Q1 2025 Bridgeline Digital Inc Earnings Call
Good day, everyone and welcome to the bridge line Digital's first quarter 2025 earnings call.
Operator: Good day, everyone, and welcome to the Bridgeline Digital First Quarter 2025 earnings call. At this time, all participants have been placed on a listen-only mode.
At this time, all participants have been placed on a listen only mode.
Operator: If you have any questions or comments during the presentation, you may press star 1 on your phone to enter the question queue at any time, and we will open the floor for your questions and comments after the presentation.
You have any questions or comments during the presentation you May press star one on your phone to enter the question queue at any time and we will open the floor for your questions and comments after the presentation.
Operator: It is now my pleasure to turn the floor over to your host, Thomas Windhausen. Sir, the floor is yours.
Speaker Change: It is now my pleasure to turn the floor over to your host Thomas warehousing, Sir the floor is yours.
Thomas Windhausen: Thank you and good afternoon everyone. Thank you for joining us today. My name is Thomas Windhausen. I'm the Chief Financial Officer of Bridgeline Digital, Inc. I'm pleased to welcome you to our fiscal 2025 first quarter conference call. On the call with us today is Ari Kahn, Bridgeline's President and CEO. We'll begin the call with a discussion of our business highlight. I will then update you on our financial results for the quarter.
Speaker Change: Thank you and good afternoon, everyone. Thank you for joining US today. My name is Thomas when housing I'm, the Chief financial Officer of Frictionless digital ink.
Speaker Change: I'm pleased to welcome you to our fiscal 2025 first quarter conference call.
Speaker Change: With us today is already Cod bridge lines, President and CEO will begin the call with a discussion of our business highlights.
Speaker Change: I will then update you on our financial results for the quarter, we will conclude by taking questions.
Thomas Windhausen: We will conclude by taking questions.
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 results or events. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The internal projections and beliefs upon which we base our expectations today may change over time, and we expressly disclaim and assume no obligation to inform you if they do.
Speaker Change: Before we begin I'd like to remind listeners that during this conference call comments that we make regarding bridge line that are not historical facts are forward looking statements within the meaning of section 27 of the Securities Act of 1933 and section 21 E of the Securities Act of $19 34, and are subject to risks and uncertainties that could cause such statements to differ.
Speaker Change: Tier Lee from actual future results or events.
Speaker Change: These statements are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Speaker Change: Eternal projections and beliefs upon which we base our expectations today may change overtime, and we expressly disclaim and assume no obligation to inform you if they do so.
Thomas Windhausen: The results 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 form-looking statements made today. For more detailed information about these factors and other risks that may have an impact on our business, please review the reports and documents filed from time to time by Bridgeline Digital with the Securities and Exchange Commission. Also, please note that on the call this afternoon, we will discuss some non-GAAP financial measures when commenting on the company's financial performance.
Speaker Change: The results. We report today should be not should not be considered as an indication of future performance.
Speaker Change: There's an economic business competitive technological regulatory and other factors could cause the bridge lines actual results to differ materially from those expressed or implied by the projections or forward looking statements made today.
Speaker Change: For more detailed information about these factors and other risks that may have an impact on our business. Please review the reports and documents filed from time to time by bridge Lin digital with the Securities and Exchange Commission.
Speaker Change: Also please note that on the call. This afternoon, we will discuss some non-GAAP financial measures when commenting on the company's financial performance. We provide a reconciliation of our GAAP financials to these non-GAAP measures in our earnings release.
Thomas Windhausen: We provide a reconciliation of our GAAP financials to these non-GAAP measures in our earnings report.
Thomas Windhausen: you can obtain a copy of the earnings release by visiting our website.
Speaker Change: A copy of the earnings release by visiting our website.
Ari Kahn: And now I'd like to turn the call over to Ari Kahn, Bridgeline's President and CEO. Ari?
Speaker Change: I like to turn the call over to Ari Kahn rig lines, President and CEO Alright. Thank you Tom good afternoon, everyone.
Ari Kahn: Thank you, Tom.
Ari Kahn: Good afternoon, everyone. In Q1 of FY25, Bridgeline signed 28 license sales, adding $2.7 million in new contracts and $800,000 in annual contract value. Our sales cycle is now only 105 days with an 18% win rate on qualified leads, world-class number.
Speaker Change: In Q1 of FY 'twenty, five <unk> signed 28 license sale, adding $2 7 million in new contracts and 800000 in annual contract value.
Speaker Change: Our sales cycle is not only 105 days with an 18% win rate on qualified leads world class numbers.
Ari Kahn: This means it's time to invest in sales. The market is hot, our products outperform our competition. Last year, we released eight AI-based products that are blowing the competition away, garnering strong analyst support and delivering key value to our customers. We invested in R&D, and it has paid off. We are the leader in AI-powered e-commerce search. Our growth is limited only by our marketing budget, not by market size, not by customer demand, not by competition.
Speaker Change: This means it's time to investment sales the market is hot our products outperform our competition last year, we released eight AI based products that are flowing the competition away garnering strong analyst support and delivering key value to our customers. We invested in R&D and they just paid off we are the leader.
Speaker Change: And AI powered ecommerce search our growth was limited only by our marketing budget not by market size by customer demand not by competition now is the time to reallocate resources from R&D to sales and marketing. It's time to go all in on growth or revenue can broadly broadly be broke.
Ari Kahn: Now is the time to reallocate resources from R&D to sales and marketing. It's time to go all in on growth.
Ari Kahn: Our revenue can broadly be broken into two product groups. core revenue comes from our Hawk Search product and its e-commerce 360 embedding, including Wooray. This revenue is $2.1 million with double-digit growth, net revenue retention of 107 percent, cash payback better than 20 months. Essentially, all of our new sales are core products.
