Bridgeline Digital Q3 2026 Earnings Call Transcript

Quartr
Provided by Quartr
August 13, 2026

Key Takeaways

  • Positive Sentiment: Core momentum remained strong: Bridgeline tied its record with nine new customer wins, signed 19 subscription contracts worth $1.7 million in total contract value, and generated more than $370,000 in new ARR. Core net revenue retention was 106%, while Core revenue grew 13% over the trailing 12 months.
  • Positive Sentiment: HawkSearch continues to gain traction in complex B2B and B2C commerce, including deployments involving large catalogs, multiple sites, and wholesale distribution networks. The product was ranked number one for the B2B search use case in Gartner’s 2026 critical capabilities report for the second consecutive year.
  • Neutral Sentiment: Financial performance improved on the bottom line but overall growth was modest: revenue rose to $3.9 million from $3.8 million, adjusted EBITDA improved to negative $102,000 from negative $330,000, and net loss narrowed to $500,000 from $800,000. Gross margin declined to 46% from the prior year’s roughly 49%.
  • Negative Sentiment: Management expects to remain approximately cash neutral in fiscal 2027, with some quarters potentially modestly negative, while continuing to prioritize growth investments over near-term profitability. Cash was $1.5 million at quarter-end, and management said it intends to avoid a non-accretive capital raise while maintaining current quarterly lead-generation spending of about $350,000.
  • Positive Sentiment: Management expects Core products to exceed 70% of total revenue and 75% of subscription revenue next year as Legacy products decline. It believes this mix shift, combined with continued double-digit Core growth, could make Bridgeline’s overall valuation more comparable to that of a focused software company.
AI Generated. May Contain Errors.
Earnings Conference Call
Bridgeline Digital Q3 2026
00:00 / 00:00

Transcript Sections

Skip to Participants
Operator

Please note this conference is being recorded. I will now turn the conference over to your host, Tom Windhausen, Chief Financial Officer. The floor is yours.

Tom Windhausen
Tom Windhausen
CFO at Bridgeline Digital, Inc.

Thank you. Thank you very much, and good afternoon everyone? Thanks for joining us today. My name is Tom Windhausen. I am the Chief Financial Officer of Bridgeline Digital, Inc. I am pleased to welcome you today to our Fiscal 2026 Third Quarter Conference Call. On the call today is Mr. Ari Kahn, Bridgeline's President and Chief Executive Officer. He will begin the call with a discussion of our business highlights, and then I will update you on our financial results for the quarter, and we will conclude by taking some questions.

Tom Windhausen
Tom Windhausen
CFO at Bridgeline Digital, Inc.

Before we begin, I would like to remind everyone that our remarks in responses to your questions today may contain forward-looking statements and those are based upon current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including, without limitation, those identified in the Risk Factors section of our most recent annual report on Form 10-K, our most recent 10-Q filing, and the company's other filings with the Securities and Exchange Commission. Such factors may be updated from time to time in our filings with the SEC, which are available on our website. We undertake no obligation to publicly update or revise our forward-looking statements as a result of new information, future events, or otherwise. Be advised that today's results should not be viewed as an indication of future performance.

Tom Windhausen
Tom Windhausen
CFO at Bridgeline Digital, Inc.

This call will also include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP financial measures. Reconciliations of those non-GAAP financial measures to our most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the investor relations portion of our website. I would now like to turn the call over to Mr. Ari Kahn, Bridgeline's President and Chief Executive Officer. Ari?

Ari Kahn
Ari Kahn
President and CEO at Bridgeline Digital, Inc.

Thank you, Tom, and good afternoon everyone? Before I review the quarter, I want to briefly frame what Bridgeline does and why our strategy matters. Bridgeline is a MarTech, Marketing Technology Software, company that helps businesses grow online revenue by delivering more traffic to their websites, converting more visitors of those websites into purchasers, and increasing the average order for each purchase. Our software supports both B2C and B2B businesses, and we are particularly strong with manufacturers and distributors that manage complex catalogs and sophisticated digital commerce requirements. As Bridgeline has evolved, certain products have shown such great promise that we drive most of our R&D and marketing investments towards them. Collectively, we call these products Core, and we use the term Legacy for the rest of our products. Our Core products include HawkSearch suite of AI-powered search and product discovery solutions.

