Bridgeline Digital, Inc.

Previous wording

We are a an AI-powered marketing technology company that offers a suite of products that help companies grow online revenue by driving more visitors to their websites, converting more visitors to purchasers, and increasing average order value per purchaser.

Current wording

We are an AI-powered marketing technology company that offers a suite of products that help companies grow online revenue by driving more visitors to their websites, converting more visitors to purchasers, and increasing average order value per purchaser.

Previous wording

All of our software is available through a cloud-based Software as a Service (“SaaS”) model, whose flexible architecture provides customers hosting and support. Additionally, Unbound and HawkSearch have the option to be available via a traditional perpetual licensing business model, in which the software can reside on a dedicated infrastructure either on premise at the customer’s facility, or manage-hosted by Bridgeline via a cloud-based, dedicated hosted services model.

Current wording

All of our software is available through a cloud-based Software as a Service (“SaaS”) model, whose flexible architecture provides customers hosting and support. Additionally, Unbound and HawkSearch have the option to be available via a traditional perpetual licensing business model, in which the software can reside on a dedicated infrastructure either on premises at the customer’s facility, or manage-hosted by Bridgeline via a cloud-based, dedicated hosted services model.

Previous wording

Each of our product offerings goes to market through two main types of partnerships. The first partner category includes platforms such as Adobe, BigCommerce, Optimizely, Sitefinity, Shopify and others. Our software often embeds directly into these platforms through connectors and SDK solutions that we develop in concert with each platform. The second category includes web-development agencies which typically have deep relationships with end-customers and have the technical expertise to implement our software solutions according to client needs, platform requirements, and industry standards.

Current wording

Each of our product offerings goes to market through two main types of partnerships. The first partner category includes platforms such as Adobe, BigCommerce, Optimizely, Sitefinity, Shopify, Unilog and others. Our software often embeds directly into these platforms through connectors and SDK solutions that we develop in concert with each platform. The second category includes web-development agencies which typically have deep relationships with end-customers and have the technical expertise to implement our software solutions according to client needs, platform requirements, and industry standards.

Previous wording

Total revenue for the fiscal year ended September 30, 2024 (“fiscal 2024”)decreasedto $15.4 million from $15.9 million for the fiscal year ended September 30, 2023 (“fiscal 2023”). The loss from operations for fiscal 2024 was $(2.0) million, compared with a loss from operations of $(9.9) million for fiscal 2023. We had a net loss for fiscal 2024 of $(2.0) million, which included a gain of approximately $0.1 million as a result of the change in fair value of certain warrant liabilities, compared with a net loss of $(9.4) million, which included a gain of approximately $0.6 million as a result of the change in fair value of certain warrant liabilities, and a goodwill impairment charge of $7.5 million in fiscal 2023. Basic and diluted net loss per share attributable to common stockholders for fiscal 2024 was $(0.19) compared with the equivalent basic and diluted net loss per share attributable to common stockholders of $(0.91) for fiscal 2023.

Current wording

Total revenue for the fiscal year ended September 30, 2025 (“fiscal 2025”) remained consistent at $15.4 million when compared to fiscal year ended September 30, 2024 (“fiscal 2024”). The loss from operations for fiscal 2025 was $(2.4) million, compared with a loss from operations of $(2.0) million for fiscal 2024. We had a net loss for fiscal 2025 of $(2.5) million, which included a loss of approximately $4 thousand as a result of the change in fair value of certain warrant liabilities, compared with a net loss of $(2.0) million, which included a gain of approximately $0.1 million as a result of the change in fair value of certain warrant liabilities, in fiscal 2024. Basic and diluted net loss per share attributable to common stockholders for fiscal 2025 was $(0.25) compared with the equivalent basic and diluted net loss per share attributable to common stockholders of $(0.19) for fiscal 2024.

Previous wording

Our revenue is derived from two sources: (i) Subscription and Perpetual licenses and (ii) Digital Engagement Services.

Current wording

Our revenue is derived from two sources: (i) Subscription and (ii) Services.