Speaker Change: And then the two product groups.
Speaker Change: Our core revenue comes from our Hot search products added E Commerce, 360, embedding including will wreck.
Speaker Change: This revenue is $2 1 million with double digit growth net revenue retention of 107% CAC payback better than 20 months.
Speaker Change: Essentially all of our new sales of our core products.
Ari Kahn: Our non-core products that represent the balance of our revenue include most of our professional services. And these products generate strong growth margins with minimal operating expenses, and they help fund growth in core.
Speaker Change: Core products that represent the balance of our revenue.
Speaker Change: Include most of our professional services and these products generate strong gross margins with minimal operating expenses and they help fund growth and core.
Ari Kahn: With momentum in sales, a leading position in AI, and a market shifting to adopt our AI products, we've made bold company-wide changes to invest more into sales and marketing and seize this opportunity. These changes go all the way to the board level, including the addition of healthcare industry veteran and business development expert Michael Ketzlack, whose expertise and network will help Bridgeline expand into additional markets.
Speaker Change: With momentum and a sale a leading position in AI and the market shifting to adopt our AI product. We've made bold company wide changes to invest more in sales and marketing and seize the opportunities. These changes go all the way to the board level, including the addition of health care industry veteran and business.
Speaker Change: <unk> expert Michael kept black, whose expertise and network will help bridge line expand into additional markets.
Ari Kahn: I recently had the acronym FOMO, Fear of Missing Out, on my mind. That's exactly the mindset driving our growth strategy. With the market shifting fast, we're seizing the moment to expand our customer base. Our board and team are in full growth mode, and I'm committed to investing in new customer wins to ensure that we stay ahead.
Speaker Change: I recently had the acronym Pall mall fear of missing out on my mind, that's exactly the mindset driving our growth strategy with the market shifting path, we're seizing the moment to expand our customer base, our board and team are full growth mode, and I'm committed to investing in new customer wins to ensure that we stay ahead.
Speaker Change: Yeah.
Ari Kahn: Let's take a look at Q1 sales, the second best sales quarter in the company's history. We sold 28 licenses for $2.7 million in total contract value. adding $800,000 in ARR.
Speaker Change: Let's take a look at Q1 sale the.
Speaker Change: Our second best sales quarter in the company's history.
Speaker Change: Sold 28 licenses for $2 7 million in total contract value.
Speaker Change: Adding 800000 and a R R.
Ari Kahn: Here's a few of our new customers. Brady Plus, a leading B2B e-commerce provider is leveraging Hawk Search AI to improve its search functionality and deliver more seamless digital experiences. John Dodge, a major supplier in janitorial and restoration industry. has also integrated HawkSearch to enhance product discovery and optimize site navigation. Aftermarket Auto Parts Alliance is using hot search to stream search across this extensive product catalog. Montefiore Health System has chosen HawkSearch to power a more intuitive and efficient search experience for its users. The leading supplier of plumbing industry has chosen HawkSearch SmartSearch to power their product discovery experience.
Speaker Change: Here's a few of our new customers.
Speaker Change: Brady plot, a leading <unk> e-commerce provider is leveraging <unk> AI to improve it search functionality and deliver more seamless digital experience.
Speaker Change: Jon does a major supplier in janitorial and respiratory a restoration industry.
Speaker Change: It's also integrated hot search to enhance product discovery and optimized site navigation.
Speaker Change: Aftermarket auto parts alliance is using hog searched extreme surge across his extensive product catalog.
Montefiore Health system has chosen harte hanks to power more intuitive and efficient search experience for its users.
Speaker Change: Legally health, a leading supplier of plumbing industry. It shows at Hawk search smart search to power their product discovery experience.
Ari Kahn: The plumbing supplier will leverage SmartSearch's visual and concept search features to enhance customer experience and drive growth. Another major supplier in the plumbing industry successfully launched HawkSearch to power its online search. All this, not to mention expanded subscription of a Fortune 100 consumer electronics customer who is powering over a million dollars an hour in online sales with HawkSearch.
Speaker Change: Plumbing supplier will leverage smart search and visual and concept search features to enhance customer experience and drive growth and other major supplier in the plumbing industry.
Exceptionally large fox surge to power its online search all of this not to mention expanded subscription of a portion 100 consumer electric tronic customer who is powering over a million dollars hour and online sales will walk through.
Ari Kahn: This momentum positions us for continued growth in 2025, as we expand our reach in B2B eCommerce and healthcare providing cutting edge AI search solutions to drive revenue and enhance customer engagement. Our 2024 investments in R&D have opened the door to partners whose customers need the latest AI-powered e-commerce tools. Our partners bring us customers thanks to our expanded product line and joint marketing events, lowering the cost per lead for both sides.
Speaker Change: This momentum positions us for continued growth in 2025, as we expand our reach and B to B E Commerce, and health care, providing cutting edge AI solutions that drive revenue and enhanced customer engagement.
Speaker Change: Our 2020 for our investments in R&D have opened the door to partners, whose customers need the latest AI power E Commerce tools, our partners bring our customers. Thanks to our expanded product line and joint marketing events lowering the cost per lead for both sides. We released our big Commerce catalyst connector just this week.
Ari Kahn: We released our BigCommerce Catalyst Connector just this week. The press release announcement will be issued soon. Catalyst will give BigCommerce customers a drag-and-drop tool to seamlessly upgrade their online stores to our hot search suite. BigCommerce has been one of our strongest partners, and we expect our catalyst release to make it even easier for their customers to upgrade to Hawk Search. xEngage and Optimizely continue to be leading partners who bring us large sales that close quickly and hot. Many of our B2B manufacturing distributor customers are on this ecosystem. Hawk Search is listed as a top paid app in the Optimizely store.
