Bridgeline Digital (NASDAQ:BLIN) executives highlighted accelerating momentum in the company’s HawkSearch product line and improving profitability during the company’s fiscal first-quarter 2026 earnings call. Management emphasized that customer expansion, AI-driven upsells, and new product releases are increasingly shaping the company’s revenue mix.
HawkSearch and “core products” drive a larger share of revenue
President and CEO Ari Kahn said Bridgeline’s “core products,” led by HawkSearch and the company’s AI offerings, are now a majority of revenue and continue to expand as customers increase their subscriptions and adopt add-on modules. Kahn described search as “the heart of the online shopping experience” for B2B and B2C sites, positioning HawkSearch as an “online salesperson” designed to improve traffic, conversion, and order size.
He added that HawkSearch accounted for 63% of subscription revenue, contributing $2.0 million compared with $1.9 million last quarter. Net revenue retention for the core product line was 107%, which Kahn said reflected renewals and expansions. During the Q&A, management noted that net revenue retention was down from the prior quarter’s 116%, but characterized 107% as “still very good for the industry.”
AI upsells and customer expansion trends
Management highlighted increasing customer spend tied to AI product adoption. Kahn said new products include Smart Search, Visual Search, Smart Response, and newer AI agents such as the Search Assistant, Analytics Assistant, and Merchandising Assistant.
On customer acquisition and deal metrics, Kahn said the average annual recurring revenue (ARR) per new customer increased 12% quarter-over-quarter to $28,000 from $25,000. He also reported that Bridgeline now has more than 200 HawkSearch customers, with an average subscription per customer of $33,000, up from $30,000 last quarter and $25,000 in fiscal Q1 2025.
During the quarter, the company sold 13 new licenses with $1.2 million in total contract value, including over $350,000 in ARR and $700,000 in professional services. Kahn said more than half of new license sales included one of Bridgeline’s AI products in the initial purchase, with additional AI capabilities often added after customers go live with HawkSearch.
Product releases and competitive positioning
Kahn pointed to continued traction in B2B manufacturing and distribution, noting that HawkSearch was ranked number one in Gartner’s 2025 Critical Capabilities Report for that segment (as characterized on the call). He also listed several recent customer wins, including:
- A national closeout retailer with more than 170 locations that replaced its prior search software with HawkSearch, citing AI-driven relevance and filtering capabilities.
- A U.S. specialty lighting distributor using HawkSearch Smart Search to support image- and concept-based queries.
- A Midwest B2B distributor launching HawkSearch to improve online product discovery for construction, industrial, plumbing, and HVAC customers.
- A wholesale supplier serving both B2B and B2C selecting HawkSearch for product discovery across five e-commerce sites, citing multi-site support and AI-driven recommendations.
- A national industrial B2B supplier implementing AI relevance tuning and “boost and bury” rules to control product ranking and merchandising.
Management also discussed several product and platform updates released during the quarter. Kahn said Bridgeline launched Spark, a next-generation user experience platform for administrators that integrates AI capabilities with advanced analytics and includes merchandising and analytics assistance. He also introduced Contextual Fields, which he said can enable franchises and chains to provide customer-specific pricing and availability per store; Kahn cited one customer use case spanning 120,000 products and 7,000 stores, with more than 1,000 real-time updates per minute.
Additional releases included the HawkSearch Advanced Analytics API, designed to help AI agents integrate with analytics for deeper insight into customer behavior, and an AI Content Extractor intended to speed implementations by examining a customer’s product catalog and marketing materials to automatically configure HawkSearch.
In response to a question on competition, Kahn said the company is “still seeing the same top competitors” as in 2025. He emphasized Bridgeline’s analytics approach, describing a “data lake” that provides customers with private analytics data and supports a “library of agents” that can automatically tune HawkSearch based on current behavior.
Financial results: revenue up modestly, profitability improves
Chief Financial Officer Thomas Windhausen reported total revenue of $3.9 million for the quarter ended December 31, 2025, compared with $3.8 million in the prior-year period.
Subscription revenue was $3.2 million, up from $3.0 million a year ago, representing 81% of total revenue. Services revenue was $758,000 versus $743,000 in the prior-year period, representing 19% of total revenue.
Cost of revenue totaled $1.3 million, resulting in gross profit of $2.6 million versus $2.5 million a year earlier. Gross margin was 66%, with subscription gross margin at 69% (down from 71% previously) and services gross margin at 55% (up from 51% in the prior-year period).
Operating expenses were $2.8 million, down from $3.0 million a year ago. Net loss improved to about $100,000 compared with a $600,000 loss in the prior-year period. Windhausen also reported positive adjusted EBITDA of $122,000, compared with negative adjusted EBITDA of $193,000 a year earlier.
Balance sheet and outlook comments
Windhausen said Bridgeline ended the quarter with $1.5 million in cash and $1.6 million in accounts receivable. Total debt was EUR 200,000 (about $236,000) at an average interest rate of 3.25%, with payments due through 2028. He added the company had no other debt, contingent payments, or earnouts from prior transactions.
Total assets were $15.7 million and liabilities were $6.2 million at December 31, 2025. Windhausen reported 12.2 million shares outstanding, 860,000 warrants, and just under 2 million stock options. He said the warrants included two primary tranches: 167,000 expiring May 26 at $2.85, and 592,000 expiring in November 2026 at $2.51.
Looking ahead, Kahn said the company expects HawkSearch and its core products to become over 70% of overall revenue in the year, which he said would support “faster, more profitable growth.” On gross margin, management said it expects combined gross margin to remain in the mid-60% range, with services gross margin generally in the low-50% area and subscription gross margin around 70%.
The company said it plans to continue focusing on revenue growth, product innovation, and customer success, and expects to hold its fiscal second-quarter 2026 conference call in May.
About Bridgeline Digital (NASDAQ:BLIN)
Bridgeline Digital, Inc is a software-as-a-service company that delivers digital experience management solutions to mid-market and enterprise organizations. The company’s core offering, the LX Platform, integrates content management, e-commerce, customer portals and digital marketing tools into a unified cloud-based environment. Bridgeline’s platform is designed to help businesses streamline the delivery of personalized content and commerce capabilities across web, mobile and other channels.
The LX Platform features modules for web content creation, online storefront management, customer self-service portals and marketing automation.
