Ari Kahn: This is a new market in which Hawk Search's concept search is particularly well-suited for success.

Speaker Change: This is a new market in which hog searches concepts searches, particularly well suited for success.

Ari Kahn: And here are a few of the wins that we've had this quarter. Colonial Electric Supply, a large electrical distributor, chose Brinkeline Hawk Search to power product discovery for its optimizably platformed e-commerce site. Colonial selected Hawk Search for AI search capabilities and reputation in the electrical distributor sector. Grizzly Industrial, a leading industrial supplier, selected Hawk Search to power search on its e-commerce site. Hawk Search will enhance Grizzly Industries e-commerce product discovery by offering precise search tailored to the needs of the machinery industry, including advanced part-comers search for both full and partial numbers, unit of measurement conversion for dimensional products, and merchandising tools to run product-specific campaigns.

Speaker Change: And here are a few of the wins that we've had this quarter.

Speaker Change: Colonial electric supply large electrical distributor chose bridge lines Hot search to powered product discovery for its optimized platforms E Commerce site.

Speaker Change: <unk> collected Hawk search for AI search capabilities and reputation in the electrical distributor sector.

Ari Kahn: Grizzly Industrial, a leading industrial supplier, selected Hawk Search to power search on its e-commerce site. OxSearch will enhance Grizzly Industrial's e-commerce product discovery by offering precise search tailored to the needs of the machinery industry, including advanced part number search for both full and partial numbers, unit of measurement conversion for dimensional products, and merchandising tools to run product-specific campaigns. Saleswright, a large craft retailer

Speaker Change: Grizzly industrial a leading industrial supplier selected hot search to power search on its ecommerce site.

Speaker Change: Search for enhanced grid sleep industrious ecommerce product discovery by offering precise search tailored to the needs of the machinery industry, including advanced part numbers search for both full and partial numbers unit of measurement conversion for dimensional products and merchandising tools to run product specific.

Speaker Change: <unk>.

Ari Kahn: Sales Right, a large craft retailer, selected Hawk Search to improve its product discovery for both B2C and B2B site. Hawk Search launched two of sales rights e-commerce sites on the Big Commerce multi-storefront platform. Our partnership with Sales Right reflects our expertise in supporting retail and big commerce multi-storefront. Shadler Yasko, an electrical distributor with over 29 locations and a thousand brands, implemented Hawk Search on its optimizably powered e-commerce site using the X-engage connector for Hawk Search.

Speaker Change: Sales right.

Speaker Change: Large crafts retailer <unk>.

Ari Kahn: Selecting Hawk Search to improve its product discovery for both B2C and B2B sites, Hawk Search launched on two of Sailrite's e-commerce sites on the Big Commerce multi-storefront platform. Our partnership with Sailrite reflects our expertise in supporting retail and big commerce multi-storey products. Schaedler Jesko, an electrical distributor with over 29 locations and 1,000 brands, implemented HawkSearch on its optimized powered e-commerce site using the xEngage connector for HawkSearch, and Voltus GMV-8, a leading German electrical distributor, selected Bridgeline to power SiteSearch for its e-commerce site.

Speaker Change: Selected Hawks search to improve its product discovery for both B to C and b to B side.

Speaker Change: Hot search launched two of <unk> E Commerce site, and the Big Commerce multi storefront platform.

Speaker Change: Our partnership with sale rate reflects our <unk> <unk>.

Expertise in supporting retail and big Commerce multi storefront.

Speaker Change: Schadler Yatsko, an electrical distributor with over 29 locations in a 1000 brands implemented Hawk search ads optimized leap powered ecommerce site using the X engage connector for Hawk search.

Ari Kahn: College. And Volta's GMBH, a leading German electrical distributor, selected Bridgeline to power site search for ICi-commerce site. Volta's aims to increase online revenue by using Bridgeline's AI-powered site search for its online catalog with more than $80,000 products. All in all, we had 23 license sales this quarter, 70 this year to date, and our average license sale is nearly double the MRR last year. This increase in volume and size is largely due to our advances in AI.

Speaker Change: And voltage GMB H <unk>.

Speaker Change: A leading German electrical distributor selected bridge line to power site search for its ecommerce site.

Ari Kahn: Volta aims to increase online revenue by using Bridgeline's AI-powered SiteSearch for its online catalog of more than 80,000 products. All-in-all, we had 23 license sales this quarter, 70 this year to date, and our average license sale was nearly double the MRR last year. This increase in volume and size is largely due to our advances in AI. I'll turn the call back over to our Chief Financial Officer, Thomas Windhausen. Thanks

Speaker Change: And to increase online revenue by use of bridge lines AI powered site search for its online catalog with more than 80000 products.

Speaker Change: All in all we had 23 license sales this quarter 70, this year to date and our average license sale is nearly double the MLR last year.

Speaker Change: This increase in volume and size is largely due to our advances in AI.

Thomas Windhausen: So at this time, I'll turn the call back over to our Chief Financial Officer, Tom, and Halpern. Thanks, Ari. Offer by an update on our financial results for the third quarter of fiscal 2024, which ended June 30th, 2024. Total revenue for the quarter into June 30th, 2024 was 3.9 million compared to 3.9 million in the prior year period. Now, going into each component of revenue, our subscription license revenue, which is comprised of SaaS licenses, maintenance and hosting revenue, and perpetual license revenue, for the quarter into June 30th, 2024, was 3 million compared to 3.2 million in the prior year period.

Tom Withheld: So at this time I'll turn the call back over to our Chief Financial Officer, Tom Withheld Alright, Tom.

Thomas Windhausen: I'll provide an update on our financial results for the third quarter of fiscal 2024, which ended June 30, 2020. Total revenue for the quarter ending June 24, was 3.9 million compared to 3.9 million in the prior year period. Now, going into each component of revenue, our subscription license revenue, which is comprised of SAS licenses, maintenance and hosting revenue, and perpetual license revenue, for the quarter and June 30th, 2024 was $3 million compared to $3.2 million in the prior year period. As a percentage of total revenue, subscription license revenue was 77% of total revenue for the quarter and June 30th, 2004.

Tom: Thanks, Eric I'll provide an update on our financial results for the third quarter of fiscal 2024, which ended June 32024.

Tom: Revenue for the quarter ended June 32024 was $3 9 million compared to $3 9 million in the prior year period.

Tom: Going into each component of revenue.

Tom: Description license revenue, which is comprised of SaaS licenses maintenance and hosting revenue and perpetual license revenue for the quarter ended June 32024 was $3 million compared to $3 2 million in the prior year period.

Thomas Windhausen: As a percentage of total revenue, subscription license revenue was 77% of total revenue for the quarter into June 30th, 2024. Services revenue was 923,000 for the quarter into June 30th, 2024, and increased from 742,000 in the prior year, third quarter. As a percentage of total revenue, services revenue accounts for 23% of total revenue for the quarter into June 30th, 24. Cost of revenue was 1.2 million for the quarter into June 30th, 2024, a decrease from 1.3 million in the prior year period. And as a result, gross profit was 2.7 million for the quarter into June 30th, 24, as compared to 2.6 million in the prior year period.

Tom: As a percentage of total revenue subscription license revenue was 77% of total revenue for the quarter ended June 32004.

Thomas Windhausen: Services revenue was $923,000 for the quarter ended June 30, 2024, an increase from $742,000 in the prior year's third quarter. As a percentage of total revenue, services revenue accounted for 23% of total revenue for the quarter ended June 30, 2024. Cost of revenue was $1.2 million for the quarter ended June 30, 2024, a decrease from $1.3 million in the prior year, and as a result, gross profit was $2.7 million for the quarter ending June 24th, as compared to $2.6 million in the prior year.