Speaker Change: The press release announcement will be issued soon.
Speaker Change: Catalyst will give e-commerce customers, a drag and drop tool that seamlessly upgrade their online stores to our hot search suite.
Speaker Change: E Commerce has been one of our strongest partners and we expect our catalyst really is to make it even easier for their customers to upgrade the hawk search.
Speaker Change: Ex engage and optimize what we continue to be leading partners, who bring us large sales that closed quickly on hot switch many of our <unk> manufacturer and distributor customers are on this ecosystem.
Speaker Change: Search is listed as the top paid apps and the optimized store.
Ari Kahn: Bridgeline earned Moblico's Partner of the Year Award for its role in advanced mobile engagement for distributors.
Speaker Change: <unk> earned <unk> partner of the year award for its wall of advanced mobile engagement for a distributor.
Ari Kahn: This quarter, Hawk Search has also joined forces with OroCommerce, a leading B2B commerce platform to bring AI-driven search and merchandising to manufacturers and distributors. Importantly, in partnership with Salesforce, Hawk Search has also launched the Hawk Search AI-powered product discovery engine for Salesforce B2B Commerce. Salesforce customers can now access Hawk Search directly from the AppExchange, deploy the connector instantly, and see immediate improvements in e-commerce performance.
Speaker Change: In this quarter Hot search has also joined forces with oral commerce, a leading e-commerce platform to bring AI, driven search and merchandising to manufacturers and distributors.
Speaker Change: Importantly in partnership with Salesforce Com searches also launched the hot search AI powered product discovery engine for Salesforce <unk> E Commerce.
Speaker Change: Sales for our customers can now access hartford's directly from the App exchange deploy the connector instantly and see immediate improvement E Commerce performance.
Ari Kahn: Partnerships will be an important part of our go to market strategy this year, but we're also greatly expanding our marketing budget. We've generated notable sales in recent years by focusing on specific verticals and joining industry conferences and associations. In the fastener industry, we won several customers by attending conferences like the International Franchise Expo and Fastener Fair in Vegas. B2B electronics and plumbing distributors have been strong with conferences such as B2B Online Chicago and Modern Distribution Management Shift Generating Sales. We have expanded our our budget and will be targeting new B2B verticals, including advertising and vertical markets and hosting more in-person events to generate even more leads and convert into customers this year.
Speaker Change: Partnerships will be an important part of our go to market strategy. This year, but we're also greatly expanding our marketing budget we.
Speaker Change: We've generated notable sales in recent years by focusing on specific verticals and joining industry conferences and associations.
Speaker Change: And the fastener industry, we won several customers by attending conferences like the international franchise Expo in fastener fair in Vegas.
Speaker Change: We need to be electronic and plumbing distributors have been strong with congresses, such as beta be online Chicago and modern distribution management shift generating sales.
Speaker Change: We have expanded our.
Speaker Change: Our budget and we'll be expand targeting new BTB verticals, including advertising in vertical markets and hosting more in person events to generate even more leads that convert into customers. This year.
Ari Kahn: Last year was a transformative year in our product suite with eight AI products being launched. This year is going to be transformative in growth with our budget reallocated from R&D to sales and marketing, so that we can capitalize on the market demand and on the strong competitive position that our innovation efforts have placed us within.
Speaker Change: Last year was a transformative year in our product suite with AI products being launched this year is going to be transformative in growth with our budget reallocated from R&D sales and marketing so that we can capitalize on the market demand and a strong competitive position that our innovation efforts is placed.
Speaker Change: With that.
Thomas Windhausen: This time I'll turn the call over to our CFO, Tom Windhausen. Thanks, Ari. I'll provide an update of our financial results for the first quarter of fiscal 2025, which ended December 31, 2024. Total revenue for the quarter ended December 31, 2024 was $3.8 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 sales licenses, maintenance and hosting revenue for the quarter end of December 31st, 2024, was 3 million, down 1% from 3.1 million in the prior year period. As a percentage of total revenue, subscription license revenue was 80% of total revenue for the quarter end of December 31st, 2024.
Speaker Change: This time I'll turn the call over to our CFO Tom warehouses.
Tom Warehouses: Thanks, Alright, I'll provide an update of our financial results for the first quarter of fiscal 2025, which ended December 31, 2020 for total revenue for the quarter ended December 31, 2024 was $3 8 million compared to $3 8 million in the prior year period.
Tom Warehouses: Going into each component of revenue, our subscription and license revenue, which is comprised of sales licenses maintenance and hosting revenue for the quarter ended December 31, 2024 was $3 million down 1% from $3 1 million in the prior year period as a percentage of total revenue subscription and license revenue was 80% of total revenue for the quarter ended December 31, two.
Tom Warehouses: 24.
Thomas Windhausen: Services revenue of $700,000 for the quarter end of December 31, 2024 was up 11% from $700,000 as rounded in the prior year first quarter. As a percentage of total revenue, services revenue accounted for 20% of total revenue for the quarter end of December 31, 2024. Cost of revenue was $1.3 million for the quarter ended December 31, 2024, an increase from $1.2 million in the prior year period, and as a result, gross profit was $2.5 million for the quarter ended December 31, 2024, down 1% from a rounded $2.6 million in the prior year period. Overall, gross profit margin was 67% for the quarter ended December 31st, 2024, compared to 68% in the prior year period.
Tom Warehouses: Services revenue of 700000 for the quarter on December 31, 2024 was up 11% from 700000 is rounded in the prior year first quarter as a percentage of total revenue services revenue accounted for 20% of total revenue for the quarter ended December 31 2024.
