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Bridgeline Digital, Inc. (BLIN)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue was $3.846M, down 2% YoY (Q3’24: $3.936M) and slightly down sequentially (Q2’25: $3.875M); GAAP diluted EPS was $(0.07) (Q3’24: $(0.03)) . Versus S&P Global consensus, revenue was below ($3.97M estimate*), while EPS was above (est. $(0.05)* vs Primary EPS actual of $(0.03)* per SPGI methodology; GAAP EPS $(0.07)) .
  • Mix continued to shift toward subscriptions: Subscription revenue rose to $3.122M (81% of total), while services fell to $0.724M (19%); gross margin compressed to 66% (from 69% YoY), with services gross margin at 50% .
  • HawkSearch now contributes “over 60%” of revenue with double-digit growth; Core product NRR improved to 114%, and management highlighted #1 Gartner ranking in B2B search as a demand catalyst .
  • Management is leaning into demand generation: lead-gen spend doubled to ~$500k per quarter, sales cycle shortened to 112 days, and 16 new subscription contracts ($1.7M TCV) added ~$0.6M ARR in the quarter .

What Went Well and What Went Wrong

  • What Went Well

    • HawkSearch momentum: “HawkSearch is ranked #1 in the 2025 Gartner Critical Capabilities Report in the B2B Search Use Case,” and accounts for “over 60% of Bridgeline’s revenue” with double-digit growth .
    • Strong retention and cross-sell: Core product NRR was 114%; CEO noted customers “starting with a $25,000 ARR contract… then adding another $50,000 ARR… for advanced features” .
    • Go-to-market leverage improving: Lead-gen budget doubled to ~$500k/quarter with “qualified lead generation more than doubling,” and sales cycle contracted from 125 to 112 days .

  • What Went Wrong

    • Revenue softness and margin pressure: Total revenue dipped to $3.846M (YoY down; QoQ down slightly), gross margin fell to 66% (from 69% YoY), and services gross margin declined to 50% (from 58% YoY) .
    • Profitability weaker YoY: Operating loss increased to $(0.689)M (Q3’24: $(0.383)M) and net loss to $(0.789)M (Q3’24: $(0.305)M); Adjusted EBITDA was $(0.330)M (Q3’24: ~$0.003M) .
    • Revenue miss vs consensus: Revenue of $3.846M came in below S&P Global consensus of $3.97M*, reflecting continued headwinds from legacy products despite HawkSearch strength .

Financial Results

Headline P&L (oldest → newest)

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenue ($USD Thousands)3,936 3,791 3,875 3,846
Gross Profit ($USD Thousands)2,706 2,535 2,616 2,548
Gross Margin %69% 67% 68% 66%
Operating Expenses ($USD Thousands)3,089 3,046 3,361 3,237
Operating Income (Loss) ($USD Thousands)(383) (511) (745) (689)
Net Income (Loss) ($USD Thousands)(305) (634) (730) (789)
Diluted EPS ($)(0.03) (0.06) (0.10) (0.07)
Adjusted EBITDA ($USD Thousands)~3 (193) (239) (330)

Q3 2025 Actual vs S&P Global Consensus

MetricQ3 2025 ActualQ3 2025 Consensus
Revenue ($USD)$3,846,000 $3,970,000*
Primary EPS ($)GAAP diluted: $(0.07) Primary EPS mean: $(0.05); Primary EPS actual: $(0.03)
EPS - # of Estimates—1*
Revenue - # of Estimates—2*

Values retrieved from S&P Global*

Segment Mix (oldest → newest)

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Subscription & Licenses ($USD Thousands)3,013 3,048 3,052 3,122
Services ($USD Thousands)923 743 823 724
Subscription % of Revenue77% 80% 79% 81%
Services % of Revenue23% 20% 21% 19%
Subscription Gross Margin %72% 71% 72% 70%
Services Gross Margin %58% 51% 52% 50%

KPIs (oldest → newest)

KPIQ3 2024Q1 2025Q2 2025Q3 2025
Core Product NRR—107% 113% 114%
New Subscription Contracts (#)—28 20 16
TCV Added ($M)—$2.7 $1.7 $1.7
ARR Added ($M)—$0.8 >$0.7 >$0.6
Cash & Equivalents ($USD Thousands)—1,483 2,751 2,103
Total Debt Outstanding (approx.)——~$406K (current+LT) ~$348K (CFO commentary)

Note: CFO specified total debt “approximately 348,000 US dollars” at 06/30/2025; balance sheet shows current and LT tranches .

