Bridgeline Digital, Inc. Q2 FY2026 earnings call

• Sales and Customer Acquisition Results
  • Q2 FY2026 delivered the highest new customer logo sales in Bridgeline's history, with 19 new customer wins, $2.8 million in total contract value (TCV), and $1.2 million in new annual recurring revenue (ARR). The company also signed over $1 million in new professional services agreements.
  • Average new customer sales price increased substantially to $44,000 in ARR, up from $30,000 last quarter and $21,000 in Q2 FY2025. Existing customers purchased an average of $28,000 in ARR of add-on products, most notably AI Visual Search.
  • Net revenue retention for core products reached 107%, indicating strong customer satisfaction and expansion from the existing base. Most new wins are in the large B2B manufacturing and distribution TAM, where Gartner ranked HawkSearch number one in its Critical Capabilities Report.

Product Innovation

• HawkSearch has been an AI-native product suite for years, allowing the company to adopt latest large language model and neural network AI faster than competitors.
• The new Hawk AI Shopping Assistant was launched this quarter. Unlike B2C shopping assistants built from support chatbots (focused only on product questions), the Hawk AI tool is built on HawkSearch's AI merchandising infrastructure and fully aligned with driving online store revenue. It natively supports complex B2B requirements including customer-specific pre-negotiated pricing, entitlement-based product access, custom freight schedules, and team-based purchasing, delivering automated, scalable intelligent sales experiences.

Go-to-Market and Partnerships

• The company strengthened its go-to-market strategy with a new partnership with Znode, bringing AI-powered search, merchandising, and personalization to B2B manufacturers and distributors on the Znode e-commerce platform.
• HawkSearch received multiple 2026 honors from Info-Tech Research Group, including Leader in Enterprise Search, Top Product Catalog, and Top UX based on verified user feedback.
• A new SVP of Marketing with over a decade of B2B software leadership was added to the team. Qualified sales pipeline grew 82% year-over-year to over 500 qualified leads with more than $5 million in projected ARR.

Bridgeline Digital reports two core revenue segments for Q2 FY2026 (ended March 31, 2026):

1. Subscription Revenue (includes SaaS licenses, maintenance, and hosting): Total revenue of $3.1 million, which equals the prior year period revenue and contributes 80% of total company revenue. Gross margin for this segment is 69%. The HawkSearch AI product suite, Bridgeline's core product line, now represents 65% of total subscription revenue, up from 61% in Q2 FY2025.
2. Services Revenue: Total revenue of $799,000, down from $823,000 in the prior year period, contributing 20% of total company revenue. Gross margin for this segment is 47%.

Total company revenue for the quarter was $3.9 million, flat with the prior year period.

Management did not provide formal numerical full-year or next-quarter guidance, but highlighted strong forward momentum from the 82% year-over-year growth in qualified sales pipeline. The company expects continued revenue growth acceleration for the HawkSearch AI product suite driven by new product innovation like the Hawk AI Shopping Assistant, expanded go-to-market reach through partnerships, and the capital deployed in marketing following last year's capital raise. Management noted that AI innovation allows smaller players like Bridgeline to outcompete larger incumbent competitors in the marketing technology space, supporting ongoing growth.

Management noted that all forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from expectations. Specific referenced risks include those already disclosed in the company's most recent Form 10-K, Form 10-Q, and other SEC filings, which are updated periodically. No new material risks or operational failures were discussed on the call.

Q: How has the 2025 capital raise contributed to the strong Q2 sales results?

A: The $2 million capital raise completed at the end of March 2025 was specifically earmarked to expand marketing to build awareness for the company's existing technology and win new customers. After a 3-month deployment period to secure conference participation and build out marketing programs, leads began moving through the company's typical 120-150 day sales cycle, resulting in the record new customer wins in the just-closed quarter. The result validates the company's ability to deploy marketing capital effectively to generate converting leads and build customer demand for its AI products, alongside its already strong 107% net revenue retention rate.

Q: What is the current state of the qualified sales pipeline, and what is its growth trajectory?

A: Qualified pipeline (measured via objective, metrics-driven accepted qualification lead (AQL) criteria, not subjective sales team assessment) grew 82% year-over-year for Q2 FY2026. There are currently over 500 AQLs holding nearly $5.5 million in total projected ARR. AQLs historically have a 20% close rate, translating to ~$1 million in expected ARR from the current pipeline alone. With a 120-150 day sales cycle, the doubled pipeline size puts the company in a strong position to maintain current growth momentum.