Previous wording

Digital engagement services revenue is comprised of implementation and retainer-related services. Total revenue from digital engagement services of $3.2 million in fiscal 2024 increased 3% from $3.1 million in fiscal 2023. Digital engagement services revenue as a percentage of total revenue increased to 21% in fiscal 2024 from 20% in fiscal 2023.

Current wording

Services revenue is comprised of implementation and retainer-related services. Total revenue from services of $3.0 million in fiscal 2025 decreased (6)% from $3.2 million in fiscal 2024. Services revenue as a percentage of total revenue decreased to 20% in fiscal 2025 from 21% in fiscal 2024.

Previous wording

Total cost of revenue for fiscal 2024 of $4.9 million decreased $(0.1) million, or (2)% compared to the prior period.

Current wording

Total cost of revenue for fiscal 2025 of $5.1 million increased $0.2 million, or 4% compared to the prior period.

Previous wording

Cost of subscription and perpetual licenses of $3.4 million in fiscal 2024 increased slightly from fiscal 2023. The increase in cost of subscription and perpetual licenses in fiscal 2024 compared to fiscal 2023 is primarily due to higher costs to operate our cloud-based hosting model with Amazon Web Services, offset by a decrease in personnel costs. The cost of subscription and perpetual licenses as a percentage of subscription and perpetual license revenue increased to 28% in fiscal 2024 from 26% in fiscal 2023. This increase is primarily due to the overall decrease in subscription and perpetual license revenue.

Current wording

Cost of subscription revenue of $3.7 million in fiscal 2025 increased $0.3 million, or 8%, from $3.4 million in fiscal 2024. The increase in cost of subscription revenue in fiscal 2025 compared to fiscal 2024 is primarily due to higher costs to operate our cloud-based hosting model with Amazon Web Services, offset by a decrease in personnel costs. The cost of subscription revenue as a percentage of subscription revenue increased to 30% in fiscal 2025 from 28% in fiscal 2024.

Previous wording

Cost of digital engagement services of $1.5 million in fiscal 2024 decreased (7)%, from $1.7 million in fiscal 2023. The cost of total digital engagement services as a percentage of total digital engagement services revenue decreased to 48% in fiscal 2024 from 52% in fiscal 2023. These decreases are primarily due to the overall decrease in personnel costs.

Current wording

Cost of services revenue of $1.5 million in fiscal 2025 and 2024 remained consistent. The cost of total services revenue as a percentage of total services revenue increased slightly to 49% in fiscal 2025 from 48% in fiscal 2024. This increase is primarily due to the overall increase in personnel costs relative to total subscription revenue.

Previous wording

Gross profit of $10.4 million decreased $(0.4) million, or (4)%, in fiscal 2024 compared to $10.9 million for fiscal 2023. The gross profit margin remained consistent at 68% for fiscal 2024 and 2023.

Current wording

Gross profit of $10.2 million decreased $(0.2) million, or (2)%, in fiscal 2025 compared to $10.4 million for fiscal 2024. The gross profit margin was 67% and 68% for fiscal 2025 and 2024, respectively.

Previous wording

Sales and marketing expenses of $3.7 million in fiscal 2024 decreased $(1.0) million, or (22)%, from $4.8 million in fiscal 2023. Sales and marketing expense as a percentage of total revenue decreased to 24% in fiscal 2024 compared to 30% in fiscal 2023. The decrease compared to the prior period is primarily attributable to lower personnel costs and lower marketing spend on leads and conferences.

Current wording

Sales and marketing expenses of $4.5 million in fiscal 2025 increased $0.8 million, or 20%, from $3.7 million in fiscal 2024. Sales and marketing expense as a percentage of total revenue increased to 29% in fiscal 2025 compared to 24% in fiscal 2024. The increase compared to the prior period is primarily attributable to higher marketing spend on leads and conferences, partially offset by lower personnel costs.

Previous wording

General and administrative expenses of $3.3 million in fiscal 2024 increased $0.1 million, or 3%, from $3.2 million in fiscal 2023. General and administrative expense as a percentage of revenue was 21% in fiscal 2024 compared to 20% in fiscal 2023. These increases compared to the prior period are primarily attributable to higher personnel costs.

