Q4 2024 Bridgeline Digital Inc Earnings Call

Operator: Colonial Electric Supply implemented Bridgeline's Hawk Search to optimize product discovery on its Optimizely e-commerce platform. The AI-powered search solution enhances the distributor's site with advanced features like merchandising and personalized search experience.

Colonial electric supply implemented bridge slides hot search to optimize product discovery and optimize our e-commerce platform.

The AI powered suite solution enhances the distributor site with advanced features like merchandising and personalized search experiences.

Operator: Finally, Hewlett-Packard chose Bridgeline's HawkSearch to meet its high-performance hosting needs and optimize on-site search capabilities. This partnership highlights HogSearch's scalability, delivering fast, relevant search results through a huge product catalog with enhanced usability for large enterprise-level AuxSearch is not a single product. It's a suite that is central to our E360 strategy with separately licensed products that drive visitors to our customer sites, convert those visitors into buyers, and increase the average order value for each one of those buyers. As a suite, HawkSearch creates upselling opportunities within our customer base, enabling a highly efficient sales engine with a CAC payback period of less than 20 months and net revenue retention rate of over 103%.

Finally, Hewlett Packard chose French like Hawks search needed high performance hosting needs and optimize onsite search capabilities.

This partnership highlights talk searches scalability delivering fast relevant search results.

Huge product catalog with enhanced usability for large enterprise level platforms.

Alex: Alex search is not a single product its a suite that is central to our E 360 strategy with separately licensed products that drive visitors to our customer sites convert those visitors into buyers and increase the average order value for each one of those buyers.

Alex: As a suite hot search create upselling opportunities within our customer base.

Alex: Labeling a highly efficient sales engine with a CAC payback period of less than 20 months and net revenue retention rate of over 103%.

Operator: In 2024, we released five products for Hawk Search that use AI language, large language models to discover the products people want to buy, generate content to help people find websites. and to learn behavioral trends that drive sales for our customers. The Hawk Search Rapid UI framework allows our customers to launch in just days, featuring a Gen AI component that seamlessly integrates smart response into search interfaces. It also enables the customization of agents, AI agents, to match brand tone, empowering merchandisers to fine tune responses to meet specific customer needs. Additionally, we launched conversational search, which is powered by generative AI conversational search leverages natural language capabilities to transform ordinary searches into conversational interaction.

Alex: In 2024, we released five products for Hawk search that use AI language large language models to discover the products people want to buy to generate content to help people find websites.

Alex: And to learn behavioral trends that drive sales for our customers.

Alex: The Hot search rapid UI framework allows our customers to launch in just days featuring a gen AI component that seamlessly integrate smart response into search interfaces. It also enabled the customization of agents AI agents to match brand talent and <unk>.

Alex: Powering merchandisers to fine tune responses to meet specific customer needs.

Alex: Additionally, we launched conversational search which is powered by generative AI conversational search Leverages natural language capabilities to transform ordinary searches in the conversational interactions.

Operator: Natural Language Processing, NLP, is used to understand the intent and phrasing to deliver accurate, meaningful search results. and then to ask clarifying questions to further refine those results so that customers can more quickly find the products that they want to buy.

Alex: Natural language processing NLP is used to understand the intent.

Alex: And phrasing to deliver accurate meaningful search results.

Alex: And then to ask clarifying questions to further refine those results so that customers can more quickly find the products that they want to buy.

Operator: This year, Hawk Search unveiled Multi-Site Management, MSM. MSM allows organizations to centrally manage multiple websites while providing local sites the flexibility to tailor content for their market. HawkeSearch is the only product discovery platform with this capability. And MSN gives us a strong competitive advantages with franchises, with chains, and with brand network. MSN is ideal for scenarios where multiple teams oversee numerous local sites, providing streamlined and efficient management of both local and global merchandising campaigns. We also introduced Smart Facets, which allow users to ask detailed, content-rich questions and then uses a large language model and generative AI to automatically set facets on the e-commerce site to filter search results.

Alex: This year Hock search unveil multi site management MSS.

Alex: MSM allows organizations to centrally manage multiple websites, while providing local sites that flexibility to tailor content for their markets.

Alex: <unk> searches the only product discovery platform with this capability and M. S. N gives us a strong competitive advantages with franchises with chains and with brand networks.

Alex: And then as soon as ideal for scenarios, where multiple teams overseeing numerous local sites, providing streamlined and efficient management of both local and global merchandising campaigns.

Alex: We also introduced smart facets, which allow users to ask detail rich.

Alex: Rich questions and then use it as a large language model and generative AI to automatically set SaaS, it's an e-commerce site to filter search results.

Operator: We announced a new smart response feature that analyzes PDF content and delivers specific answers to user questions. This innovation includes tools for extracting content from large PDF repositories and using generative AI to create helpful search features, such as thumbnails of PDFs, summaries of pages within each PDF, and extraction of other important metadata, including file names and categorization. Finally, we announced an enhancement of integrating keywords and concept search into a unified intelligent search bar, which will be known as the Unified Search. Unified Search is part of Bridgeline's Agentic AI project, and its collaboration with Salesforce.com's AgentForce initiative emphasizes advanced automation and seamless integration with intelligent This innovation combines HawkSearch's precise keyword search with the natural language processing capabilities of ConceptSearch, delivering faster and more relevant results to improve customer experiences and drive engagement.

Alex: We announced a new smart response feature that analyzes PDF content and deliver specific cancers to user questions. This innovation includes tools for extracting content from large PDF repositories and using generative AI to create helpful. Search features such as thumbnails of PDF.

