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Bridgeline Digital, Inc. (BLIN)·Q2 2025 Earnings Summary

Executive Summary

  • Revenue was $3.88M, up ~2% YoY and ~2% QoQ; gross margin expanded to 68% (+200bps YoY, +100bps QoQ) .
  • GAAP diluted EPS was -$0.10, below Wall Street consensus Primary EPS of -$0.04; revenue was slightly below consensus at $3.88M vs $3.93M (miss ~1%) . Consensus: Primary EPS -$0.04*, Revenue $3.93M*.
  • Adjusted EBITDA was -$0.24M vs -$0.08M YoY and -$0.19M in Q1; operating loss widened to $0.75M as OpEx rose with higher sales & marketing and restructuring costs .
  • Management executed a $2.2M equity financing in March to fund an aggressive increase in sales & marketing; expects the spend to start impacting bookings late Q4 FY25 and revenue in Q1 FY26 .
  • Near-term catalysts: partner-led pipeline expansion (Shopware, Salesforce, BigCommerce, Optimizely) and Hawk AI feature launches; watch Q4 bookings and Q1 FY26 revenue inflection .

What Went Well and What Went Wrong

What Went Well

  • Core product momentum: 20 new subscription contracts in Q2 (~$1.7M TCV; +$0.7M ARR); Core product NRR reached 113% .
  • Margin improvement: gross margin rose to 68% (subscription/license GM 72%, services GM 52%) on mix and cost control .
  • Clear go-to-market acceleration funded by capital raise; CEO: “We expect an excellent return in this expansion of our sales and marketing budget” . CFO highlighted cash of $2.7M, low debt (~$0.41M), and no remaining earn-outs .

What Went Wrong

  • Profitability: Net loss widened to $0.73M and GAAP EPS fell to -$0.10, pressured by higher OpEx and a preferred redemption line, while Adjusted EBITDA deteriorated to -$0.24M .
  • Slight miss vs consensus: revenue of $3.88M came in below $3.93M, and Primary EPS below the -$0.04 estimate, signaling limited near-term operating leverage as S&M scales up . Consensus: Revenue $3.93M*, EPS -$0.04*.
  • Non-core revenue declines offset core growth, keeping total revenue relatively flat sequentially; management noted this balance likely persists through H2 FY25 .

Financial Results

Headline Metrics (GAAP)

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$3.863 $3.791 $3.875
GAAP Diluted EPS-$0.04 -$0.06 -$0.10
Gross Margin %69% 67% 68%
Operating Loss ($USD Millions)$0.482 $0.511 $0.745
Adjusted EBITDA ($USD Millions)$0.005 -$0.193 -$0.239

Segment Mix

MetricQ4 2024Q1 2025Q2 2025
Subscription & Licenses ($USD Millions)$3.025 $3.048 $3.052
Services ($USD Millions)$0.838 $0.743 $0.823
Subscriptions as % of Revenue78% 80% 79%
Services as % of Revenue22% 20% 21%

KPIs and Operating Highlights

KPIQ4 2024Q1 2025Q2 2025
New Subscription Contracts (#)17 28 20
ARR Added ($USD Millions)$0.360 $0.800 $0.700
Core Product NRR (%)103% (HawkSearch) 107% 113%
Sales Cycle (days)—105 120

Performance vs Wall Street Consensus (Q2 2025)

MetricConsensusActualSurprise
Revenue ($USD)$3,925,000*$3,875,000 -$50,000 (~-1.3%)*
Primary EPS-$0.04*-$0.0571*-$0.0171*

Values with asterisks retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Sales & Marketing ExpenseQ3–Q4 FY25Not specifiedIncrease $250k–$500k per quarter over “next few quarters” Raised
Revenue TrajectoryH2 FY25 → Q1 FY26Not specifiedH2 FY25: relatively flat overall as core growth offsets non-core declines; expect bookings impact late Q4, revenue acceleration in Q1 FY26 Qualitative raise (timing)
M&AOngoingOpportunisticFocus on organic growth; no active pipeline to announce Maintained
DividendsOngoingNoneNone; not contemplated near-term Maintained

No formal numeric guidance was issued for revenue, margins, OpEx beyond S&M, OI&E, or tax rate.