Tom: Services revenue was 923000 for the quarter ended June 32024, an increase from 742000 in the prior year third quarter as a percentage of total revenue services revenue accounted for 23% of total revenue for the quarter ended June 32004.

Tom: Cost of revenue was $1 2 million for the quarter ended June 32004, a decrease from $1 3 million in the prior year period.

Tom: As a result gross profit was $2 7 million for the quarter ended June 24, as compared to $2 6 million in the prior year period.

Thomas Windhausen: Or overall gross profit margin was 69% for the quarter into June 30th, 24, compared to 68% in the prior year period. With subscription license gross margin, that 72% for the quarter into June 30th, 24, compared to 73% in the prior period. And service margins of 58% for the quarter into June 24, compared to 44% in the same period in 2023. Our upper expenses of 3.1 million were in the quarter in the June 24 for lower compared to 3.3 million in the prior year period. Moving down to below upper expenses, the change in fair value of our liability classified warrants resulted in a non-cash gain of 88,000 this quarter, compared to a non-cash loss of 107,000 in the prior year period.

Thomas Windhausen: Our overall gross profit margin was 69% for the quarter ended June 30, 2024, compared to 68% in the prior year period, with subscription license gross margin of 72% for the quarter ended June 30, 2024, compared to 73% in the prior period, and service margins of 58% for the quarter ended June 24, compared to 44% in the same period in 2023. Our operating expenses of $3.1 million in the quarter ended June 24 were lower compared to $3.3 million in the prior year period.

Overall gross profit margin was 69% for the quarter ended June 24, compared to 68% in the prior year period with subscription license gross margins at 72% for the quarter ended June 32004, compared to 73% in the prior year period and service margins up 58% for the quarter ended June 24, compared to 44% in the same.

Tom: Period in 2023.

Tom: Our operating expenses of $3 1 million.

Tom: During the quarter ended June 24 were lower compared to $3 3 million in the prior year period.

Thomas Windhausen: Moving down to below operating expenses, the change in fair value of our liability classified warrants resulted in a non-cash gain of $88,000 this quarter, compared to a non-cash loss of $107,000 in the prior year, and moving to the bottom line, that it could gap and then come lost. Our net loss was 300,000 for the quarter-ended June, so the 24 compared to a net loss of 800,000 in the players Moving to EBITDA, our adjusted EBITDA for the quarter ended June 24 was $3,000, compared to a negative $163,000 in the prior year comparable period.

Tom: Moving down to below operating expenses the change in fair value of our liability classified warrants resulted in a noncash gain of 88000 this quarter compared to a noncash loss of 107000 in the prior year period.

Thomas Windhausen: And moving to bottom line, that gaped an income loss. Our net loss was 300,000 for the quarter ended June 24, compared to a net loss of 800,000 in the prior year period. Moving to EBITDA, our just EBITDA for the quarter ended June 24 was 3,000 compared to a negative 163,000 in the prior year comparable period.

Tom: And moving to Bottomline.

Tom: GAAP net income loss, our net loss was 300000 for the quarter ended June 24, compared to a net loss of 800000 in the prior year period.

Tom: Moving to EBITDA, our adjusted EBITDA for the quarter ended June 24, 3000, compared to a negative 163000 in the prior year comparable period.

Thomas Windhausen: Now moving to our balance sheet. On June 30th, 2024, we had 1.2 million of cash in 1.5 million of accounts receivable. Our total debt outstanding as of June 30th, 2024, was under 500,000 euros or about 524,000 US dollars. With a weighted average interest rate of about 4.6 percent, with principal payments due throughout through 2020. We have no other debt or remaining earnouts from any other provisions or from any of the previous acquisitions. At June 34, our total assets were 16 million and total liabilities were 5.6 million. In the quarter, cash decreased about $100,000, of which $19,000 was used in investing activities and $84,000 was used in financing activities.

Thomas Windhausen: Now moving to our balance sheet, on June 30th, 2024, we had 1.2 million in cash and 1.5 million in accounts receivable. Our total debt outstanding as of June 30th, 2024 was under 500,000 euros or about 524,000 US dollars, with a weighted average interest rate of about 4.6% with principal payments due throughout the year 2020.

Tom: Yes.

Tom: Now moving to our balance sheet.

Tom: On June 30 of 2024th we had $1 2 million of cash and $1 5 million of accounts receivable. Our total debt outstanding as of June 32024 was under 500000 euros are about 524000 U S dollars with a weighted average interest rate of about four 6% with principal payments due to.

Tom: As you move through 2028.

Thomas Windhausen: We have no other debt or remaining earnouts from any other provisions or from any other previous acquisitions. And, on June 30th, 24, our total assets were $16 million, and total liabilities were $5. In the quarter, cash decreased about $100,000, of which 19,000 was used in investing activities, and 84,000 was used in financing.

Tom: We have no other debt remaining earn out some any other provisions correct from any other previous acquisitions.

Sorry, 24, our total assets were $16 million and total liabilities were $5 6 million.

Tom: In the quarter cash decreased about $100000 of which 19000 was used in investing activities of 84000 was used in financing activities are.

Thomas Windhausen: Our flat operating cash for the quarter was consistent with our EBITDA of $3,000 for the quarter into June 2024.

Thomas Windhausen: Our flat operating cash for the quarter was consistent with our EBITDA of $3,000 for the quarter ended June 2024. Finally, as an update to our cap table, as of June 2024, our cap table included 10.4 million shares outstanding, 39,000 shares of Series C preferred on an as-converted basis, 1.7 million warrants, and 2.1 million options. Of these warrants, nearly $900,000 with an exercise price of $4, will expire in September 2024.

Tom: Our flat operating cash for.

Tom: For the quarter was consistent with our EBIT of $3000 for the quarter ended June 2024.

Thomas Windhausen: Finally, as an update to our cap table, as of June 2024, our cap table included 10.4 million shares outstanding, 39,000 shares from Sirius C. Preferred and I asked inverted basis, 1.7 million of warrants and 2.1 million options. Of these warrants, nearly 900,000 with an exercise price of $4 will expire in September 2024. After that, we will have about 800,000 warrants, primarily 180,000 warrants with a $2.85 cent exercise price, expiring in May 2026, and 592,000 warrants with a $2.51 cent exercise price, which expired in November 2026.

Speaker Change: Finally, as an update to our cap table as of June 2024, our cap table included $10 4 million shares outstanding 39000 shares from series C preferred and I as converted basis $1.7 million warrants and $2 1 million options.

Speaker Change: These warrants nearly 900000 with an exercise price of $4 will expire in September 2024. After that we will have about 800000 warrants primarily of 180000 warrants with a $2 85.

Speaker Change: Exercise price expiring in May 2026, and 592000 warrants for the $2 51 exercise price, which expire in November 2026.

Thomas Windhausen: Roger Kahn looks forward to continue growth and success remaining in 2024 and beyond. There's a period of focus on driving growth, product innovation, customer success, and shareholder value.

Speaker Change: Richard I look forward to continued growth and success, we're mainly a 2024 and beyond.

Speaker Change: To focus on driving growth product innovation customer success and shareholder value.

Moderator: Thank you for joining us in the call today, and at this time, we'd like to open the call to questions and answers.

Thomas Windhausen: After that, we will have about $800,000 warrants, primarily $180,000 warrants with a $2.85 exercise price expiring in May 2026, and $592,000 warrants with a $2.51 exercise price expiring in November 2022. Bridgeline looks forward to continued growth and success in the remainder of 2024 and beyond as we continue to focus on driving growth, product innovation, customer success, and shareholder value. Thank you for joining us on the call today. And at this time, we'd like to open the call to questions and answers. Moderator.

Speaker Change: Thank you for joining us on the call today and at this time I'd like to open the call to questions and answers moderator.