Alex: Summaries of pages within each PDF and extraction of other important metadata, including file names that categorization.

Alex: Finally.

Alex: We announced an enhancement of integration integrating keywords and concepts search into a unified intelligent search bar, which will be known as the unified search.

Alex: Unified searches part of bridge slides agenda AI project.

Alex: And its collaboration with Salesforce Dot Com agent Force initiative emphasizes advanced automation and seamless integration with intelligent agents.

Alex: This innovation combines hog searches precise keyword search with a natural language processing capabilities of concept search delivering faster and more relevant results to improve customer experiences and drive engagement.

Operator: Two important platform partners that we expect to continue to generate new customers for HawkeSearch are Optimizely and BigCommerce. BigCommerce is promoting HawkSearch ahead of all of the other search providers on the first page of its App Store providing tens of thousands of BigCommerce customers the ability to upgrade to HawkSearch's AI technology. Fox Search offers a one click install for Optimizely and is recognized by Optimizely as a top paid app in their app store. FoxSearch is now uniquely positioned to improve site search for more than 1,000 optimizely configured commerce customers with several already purchasing licenses.

Alex: Two important platform partners that we expect to continue to generate new customers for hawk search or optimizing and big commerce.

Alex: Big Commerce is promoting Hawks surge ahead of all of the other search providers and the first page of its app store, providing tens of thousands of big commerce customers the ability to upgrade to Hawk searches AI technology.

Alex: Search offers a one click install for optimized Lee and is recognized for optimized Lee as a paid app in their app store.

Alex: Fox searches now uniquely positioned to improve site search for more than a thousand optimizing configured commerce customers with several already purchasing licenses.

Operator: ParkSearch AI was showcased at OptiCon 2024 in San Antonio, Texas just last month. We also partnered with the system integrator and optimized the Expert XEngage for an optimized lead connector, which leads to even more sales. In the quarter, we announced a leading distributor of fasteners and industrial supplies to the selected Hawk Search to enhance their on-site capabilities. This distributor, the first lead from our partner Xengage, will use the Xengage XConnect connector for Hawk Search to power their product discovery on the optimizing platform. Furthermore, HawkeSearch was named Mobleco Partner of the Year. Mobleco's integration of HawkeSearch's AI capabilities enhances mobile engagement for distributors, optimizing real time shopping experiences and increasing customer retention.

Alex: Oxford AI was showcased at <unk> 2024 in San Antonio, Texas, just last month.

We also partnered with the system integrator and optimize the expert ex engaged for an optimized Lee connector, which leads to even more sales in the quarter, we announced a leading distributor of fasteners and industrial supplies of the selected Hawks search to enhance their onsite capabilities. This.

Alex: Peter.

Alex: First lead from our partner <unk> engaged we'll use the X engage X connect connector for Hawk search to power their product discovery on the optimizing platform.

Alex: Furthermore, <unk>.

Alex: <unk> was named mobile co partner of the year Mobile code integration of Hawk searches AI capabilities enhances mobile engagement for distributors optimizing real time shopping experiences and increasing customer retention. This collaboration allows distributors to provide a personalized customer experience.

Operator: This collaboration allows distributors to provide a personalized customer experience, leading to increased revenue and a stronger market. We also partnered with Product Genius Technology, a leading provider of innovative solutions with decades of experience in the fastener industry. where we'll partner with HawkSearch and provide patented search technology to enhance customer engagement and drive sales by simplifying the search, sort and display of complex product catalogs, especially those in the fastener end Bridgeline has partnered with Human Element, a leading commerce services agency will partner with HawkSearch to expand its offerings for B2B and B2C merchants to include AI powered search technology.

Alex: The increased revenue and a stronger market position.

Alex: We also partnered with product genius technology, a leading provider of innovative solutions with decades of experience in the fastener industry.

Alex: We will partner with HOK search and provide search technology to enhance customer engagement and drive sales by simplifying the search sort and display a complex product catalogs, especially those in the fastener industry.

Speaker Change: <unk> has partnered with human element, a leading commerce services agency will partner with Hog search to expand its offerings for b to B and B to C. Merchants to include AI powered search technology and the partnership gives Adobe Commerce previously magenta.

Operator: And the partnership gives Adobe Commerce, previously Magento, BigCommerce, and Shopify platform users easy access to HawkSearch AI powered Our leadership in AI has resulted in record sales and given us a pipeline for a great 2025.

Speaker Change: Big Commerce, and Shopify platform users easy access to Hawk search AI powered search.

Speaker Change: Our leadership in AI has resulted in record sales and given US a pipeline for a great 2025 <unk>.

Ari: This time, I'd like to turn the call over to our Chief Financial Officer, Tom Windhausen.

Tom Warehousing: This time I'd like to turn the call over to our Chief Technology, Our Chief Financial Officer, Tom Warehousing.

Thomas Windhausen: Tom? Thanks, Ari.

Thomas Windhausen: I'll provide an update of our financial results for the fourth quarter of fiscal 2024, which ended September 30th. Total revenue for the quarter ended September 30th, 2024 was $3.9 million compared to $3.8 million in the prior year period. Going into each component of revenue, our subscription license revenue, which is comprised of SAS licenses, maintenance and hosting revenue, for the quarter ended September 30th, 2024 was 3.0 million compared to 3.1 million in the prior year period. As a percentage of total revenue, subscription license revenue was 78% of total revenue for the quarter ended September 30th, 2024.