Ari Kahn
Ari Kahn
President and CEO at Bridgeline Digital, Inc.

Our Legacy products continue to contribute profit that helps fund investments and growth in the Core product lines. Because our financial statements consolidate Core and Legacy, total company results do not always show the revenue growth profile of our Core business. That is why we also discuss Core revenue mix, Core net revenue retention, Core growth, and new annual recurring revenue for our Core products. Sales momentum remained strong in the third quarter. Last quarter, we set a record of nine new customer wins, and this quarter we tied that record. In addition to winning nine new customers, 10 existing customers purchased additional license from us, resulting in 19 new subscription contracts and $1.7 million in total contract value, with more than $370,000 in annual recurring revenue. This performance demonstrates continued demand for our AI-powered product discovery solutions across both new customers and expansion opportunities.

Ari Kahn
Ari Kahn
President and CEO at Bridgeline Digital, Inc.

Core net revenue retention was 106%, reflecting strong retention and expansion across the Core customer base. Core product revenue grew to $2.4 million for the quarter, compared to $2.2 million in the prior year period, and 13% growth in the trailing 12 months. Core revenue is now 62% of total revenue and 66% of subscription revenue, compared to 57% of total revenue and 58% of subscription revenue in the prior year quarter, respectively. Investors and stock analysts often ask us to separate Core and Legacy revenue to provide additional details for valuation calculations, recognizing the inefficiency in capital markets for micro-cap stocks such as Bridgeline. Because Core and Legacy products have different growth profiles, they also have different valuation metrics.

Ari Kahn
Ari Kahn
President and CEO at Bridgeline Digital, Inc.

Growing AI SaaS companies with products like our Core product lines are often valued with a multiple of 3x SaaS revenue and 1x services revenue, for example. Non-growing SaaS companies that generate gross profit, like our Legacy product lines, often have multiples closer to 1x SaaS and one half time services, for instance. Investors may use such multiples with our Legacy revenue results in addition to the value of our Core products for valuation analysis. The third quarter marked a record-tying quarter for new customer acquisition, nine customer logo wins, 19 subscription contracts in total. Examples during this quarter include a U.S.-based wholesale distributor of pet, farm, and garden, and home products who selected HawkSearch for its BigCommerce, e-commerce platform following a 14-day sales cycle. That is right, 14, one, four. That is how quick the sales cycle was.

Ari Kahn
Ari Kahn
President and CEO at Bridgeline Digital, Inc.

The deployment supports approximately 25,000 products and more than 450,000 monthly sessions. Another win for the quarter is a leading home and garden supplier who launched the first two of five contracted HawkSearch deployments across its B2B and D2C direct-to-consumer e-commerce portfolio, covering approximately 80,000 SKUs, with additional deployments scheduled for the future. A large-scale enterprise wholesale distributor selected HawkSearch to power search and product discovery across five OroCommerce sites, with the potential to expand to eight sites. Collectively, these wins and launches demonstrate HawkSearch's strength in complex commerce environments, including large product catalogs, multi-site deployments, wholesale distribution networks, and sophisticated B2B buying experiences. On the product side, HawkSearch was ranked number one for the B2B search use case in Gartner's critical capabilities for search and product discovery of 2026. This is the second consecutive year that HawkSearch was selected to be number one for B2B search by Gartner.

Ari Kahn
Ari Kahn
President and CEO at Bridgeline Digital, Inc.

This recognition is particularly meaningful because Gartner is widely relied upon by organizations when evaluating technology platforms. Unlike consumer commerce, B2B organizations must support customer-specific pricing, product entitlements, complex catalogs, and purchasing workflows designed for professional buyers rather than casual shoppers. HawkSearch leadership in B2B commerce reflects its deep expertise in solving these challenges for manufacturers, distributors, and industrial suppliers, helping earn recognition as the highest-scoring solution in Gartner's B2B use case. This quarter, we expanded the adoption of HawkSearch AI Agent Suite. Customer sales and pipeline activity grew for Shopping Assistant, Analytics Assistant, and other AI-powered commerce tools as businesses increasingly look to use AI to improve product discovery and online revenue with HawkSearch. Customers and business buyers alike are becoming more accustomed to conversational experiences that allow them to ask questions, receive recommendations, and quickly find products that they need. HawkSearch provides this experience to our customers.