Moderator: Moderator? Thank you. As a reminder to ask a question at this time, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. One moment while we combine our Q&A roster. We have a couple of questions that were previously submitted, so while people go into the Q&A roster, we'll handle those.

Operator: Thank you. As a reminder, to ask a question at this time, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Speaker Change: Thank you.

Speaker Change: Reminder, to ask a question at this time. Please press star one on your telephone and wait for your name to be announced silver draw. Your question. Please press star one again.

Operator: One moment while we compile our Q&A roster. We have a couple of questions that were previously submitted, so while people go into the Q&A roster, we'll handle those. All right, the first one here: what are our opportunities to expand within our existing customers? Okay, great.

One moment, while we come viola Q&A roster.

Speaker Change: We have a couple of questions that were previously submitted so people go into the Q&A roster, we'll handle those.

Ari Kahn: The first one here, what are our opportunities to expand within our existing customer base? Okay, great. Hawksurch is the primary expansion opportunity, and we have more than 600 Hawksurch customers. Every single one of those customers, just like every single website owner on the planet, needs to embrace what's happening with AI and upgrade their site search. To include AI capabilities and conversational capabilities. So we see opportunities. We've already upgraded several customers within Bridgeline for smart search, but we're going to have hundreds more. And in general, our pricing increases by about 35% when somebody upgrades to site search within Bridgeline.

Speaker Change: The first one here what are opportunities to expand within our existing customer base.

Speaker Change: Okay great.

Ari Kahn: Hawks, sir, is the primary expansion opportunity, and we have more than 600. Clock Search Cut, on every single one of those customers, just like every single website owner on the planet needs to embrace what's happening with AI and upgrade their site service to include AI capabilities and conversational capabilities. So we see opportunities. We've already upgraded several customers within Bridgeline for Smart Search, but we're going to have hundreds more. And in general, our pricing increases by about 35% when somebody upgrades to Site Search within Bridgeline, and nearly 60% of our subscription revenue is search revenue right now, so that's a significant increase for us.

Speaker Change: Hock search.

Speaker Change: As the primary expansion opportunity and we have more than 600 <unk>.

Speaker Change: <unk> search customers.

Speaker Change: Every single one of those customers just like every single website owner.

Speaker Change: On the planet.

Speaker Change: We need to embrace what's happening with AI and upgrade their site search too.

Speaker Change: To include AI capabilities conversational capabilities. So we see opportunities we've already upgraded several customers with Enbridge line.

Speaker Change: Smart search, but we're going to have hundreds more.

Speaker Change: And in general.

Speaker Change: Our pricing increases by about 35%.

Speaker Change: Somebody upgrades to site search within bridge line.

Ari Kahn: And nearly 60% of our subscription revenue is search revenue right now. So that's a significant increase for us. However, that increase really paled in comparison to the broader market opportunity. This entire market is undergoing a really disruptive shift where everybody needs to evaluate what they're doing in the search.

And nearly 60% of our subscription revenue.

Ari Kahn: However, that increase really pales in comparison to the broader market opportunity. This entire market is undergoing a really disruptive shift where everybody needs to evaluate what they're doing in the search area and how customers' expectations are quickly evolving to interact with websites in a more natural way, in a multi-modal way, meaning images and cameras driving search, and in a consultative way, meaning that they expect websites to come back with intelligent questions and to have a dialogue to better refine which products will fit their goals. And these are all opportunities for hawk search to grow in a billion-dollar market. Great

Speaker Change: As.

Speaker Change: Search revenue right now so that's a significant increase for us however that increase really pale in comparison to the broader market opportunity.

Speaker Change: This entire market is undergoing a.

Speaker Change: Really disruptive shift where everybody needs to evaluate what theyre doing in the.

Ari Kahn: Area and how customers expectations are quickly evolving to interact with websites in a more natural way in a multimodal, meaning images and cameras driving search and in a consultative way, meaning that they expect websites to come back with intelligent questions and they have a dialogue to better refine what products will fit their goals. These are all opportunities for hawksurge to grow across the entire, across a billion dollar market. Great.

Speaker Change: Search.

Speaker Change: Area and how customers expectations are quickly evolving to interact with website and a more natural way.

Speaker Change: In a multi modal meaning images and cameras.

Speaker Change: Driving search and in a consultative way, meaning that.

Speaker Change: They expect websites to come back with intelligent questions and to have a dialogue to better refine what.

Speaker Change: The products will fit their goals and these are all opportunities for hawk search to grow.

Speaker Change: Across the entire and cross a billion dollar market.

Ari Kahn: Our next question: How are our relationships with companies such as Big Commerce, Sales, Force, and Optimizing helping expand our customer base? And what is our new customer pipeline? Okay, perfect. Um, every e-commerce site has a content management and commerce platform as its foundation, and what we are doing is making it so that talk search is available point and click out of the box on each of these platforms. And that doesn't mean that you won't do any work thereafter. But it means that you can quickly try Hawk out, launch it in its vanilla form, and tune it thereafter.

Ari Kahn: Our next submit a question, how are our relationships companies such as Big Commerce, Sales Force and Optimizy helping expand our customer base and what does our new customer pipeline look like? Okay, great. Every, every ecommerce site has a content management and commerce platform as its foundation, and what we are doing is making it so that hawksurge is available point and click out of the box on each of these platforms. And that doesn't mean that you won't do any work thereafter, but it means that you can quickly try hawk out, launch it in its vanilla form and tune it thereafter.

Speaker Change: Great. Our next submitted question, how our relationships companies, such as Big Commerce sales force and optimize helping expand our customer base and what is our new customer pipeline look like.

Speaker Change: Okay great.

Speaker Change: Yes.

Speaker Change: Every.

Speaker Change: Every E Commerce site.

Speaker Change: As a content management and commerce platform.

Speaker Change: As its foundation.

Speaker Change: And what we're doing.

Speaker Change: Making it so that talk search is available point and click out of the box on each of these platforms and that doesn't mean that you won't do any work thereafter.

Speaker Change: But it means that you can quickly try hawk out launch it and its vanilla form and tune. It thereafter, and this is important because its actually different than the approach that other companies have taken at least in the AI part.

Ari Kahn: And this is important because it's actually different than the approach that other companies have taken, at least in the AI part of site search, where they are thinking of AI as sort of this omnipotent capability that you just enable, and it drives everything from that point forward. Um, but we're partnering with Salesforce and with optimizing and big commerce and site affinity and other, uh, commerce platforms so that you can quickly find us in their app stores, quickly and painlessly launched HawkSearch. And then, from that point forward, TUNE.

Ari Kahn: And this is important because it's actually different than the approach that other companies have taken, at least in the AI part of site search, where they are thinking of AI as sort of a definite capability that you just enable, and it drives everything from that point forward. But we're partnering with Sales Force and with Optimizy and Big Commerce and Site Affinity and other commerce platforms, so that you can quickly find us in their app stores, quickly and painlessly launch Hawk Search. And then from that point forward, tune Hawk Search to have more refined results based on your evolving business needs.

Speaker Change: Art.

Speaker Change: On site search where they are thinking of.

Speaker Change: AI is sort of is there for that.

Speaker Change: <unk>.

Speaker Change: Capability that you just enable and it drives everything from that point forward.

Speaker Change: But we are partnering with salesforce and with optimizing our big Commerce and site entity and other.

Speaker Change: Commerce platforms.

Speaker Change: So that you can quickly find us in there.

Speaker Change: Stuart.

Speaker Change: Quickly and Painlessly launched Hawks search and then from that point forward.

Ari Kahn: Park search to have more refined results based on your evolving business. So they're going to continue to drive a large part of our business for us. And already this has resulted in substantial improvements to our own sales pipeline. We have a pipeline now that is nearly tripled.

Speaker Change: <unk> <unk>.

Speaker Change: <unk> search to have.