Tom Warehousing: Thanks, sorry, I'll provide an update of our financial results for the fourth quarter of fiscal 2024, which ended September 32024.

Tom Warehousing: Total revenue for the quarter ended September 30th 'twenty 'twenty four it was $3 9 million compared to $3 8 million in the prior year period.

Tom Warehousing: Going into each component of revenue our subscription license revenue, which is comprised of SaaS licenses maintenance and hosting revenue for the quarter ended September 32024 was 3.0 million compared to $3 1 million in the prior year period.

As a percentage of total revenue subscription license revenue was 78% of total revenue for the quarter ended September 32024.

Thomas Windhausen: Services revenue was $800,000 for the quarter on September 30, 2024, as an increase from $700,000 in the prior year, fourth quarter. As a percentage of total revenue, services revenue accounted for 22% of total revenue for the quarter ended September 30th, 2024. Our cost of revenue was $1.2 million for the quarter ended September 30, 2024, remaining consistent with $1.2 million in the prior year period. And as a result, our gross profit was $2.7 million for the quarter ended September 30, 2024, as compared to $2.6 million in the prior year period. Our overall gross margin was 69% for the quarter ended September 30, 2024, compared to 68% in the prior year period.

Tom Warehousing: Services revenue was 800000 for the quarter on September 30 of 2024, an increase from 700000 in the prior year fourth quarter.

Tom Warehousing: Scientists of total revenue services revenue accounted for 22% of total revenue for the quarter ended September 32024.

Tom Warehousing: Our cost of revenue was $1 2 million for the quarter ended September 32024 remaining consistent with $1 2 million in the prior year period and as a result, our gross profit was $2 7 million for the quarter ended September 32024, as compared to $2 6 million in the prior year period.

Tom Warehousing: Our overall gross margin was 69% for the quarter ended September 32024, compared to 68% in the prior year period.

Thomas Windhausen: Our subscription license gross margins were 72% for the quarter and September 30th, 2024, compared to 73% in the prior year period, and our services gross margins were 58% for the quarter and September 30th, 2024, compared to 46% for the same period in 2023.

Tom Warehousing: Our subscription license gross margins were 72% for the quarter at September 30th 2024, compared to 73% in the prior year period, and our services gross margins were 58% for the quarter ended September 32024, compared to 46% for the same period in 2023.

Thomas Windhausen: Moving to operating expenses, our operating expenses were $3.1 million for the quarter ended September 30, 2024, compared to $10.8 million in the prior year. The prior year period operating expenses include a $7.5 million goodwill impairment charge. Moving below OPEX, a change in fair value of our liability classified warrants resulted in a non-cash loss of $5,000 for the quarter compared to a non-cash gain of $214,000 in the prior year. And our gap net loss was $0.4 million for the fiscal year ended September 30, 2024, compared to a net loss of $8.1 million in the prior year period, which included the impact of $7.5 million of critical impairment.

Moving to operating expenses, our operating expenses were $3 1 million for the quarter ended September 30 of 2024 compared to $10 8 million in the prior year period the.

Tom Warehousing: The prior year period, operating expenses, including $7 5 million goodwill impairment charge.

Tom Warehousing: We will be below Opex, a change in fair value of our liability classified warrants resulted in a noncash loss of $5000 for the quarter compared to a noncash gain of 214000 in the prior year period.

Tom Warehousing: And our GAAP net loss was zero point $4 million for the fiscal year ended September 30th 2024, compared to a net loss of $8 1 million in the prior year period, which included the impact of $7 5 million.

Thomas Windhausen: Justin Ibena for the quarter and at September 30, 2024 was $5,000 compared to negative $192,000 for the prior year comparison.

Tom Warehousing: Their mix.

Tom Warehousing: EBITDA, our adjusted EBITDA for the quarter ended September 30th 2024 was 5000 compared to a negative 192000 for the prior year comparable period.

Thomas Windhausen: Moving to our balance sheet. At September 30th, 2024, we had cash of $1.4 million, a $200,000 increase from June 30th, 2024. And at September 30th, 2024, our accounts receivable was $1.3 million. Our total debt outstanding as of September 30, 2024 was 471,000 euros for approximately 526,000 U.S. The weighted average interest rate was approximately 4.4% with principal payments due through 2020. We have no other debt or remaining earnouts from any previous act.

Tom Warehousing: Moving to our balance sheet at September 30th 2024, we had cash of $1 4 million a 200000 increase from June 32024, and at September 32020 for our accounts receivable was $1 3 million.

Tom Warehousing: Our total debt outstanding as of September 32024 was 471000 euros or approximately 526000 U S T.

Tom Warehousing: Average interest rate was approximately 4.4% with principal payments due through 2028.

Tom Warehousing: We have no other debt remaining earn outs from any previous acquisitions.

Thomas Windhausen: And as of September 30th, 2024, our total assets were $15.6 million, and our total liabilities were $5.6 million. Finally, to give an update on our cap table, at September 30, 2024, our up cap table included 10.4 million outstanding shares, 39,000 shares from a Series C preferred stock, 800,000 warrants and 2.1 million options. In September 2024, nearly 900,000 warrants whose exercise price was $4 expired. The remaining 100,000 warrants consists primarily of 180,000 warrants with a $2.85 exercise price, which expire in May and 592,000 warrants for the $2.51 exercise price, which expired in November 2026.

Tom Warehousing: Acquisitions.

Tom Warehousing: As of September 30th 2024, our total assets were $15 6 million and our total liabilities were $5 6 million.