Tom Warehouses: Cost of revenue was $1 3 million for the quarter ended December 31, 2024, an increase from $1 2 million in the prior year period and as a result gross profit was $2 5 million for the quarter ended December 31, 2024 down 1% from around $2 6 million in the prior year period.
Tom Warehouses: Overall gross profit margin was 67% for the quarter ended December 31, 2024 compared to 68% in the prior year period.
Thomas Windhausen: Services gross margin was 51% for the quarter ended December 31st, 2024, compared to 44% in the same period, an increase of 7%, and subscription license gross margins were 71% for the quarter ended December 31st, 2024, compared to 73% in the prior year. Operating expenses were $3.0 million for the quarter ended December 31, 2024, down 4% compared to $3.2 million in the prior year. Going below OPEX, the change in fair value of our liability classified warrants resulted in a non-cash loss of $114,000 compared to a non-cash gain of $18,000 in the prior year. Moving to the bottom line, our net loss was 0.6 million for the quarter ended December 31st 2024 compared to a net loss of 0.6 million in the prior year period.
Tom Warehouses: Gross services gross margin was 51% for the quarter ended December 31, 2024 compared to 44% in the same period, an increase of 7% and subscription license gross margins were 71% for the quarter ended December 31, 2024 compared to 73% in the prior year period.
Tom Warehouses: Operating expenses were 3.0 million for the quarter ended December 31, 2024 down 4% compared to $3 2 million in the prior year period.
Tom Warehouses: Joining below Opex the change in fair value of our liability classified warrants resulted in a noncash loss of 114000 compared to a noncash gain of 18000 in the prior year period.
Tom Warehouses: Moving to the bottom line, our net loss was.
Tom Warehouses: Zero point $6 million for the quarter ended December 31, 2024, compared to a net loss of <unk> 6 million in the prior year period.
Thomas Windhausen: Justin Ibarra for the quarter ended December 31st, 2024, was negative 193,000 compared to negative 117,000 in the prior year comparable period. Moving on to our balance sheet, the December 31, 2024, the company had cash of 1.5 million and accounts receivable of 1.2 million. Our total debt outstanding as of December 31, 2024 was under 400,000 euros and approximated 409,000 US weighted average interest rate of that debt is approximately 4.1% with payments due through the year 2028. And we have no other debt to remaining earnouts from any of our previous acquisitions. And that December 31st, 24th, our total assets were $15.5 million and total liabilities were $6 million.
Tom Warehouses: Adjusted EBITDA for the quarter ended December 31, 2024 was negative 193000 compared to negative 117000 in the prior year comparable period.
Tom Warehouses: Moving onto our balance sheet at December 31, 2024, the company had cash of $1 5 million in accounts receivable of $1 2 million.
Tom Warehouses: Total debt outstanding as of December 31, 2024 was under 400000 euros and approximately 409000 USD.
Tom Warehouses: A weighted average interest rate of bad debt is approximately four 1% with payments due through the year 2028.
Tom Warehouses: And we have no other debt remaining earn outs from any of our previous acquisitions and at December 31, 24, our total assets were $15 5 million and total liabilities were $6 million.
Thomas Windhausen: Finally, I'll give an update on our cap table, which as of December 31, 2024, included 10.4 million outstanding shares, 39,000 shares of Series C preferred stock on an as-converted basis, 800,000 warrants, and 2.1 million options. As a reminder, in September 24, nearly 900,000 warrants with an exercise price of $4 expired. The remaining 800,000 warrants consist primarily of 180,000 warrants with a $2.85 exercise price expiring in May 26, and 592,000 warrants with a $2.51 exercise price expiring in November.
Tom Warehouses: Finally, I'll give an update on our cap table, which as of December 31, 2024 included $10 4 million outstanding shares 79000 shares of series C preferred stock on an as converted basis 800000 warrants and $2 1 million options as.
Tom Warehouses: As a reminder, in September 24, nearly 900000 warrants with an exercise price of $4 expired.
Tom Warehouses: Remaining 800000 warrants consists primarily of 180000 warrants the $2 85 exercise price expiring in May 26, and.
Tom Warehouses: 592000 warrants with a $2 51 and exercise price expiring in November 2026.
Thomas Windhausen: Bridgeline looks forward to continued growth and success in Cisco 2025 and beyond as we continue our focus on revenue growth, product innovation, customer success, and delivering 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.
Tom Warehouses: <unk> looks forward to continued growth and success in fiscal 2025 and beyond as would be your focus on revenue growth product innovation customer success and delivering shareholder value.
Tom Warehouses: 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.
Operator: Moderator? Everyone at this time, we are conducting a question and answer session. If you have any questions or comments, please press star 1 on your phone at this time. Once again, if you have any questions or comments, please press star 1 on your phone at this time. Please hold while we poll for questions. Thank you.
Tom Warehouses: Yeah.
Tom Warehouses: Certainly everyone. At this time, we are conducting a question and answer session. If you have any questions or comments. Please press star one on your phone at this time.
Tom Warehouses: Once again, if you have any questions or comments. Please press star one on your phone at this time, please hold while we poll for questions.
Speaker Change: Thank you. Your first question is coming from Casey Ryan from Westport Capital. Your line is live.
Casey Ryan: Your first question is coming from Casey Ryan from West Park Capital. Your line is locked.
Casey Ryan: Thank you, Ari, Tom. Nice quarter.
Casey Ryan: Thank you Ari Tom nice quarter.