Speaker Change: More refined results based on your evolving business needs, so they're going to be dry they're going to continue to drive a large part of our business for us.

Ari Kahn: So they're going to be drive, they're going to continue to drive a large part of our business for us. And already this has resulted in substantial improvements to our own sales pipeline. We have a pipeline now that is nearly triple the size of this time last year. We've got a conversion rate that is one and a half times what it was last year. And an average sales price that is nearly double what we saw last year. And all of this is both for Hawk Search really becoming a dominant revenue factor for Bridge Line.

Speaker Change: And already this.

Speaker Change: Resulted in substantial improvements to our own sales pipeline, we have a pipeline now that is nearly triple.

Ari Kahn: The size of this time last year, we've got a conversion rate that is one and a half times what it was last year, and an average sales price that is nearly double what we saw last year. And all of this bodes well for Hawk Search really becoming the dominant revenue factor for Bridgeline.

Speaker Change: The size.

Speaker Change: This time last year, we've got.

Speaker Change: Conversion rate that is one and half times, what it was last year.

Speaker Change: And an average sales price that is nearly double.

Operator: Good day, and thank you for standing by.

Operator: Welcome to the Bridgeline Digital 3rd quarter of 2024, earnings conference hall. At this time, participants are in a listen only mode.

Speaker Change: What we saw last year and all of this bodes for.

Speaker Change: Hawk search really becoming the dominant.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 1-1 again.

Speaker Change: Revenue.

Speaker Change: <unk> for a bridge loan.

Ari Kahn: Great, next question submitted. What types of doors have opened up after Hawk Search was named a top performing enterprise search software provider. I think that's referring to the Summer 2024 customer success reports and enterprise search for future customers. Okay, great. Well, I'm happy to say that we're getting leads directly from analysts and directly related to these awards and reports. Without naming names, I'll say that one of the largest hardware suppliers came directly from Amazon. I don't know. is this report, and we're in sales cycle for them right now, and that would be one of the largest customers, Bridgeline's one-to-date, in fact.

Ari Kahn: Next question submitted: What types of doors have opened up after Hawk Search was named a top-performing enterprise search software provider? I think that's referring to the Summer 2024 Customer Success Report, an enterprise search for pre-featured customers. Okay. Okay, great. Well, I'm happy to say that we're getting leads directly from analysts and directly related to these awards.

Speaker Change: Great.

Speaker Change: Next question submitted what types of doors have opened up after Hawk search was named a top performing enterprise search software provider.

Operator: Please be advised to today's conference is being recorded.

Speaker Change: Referring to the sub 2020 for customer success reports enterprise search for future customers, Okay, Okay, great well.

Thomas Windhausen: I would now like to hand the conference over to your speaker today, Tom Windhausen, Chief Financial Officer. Please go ahead. Thank you and good afternoon everyone. Thank you for joining us today. My name is Thomas Windhausen and I'm the Chief Financial Officer of Bridgeline Digital. I'm pleased to welcome you to our fiscal 2024 3rd quarter conference call.

Speaker Change: I'm happy to say that we're getting leads directly from analyst and directly related to these awards and reports.

Ari Kahn: Without naming names, I'll say that one of the largest hardware suppliers came directly from this report, and we're in the sales cycle for them right now. And that would be one of the largest customers, Bridgeline, is one to date, in fact. So, uh, they.

Speaker Change: Without naming names out say that.

Thomas Windhausen: On the call of this, 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.

Speaker Change: One of the largest hardware supplier came directly from.

Speaker Change: This report and we're in a sales cycle for them right now and that would be.

Thomas Windhausen: Before we begin, I'd like to remind listeners that during this conference call, comments that we made 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 results, events or results. These statements are made pursuant to the safe harbor prohibition of the private securities litigation reform act of 1995.

Speaker Change: One of the largest customers bridge lines wanted to date back.

Moderator: So they produce leads, they reduce our customer acquisition costs, they accelerate our sales cycle, and it's a strategic part of our marketing going forward. Great. Okay, let's see if we've got any other questions there. Again, if you would like to ask a question on the phone line, please press star 1-1 on your telephone.

Speaker Change: No.

Ari Kahn: They produce leads, they reduce our customer acquisition costs, they accelerate our sales cycle, and it's a strategic part of our marketing going forward. Okay, let's see if we've got any other questions there. Again, if you would like to ask a question on the phone line, please press star 1 1 on your telephone. We have one more question submitted if we go through that.

Speaker Change: <unk>.

Speaker Change: They produce leads they reduced our customer acquisition costs, they accelerate our sales cycle and it's a strategic part of our marketing going forward.

Speaker Change: Great.

Speaker Change: Yes.

Okay, let's see if we've got any other questions there.

Speaker Change: Again, if you would like to ask a question on the phone lines. Please press star one on your telephone.

Thomas Windhausen: The national projections and beliefs upon which we base our expectations today may change over time and we express the disclaimer, assume no obligation to inform you if they do. The result for your report today should not be considered as an indication of future performance. Change is an 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 forms of statements made today.

Ari Kahn: We have one more submitted if we only go through that. When are we, when will Hawk searches momentum outpace that other products for Bridgeline and dominate the business? Okay. Well, from a momentum perspective, in terms of growth, Hawk Search certainly is growing, you know, at least about faster than everything else. It is very dominant, and now represents 60% of our subscription revenue. However, that doesn't shine through in our financials yet, and it will, at its current pace, in just a couple of quarters. We expect the growth of Hawk search to outpace any decline in other revenue in that time period.

Speaker Change: We have one more submitted when we go through that.

Speaker Change: Everyone will hawk searches momentum outpace that other products for bridge line and dominate the business.

Ari Kahn: When will HawkSearch's momentum outpace that of the other products for Bridgeline and dominate the business? Okay, well, from a momentum perspective, in terms of growth, it certainly is growing, you know, leaps and bounds faster than everything else. It is very dominant and now represents 60% of our subscription revenue. However, that doesn't shine through in our financials yet, and it will at its current pace in just a couple of quarters. We expect the growth of hawk search to outpace any decline in other revenue in that time period, and most importantly, because of what we've done with AI and because we are in a disruptive market. I mean, site search, everyone, everyone has to reevaluate this.

Well from a momentum perspective in terms of growth.

Speaker Change: Hock search certainly is growing.

Speaker Change: Leaps and bounds faster than everything else is.

Thomas Windhausen: For more detailed information about these factors and other risks that may have impact on our businesses and our business, please review the reports and documents filed through time-to-time by Bridgeline Digital for the Securities and Exchange Commission. Also please know on the call this afternoon we will discuss some non-gap financial measures from commenting on the company's financial performance.

Speaker Change: Very dominant and now represent 60% of our subscription revenue.

Speaker Change: However.

Speaker Change: That doesn't shine through in our financials yet.

Speaker Change: And it will.

Speaker Change: Current pace and just a couple of quarters.

Thomas Windhausen: We provide a reconciliation of our gap financials to these non-gap measures in our earnings release and you can take a copy of that on our website.

Speaker Change: We expect the growth of <unk> search to outpace any decline in other revenue in that time period.

Ari Kahn: I'd now like to turn the call over to Aritone, Bridgeline's president and CEO. All right. Thank you, Tom.

Ari Kahn: And most importantly, because what we've done with AI, and because we are in a disruptive market, I mean, site search, everyone, everyone has to reevaluate this. So they might stay with their current solution, but everyone's got to evaluate it. And with our advances in AI, this creates an opportunity for an inflection point in the site search market that could be just absolutely incredible for Bridgeline. So we're positioned for that. We're taking a leadership role in AI that is beyond what anyone else is doing, quite frankly. We have a very deep understanding of how AI works and how it collaborates, not replaces, but collaborates with the merchandising team.

Speaker Change: And most importantly, because what we've done with AI and because we are in a disruptive market.