Tom Warehousing: Finally to give it up the our cap table at September 32024, or up cap table included $10 4 million outstanding shares 39000 shares from our series C preferred stock 800000 warrants and $2 1 million options in September 2020 for nearly 900000 warrants with exercise prices $4 expired.

Tom Warehousing: The remaining 800000 warrants consist primarily of 180000 warrants with a $2, 85% extra exercise price, which expire in May 2026, and 592000 warrants with a $2 51 extra stock exercise price, which expire in November 2026.

Thomas Windhausen: Bridgeline looks forward to continued growth and success in fiscal 2025 and beyond as we continue our focus on revenue growth, product innovation, customer success and delivering shareholder value.

Tom Warehousing: Bridge and looks forward to continued growth and success in fiscal 2025 and beyond as we continue our focus on revenue growth product innovation customer success and delivering shareholder value.

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

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

Operator: Operator? Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. Please stand by while we compile the Q&A.

Tom Warehousing: Operator.

Tom Warehousing: Thank you as a reminder to ask a question you will need to press star one one on your telephone to remove yourself from the queue. You May Press Star one one again, please standby, while we compile the Q&A roster.

Howard Halpern: Our first question comes from the line of Howard Halpern of Taglik Brothers. please go ahead. graduation on the quarter and finishing up on a strong note for the year.

Speaker Change: Our first question comes from the line of Howard Halpern of <unk> Brothers. Please go ahead Howard.

Howard Halpern: Gratulation on the quarter and finishing up on a strong note for the year. Thank.

Howard Halpern: Thank you, Howard. I guess now with all the different partnerships in place that you know agencies and such, we're...

Art: Thank you art.

Speaker Change: I guess now with.

Speaker Change: With different partnerships in place that agencies and such.

Operator: How do you imagine you are on the runway for a walk-walk search? beginning to tap into a potentially huge customer base. You could give some color for that over the next couple of weeks. Right, yeah. So Hawk Search is I talk such as well over half our revenue. A lot of that revenue is partner driven. Most of the sales are on the B2B side. And I think that we differentiate most strongly B2B, although we have, you know, Packer dot com is a great example of a B2C enterprise. So we're going to continue to see a lot of growth there.

Speaker Change: Yes.

Speaker Change: Would you imagine you are on the runway walk searches it really just beginning.

Speaker Change: Beginning to tap into potentially huge customer base, if you could give us some color for that over the next couple of years right, yes, So hock searches.

Speaker Change: Hi.

Speaker Change: I talk.

Speaker Change: Such as well over half of our revenue a lot of that revenue is partner driven most of the sales are on the b to b side, and I think that we differentiate most strongly b to b, although we have Hewlett Packard that kind of is a great example of the BDC.

Speaker Change: So we're going to continue to see a lot of growth there the big thing Thats going to happen is that because of all the investments that we've made in artificial intelligence and a recognition.

Operator: The big thing that's going to happen is that because of all the investments that we've made in artificial intelligence and the recognition from analysts like Gartner and partners like Optimizing and BigCommerce and our leadership in the A.I. area. We expect to start seeing continued acceleration and growth. We nearly doubled our sales volume year over year in terms of annual contract value and the size of each of the contracts nearly doubled as well. In terms of like monthly recurring revenue. So that's going to continue.

Speaker Change: Analysts like Gartner and our.

Speaker Change: Partners like optimizing big Commerce, and our leadership in the AI area. We expect to start seeing continued acceleration in growth, we nearly doubled our sales volume year over year in terms of annual contract value and the.

Speaker Change: The size of each of the contracts nearly doubled as well.

Speaker Change: In terms of like a monthly recurring revenue.

Speaker Change: So that's going to continue the biggest challenge that we have on the growth side is overall sales and marketing budget, we need to find ways to put more and more dollars in.

Operator: The biggest challenge that we have on the growth side is overall sales and marketing budget. We need to find ways to put more and more dollars into lead generation because the return on investment that we're seeing in marketing is outstanding with less than 20 months CAC payback. I think that's world-class and we're really limited primarily just by our ability to inject more dollars into that funnel. Okay.

Speaker Change: To lead generation because the return on investment that we're seeing in marketing is outstanding with less than 20 months CAC payback.

Speaker Change: I think that's world class and we're really limited primarily just by our ability to inject more dollars into that model.

Operator: And, and for, you know, Hawk Search being, you know, one of the big leaders, are you, and let me try to phrase this correctly with, are you a customer's customer? So we're seeing increased satisfaction when they go to, your customer's websites that are powered by WalkSearch. Is there some sort of measurable that you're seeing out there that benefits your customers? We are, we are. So, um, a big part of our strategy is to focus specifically on driving our customers revenue. That's the most meaningful metric for them. It's one that they are all monitoring very carefully and is Part of our strategy also because it results in the fastest sales cycle when we can demonstrate and we are seeing customers that are better than doubling better than doubling their own conversion rate.

Speaker Change: Okay.

Speaker Change: And for <unk>.

Speaker Change: <unk> being one of the Big leaders are you and let me try to phrase this correctly.

Speaker Change: Your customers' customers.

Speaker Change: Seeing increased satisfaction when they go to I guess your your customers' websites that are powered by walk searches there some sort of measurable that youre seeing.

Speaker Change: Out there.

Benefits to your customers.

Speaker Change: We are so.

Speaker Change: <unk>.

Speaker Change: A big part of our strategy.