Ari Kahn: Thanks, Casey. Yeah, you bet. It sounds like we're hitting an inflection point with what you're seeing in the market and the success with hawk search. So I have a couple questions around that. First of all, I think you called out 2.1 million was kind of from... what you're calling the core product, right? It's a sort of WooRank PlusHawk search in the core. Correct. And then services were about 700,000. So it looks like taking 2.8 million that services is like, you know, one-third of what Hawk Search sales are, or sort of that core software sale is.
Tom Warehouses: Thanks Kathy.
Speaker Change: Yeah, you bet.
Speaker Change: It sounds like we're hitting an inflection point with what youre seeing in the market and the success with HOK search.
So I have a couple of questions around.
Speaker Change: That <unk>.
Speaker Change: First of all I think you called out $2 1 million was kind of from.
Speaker Change: What youre, calling the core product.
Speaker Change: Sort of we ranked plus ORC search in the quarter.
Speaker Change: And then services were about 700000, so so it looks like taking $2 8 million at services like.
Speaker Change:
Speaker Change: One third of what Hog search sales are sort of that core software sale is is that a ratio that will sort of continue to be consistent so that if we played it out in the core revenue was higher services would be higher or.
Ari Kahn: Is that a ratio that will sort of continue to be consistent, you know, so that if we played it out and the core revenue was higher, you know, services would be higher, or is that not going to sort of hold long-term? It actually adds up a little bit different than that.
Speaker Change: Is that not going to sort of hold long term.
It actually is up a little bit different in that I'm going to have Tom break it down for you.
Thomas Windhausen: I'm going to have Tom break it down for you. The services, right, in Ari's comments, we had services of $700,000 for the quarter, and those are not all core. So I think I think you I think you mentioned that in what you said. Yeah, here's here's how it is. So we got 2.1 million dollars in revenue for our core product lines. That's both services and subscription. About 80% of that, a little bit north of 80% is subscription. and so like 19% is services, whatever that math comes out. Right. That's core revenue. Core revenue is growing by double digit.
Okay.
Speaker Change: The the services in.
Speaker Change: E Commerce, we had services of 700000 for the quarter and those are not all core.
Speaker Change: So I think.
Speaker Change: I think you mentioned that in what you said.
Speaker Change: So we got $2 1 million.
Speaker Change: Revenue for our core product lines, that's both services and subscription about 80% of that a little bit north of 80% is subscription.
Speaker Change: And so like 19%.
Speaker Change: Services, whatever that math comes out to be.
Speaker Change: That core revenue and core revenue is growing by double digits. That's what we are.
Ari Kahn: That's what we're We're not going into more detail on that right now, but anyway, yeah. And that's got the net revenue retention of 107 CAC payback better than 20 months. then the rest of the rabbit for the company's services and subscriptions.
Speaker Change:
Speaker Change: Declared when I go into more detail.
Speaker Change: Right.
Speaker Change: Yes.
Speaker Change: And they have got the net revenue retention of 107, CAC payback better than 20 months.
Speaker Change: Then the rest of the revenue.
Speaker Change: For the company's services and subscriptions.
Ari Kahn: is the non. Got it. Okay. Um, and, and the reality is, is that we're kind of seeing the non-core decline. has historically been declining and knocking out the growth in the core. This year, FY25, we're providing better clarity on that for everybody so that we can see that breakthrough growth coming in, the double digit growth from from core. From core, right. OK, OK, good. That this is sort of a helpful way to sort of frame it.
Is are is the noncore.
Speaker Change: Got it okay. Okay.
Speaker Change: And the reality is that we're kind of seeing the noncore declining.
Speaker Change: Historically been declining.
Speaker Change: Knocking out the growth in the core this year FY 'twenty five we're providing better clarity on that for everybody. So that we can see that.
Speaker Change: Breakthrough.
Speaker Change: Growth coming in the double digit growth from from core.
Speaker Change: Core right okay. Okay. Good.
Speaker Change: This is sort of a helpful way to sort of frame. It. So so tell me about for the core products.
Ari Kahn: So so tell me about, you know, for the core products. I guess talk a little bit about how you see the sales. It sounds like the 18% win rate's very strong, but tell me what you see from the lead gen or interest side, if that's expanding at a faster rate or a faster rate than maybe we had seen in revenues. Talk about qualitatively, maybe, if it's possible, about the pipeline. Perfect. Yeah, that's the thing that's got me super excited right now. Qualitatively, we've got leads that are coming in at a higher rate than we've ever had before on a per-dollar basis, and that's represented by a very strong CAC payback.
Speaker Change: I guess talk a little bit about how you see the sales it sounds like the 18% win rate is very strong, but like tell me what you see from sort of the like lead gen or interest side, if thats expanding sort of at a faster rate or a faster rate than maybe what we had seen in revenues are.
Speaker Change: Talk about qualitatively, maybe if it's possible about the pie perfect perfect yes.
Speaker Change: That's the thing that got me Super excited right now so qualitatively. We've got so we've got leads that are coming in at a higher rate than we've ever had before on a per dollar basis and that's represented by a very strong CAC payback, so customer acquisition costs.
Ari Kahn: So, customer acquisition costs are very efficient. Coming from face-to-face conferences, these narrow verticals, industry verticals like fasteners and plumbing and things like that, so we're not so much going to the technology conferences as we are to where our customers' conferences are. And then out of those, what we call a qualified lead, which is not a very high bar, qualified lead for us, it's an objective measurement, meaning that that person has contacted us twice, not us sending them an email, but them filling out a form on a landing page, sending us an email or calling us two times, and has given us an indication of what their budget is and an indication of who the person is who will make the ultimate decision.
Speaker Change: Our very efficient coming from face to face conferences. These narrow vertical industry vertical like fasteners, and plumbing and things like that so much go into the technology conferences as we are to the to where our customers conferences are and then out of those what we call <unk>.