Ari Kahn: Good afternoon, everyone. Recent advances in AI, especially large language models from Gen AI, are revolutionizing e-commerce and reshaping online shopping expectations. As a result, nearly every e-commerce site will upgrade their site search to be both intelligent and conversational. This shift is disrupting the billion-dollar site search market, forcing everyone to reconsider their search provider. Hawk Search is uniquely positioned displaced competitors. Our team has a deep history in AI and is approaching the site search market in a more meaningful way than anyone else.

Speaker Change: Site search everyone, everyone has to reevaluate their they might stay with their current solution, but everyone's got to evaluate it and with our advances in AI. This creates an opportunity for an inflection point in the site search market.

Ari Kahn: So they might stay with their current solution, but everyone's got to evaluate it. And with our advances in AI, this creates an opportunity for an inflection point in the site search market that could be... are just absolutely incredible for Bridgeline. So we're positioned for that. We're taking a leadership role in AI that is beyond what anyone else is doing. Quite frankly, we have a very deep understanding of how AI works and how it collaborates, not replaces, but collaborates with the merchandising team, and these together can completely create exponential growth in that market. Moderator, do we have anyone on the Q&A?

Speaker Change: That could be.

Speaker Change: Just absolutely incredible for a bridge lines. So we're positioned for that we're taking a leadership role in AI that is beyond what anyone else is doing quite frankly, we have a very deep understanding of how AI works and how it collaborate that replaces.

Ari Kahn: This gives us an opportunity to take a disproportionate share of the market during this turbulent time. We are the only AI company offering merchandising AI agents that work directly with our customers' marketing team to continuously tune in their site search as results. This capability, known as Tailored AI, is already positioning us as a leader in the market. Tailored AI has helped double the average hawk search sales size when new customers every week secure top-tier partnerships and gain recognition from leading analysts like Gartner.

Speaker Change: Look collaborates with the merchandising team.

Ari Kahn: And these together can completely create exponential growth in that market.

Speaker Change: And these together can.

Speaker Change: Lately.

Speaker Change: Exponential.

Speaker Change: Growth in that market.

Moderator: Mariner, do we have anyone on the Q&A? Well, we do one moment for our first question.

Speaker Change: Moderator do we have anyone on the Q&A.

Operator: We'll take one moment for our first question, and our first question is going to come from the line of Casey Ryan with West Park Capital. Your line is open. Please go ahead. Ari Thomas, how are you?

When we do one moment for our first question.

Casey Ryan: And our first question is going to come from the line of Casey Ryan with West Park Capital. Your line is open. Please go ahead. Are you nice quarter? I have a question about, hey, great to talk to you. What are the incremental margins you're talking about, sort of expanding what the example customer might spend using Hawk Search, right? What's the incremental growth margin, I guess, is what I'm thinking about. So the corporate average is 68%, but if a customer moves from Billings, say 12,000 a year or something, to 20,000 because they're utilizing more features of Hawk.

Speaker Change: And our first question is going to come from the line of Casey Ryan with West Park Capital. Your line is open. Please go ahead.

Speaker Change: Our E Commerce, how are you nice quarter.

Ari Kahn: We have truly taken a different approach to AI that is providing collaborative agents rather than a black box one-size-fits-all solution. Our competition only allows customers to enable AI, and as soon as they should then be hands-off as AI powers their site regardless of their corporate goals. With Tailored AI, we deliver AI agents that collaborate with our customers' marketing teams to optimize their site. Our customers are empowered to continually tune and train the AI agents based on their ever-changing goals, inventory, and market demands.

Casey Ryan: Nice quarter. I have a question about, hey, great to talk to you. What are the incremental margins? You're talking about sort of expanding what the example customer might spend using hawk search, right? What's the incremental gross margin, I guess, is what I'm thinking about. So the corporate average is 68%. But if a customer moves from billing, say, $12,000 a year or something to $20,000 because they're utilizing more features of Hawk, does the gross margin expand? Say directionally far above the corporate average. Yeah, that's a really great point.

Speaker Change: <unk>.

Speaker Change: I have a question about hey, great to talk to you.

Speaker Change: What are the incremental margins you are talking about sort of expanding what the.

Speaker Change: Example, customer might spend using hawk search right.

Speaker Change: What's the what's the what's the incremental gross margin I guess is what I'm thinking about sort of corporate average is 68%.

But if a customer moves from billings say 12000 a year.

Speaker Change: Ear or something to 20000, because they are utilizing more.

Speaker Change: Features of Hawk.

Ari Kahn: is the gross margin expand, say, directionally far above the A corporate average rate. Yeah, that's a really great point. Our cost of goods sold with this increase in revenue. Our cost of goods sold are essentially constant for this. So we should start seeing our gross margins approaching 80%. And our customers begin to, and that's even without the AI. These are customers start using more and more of the AI. That's going to be in the mid-70% range. So I expect this to stabilize in the high 70s. And one of the things that has happened recently that has been very impactful.

Speaker Change: Does the gross margin expand.

Speaker Change: Say directionally far above the corporate average that's a really great point.

Ari Kahn: We are moving fast in AI innovation. This year we launched Concept Search. We launched Image Search, Visual Search, Conversation Search, and now Smart Response. No other platform has moved this quickly to seize the Tailored AI opportunity in site search. As we continue to innovate, we expect these advancements to accelerate our growth, solidify our leadership in a market where Search now drives 60% of our subscription revenue. This quarter, we sold 23 licenses with 420,000 an ARR, 1.4 million, and TCV.

Ari Kahn: Our cost of goods sold is in the, With this increase in revenue, our cost of growth tolls is essentially constant for this. So we should start seeing our growth margins approaching 80 percent. And our customers begin to, and that's even without the AI. As our customers start using more and more of the AI, that's gonna be in the mid-70% range. So I expect us to stabilize in the high 70s. And one of the things that has happened recently that has been very, so I think it's going to be very impactful on gross margin is above and beyond all of that.

Speaker Change: Our cost of goods sold in the.

Speaker Change: Yes.

Speaker Change: With this increase in revenue our cost of goods sold are essentially constant for.

Speaker Change: So we should start seeing our gross margins approaching 80%.

Speaker Change: Yes.

Speaker Change: Our customer <unk>.

Speaker Change: Yes.

Speaker Change: That's even without the AI that as our customers start using more and more of that.

Speaker Change: Thats going to be in that.

Speaker Change: Mid 70% range, so I expect that to stabilize.

Speaker Change: In the in the high Seventy's and one of the things that has happened recently that has been very.

Ari Kahn: That brings us to 70 licenses, totally 1.7 million an ARR, 5.1 million, and total contract value, that's 50 years. Hawk Search was a lion's share of these sales. Importantly, our investments in partner connectors accelerate sales by allowing customers to launch Hawk Search with the click of a button. We're launching multiple customers every single week. Our Tailored AI approach also accelerates sales because our customers know that they can continually refine search results based on their merchandising goals.

Ari Kahn: We've seen customers that have become so reliant upon the performance of Hawkshire that they are asking for isolated environments rather than a SaaS environment and paying a premium to be able to isolate their performance from anyone else.

Speaker Change: So I think it's going to be very impactful on gross margin is above and beyond all of that.

Ari Kahn: I'm gross margin is above and beyond all of that. We've seen customers that have become so reliant upon the performance for Coxerge. That they are asking for isolated environments rather than a stacked environment and paying a premium. To be able to isolate their performance from anyone else. And as those instances, you also start averaging about 80% gross margin as well. So we expect to be in the high 70s all together. And we're going to be there. And I'm talking about for subscription in their terms. One other point on that is that our sales are now have a much higher percentage of license to services than they have historically.

Speaker Change: Seeing customers that have.

Speaker Change: Become.

Speaker Change: So.