Speaker Change: Is to focus specifically on driving our customers' revenue that's the most meaningful metric for them. It's one that they are all monitoring very carefully and.

<unk>.

Speaker Change: Part of our strategy also because it results in the fastest sales cycle when we can demonstrate improvement.

Speaker Change: And we are seeing customers that are better than doubling better than doubling their own conversion rates.

Operator: and are also. One of the great things about the B2B space for us is that There's a lot of turnover right now in terms of technical platforms. That space has been a laggard. They're realizing that the next generation is embracing online purchases as opposed to telephonic or fax, which still happens in the B2B world, especially manufacturing. And because they're now willing to make that investment, they are comparing us with competitors. They're taking a hard look at all certs. products in that space and requiring us to really demonstrate that value. So we're increasing the revenue significantly.

Speaker Change: Okay.

Speaker Change: Our also.

Speaker Change: Increasing their average order value significantly one of the great things about the b to B space for us is that.

Speaker Change: There's a lot of turnover right now in terms of technical platforms that space has been a laggard there realizing that the next generation is embracing online purchases as opposed to.

Speaker Change: Telephonic or.

Speaker Change: Which still happens in the BDC world, especially in manufacturing.

Speaker Change: Cause there now well to make that investment they are comparing us with competitors. They are taking a hard look at.

Speaker Change: All search.

Speaker Change: <unk> in that space and requiring us to really demonstrate.

Speaker Change: That value so.

Operator: And Gartner in particular is promoting us and a lot of the manufacturers and distributors that we're winning our subscribers to Gartner and are reading that report seeing the return on investment.

Speaker Change: We are increasing their revenue significantly.

Speaker Change: Gartner in particular is promoting us and a lot of the manufacturers and distributors that were winning are subscribers to Gartner had a reading that report seeing the return on investment.

Operator: Okay, and just one last one because I did see it in the press release and you had a press release on it. You know, I know it's not as big as hawk search, but You know, is WooRank still an important tool out there and Well, WooRank is very tightly integrated with HawkSearch now. So you see consolidated HawkSearch and WooRank sales, where WooRank is actually powering the interface for HawkSearch, is powering the landing pages that HawkSearch is automatically able to generate, and becomes an add-on to the license when we make a HawkSearch sale. So we're often talking about HawkSearch deals, but they actually have WooRank as part of the license that are inside that sale itself.

Speaker Change: Okay, and just one last one on that because I did see in the press release and you had a press release on it.

Speaker Change: I know, it's not as big as walk search but.

Speaker Change: Yes.

Speaker Change: Still important.

Speaker Change: Tool out there and beneficial to your future.

Well, we'll rank is is very tightly integrated with Hawk search now so you see consolidated Hawk search and will rank sales, where we rank is actually powering the interface for Hawk search is powering the landing pages that hawk searches automatically able to generate and becomes an.

Speaker Change: Add on to the license when we make a hawk search sale. So we're often talking about hot search deals, but they actually have will rank as part of the the license that are inside that sells itself is certainly grew rank. If you were to line item that is significantly smaller than if you were to line item all the other technologies inside of <unk>.

Operator: It's certainly, WooRank, if you were to line item that is significantly smaller than if you were to line item all the other technologies inside of HawkSearch. However, we have strategically broken HawkSearch into being really a suite of products as opposed to a single product that allows us to quickly get into customers and upsell them along the way with WooRank, with smart search, with smart response, conversational search, smart facets, and so forth. This a la carte model is allowing us to reduce our sales cycle. Our sales cycle is now 105 days from the first point in which we receive an email through the whole marketing stage and the sales cycle and then closing and winning or losing a deal.

Speaker Change: <unk> search however, we have strategically broken hawk search into being really a suite.

Speaker Change: <unk> products as opposed to a single product that allows us to quickly get into customers and upsell them, along the way, which will rank with smart search with smart response conversational search smart facets and so forth. This ala carte model is allowing us to reduce our sales cycle. Our sales cycle is now.

Speaker Change: 105 days from the first point in which you receive an E mail through the whole marketing stage in the sales cycle, and then closing and winning or losing a deal.

Operator: and the CAC payback is much lower. So selling into our own customer base is part of our strategy and it reduces our overall market.

Speaker Change: And the cash payback is much lower so selling into our own customer base as part of our strategy and it reduces our overall marketing spend.

Operator: Okay, and just one last one. Of course, you know, the search and AI part of it is very important. I have you seen your customers? I know it's powered, you know, for their customers, but have you seen them try to use it internally to help their own sales force or their own productivity that your AI search capability? Yeah, that's not our primary use case. But we do have that we have, as an example, a pharmaceutical company that is using hawk search in order to manage internal documents about drugs that are going through different review processes and find information even when it's embedded deeply within a scanned PDF file.

Speaker Change: Okay, and just one last one.

Speaker Change: Because the search and AI part of it is very important.

Speaker Change: Have you seen your customers.

Speaker Change: No. It's powered for their customers, but have you seen them tried to use it internally to help their own sales force or their own productivity.

Speaker Change: AI search capabilities, yes, that's not our primary use case, but we do have that we have as an example.

Speaker Change: Our Masuda co company that is using hot search in order to.

Speaker Change: Manage internal document about drugs that are going through different review processes and find information even when it is embedded deeply within a scan.

Operator: We have a hospital that has information that is searched through hawk search. So we do have those but our target from a marketing perspective is where we have a direct impact on top line revenue. So although our search can do that, that's not what we're OK, OK, well, great.