Guidance Changes

No formal quantitative guidance was provided for revenue, margins, or EPS. Management did offer operational outlook points:

MetricPeriodPrevious GuidanceCurrent Guidance/CommentaryChange
Services Revenue ($)FY 2025–FY 2026—“Around $750,000 per quarter” with ~50% gross margin New qualitative outlook
Lead-Gen Spend ($)Q3’25–Q1’26—~$500,000 per quarter after March capital raise; “solid 500” for Q3, Q4, and Q1’26 Increased
Mix/Trajectory2026—HawkSearch growth expected to outshine legacy decline “as early as 2026” Qualitative outlook

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3 2025)Trend
AI/Technology initiativesQ1: Agentic-AI roadmap; Smart Search/Response; Salesforce & BigCommerce integrations . Q2: Smart Conversation, Rapid UI; BigCommerce Catalyst SDK; partnerships with Shopware, GrooveCommerce, Netformic .MCP (Model Context Protocol) for AI agents; AI Workbench; Advanced Analytics; Gartner #1 in B2B search .Improving
Sales & Marketing investmentCapital raise of $2M to accelerate S&M (noted in Q2 PR) .Lead-gen doubled to ~$500k/quarter; qualified leads more than doubled; sales cycle to 112 days .Improving
Product performance (HawkSearch)Core products at >10% CAGR; NRR 107%–113% .“Over 60%” of revenue; double-digit growth; NRR 114% .Improving
Services (mix/margin)$0.7–$0.8M/quarter; GM ~51–52% .$0.724M; GM 50%; outlook ~$0.75M/quarter, 50% GM .Stable-to-mix shift
Competitive dynamics—Some competitors “throwing in free professional services”; seen as unsustainable .Watch
Pipeline & customer expansionQ1 28 new contracts, $0.8M ARR; Q2 20 new, >$0.7M ARR .Q3 16 new, $1.7M TCV, >$0.6M ARR; 60% of sales to existing customers YTD .Mixed (expansion strong; new logos lower q/q)

Management Commentary

  • “HawkSearch is ranked #1 in the 2025 Gartner Critical Capabilities Report in the B2B Search Use Case.”
  • “We are seeing double-digit growth for [HawkSearch], which now accounts for over 60% of Bridgeline’s revenue and will continue to grow.”
  • “We doubled our ad spend from $250,000 a quarter to $500,000 a quarter… with qualified lead generation more than doubling… [and] sales cycle… reduced from 125 days down to 112 days.”
  • “In the third quarter… we sold 16 new subscription contracts for $1.7M in total contract value, adding over $600,000 in Annual Recurring Revenue.”
  • “We do see some decline in our legacy products, which flattens our overall revenue and we expect HawkSearch to continue to grow and outshine this dampening as early as 2026.”
  • On competition: some rivals use “free professional services to make up the difference between their capabilities and ours” — a tactic management views as unsustainable .

Q&A Highlights

  • Sales & marketing cadence: Lead-gen spend held at ~$500k per quarter in Q3, Q4, and expected in Q1’26, reflecting strong ROI .
  • Services profile: Management expects services revenue to be roughly $750k per quarter at ~50% gross margin through 2026; focus remains on license growth and partner-led services .
  • Pipeline mix and retention: ~60% of license sales YTD from existing customers; expansion deals often exceed initial new-logo ACV, supported by AI add-ons .
  • Competitive response: Some competitors subsidize implementations with free services; BLIN counters with out-of-box capability and long-term TCO advantages .
  • Concentration: No single HawkSearch customer contributes 5% of total revenues; HP and key electrical distributors are influential partners/customers .

Estimates Context

  • Revenue missed S&P Global consensus ($3.846M actual vs $3.97M estimate*) while EPS exceeded consensus (GAAP diluted $(0.07) vs Primary EPS mean $(0.05); S&P “Primary EPS actual” reported $(0.03), reflecting methodology/adjustment differences) .
  • With service mix steady and subscription growth led by HawkSearch, estimate revisions may modestly lower near-term revenue but raise quality-of-revenue assumptions (subscription mix, NRR). Values retrieved from S&P Global*

Key Takeaways for Investors

  • HawkSearch is the growth engine: >60% of revenue, double-digit growth, and 114% NRR, reinforced by #1 Gartner B2B search ranking — a credible catalyst for pipeline and pricing power .
  • Quality mix improving: Subscription reached 81% of revenue; services held ~19% with stable ~$0.75M per quarter outlook and ~50% GM, supporting margin predictability over time .
  • Near-term profitability remains pressured: Gross margin compressed to 66% and Adj. EBITDA was $(0.33)M; increased S&M spend is strategic but weighs on near-term earnings .
  • Execution focus: Shorter sales cycles, doubled lead-gen, and strong partner ecosystem should sustain pipeline conversion into FY26 .
  • Watch the narrative into 2026: Management expects HawkSearch growth to more than offset legacy declines by 2026 — monitor subscription growth, churn, and expansion rates as leading indicators .
  • Trading setup: Mixed print (revenue miss vs EPS beat*) with strong AI/product momentum and improving demand-gen efficiency — stock likely reacts to forward indicators (bookings, ARR adds, NRR, Gartner halo) more than backward EPS. Values retrieved from S&P Global*

Source Documents

  • Q3 2025 8-K and Exhibit 99.1 press release (Aug 18, 2025)
  • Q3 2025 earnings call transcript (Aug 14, 2025)
  • Q2 2025 8-K and press release (May 19, 2025)
  • Q1 2025 8-K and press release (Feb 18, 2025)

Values retrieved from S&P Global*