Speaker Change: Reliant upon the performance for Hawk search that they are asking for isolated environments, rather than SaaS environment and paying a premium.

Speaker Change: To be able to isolate their performance from anyone else and in those instances you also start averaging at about 80% gross margin as well. So we expect to be in the high seventy's altogether, and we're going to be there.

Ari Kahn: And in those instances, you also start averaging about an 80% gross margin as well. So we expect to be in the high 70s altogether, and we're gonna be there, and I'm talking about for subscription, in the near term. One other point on that is that our sales now have a much higher percentage of licenses to services than they have historically, and our services are selling at a premium this quarter.

Ari Kahn: This is different than competitors who simply have an AI button that puts the site on autopilot with no ability for ongoing turning and therefore significant Q&A review before the launch. With each launch, we have more references and further recognition as leaders in the site search sector. Analysts continue to recognize Hawk Search for its advancements in AI and this is driving demand and average sales price. Gartner recognized Hawk Search and its magic quadrant for search and product discovery, highlighting Hawk Search and strength in both artificial intelligence and the B2B market.

Speaker Change: Thinking about.

Speaker Change: First subscription.

Speaker Change: In the near term.

Speaker Change: One other point on that is that our sales are now <unk>.

Speaker Change: A much higher percentage of license to services than they have historically and our services are selling at a premium this quarter, we had pretty high services gross margin.

Ari Kahn: And our services are selling in a premium this quarter. We have pretty high services gross margin. I think we should be striving for 50% in that range. But the subscription will become a larger percentage of our revenues while KC. Yeah, that's actually a helpful point on the services side. So that 58% margin was assertive on anomaly. You know, maybe in the quarter and shouldn't be something we expect every quarter moving forward from here. Right. That isn't an anomaly historically. We've been in the in the 40s. And I think that 50 is about the highest anyone should ever expect.

Ari Kahn: We have pretty high service gross margins. I think we should be, you know, striving for 50 percent in that range, but the subscription will become a larger percentage of our revenue as well, Casey. Yeah. That's actually a helpful point on the services side. So that 58% margin was just sort of an anomaly, you know, maybe in the quarter and shouldn't be something we expect every quarter moving forward from here. That is an anomaly. Historically, we've been in the 40s, and I think that 50 is about the highest anyone should ever expect.

They should be.

Speaker Change: Driving for 50% in that range right.

Speaker Change: But the subscription will become a larger percentage of our revenue as well Casey.

Ari Kahn: Info Tech Research Group awarded Hawk Search as a champion in enterprise search and recognized Hawk Search as a top rated software within the category. Featured Customers listed Hawk Search as a top performer in the summer 2024 customer's success report for enterprise search software. This quarter, Hawk Search launched the Gen-A Power Athena release, update features with smart response and conversational dialogues based on search queries, where prompts for follow-up questions and suggestions to imitate a personalized in-person conversation with the sales visits that are available.

Speaker Change: Yes.

Casey Ryan: That's actually helpful point on the services side, so that 58% margin was sort of an anomaly.

Speaker Change: Maybe in the quarter and Shouldnt be something we expect every quarter moving forward from here right that is an anomaly historically we've been in the.

Speaker Change: In the <unk> and I think that 50 is about the highest anyone should ever expect and if we get a 58 then great we'll take it but.

Thomas Windhausen: And if we get a 58, great, we'll take it, but that doesn't serve us any good. Okay. Thank you. That's really helpful.

Casey Ryan: And if we get a 58, then great we'll take it. But that doesn't serve as repeatable. Okay. Thank you. That's really helpful.

Speaker Change: Not necessarily repeatable.

Casey Ryan: And then one more question. I'm just thinking about... on the OpEx line, you know, maybe this is a market that needs evangelism, and there's a natural, you know, cycle to it. I think, as you were suggesting, as customers, you know, need to evaluate what these tools can do for them and start to integrate them, and, as you say, not integrate them. But is there any value or potential, say, in an unconstrained resource market where more sales and marketing could speed that up, or does the market feel too big and it kind of needs to move at a slower pace, and you guys can't necessarily drive that yourself?

Speaker Change: Okay.

Speaker Change: Thank you that's really helpful. And then one more question I am just thinking about.

Casey Ryan: And then one more question. I'm just thinking about on the op x line. You know, maybe this is a market that needs evangelism. And there's a natural, you know, cycle to it. I think, as you were suggesting, as customers, you know, need to evaluate what these tools can do for them and start to integrate them. And, as you say, not integrate them. But is there any value or potential, say, in like a, you know, unconstrained resource market where more sales and marketing could speed that up. Or just the market field too big and it kind of needs to move at the pace.

Speaker Change: On the Opex line, maybe this is a market that needs evangelism and there's a natural cycle to it I think as you were suggesting as customers need.

Ari Kahn: Two important platform partners that we expect to continue to generate new sales for Hawk Search are optimizably in big commerce. Big commerce is promoting Hawk Search ahead of all other search providers on the first page of the app store, providing tens of thousands of big commerce customers the ability to upgrade to Hawk Search's AI technology. Hawk Search offers a one-click install for optimizably and is recognized by optimizably as a top-paid app and their app store on the very first page.

Speaker Change: We need to evaluate what these tools can do for them and start to integrate them and as you say not integrate them but.

Speaker Change: Is there any value or potential.

Speaker Change: Say in like a.

Speaker Change: Unconstrained resource market, where we're more sales and marketing could speed that up or does the market feel too big and then it kind of needs to move at the pace and you guys can't necessarily drive that yourself.

Ari Kahn: And you guys can't necessarily drive that yourself. I think that an increased investment sales and marketing would would would have results for us. Um. We see the market is almost infinite, and our ability to increase investments in sales and marketing would be proportionally impact sales for them. We have focused in R&D recently and made a lot of investments in that regard, including partnerships with some revenue share to accelerate some development to help manage our own expenses. But sales and marketing is a place where we are looking for ways to invest even more, and in particular with partnerships to help manage that customer acquisition cost because we expect that if we invest more until it's marketing, we're going to get proportionate results.

Ari Kahn: I think that an increased investment in sales and marketing would have results for us. We see the market is almost infinite, and our ability to increase investments in sales and marketing would have a proportionally impact sales for us. We have focused on R&D recently and made a lot of investments in that regard, including partnerships with some revenue share to accelerate some development to help manage our own expenses. But sales and marketing is a place where we're looking for ways to invest even more, and in particular, partnerships to help manage that customer acquisition cost because we expect that if we invest more in sales and marketing, we're going to get proportionate results. Yeah, that makes a lot of sense.

Speaker Change: I think there is an increased investment.

Speaker Change: Sales and marketing wood.

Speaker Change: We would have results for us.

Ari Kahn: Hawk Search is now uniquely positioned to improve site search for more than a thousand optimizably configured commerce customers with several already purchasing license. We partner with the system integrator and optimizably expert X Engage for our optimizably connector which leads even more sales. Hawk Search AI will be showcased at Opticon 2024 in San Antonio, Texas this November with optimizably. At the applied AI conference in Chicago this past June, Moblico presented Hawk Search as a key AI-powered site search platform for mobile devices. This is a new market in which Hawk Search's concept search is particularly well-suited for success.

Speaker Change: We see the market.

Speaker Change: <unk> net and our ability.

Speaker Change: <unk> ability to increase.

Speaker Change: <unk> and sales and marketing will be proportionately.

Speaker Change: Unfortunately impacts sales for us we have focused in R&D recently and made a lot of investments in that regard including partnerships with.

Speaker Change: Yes, some revenue share accelerate some development to help manage our <unk> expenses.

Speaker Change: Sales and marketing as a place where we're looking for ways to invest even more and in particular for partnerships.

Speaker Change: Hi.

Speaker Change: To help manage that customer acquisition cost because we expect that if we.