Ari Kahn
Ari Kahn
President and CEO at Bridgeline Digital, Inc.

In addition, we advanced the Hawk AI Shopping Assistant with our Aura AI Agent framework to connect product discovery with inventory, pricing, entitlements, order history, and other commerce workflows. Together, these innovations help customers deliver more intelligent, personalized buying experiences across both B2B and B2C commerce environments. Our strategy is to continue growing core revenue, expanding ARR through new customers and existing customer adoption, maintain strong retention, and use AI to help customers drive more revenue from their digital commerce operations. The quarter's sales, customer deployments, and product progress reinforce HawkSearch's value for businesses with complex catalogs, multi-site requirements, and sophisticated B2B commerce needs. Now, I'll turn the call over to our Chief Financial Officer, Tom Windhausen, to share details. Tom?

Tom Windhausen
Tom Windhausen
CFO at Bridgeline Digital, Inc.

Thanks, Ari. I'll provide an update of our financial results for the third quarter of fiscal 2026, which ended June 30, 2026. Total revenue for the quarter ended June 2026 was $3.9 million, compared to $3.8 million in the prior year period. As we look at the components of revenue, our subscription revenue, which is comprised of SaaS licenses, maintenance, and hosting, was $3.1 million for the quarter ended June 2026, compared to $3.1 million in the prior year period. Subscription revenue was 79% of total revenue, compared to 81% in the prior year. Services revenue was $0.8 million for the quarter ended June 2026, compared to $700,000 in the prior year period, and our services revenue accounted for 21% of that revenue, compared to 19% last year.

Tom Windhausen
Tom Windhausen
CFO at Bridgeline Digital, Inc.

Cost of revenue was $1.4 million for the quarter ended June 2026, compared to $1.3 million in the prior year. Our gross profit then was $2.5 million for the quarter ended June 2026, compared to $2.5 million in the prior year period. Our overall gross margin was 46% for the quarter ended June 2026, with subscription gross margin of 69%, compared to 70% in the prior year, and services margin of 47%, compared to 50% in the prior year. Our operating expenses were $3.0 million for the quarter ended June 2026, compared to $3.2 million in the prior year. Our net loss then was only $500,000 for the quarter ended June 26, compared to a net loss of $800,000 in the prior year period.

Tom Windhausen
Tom Windhausen
CFO at Bridgeline Digital, Inc.

Moving to adjusted EBITDA, our adjusted EBITDA for the quarter ended June was -$102,000, compared to a -$330,000 in the prior year same period. Moving to our balance sheet, on June 30th, the company had cash of $1.5 million and accounts receivable of $1.2 million. Our total debt outstanding as of June 30, 2026, was $187,000, with a weighted average interest rate of 3.5% with principal payments due equally through 2028. At June 2026, our total assets were $15.3 million, and our total liabilities were $6.4 million. Finally, a quick update on our cap table, which as of June 30th, included 12.6 million shares, 660,000 warrants, and 2.1 million options.

Tom Windhausen
Tom Windhausen
CFO at Bridgeline Digital, Inc.

Of those 660,000 warrants, 592,000 of them with a $2.51 exercise price expire in November 2026 with the remaining 70,000 warrants not expiring until March 2030 at a $1.88 exercise price. We will now transition over to a Q&A period. Operator, as you check for those questions, I do have some questions that were sent in advance, so we will start with those. Okay, perfect. Ari, thanks. We had questions come in from a long-term investor. Three questions. First question, about a year ago, we had the $2 million capital raise, and then we mentioned that we would be spending roughly $500,000 a quarter in advertising for the next four quarters. Now for these upcoming quarters, how do we see our advertising spending current?

Ari Kahn
Ari Kahn
President and CEO at Bridgeline Digital, Inc.

Okay, great. In March 2025, we raised $2 million above market, explicitly to invest in ad spend for sales and marketing to capitalize on the momentum that we have been seeing at that time, both by experimenting with new lead sources and expanding investments in existing ones. I am happy to say that this was a successful investment, as shown by the last two quarters of record new logo sales. When we invest in sales and marketing, it is not so much about upselling existing customers, which is an important part of our growth, but in attracting new ones. We did experiments. We expanded investments in known lead sources, and all in all, we had good ROI. Today, we are at about $350,000 per quarter in lead spend.