Speaker Change: Qualified lead which is not a very high bar qualified lead for us. It's an objective measurement, meaning that that person has contacted us twice notwithstanding them, an email, but them filling out a form out a landing page, sending us an email or calling us two times and has given us.
Speaker Change: An indication of what their budget is and an indication of who the person is who will make the ultimate decision that's it.
Ari Kahn: That's it. We're seeing 18% conversion to a win out of someone that just goes that far, a lead that just goes that far with us. And what that tells me is that we've got the right product, we're in the right market, and we need to go all in on sales and marketing immediately and take advantage, because that kind of a win rate is not going to be here forever. And that's my FOMO comment. Go, go, go time. Yeah, well, listen, I took notice of that 18% win rate, and yeah, it makes perfect sense that we should expand that as rapidly as possible, right?
Speaker Change: We're seeing 18% conversion to a win.
Speaker Change: Someone that just goes that far a lead that just goes that far with us and what that tells me is that we've got the right products. We're in the right market and we need to go all in on sales and marketing.
Speaker Change: Mediately and take advantage because that kind of a win rates not going to be here forever and thats five fomo comment.
Speaker Change: Gogo go down yes.
Speaker Change: Yeah, well listen I I took.
Speaker Change: Does that 18% win rate in yes. It makes perfect sense that we should expand that as rapidly as possible right, especially considering that like low bar to sort of measuring the qualified lead perspective. So.
Casey Ryan: Especially considering that low bar to sort of measuring the qualified lead perspective. That's very exciting.
So that's very exciting and so.
Ari Kahn: And so... One thing also about the pipeline, I guess, is is it possible that people can go from lead to sort of customer through self-service entirely? It sounds like maybe there's some functionality there where people can sort of enable hawk search on their own, or do you always have to touch them in some way? Well, so with our connectors, the Salesforce AppExchange connector and the BigCommerce Catalyst connector, people could go directly on their own. But the reality is that's not how it works. There's typically a digital agency or a systems integrator that's involved who's managing their broader website.
Speaker Change: One thing else about the ultimate the pipeline I guess is it possible that people can go from lead to sort of customer through self service entirely it sounds like maybe there are some functionality that where people can sort of enable hawk search on their own or do you always have to touch them in some way.
Speaker Change: Well.
Speaker Change: So with our connectors the Salesforce App exchange connector and the Big Commerce catalyst connection connector.
Speaker Change: People could go directly on their own but the reality is that not how it how it works.
Speaker Change: Typically.
Speaker Change: Digital agency or assistant integrator that that's involved who's managing their broader website and we have.
Ari Kahn: And we have salespeople that do have conversation. So the entire sales cycle from the very first time that they hit our system, way before their qualified lead, all the way to either buying or not buying from us, but closing one way or the other, is 105 days on average. And our sales team is currently two, what we call BDRs, Business Development Reps. Those are inside salespeople that are making the initial contact, plus two BDEs, business development executives, who are actually running the deal, plus a working manager. That's our outside sales team. We also have our customer success sales team because we've released so many products, our customers don't own all of them yet.
Speaker Change: Our salespeople that do have conversation so the entire sales cycle from the very first time that they hit our system way before Theyre qualified lead all the way to either buying or not buying from us, but closing one way or the other is a 105 days on average and our sales.
Speaker Change: <unk> is currently two what we call the <unk> business development reps those are inside salespeople that are making the initial contact.
Speaker Change: Plus two BD EES business development executives, who are actually running the deal plus the working manager that's our outside sales team. We also have our customer success sales team because we've released some of the products our customers don't all have one all of them yet. So we also have a three <unk>.
Ari Kahn: So we also have a three-person team that is selling to our existing customers.
Speaker Change: <unk> that is.
Speaker Change: Selling to our existing customers. So that's the sales org on.
Ari Kahn: So that's the sales org. On the marketing side, we've got a working VP of marketing, a graphics person, an event coordinator. and then an SEO consultant, halftime. So that's who's doing the marketing. That team by itself right now is not the first place for us to expand. Our first place that we expand is we're just gonna go to more conferences with that team, make everybody stay up all night, every night, run so many deals into them that they're choking on them and then we'll keep on adding more and more people after those guys are so rich they stop working for us because of their commitment.
Speaker Change: On the marketing side, we've got a working VP of marketing.
Speaker Change: A graphics person on event coordinator.
Speaker Change: And then in SCO consultant halftime.
Speaker Change: So that too.
Speaker Change: Doing the marketing that <unk> by itself right now is not the first place for us to expand our first place that we expand as we're just going to go to more conferences with that team make everybody stay up all night every night run so many deals and do their into them that they're choking on them and then we'll keep on adding more and more.
Speaker Change: People. After those guys are still richness that working for us because of their commissions.
Casey Ryan: Right, got it.
Speaker Change: Got it okay.
Casey Ryan: Okay.
Ari Kahn: Well, and so You guys didn't offer any formal guidance around revenue, but... sort of, have you gotten a comfort around sort of looking at your, at your sort of pipeline, I guess, and saying it's 105 days, which is a quarter, right, roughly, so you say, okay, you know, have you guys built out a model where you feel you have some confidence, even if the numbers are internal, that you say, we sort of understand where revenues will come in, if things continue. Yeah, we actually have, yeah, we do have pretty good confidence and there's volatility on a company our size, which is one of the reasons why we're not doing guidance, but we, so we've got our, our, our revenue broken into two halves.
Well so.
Speaker Change: You guys didn't offer any formal guidance around revenue but.
Speaker Change: Sort of.