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
AI product suite (HawkSearch)5 AI products launched; Gartner recognition; Rapid UI/Conversational/Smart Facets; partner traction (Optimizely, BigCommerce) Smart Conversation; streaming API; BigCommerce Catalyst SDK; Shopware partnership Expanding features, integrations
Go-to-market investmentReallocate from R&D to S&M; strong CAC payback; pipeline doubled $2.2M raise to double ad spend; expect impact late Q4 bookings/Q1 FY26 revenue Accelerating S&M
Core vs non-core mixCore >60% subscription revenue; non-core declining offsets core growth Same dynamic through H2 FY25; core growth expected to outpace in FY26 Improving mix over time
Sales metricsWin rate 18%, cycle 105 days Win rate ~19%, cycle 120 days; LTV/CAC ~3x; avg initial contract 30 months Strong unit economics
PartnershipsOptimizely, BigCommerce, Salesforce connectors New partner Shopware; Groove Commerce, Netformic USA Broadening partner channels
Internationalization—Support for 50 languages; Arabic deployment example Expanding language support
Pricing models—Discussion of potential AOV pricing not suitable now Exploring, not near-term

Management Commentary

  • “Our Hawk AI product line has received outstanding demand… we expect an excellent return in this expansion of our sales and marketing budget.” — Ari Kahn, CEO .
  • “Total revenue was $3.9 million… gross margin was 68%… Adjusted EBITDA was negative $239,000.” — Thomas Windhausen, CFO .
  • “We modeled LTV-to-CAC at ~3x… 75% gross margin and ~5-year customer lifespan… doubling ad spend intended to double leads and in turn, double sales.” — CEO .
  • “Sales and marketing [will] increas[e] between $250,000 and $500,000 per quarter for the next few quarters.” — CEO .
  • “Average initial contract is ~30 months… customers tend to buy twice as much software over their lifespan as their initial contracts.” — CEO .

Q&A Highlights

  • Sales & marketing trajectory: Expect S&M to rise $250–$500k per quarter; unit economics modeled at ~3x LTV/CAC with 75% GM and 5-year life .
  • Contract characteristics: Average initial term ~30 months; strong upsell over lifecycle .
  • Language/International: Default LLM supports ~50 languages; examples across Asia and Middle East .
  • Revenue timing: 120-day sales cycle implies Q4 bookings uptick and Q1 FY26 revenue impact; no formal revenue guidance due to volatility .
  • Mix commentary: Non-core declines offset core growth near-term; focus remains on core products .

Estimates Context

  • Consensus (S&P Global): Q2 revenue $3.93M vs actual $3.88M (miss ~1%); consensus Primary EPS -$0.04 vs actual -$0.0571 (miss ~$0.017) for the quarter. Coverage: 1 EPS estimate, 2 revenue estimates*.
  • Implications: Modest revenue miss and EPS miss amid higher S&M spend and restructuring costs. Given management’s plan to step up S&M, near-term EBITDA may compress, but estimates for FY26 could need upward revision if the modeled LTV/CAC and pipeline conversion arrive as guided in timing*.

Values with asterisks retrieved from S&P Global.

Key Takeaways for Investors

  • Margin expansion is intact (68% GM), but near-term profitability will be pressured as S&M steps up to capture demand; adjusted EBITDA remained negative .
  • Revenue growth remains modest as core strength is offset by non-core decline; watch mix shift and core ARR additions to drive inflection .
  • The $2.2M capital raise extends runway and is explicitly targeted to accelerate lead generation; monitor Q4 bookings for proof-of-execution .
  • Strong unit economics (LTV/CAC ~3x; NRR up to 113%) and partner ecosystem (Salesforce, Optimizely, BigCommerce, Shopware) support a scalable growth thesis .
  • Near-term estimate risk skewed to EPS downside from higher S&M; medium-term upside if Q1 FY26 revenue acceleration materializes per 120-day cycle .
  • Product differentiation continues (Smart Conversation, streaming APIs, Rapid UI 2.0), enhancing competitive positioning in AI-powered product discovery .
  • Tactical trades: focus on upcoming Q3/Q4 events and partner wins; strategic view hinges on conversion of expanded pipeline and sustained core ARR growth .