Speaker Change: Scanned PDF file we have asked that all of that.

Sure.

Speaker Change: Thanks, Ken information that is searched through Hawk search so we do have those but our target from a marketing perspective is where we have a.

Speaker Change: A direct impact on top line revenue so although our search can do that.

Speaker Change: Not where we're focused.

Howard Halpern: Keep up the great work and I look forward to 2025. Have a happy. Happy New Year, Howard. Thank you.

Speaker Change: Okay, Okay, well, great keep up the great work and I look forward to 2025.

Happy New year happy New year Howard Thank you.

Per Jacobson: Once again, to ask a question, please press star 11 on your telephone. Our next question comes from the line of Per Jacobson. Your question, please, Per.

Speaker Change: Thank you once again to ask a question. Please press star one one on your telephone. Our next question comes from the line per Jacobson Quest.

Speaker Change: Question. Please.

Per Jacobson: I'm sorry, is this me? I, I can't hear.

Per Jacobson: I'm sorry is it me.

Speaker Change: Yes.

Per Jacobson: Hey, happy holidays, guys. Well, as usual, thank you. This has been terrific.

Speaker Change: Hey.

Speaker Change: Thank you.

Speaker Change: Happy holidays guys.

Thomas Windhausen: A couple of questions. The line cut out when Tom was giving the cash on hand number. Can you repeat that, Tom, please? Yeah, absolutely. At September 30th, we had cash on hand of $1.4 million, and that was approximately $200,000 increase from that at June 30th, so $1.4 million. And we are comfortable that that will take us to the foreseeable future, right? Correct.

Speaker Change: As usual thank you it's been terrific.

Speaker Change: A couple of questions. The line cut out when Tom was giving the cash on hand number can you repeat that please yes, absolutely at September 30, we had cash on hand of $1 4 million and that was approximately 200000 increase from that at June 30, So one formula.

Speaker Change: Alrighty.

Speaker Change: We are comfortable that that will take us to the foreseeable future.

Operator: Okay, thank you.

Speaker Change: Correct.

Operator: Can we can we can we get some color on the on the backlog? I mean, you know, what does it look like? And and, you know, how is that going to play out over the foreseeable period? you referring to the backlog in terms of signed contracts and forward going revenue from those contracts? No, I was talking about opportunity backlog, I guess, you know, what we have, we don't have that. Yeah.

Speaker Change: Okay. Thank you.

Speaker Change: Can be can be can we get some color on the backlog I mean.

Speaker Change: Yes.

Speaker Change: What does it look like.

Speaker Change: And how is that going to play out over the foreseeable period.

Speaker Change: You're referring to the backlog in terms of signed contracts and forward going revenue from those contracts.

Speaker Change: No actually I was talking about opportunity backlog I guess, we have been.

Operator: So, on the opportunity backlog, so we ended. fiscal 24 with nearly double the sales pipeline from what we started FY24. And that includes 186 opportunities that are sales qualified leads, which means that the prospective customer has shared budget, they've shared needs, they are communicating regularly back and forth with us. That's more than 3.6 million in annual contract value. So you can kind of multiply that by three, approximately $10 million in total contract value. And that's how we're kicking the year off. Most of those customers or prospective customers are in manufacturing and distribution. They're B2B customers.

Speaker Change: Yes, so on the opportunity backlog so we ended <unk>.

Speaker Change: Fiscal 'twenty four with nearly double.

Speaker Change: The sales pipeline.

Speaker Change: From what we started.

Speaker Change: Hi.

Speaker Change: FY 'twenty four.

Speaker Change: That includes a 186 opportunities that our sales qualified leads which means that the prospective customer has shared budget they've shared need they are communicating regularly back and worked with us that's more than.

Speaker Change: $3 6 million and annual contract value. So you can kind of multiply that by three approximately $10 million in total contract value and Thats, how were kicking the year off most of those customers or prospective customers.

<unk>.

Speaker Change: In manufacturing and distribution there are <unk> customers, we are extremely strong and electrical and and.

Operator: We are extremely strong in electrical and in plumbing distributors, which is a larger space than I would have thought before. And in fact, nine of the top 50 electrical distributors are currently customers. of ours are all referenceable customers. And that pipeline is pretty, has some pretty big names in the electrical distribution space. So we're expecting to continue to dominate that space.

Speaker Change: Our plumbing distributors, which is a larger space than I would've thought before and in fact nine of the top 50 electrical distributors are currently customers.

Speaker Change: Ours are all reference to both customers and that pipeline is pretty.

Speaker Change: Has some pretty big names in the electrical distribution space. So we're expecting to continue to dominate that space.

Operator: Do you expect that the 186, you know, qualified leads, that that will sort of be the measure going forward? Or do you expect that number will dip or go up or whatever over time? Right, it'll go up. So as leads come out of our pipeline, either because we win them or lose them, we have new leads coming in at a faster rate. And we're We're very much focused on what we call top of funnel marketing. So we're making some investments right now, in terms of being able to create a more targeted ideal customer profile, have automated outreach to that ICP, and automated nurturing for the first few stages, because this will allow us to just touch more people, we're seeing a good close race, we just want to expand that, and then we'll get our humans involved after the first few touches.

Speaker Change: Do you expect that 186.

Speaker Change: Qualified leads.

That will sort of be the.

Speaker Change: The make sure going forward do you expect that that number will go up or whatever over time right.

Speaker Change: It will go up so as leads come out of our pipeline either because we win them or lose them. We have new leads coming in at a faster rate and where.