Have you gotten comfort around sort of looking at your at your sort of pipeline I guess in saying, it's a 105 days, which is a quarter right roughly so you say okay. Yes.
Speaker Change: Have you guys built out a model where you feel you have some confidence even if the numbers are internal that you say, we sort of understand where revenues will come in if things continue yes, we actually have yes, we do have pretty good confidence in this volatility on a company our size, which is one of the reasons why we're not doing guidance, but we so we've got our our revenue broken.
Speaker Change: Into two half we've got our core in our noncore for noncore, that's renewal of existing customers. So that's pretty easy to forecast because we know all above and we know whether they are redoing or that brand.
Ari Kahn: We've got our core and our non-core, so the non-core, that's renewal of existing customers, so that's pretty easy to forecast, because we know all of them and we know whether they're renewed or not. And we do sell core products into that non-core group as well. But those are also highly forecastable. On the core side of winning new logos, that's the part that's less forecastable, but that's 105 days, which is not very long. As you mentioned, it's one quarter, so that's good visibility. Boy, I really like selling in that model more than the old days when I used to sell these three-quarter deals that, you know, find out to the last minute.
Speaker Change: And we do sell.
Speaker Change: Hi.
Speaker Change: Core products into that that core group as well, but those are also highly forecastable.
On the.
Speaker Change: On the core side of winning new logos. That's the part that's last forecastable, but they have a 105 days, which is not very long as you mentioned, it's one quarter. So thats good visibility.
Speaker Change: Really like selling in that model more than the old days when I used to sell these three quarter deals that.
Speaker Change: Find out to the last minute. So we do internally have a good sense for that and that's important because we run on a shoestring budget and we don't.
Ari Kahn: So we do internally have a good sense for that, and that's important because we run on a shoestring budget and we don't, you know, have a lot of room for missing something on the financial side.
Speaker Change: Have a lot of room for missing something on the financial side.
Speaker Change: Right, Okay, Okay terrific.
Casey Ryan: Right, okay, okay, terrific. Well, look, you know, it sounds like a real shift in tone here, and I think it's very positive and Yeah, we're excited to see where we go as we get it moving to 25.
Speaker Change: We'll look at.
Speaker Change: It sounds like a real shift in tone here and I think it's been very positive and we're excited to see where we go as we get it moved into 25%. So thanks for the time and great quarter again.
Casey Ryan: So thanks for the time and a great quarter. Thank you, Kate. Thank you.
Speaker Change: Thank you Casey.
Speaker Change: Thank you once again, everyone. If you have any questions or comments. Please press Star then one on your phone. Your next question is coming from Howard Halpern from <unk> titled Brothers. Your line is live.
Howard Halpern: Once again, everyone, if you have any questions or comments, please press star then one on your phone. Your next question is coming from Howard Halpern from Track Taglet Brothers.
Howard Halpern: Your line is live. Congratulations on the quarter and the customer wins.
Speaker Change: Congratulations on the quarter and the customer wins <unk> keybanc.
Thomas Windhausen: Thank you Howard, nice to hear your voice. So, in terms of overall operating expenses, we're going to see the shift from research and development to sales and marketing, and only maybe an incremental increase in overall operating expenses. That's right. So we're going to hold the operating expenses more or less where they're at. And instead, we're just shifting personnel and consultants and so forth, so that we'll be investing more on that marketing side. And G&A is already running a pretty tight ship with three people, no, four, four people in it, altogether. And, but R&D really killed it last year, did a great job, released a lot of stuff.
Speaker Change: Alright.
Speaker Change: So in terms of overall operating expenses, we're going to see the shift from <unk>.
Speaker Change: Research and development to sales and marketing and only may be incremental increase in overall operating expenses.
Speaker Change: That's right. So we're going to hold the operating expenses more or less where they're at.
Speaker Change: And instead, we're just shifting personnel and consultants and so forth so that will be <unk>.
Speaker Change: <unk> more on that marketing side and.
Speaker Change: G&A is already running a pretty tight ship with a three peat.
Speaker Change: Four four people in it.
Speaker Change: Altogether and.
Speaker Change: But our R&D really killed it last year did a great job released a lot of stuff.
Ari Kahn: And now it's time to sell what they built. Yeah, so on the partnership side, that's an important and relatively new sales channel for us. You have two types of partners. We've got what we call IFVs, and these are content management and e-commerce platforms. They include BigCommerce, Optimizely, Salesforce, Magento, and these platforms, we typically will have connectors. that allow us to seamlessly integrate with them. And they have marketplaces where we can put our software and their customers can buy from us. They're important partners for us because their customers have already built their website, which takes a lot of money and takes a lot of time and slows deals down.
And now it's time to sell what they bill.
Okay.
Speaker Change: Can you talk about maybe the opportunity new partnership opportunities and potentially new verticals or new sectors within verticals.
Speaker Change: Yeah, Yeah. So on the partnership side that's important.
Speaker Change: And relatively new.
Speaker Change: Sales channel for us.
Speaker Change: <unk>.
Speaker Change: You have two types of partners, we've got what we call IAF. These and these are content management and E. Commerce platforms that include E Commerce optimized Lee sales for Genco.
Speaker Change: And.
Speaker Change: These platforms, we typically will have connectors.
Speaker Change: That allow us to seamlessly integrate with them and they have marketplaces, where we can.
Speaker Change: Put our software and their customers can buy from us. They are important partners for us because their customers have already built their website, which takes a lot of money and takes a lot of time and slows deals down. So now it's a matter of just enhancing their website with whatever their default search capabilities where with our.