Ari Kahn: And here are a few of the wins that we've had this quarter. Colonial Electric Supply, large electrical distributor, chose Brinkeline Hawk Search to power product discovery for its optimizably platformed e-commerce site. Colonial selected Hawk Search for AI search capabilities and reputation in the electrical distributor sector. Grizzly Industrial, a leading industrial supplier, selected Hawk Search to power search on its e-commerce site. Hawk Search will enhance Grizzly Industries e-commerce product discovery by offering precise search tailored to the needs of the machinery industry including advanced part-comers search for both full and partial numbers, unit of measurement conversion for dimensional products, and merchandising tools to run product-specific campaigns.

Speaker Change: Invest more in sales and marketing, we're going to get proportional results.

Casey Ryan: Thank you. It was a great quarter. I look forward to following along as we move forward. Thank you, Casey. Thank you. And again, to ask a question, please press star 11 on your telephone.

Casey Ryan: Yeah, that makes a lot of sense. Thank you. It was a great quarter. I looked forward to following along those with a forward thanks. Thank you, Kate. Thank you, and again to ask a question. Please press star one on your telephone.

Speaker Change: That makes a lot of sense.

Speaker Change: It was a great quarter, we look forward to following along though going forward. Thanks.

Casey Ryan: Thank you Casey.

Speaker Change: Thank you and again to ask a question. Please press star one on your telephone.

Moderator: And I'm showing no further questions, and I'd like to hand the conference back to management for closing remarks.

Operator: And I'm showing no further questions, and I'd like to hand the conference back to management for closing remarks. Thank you, everybody. Thank you for joining us today. We appreciate the continued support from all of our customers, our partners, and our shareholders. We're excited about our business and ongoing growth prospects.

Speaker Change: And im showing no further questions and I'd like to hand, the conference back to management for closing remarks.

Ari Kahn: Thank you, everybody. Thank you for joining us today. We appreciate the continued support from all of our customers, our partners, and our shareholders. We're excited about our business and ongoing growth prospects.

Ari Kahn: And we look forward to speaking with you again on our fourth quarter fiscal 24 conference call, expected to be in December of 2024. Be well, everyone. Thanks. This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day. Here Comes Christmas

Thank you everybody. Thank you for joining us today. We appreciate the continued support from all of our customers our partners and our shareholders. We're excited about our business and ongoing growth prospects and we look forward to speaking with you again on our fourth quarter fiscal 'twenty four conference call expect.

Moderator: And we look forward to speaking with you again on our fourth quarter fiscal 24 conference call, expected to be in December of 2024. Be well, everyone. Thanks.

Speaker Change: To be in December of 2024, B well everyone. Thanks.

Moderator: This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day. Thank you.

Yes.

Ari Kahn: Sales right, a large craft retailer, selected Hawk Search to improve its product discovery for both B2C and B2B site. Hawk Search launched two of sales rights e-commerce sites on the big commerce multi-storefront platform. Our partnership with Sales Right reflects our expertise in supporting retail and big commerce multi-storefront. Shadler Yasko, an electrical distributor with over 29 locations and a thousand brands implemented Hawk Search on its optimizably powered e-commerce site using the X-engage connector for Hawk Search.

Speaker Change: This concludes today's conference call. Thank you for participating and you may now disconnect everyone have a great day.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: [music].

Speaker Change: Yes.

Ari Kahn: College. And Volta's GMBH, a leading German Electrical Distributor, selected Bridgeline to power site search for ICi-commerce site. Volta's aims to increase online revenue by using Bridgeline's AI-powered site search for its online catalog with more than $80,000 products. All in all, we had 23 license sales this quarter, 70 this year to date, and our average license sale is nearly double the MRR last year. This increase in volume and size is largely due to our advances in AI.

Thomas Windhausen: So at this time, I'll turn the call back over our chief financial officer, Tom, and Halpern. Thanks, Ari.

Thomas Windhausen: Offer by an update on our financial results for the third quarter of fiscal 2024, which ended June 30th, 2024. Total revenue for the quarter into June 30th, 2024 was 3.9 million compared to 3.9 million in the prior year period. Now, going into each component of revenue, our subscription license revenue, which is comprised of SaaS licenses, maintenance and hosting revenue and perpetual license revenue, for the quarter into June 30th, 2024 was 3 million compared to 3.2 million in the prior year period.

Thomas Windhausen: As a percentage of total revenue, subscription license revenue was 77% of total revenue for the quarter into June 30th, 2024. Services revenue was 923,000 for the quarter into June 30th, 2024, and increased from 742,000 in the prior year, third quarter. As a percentage of total revenue, services revenue account for 23% of total revenue for the quarter into June 30th, 24. Cost of revenue was 1.2 million for the quarter into June 30th, 2024, a decrease from 1.3 million in the prior year period.

Thomas Windhausen: And as a result, gross profit was 2.7 million for the quarter into June 30th, 24, as compared to 2.6 million in the prior year period. Or overall gross profit margin was 69% for the quarter into June 30th, 24, compared to 68% in the prior year period. With subscription license gross margin, that 72% for the quarter into June 30th, 24, compared to 73% in the prior period. And service margins of 58% for the quarter into June 24, compared to 44% in the same period in 2023.

Thomas Windhausen: Our upper expenses of 3.1 million were in the quarter in the June 24 for lower compared to 3.3 million in the prior year period. Moving down to below upper expenses, the change in fair value of our liability classified warrants resulted in non-cash gain of 88,000 this quarter, compared to a non-cash loss of 107,000 in the prior year period. And moving to bottom line, that gaped an income loss. Our net loss was 300,000 for the quarter ended June, so the 24 compared to a net loss of 800,000 in the prior year period. Moving to EBITDA, our just EBITDA for the quarter ended June 24 was 3,000 compared to a negative 163,000 in the prior year comparable period.

Thomas Windhausen: Now moving to our balance sheet. On June 30th, 2024, we had 1.2 million of cash in 1.5 million of accounts receivable. Our total debt outstanding as of June 30th, 2024 was under 500,000 euros or about 524,000 US dollars. With a weighted average interest rate of about 4.6 percent, with principal payments due throughout through 2020. We have no other debt or remaining earnouts from any other provisions or from any of the previous acquisitions.

Thomas Windhausen: At June 34, our total assets were 16 million and total liabilities were 5.6 million. In the quarter, cash decreased about $100,000 of which 19,000 was used in investing activities and 84,000 was used in financing activities. Our flat operating cash for the quarter was consistent with our EBITDA of $3,000 for the quarter into June 2024.

Thomas Windhausen: Finally, as an update to our cap table, as a June 2024, our cap table included 10.4 million shares outstanding 39,000 shares from Sirius C. Preferred and I asked inverted basis, 1.7 million of warrants and 2.1 million options. Of these warrants, nearly 900,000 with an exercise price of $4 will expire in September 2024. After that, we will have about 800,000 warrants, primarily 180,000 warrants with a $2.85 cent exercise price, expiring in May, 2026, and 592,000 warrants with a $2.51 cent exercise price, which expired in November, 2026.

Roger Kahn: Roger Kahn looks forward to continue growth and success remaining in 2024 and beyond. There's a period of focus on driving growth, product innovation, customer success, and shareholder value.

Operator: Thank you for joining us in the call today and at this time, we'd like to open the call to questions and answers.

Operator: Moderator? Thank you. As a reminder to ask a question at this time, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. One moment while we combine our Q&A roster. We have a couple of questions that were previously submitted, so while people go into the Q&A roster, we'll handle those.