Speaker Change: We're very much focused on what we call top of funnel.

Speaker Change: Marketing, so we're making some investments right now in terms of being able to create a more targeted ideal customer profile have automated outreach to that ICP.

Speaker Change: And.

Speaker Change: Automated nurturing for the first year stages because.

This will allow us to just touch more people, we're seeing a good close rates. We just wanted to expand that and then we will get our humans involved after the first few touches. So we'll continue to grow that pipeline, but in terms of the overall total addressable market, we're really not even scratching the surface and if you look at our two biggest partners.

Operator: So we'll continue to grow that pipeline. But in terms of the overall total addressable market, we're really not even scratching the surface. And if you look at our two biggest partners, Optimizely, which has 400 million in ARR, and Big Commerce, which has 300 million in ARR, those two platforms, we could, you know, they have 20% of their ARR in sales, and that would result in 8 million plus 60 million in sales. And that's just those two partners. Of course, we're selling a lot with Salesforce, and we're selling with Adobe Magento. And staying inside of those ecosystems is part of how we generate lots of leads at the top of the funnel, keep our own marketing expenses low, and build a reputation for references to help increase our close.

Speaker Change: Optimized Lee, which has $400 million in.

Speaker Change: Sure.

Speaker Change: And Big Commerce, which has $300 million in those two platforms, we could have 20%.

Speaker Change: They're <unk> and sales and that would result in.

Speaker Change: 8 million plus $60 million in sales and that's just those two partners of course, we're selling a lot with sales force and we are selling with Adobe magenta.

Speaker Change: Staying inside of those ecosystems as part of how we generate lots of leads at the top of the funnel keep our own marketing expenses low and build a reputation for references to help increase our close rate.

Operator: And when we engage with these prospects, and I assume that almost all of them is a competitive situation, right? So, when we engage, what is sort of our win rate at this point? Right. So, from what we call a sales qualified lead, and that's where we have had multiple inbound inquiries from a customer and they've stated need and budget, we're actually seeing a 20%, 2-0 close rate on those. And that's really driving our mentality of pushing lots and lots of leads into the funnel itself, because I almost feel like that close rate is too high.

Speaker Change: And when we engage with these prospects.

Speaker Change: I assume that almost all of them. It is a competitive situation right.

Speaker Change: So when we engage what is sort of a win rate at this point right now from what we call a sales qualified lead and Thats, where we have had.

Speaker Change: Multiple inbound inquiries from a customer and they stated need and budget, we're actually seeing a 20% to zero close rate and those and that's really driving our mentality.

Speaker Change: <unk>.

Speaker Change: We're pushing lots and lots of leads into the funnel itself because I almost feel like that close rate is too high I mean, I want to win every single deal, but I want to have so many leads in there that were having.

Operator: I mean, I want to win every single deal, but I want to have so many leads in there that we're having more at-bats, so to speak. So, we've got a very strong close rate. We need more leads into the top of the funnel.

Speaker Change: Having more at bats, so to speak so we've got a very strong close rate we need more leads into the top of the funnel and the reality is every league does cost money and we don't have a ton of money. So we need to find good ways to be able to generate more leads generate more money to buy more leads but also work through those.

Operator: And the reality is, is every lead does cost money and we don't have a ton of money. So, we need to find good ways to be able to generate more leads, generate more money to buy more leads, but to also work through those partner ecosystems and other low-hanging fruit to feed that tunnel without having to invest money that we don't.

Speaker Change: <unk> ecosystems.

Speaker Change: And other.

Speaker Change: Low hanging fruit to.

Speaker Change: Feed that tunnel without having to invest money that we don't have.

Operator: That's terrific. I really appreciate that.

Speaker Change: That's terrific I really appreciate that.

Operator: And well, can you give sort of a sense, just a sort of a general direction of how many of the sales are coming direct now? How many are floating through to partnership? What's the sort of the I don't know, by submission, what's the breakdown there? Yeah. So in terms of flowing from the partner itself, the partner actually providing us with the contact, that's about 25 percent. So one fourth of our deals are the result of us being at a conference like Opticon that we were in San Antonio last month. Or maybe it was October, actually, at a customer conference or them providing it directly to us.

Speaker Change: Can you give sort of a sense just sort of general direction of how many of the sales are coming direct now how many are floating true.

Speaker Change: Two partnerships, what's the sort of a bit.

Speaker Change: And I hope by some Michigan.

Speaker Change: What's the breakdown there, yes, so in terms of flowing from the partner itself the partner actually providing us with the contact.

About 25%. So one fourth of our deals are the result of us being at a conference like <unk> Com that we were in San Antonio last month or maybe it was October actually at the customer conference or them, providing it directly to us the other 75% always have a partner attached to them because all of our <unk>.

Operator: The other 75 percent always have a partner attached to them because all of our customers need one of our partners' platforms as part of their website. But that 75 percent is happening through a lot of them come from our website itself, from hawksearch.com. So Hawk is a brand name is really where we're investing and we're seeing leads come in through there. And we're also buying data lists and having outreach, including just invites to YouTube videos that we create, webinars. PDFs of case studies and things like that.

Speaker Change: <unk> need one of our partners' platforms as part of their website, but that 75% is happening through a lot of them come from our website itself from Hawk search Dot com. So hawk is a brand name is really where we're at.

Investing in we're seeing.

Speaker Change: Leads come in through there and we're also.

Speaker Change: Buying data lists and having outreach.

Speaker Change: Including just invites to Youtube videos that we create webinars.