Ari Kahn: So now it's a matter of just enhancing their website with whatever their default search capabilities were with our Hawk Search AI-powered. The second category of partner is the digital agency, also called the systems integrator. So these are the teams that actually implement the, do the initial implementation of an e-commerce site, but then they have an ongoing relationship with the end online store to continually update their site, and they are very influential in the selection of technologies that are launched on that site. So they will recommend Hawk Search. These are companies like American Eagle. They're like Gorilla, and there's a lot of 50-person local market system integrators slash digital agencies that we partner with.
Speaker Change: <unk> search AI powered search.
Speaker Change: The second category of partner.
Speaker Change: Is the.
Speaker Change: Digital agency also called the systems integrator. So these are the teams that actually implement due to the initial implementation of an ecommerce site, but then they have an ongoing relationship with the.
Speaker Change: And online store to continually update their site and they are very influential.
Speaker Change: And the selection of technologies that are.
Speaker Change: Launched on that site so.
Speaker Change: They will recommend Hawk search these are companies like American Eagle, they're like Gorilla and Theres, a lot of 50% local market system integrators slash digital agencies that that we partner with.
Ari Kahn: So that's half of the channel, and systems integrators and ISVs are involved in basically every deal. But then the other half of the channel is direct marketing, and this is where we are finding a lot of progress with vertical, physical human conferences. We're seeing progress where we have our own customer conference, but then we invite a partner and have them bring their customers as well, so it becomes a joint customer conference with cross-sales across the two customer bases. And then we, of course, do a lot of online marketing with webinars and virtual conferences and even Google AdWords that bring in a lot of leads.
Speaker Change: So thats.
Speaker Change: That's half of the.
Speaker Change: The channel and systems integrators and.
Speaker Change: <unk> are involved in basically every deal within the other half of the channel is direct marketing and this is where we are finding a lot of progress with.
Speaker Change: Vertical physical human conferences.
Speaker Change: We're seeing progress, where we have our own customer conference, but then we invite our partner and have them bring their customers as well. So it becomes a joint customer conference was cross sales across the two.
Speaker Change: Customer basis, and then we of course do a lot of online.
Speaker Change: Marketing with Webinars.
Speaker Change: And virtual conferences, and even Google AD words that bring in a lot of leads.
Howard Halpern: Okay, so really the emphasis is going to be on the current verticals that you're in and then just sort of migrate to potential new verticals slowly and then add them into the mix. That's exactly right, Howard, because we see a great return on investment when we reach critical mass and a narrow vertical and have specific referenceable customers. The reality is that although we, meaning Bridgeline, live in the technology world on a day-to-day basis and can generalize and create analogies between how we might implement one site and another one, when we're working with someone who is an expert in the plumbing world, they don't necessarily have the familiarity with our type of software to see how what we implemented for a hospital might be analogous to what their needs are.
Speaker Change: Okay. So really the emphasis is going to be on the current verticals that you're in and then just sort of migrate and potential new new.
Speaker Change: New vertical slowly and then add them into the mix.
Howard: That's exactly right Howard because we see.
Howard: Great return on investment when we reach critical mass and a narrow vertical and have specific reference to bulk customers. The reality is that although we mean, meaning bridge line live in the technology World on the day to day basis and can.
Generalized and create analogies between how we might implement one site and another one when we're working with someone who is an expert in the plumbing world They don't necessarily have.
Howard: The familiarity with our type of software to see how what we implemented for a hospital might be analogous to what their needs are so after we won a couple of plumbing customers than we really hit critical mass. We have got that specific example, web sites in the space.
Ari Kahn: So, after we want a couple of plumbing customers, then we really hit critical mass. We've got the specific example websites and the specific customer references that make all the difference in the world. Okay, and that you feel that's why the, you know, the 105 days could actually start coming down in some of those core verticals. That's right. In the core verticals, we see faster sales cycles, thanks to the references and the case studies and example websites. Also, the 105 comes down when we are working closely with our partners on those joint customer conferences, for instance, because relationship just gets accelerated due to the partner relationship.
Howard: <unk> customer references that make all the difference in the world.
Howard: Okay and that you feel that's why.
Howard: The 105 days could actually start coming down in some of those core verticals. That's right in the core verticals, we see faster sales cycle, thanks to the references and the.
Howard: Yeah.
Howard: Case study as an example websites also the 105 comes down when we are working closely with our partners on those joint customer conferences for instance, because it relationship just gets accelerated due to the partner relationship.
Howard Halpern: Okay.
Howard: Okay.
Howard Halpern: Well, keep up the great work, guys. Thank you very much. Thank you.
Howard: Keep up the great work guys.
Howard: Thank you very much.
Speaker Change: Thank you there are no further questions in the queue I'll now hand, the conference back to management for closing remarks. Please go ahead.
Operator: There are no further questions in the queue.
Thomas Windhausen: I will now hand the conference back to management for closing remarks.
Thomas Windhausen: Please go ahead.
Thomas Windhausen: Everybody, thank you for joining us today. We appreciate the continued support of our customers, our partners, our shareholders. We're obviously very excited about the business and ongoing growth prospects.
Speaker Change: Everybody. Thank you for joining us today, we appreciate the continued support of our customers our partners our shareholders. We're obviously very excited about the business the ongoing growth prospects. We look forward to speaking with you again at our second quarter fiscal 2025 conference call. It will be in May 2025 until then.
Operator: We look forward to speaking with you again in our second quarter fiscal 2025 conference call. It'll be in May 2025. Until then, be well. Thank you everyone.
Speaker Change: Well.
Speaker Change: Thank you everyone. This concludes today's event you may disconnect at this time and have a wonderful day. Thank you for your participation.
Operator: This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.
Speaker Change: Yes.
Speaker Change: Yeah.