Ari Kahn
Ari Kahn
President and CEO at Bridgeline Digital, Inc.

Going forward, even though we've deployed most of the capital from that raise, I think we got $1.5 million in the bank at the end of this quarter. Going forward, we expect to be able to remain at the current level. We've created several synergies within the business that will allow us to maintain this level of ad spend investment without significant cash burn. I'm happy to say that thanks to our internal sophistication with artificial intelligence, we've become a much more efficient organization than I think many have.

Tom Windhausen
Tom Windhausen
CFO at Bridgeline Digital, Inc.

Great. The second question talks about pipeline. The nature of our business is that we have revenue coming in at the back of the pipeline. Sorry. We have more business and revenue coming at the back of the pipeline than ending at the front of the pipeline. We understand that there's forward-looking statements, but can we get an idea of how cash flow will progress over the next two quarters, and will it be positive?

Ari Kahn
Ari Kahn
President and CEO at Bridgeline Digital, Inc.

Got it. Mm-hmm. Sure. Yeah. Well, that is the nature of SaaS in general. From a cash flow perspective, you're signing multi-year contracts, and a lot of times the CAC payback, customer acquisition cost payback in the MarTech sector is 24 months or higher. The great thing about this industry is that once you're locked into these longer-term contracts, you take your foot off of the gas and start, I don't want to say printing money, but it's not a bad place to be in, and that's where we're heading. We do ensure that our negative cash flow is less than our discretionary spending so that it's easier for us to manage cash flow without having to, for example, change headcounts, but instead pull back on things like specifically ad spend, and that we always have more than a year of cash.

Ari Kahn
Ari Kahn
President and CEO at Bridgeline Digital, Inc.

We balance our spending growth and are going to likely remain cash neutral, which is kind of where we are right now in 2027. That means that some quarters will have minor negative and others minor positive. But our strategy in 2027 is not going to be a bottom-line focused cash-generating business. We think there's greater shareholder value in investing as much as we can in growth without positioning ourselves to have to do a non-accretive capital raise. As largest investor in the business, I am well aligned with that thought process.

Tom Windhausen
Tom Windhausen
CFO at Bridgeline Digital, Inc.

Excellent. Thank you. Next question asks about some history. It acknowledges Ari's been with the company for the last 10 years, seen lots of changes in the business. What is it that we could share with shareholders in regards to our financial health now compared to the past? Secondly, if someone asks why they should invest in Bridgeline, what do you tell them?

Ari Kahn
Ari Kahn
President and CEO at Bridgeline Digital, Inc.

Okay. This is dangerous because I could go into all sorts of ancient history and talk for a long time. I'll try not to. When I first became involved in Bridgeline, it was a completely different company. It was a roll-up of digital agencies, made a valid attempt at being that type of entity, but it wasn't quite working. The revenue was declining. The company was burning a lot of cash, and the cap table was problematic. I invested in the company. I originally invested about, I think it was $250,000 before I became actively involved from a management perspective, because specifically, I saw that there was a lot of value in the customer base, that the software that it did have could be cash generating, and that the market space overall was getting ready for a lot of opportunities to happen. No one could see exactly where they were.

Ari Kahn
Ari Kahn
President and CEO at Bridgeline Digital, Inc.

But I'd been around the block long enough as one of the founders in content management back in the dotcom booms and with a PhD in AI, to have a good sense that we could do something special with the business. We started off really resetting the company, looking for acquisitions. Now we're talking about 2016, 2017. It took a little while. We found Celebros, which was really an important acquisition for the business in terms of getting the business pointed in a direction to be squarely a software company that can be partnered with e-commerce platforms and agencies. Celebros is really a competitor to HawkSearch and is in a growth area well-positioned for AI. We acquired OrchestraCMS and WooRank, both of which are cash flowing.

Ari Kahn
Ari Kahn
President and CEO at Bridgeline Digital, Inc.