Speaker Change: Yes.

Speaker Change: Pdfs of case studies and things like that.

Operator: Thank you.

Operator: Look, I think we are 12 to 18 months into the great Hawke Search AI experiment here, and I think it looks like it's going really well. So it's a bit of a mystery. I mean, we look at the company valuation relative to the healthy results and, you know, and the potential. It's just, do you have any ideas what it is that, you know, that is not liked about the company from the market's perspective? Because market, of course, equals capital, right? Of course. Yeah, yeah, exactly.

Speaker Change: Thank you Hey look.

Speaker Change: I think we are 12 to 18 months into the great Hulks search AI experiment.

Speaker Change: I think it looks like it's going really well.

Speaker Change: So it's a bit of a mystery.

Speaker Change: If we look at.

Speaker Change: The company valuation relative to to help you resolve.

Speaker Change: Potentially.

Speaker Change: Do you have any idea of what it is that.

Speaker Change: That is not liked about the company from the market perspective, because market of course equals capital wide of course, yes, yes, exactly if we have different stock price I would not be hesitating to promote injected capital to feed the sales funnel, but it's Dave.

Operator: If we had a different stock price, I would not be hesitating to promote injecting capital to feed the sales funnel. But if today's stock price, I think that would be dilutive and not the right thing to do. And our stock has, we have a poor history with the stock. I think that that has, and capital raised back in 2019 that produced a bunch of warrants and shorting and other things that may have created structural problems. But probably also our overall size is a challenge for our stock as well, just the overall revenue. We're $16 million company.

Speaker Change: <unk> price.

Speaker Change: I think that would be dilutive and not the right thing to do.

Speaker Change: Our stock has.

Speaker Change: We have a.

Speaker Change: Poor history with the stock.

Speaker Change: I think that that has.

Speaker Change: And our capital raise back in 2019 that produced a bunch of <unk>.

Speaker Change: Warrants that.

Speaker Change: Shorting and other things that may have created structural problems, but probably also our overall size is.

Speaker Change: Is a challenge for for our stock as well just the overall revenue.

Operator: We are the AI leader in product search. We've been doing AI for a long time. And we've added a ton of innovation, we have to get the word out there and rectify that multiple. But it's a great buy, because I'm confident that this company is worth a lot more than where it's trading at today.

Speaker Change: On the $16 million of company we are.

Speaker Change: The AI leader and product search we've been doing AI for a long time and we've added a ton of innovation, we have to get the word out there.

Speaker Change: Rectify that multiple but it's a great buy because I'm confident that this company is worth a lot more than where it's trading at today.

Thomas Windhausen: Tom, can you tell me, of the remaining wands, what is the strike price of that thing, or what's the exploit dates on those? Yep, so there's $800,000 remaining. $180,000 of those have a $2.85 exercise price expiring in May 26, and $592,000, $2.51, expiring November 26. So of those $800,000 between $2.51 and $2.85 and between May 26 and November.

Speaker Change: Yes, I mean, obviously I agree.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Hey, Joe.

Speaker Change: Okay.

Speaker Change: Can you tell me.

Speaker Change: The remaining one so what is the strike price of the thing on what's the exposure data flows.

Speaker Change: Yes, 800000 remaining 180000 of those are of $2 85 exercise price expiring in May 26, and $592002 51 <unk>.

Speaker Change: Expiring November 26, so although the 800000 between $2 51, and $2 85 and between May 26 in November 26.

Operator: Okay, thank you. So realistically, I mean, I mean, these are gonna trickle for sure. Okay. All right.

Speaker Change: Okay. Thank you so so realistic.

Speaker Change: These are going to trigger for sure okay.

Operator: I really appreciate it. I want to thank everybody for what they have done over the last year. It has been impressive to watch. I really appreciate it.

Speaker Change: I really appreciate it and I want to thank everybody for what they have done over the last year. It has been impressive to watch.

Operator: You know, and again, happy holidays. Happy holidays. Thank you. Really appreciate your support. Thank you.

Speaker Change: Really appreciate it.

Speaker Change: And again happy holidays.

Speaker Change: The holidays. Thank you can't really appreciate your support.

Speaker Change: Thank you.

Speaker Change: Yes.

Operator: I would now like to turn the conference back to management for closing remarks. Okay, perfect.

Speaker Change: Thank you I would now like to turn the conference back to management FERC closing remarks.

Operator: Well, everybody, happy holidays. Thank you for joining us today. We really appreciate continued support of all of our customers, of our partners, and of course, our shareholders. We're excited about the business, everything that we're doing with AI. I mean, I'm custom built for this stuff. I have a PhD in AI, I've been living it most of my life and things are getting real. And we're adding tangible value for our customers with this and it's a very exciting time.

Speaker Change: Great.

Speaker Change: Perfect.

Speaker Change: Everybody happy holidays. Thank you for joining US today, we really appreciate continued support of all of our customers of our partners and of course, our shareholders. We're excited about the business everything that we're doing with AI.

Speaker Change: Custom built for this stuff at PST.

Speaker Change: Most of my life and things are getting real and we're adding tangible value for our customers with us and it's a very exciting time.

Operator: We look forward to speaking with you again on our first quarter fiscal 25 conference call, which will be in February of 2025. Until then, be well, happy holidays.

Speaker Change: Look forward to speaking with you again on our first quarter fiscal 'twenty five conference call, which will be in February of 2025.

Speaker Change: Then b well happy holidays.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. Thanks for watching!

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].