Ari Kahn: The first one here, what are our opportunities to expand within our existing customer base? Okay, great. Hawksurch is the primary expansion opportunity and we have more than 600 Hawksurch customers. Every single one of those customers, just like every single website owner on the planet, needs to embrace what's happening with AI and upgrade their site search. To include AI capabilities and conversational capabilities. So we see opportunities. We've already upgraded several customers within Bridgeline for smart search, but we're going to have hundreds more. And in general, our pricing increases by about 35% when somebody upgrades to site search within Bridgeline. And nearly 60% of our subscription revenue is search revenue right now. So that's a significant increase for us.

Ari Kahn: However, that increase really paled in comparison to the broader market opportunity. This entire market is undergoing a really disruptive shift where everybody needs to evaluate what they're doing in the search. Area and how customers expectations are quickly evolving to interact with websites in a more natural way in a multimodal, meaning images and cameras driving search and in a consultative way, meaning that they expect websites to come back with intelligent questions and they have a dialogue to better refine what products will fit their goals and these are all opportunities for hawksurge to grow across the entire, across a billion dollar market. Great.

Ari Kahn: Our next submit a question, how are our relationships companies such as big commerce, sales, force and optimizy helping expand our customer base and what does our new customer pipeline look like? Okay, great. Every, every ecommerce site has a content management and commerce platform as its foundation and what we are doing is making it so that hawksurge is available point and click out of the box on each of these platforms. And that doesn't mean that you won't do any work thereafter, but it means that you can quickly try hawk out, launch it in its vanilla form and tune it thereafter.

Ari Kahn: And this is important because it's actually different than the approach that other companies have taken, at least in the AI part of site search, where they are thinking of AI as sort of a definite capability that you just enable and it drives everything from that point forward. But we're partnering with sales force and with optimizy and big commerce and site affinity and other commerce platforms, so that you can quickly find us in their app stores quickly and painlessly launch hawk search.

Ari Kahn: And then from that point forward, tune hawk search to have more refined results based on your evolving business needs. So they're going to be drive, they're going to continue to drive a large part of our business for us. And already this has resulted in substantial improvements to our own sales pipeline. We have a pipeline now that is nearly triple the size of this time last year. We've got conversion rate that is one and half times what it was last year. And an average sales price that is nearly double what we saw last year. And all of this is both for hawk search really becoming a dominant revenue factor for bridge line.

Ari Kahn: Great, next question submitted. What types of doors have opened up after hawk search was named a top performing enterprise search software provider. I think that's referring to the summer 2024 customer success reports and enterprise search for future customers. Okay, great. Well, I'm happy to say that we're getting leads directly from analysts and directly related to these awards and reports. Without naming names, I'll say that one of the largest hardware suppliers came directly from Amazon.

Ari Kahn: I don't know, is this report, and we're in sales cycle for them right now, and that would be one of the largest customers, Bridgeline's one-to-date, in fact. So they produce leads, they reduce our customer acquisition costs, they accelerate our sales cycle, and it's a strategic part of our marketing going forward. Great.

Operator: Okay, let's see if we've got any other questions there.

Operator: Again, if you would like to ask a question on the phone line, please press star 1-1 on your telephone. We have one more submitted if we only go through that.

Ari Kahn: When are we, when will Hawk searches momentum outpace that other products for Bridgeline and dominate the business? Okay. Well, from a momentum perspective, in terms of growth, Hawk search certainly is growing, you know, at least about faster than everything else. It is very dominant, and now represents 60% of our subscription revenue. However, that doesn't shine through in our financials yet, and it will, at its current pace, in just a couple of quarters, we expect the growth of Hawk search to outpace any decline in other revenue in that time period.

Ari Kahn: And most importantly, because what we've done with AI, and because we are in a disruptive market, I mean, site search, everyone, everyone has to reevaluate this, so they might stay with their current solution, but everyone's got to evaluate it. And with our advances in AI, this creates an opportunity for an inflection point in the site search market that could be just absolutely incredible for Bridgeline. So we're positioned for that. We're taking leadership role in AI that is beyond what anyone else is doing quite frankly. We have a very deep understanding of how AI works and how it collaborates, not replaces, but collaborates with merchandising team. And these together can completely create exponential growth in that market.

Operator: Mariner, do we have anyone on the Q&A? Well, we do one moment for our first question.

Casey Ryan: And our first question is going to come from the line of Casey Ryan with West Park Capital. Your line is open. Please go ahead. Are you nice quarter? I have a question about, hey, great to talk to you. What are the incremental margins you're talking about sort of expanding what the example customer might spend using hawk search, right? What's the incremental growth margin, I guess, is what I'm thinking about. So the corporate average is 68%, but if a customer moves from Billings, say 12,000, you know, a year or something to 20,000 because they're utilizing more features of hawk, is the gross margin expand, say, directionally far above the Acorporate average rate.

Casey Ryan: Yeah, that's a really great point. Our cost of goods sold with this increase in revenue. Our cost of goods sold are essentially constant for this. So we should start seeing our gross margins approaching 80%. And our customers begin to, and that's even without the AI. These are customers start using more and more of the AI. That's going to be in the mid-70% range. So I expect this to stabilize in the high 70s.

Casey Ryan: And one of the things that has happened recently that has been very impactful. I'm gross margin is above and beyond all of that. We've seen customers that have become so reliant upon the performance for coxerge. That they are asking for isolated environments rather than a stacked environment and paying a premium. To be able to isolate their performance from anyone else. And as those instances, you also start averaging about 80% gross margin as well.

Casey Ryan: So we expect to be in the high 70s all together. And we're going to be there. And I'm talking about for subscription in their terms. One other point on that is that our sales are now have a much higher percentage of license to services than they have historically. And our services are selling in a premium this quarter. We have pretty high services gross margin. I think we should be striving for 50% in that range.

Casey Ryan: But the subscription will become a larger percentage of our revenues while KC. Yeah, that's actually a helpful point on the services side. So that 58% margin was assertive on anomaly. You know, maybe in the quarter and shouldn't be something we expect every quarter moving forward from here. Right. That isn't an anomaly historically. We've been in the in the 40s. And I think that 50 is about the highest anyone should ever expect.

Casey Ryan: And if we get a 58 then great we'll take it. But that doesn't serve as repeatable. Okay. Thank you. That's really helpful. And then one more question. I'm just thinking about on the op x line. You know, maybe this is a market that needs evangelism. And there's a natural, you know, cycle to it. I think as you were suggesting as customers, you know, need to evaluate what these tools can do for them and start to integrate them.

Casey Ryan: And as you say, not integrate them. But is there any value or potential say in like a, you know, unconstrained resource market where more sales and marketing could speed that up. Or just the market field too big and it kind of needs to move at the pace. And you guys can't necessarily drive that yourself. I think that an increased investment sales and marketing would would would have results for us. Um. We see the market is almost infinite and our ability to increase investments in sales and marketing would be proportionally impact sales for them.

Casey Ryan: We have focused in R&D recently and made a lot of investments in that regard including partnerships with some revenue share to accelerate some development to help manage our own expenses but sales and marketing is a place where we are looking for ways to invest even more and in particular with partnerships to help manage that customer acquisition cost because we expect that if we invest more until it's marketing we're going to get proportionate results. Yeah, that makes a lot of sense.

Casey Ryan: Thank you. It was a great quarter. I looked forward to following along those with a forward thanks. Thank you, Kate. Thank you and again to ask a question. Please press star one on your telephone. And I'm showing no further questions and I'd like to hand the conference back to management for closing remarks. Thank you everybody. Thank you for joining us today. We appreciate the continued support from all of our customers, our partners and our shareholders.

Roger Kahn: We're excited about our business and ongoing growth prospects.

Roger Kahn: And we look forward to speaking with you again on our fourth quarter fiscal 24 conference call expected to be in December of 2024.

Operator: Be well everyone. Thanks.

Operator: This concludes today's conference call. Thank you for participating.

Operator: You may now disconnect. Everyone have a great day. Thank you.