After a long courtship with HawkSearch, it took several years to make that happen, but HawkSearch is such a great product, we were able to make it happen. We did that acquisition and shifted towards a company that has a true opportunity for organic growth. Now, it doesn't mean that everything is going to be organic going forward, but with that type of a platform, we became a business with a clean cap table, with a clean balance sheet, with a growing software, with small competitors, and great partners. I, at that point, personally invested well over $1 million in common stock, open market buys, supporting the business. We did an above-market raise, which we spoke about just a minute ago, to test out and expand on the sales and marketing capabilities.

Ari Kahn
Ari Kahn
President and CEO at Bridgeline Digital, Inc.

Today, I think that you're really in a position where you've got a well-aligned leadership team, money where their mouth is, all in, with deep experience in AI. My experience in AI is from the early 1990s, so this isn't like Johnny-come-lately stuff. Deep experience in e-commerce, not super successful, but successful in the dot-com, e-commerce space. Most importantly, a truly well-positioned product that delivers clear value to its customers, whose customers put their money where their mouth is, and reinvest and expand their investment in the HawkSearch product suite that is squarely in the sweet spot for artificial intelligence. Search, product discovery, and agentic recommendations are exactly what large language model with this particular form of artificial intelligence are best at, and you don't need to be a multi-billion dollar business to implement that stuff.

Ari Kahn
Ari Kahn
President and CEO at Bridgeline Digital, Inc.

It levels the playing field where a dedicated, well-aligned team like Bridgeline can leapfrog over other businesses and deliver outsized investor returns. I don't want to understate this at all. Clean cap table and balance sheet is an important part of all that, and huge investor alignment is as well.

Tom Windhausen
Tom Windhausen
CFO at Bridgeline Digital, Inc.

Excellent. Thanks for that. I had one other question from a different investor that came in. Is there an expected timeframe for the growth in HawkSearch's core business to offset the decline in the legacy business? When we can start seeing that growth.

Ari Kahn
Ari Kahn
President and CEO at Bridgeline Digital, Inc.

Okay, great. This is an important aspect because one of the challenges for Bridgeline investors is transparency. We spoke about it at the beginning of this, to really be able to understand because we've got this dichotomy of legacy and core products. When did the core product dominate everything, so you can truly just count on the cumulative revenues and expenses as representing the vast majority of the business and see exactly where everything's going. It's been a little bit of a long haul getting there, and I think it's been a worthy investment. Today, our core is 62% of revenue, 66% of subscription revenue.

Ari Kahn
Ari Kahn
President and CEO at Bridgeline Digital, Inc.

At our current growth rates, which I think are going to accelerate, but at the current rates, and the attrition of legacy, that is kind of part of the equation, I'm expecting us to be over 70% of core next year and over 75% of core subscription next year. That means a double-digit CAGR, compounded annual growth rate, in core should deliver double-digit CAGR in overall revenue as well. That's when you really start seeing, I think, the multiples for HawkSearch overall starting to look more like what you see for a typical software company that has a single product that looks like our core products. My expectation is that there'll be some happy investors at that point.

Tom Windhausen
Tom Windhausen
CFO at Bridgeline Digital, Inc.

Excellent. Thank you. Operator, is there any questions that have been submitted? Any questions pending on the line?

Operator

I'm not seeing any questions in the queue at the moment. Just a reminder, if you would like to ask a question, you can press star one on your phone keypad now.

Tom Windhausen
Tom Windhausen
CFO at Bridgeline Digital, Inc.

We'll wait 10 seconds, 15 seconds here. All right, if no questions have further come in, we'll wrap up the call.

Ari Kahn
Ari Kahn
President and CEO at Bridgeline Digital, Inc.

Great.

Operator

Yeah. No question.

Ari Kahn
Ari Kahn
President and CEO at Bridgeline Digital, Inc.

Well, everybody, thank you so much for joining us on our call today. We really appreciate the continued support from our investors, but also our customers and partners. We remain confident in Bridgeline's opportunity to help customers drive more online revenue through AI-powered product discovery or complex commerce solutions. We also look forward to speaking with you again on our Fourth Quarter Fiscal 2026 Conference Call. Till then, be well.

Operator

Thank you very much. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. We thank you for your participation.

Executives
    • Tom Windhausen
      Tom Windhausen
      CFO
    • Ari Kahn
      Ari Kahn
      President and CEO
Powered by Quartr