Current wording

General and administrative expenses of $3.1 million in fiscal 2025 decreased $(0.1) million, or (4)%, from $3.3 million in fiscal 2024. General and administrative expense as a percentage of revenue was 20% in fiscal 2025 compared to 21% in fiscal 2024. The decrease compared to the prior period is primarily attributable to lower personnel costs.

Previous wording

Research and development expense of $4.2 million in fiscal 2024 increased $0.5 million, or 13%, from $3.7 million in fiscal 2023. Research and development expense as a percentage of total revenue increased to 27% in fiscal 2024 compared to 23% for fiscal 2023. These increases compared to the prior period are primarily attributable to higher personnel costs.

Current wording

Research and development expense of $4.0 million in fiscal 2025 decreased $(0.1) million, or (3)%, from $4.2 million in fiscal 2024. Research and development expense as a percentage of total revenue decreased to 26% in fiscal 2025 compared to 27% for fiscal 2024. These decreases compared to the prior period are primarily attributable to lower personnel costs.

Previous wording

Depreciation and amortization expense of $1.1 million in fiscal 2024 decreased by $(0.4) million, or (29)%, from $1.5 million in fiscal 2023. Depreciation and amortization as a percentage of total revenue decreased to 7% in fiscal 2024 compared to 10% for fiscal 2023. The decrease was due to intangible assets that became fully amortized.

Current wording

Depreciation and amortization expense of $0.8 million in fiscal 2025 decreased by $(0.3) million, or (28)%, from $1.1 million in fiscal 2024. Depreciation and amortization as a percentage of total revenue decreased to 5% in fiscal 2025 compared to 7% for fiscal 2024. The decrease was due to intangible assets that became fully amortized.

Previous wording

Restructuring and acquisition related expenses was $0.2 million in fiscal 2024. During fiscal 2024, expenses incurred were related to severance and merger and acquisition costs, and during fiscal 2023, expenses incurred were related to further acquisition integrations.

Current wording

Restructuring and acquisition related expenses of $0.2 million in fiscal 2025 remained consistent with 2024. During fiscal 2025 and 2024, expenses incurred were related to severance and merger and acquisition costs.

Previous wording

The loss from operations was $(2.0) million for fiscal 2024 compared to a loss from operations of $(9.9) million for fiscal 2023, a decrease of $(7.9) million or (80)%. The decrease is primarily due to the goodwill impairment in fiscal 2023.

Current wording

The loss from operations was $(2.4) million for fiscal 2025 compared to a loss from operations of $(2.0) million for fiscal 2024, an increase of $0.4 million or 20%.

Previous wording

Interest expense and other, net, was $(0.1) million of income in fiscal 2024, which primarily consisted of non-recurring non-operating costs, compared to $(0.2) million of income in fiscal 2023, which primarily consisted of non-recurring operating costs.

Current wording

Interest expense and other, net, was $(0.1) million of income in fiscal 2025 and 2024, which primarily consisted of non-recurring, non-operating costs.

Previous wording

The Company recognized a gain related to the change in fair value of warrant liabilities of $0.1 million for fiscal 2024, and a gain related to the change in fair value of warrant liabilities of $0.6 million for fiscal 2023.

Current wording

The Company recognized a loss related to the change in fair value of warrant liabilities of $4 thousand for fiscal 2025, and a gain related to the change in fair value of warrant liabilities of $0.1 million for fiscal 2024.

Previous wording

The provision for (benefit from) income taxes was $(43) thousand for fiscal 2024 and $(94) thousand for fiscal 2023. Income tax expense consists of estimated liability for federal and state income taxes owed by the Company. Net operating loss (“NOL”) carryforwards are estimated to be sufficient to offset any potential taxable income for all periods presented. A valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will not be realized. The Company maintains a valuation allowance against its net deferred tax assets. As of September 30, 2024 and 2023, the Company had a valuation allowance on its net deferred tax assets of $11.3 million and $10.8 million, respectively.

Current wording

The provision for (benefit from) income taxes was $ (39)thousand for fiscal 2025 and $(43) thousand for fiscal 2024. Income tax expense consists of estimated liability for federal and state income taxes owed by the Company. Net operating loss (“NOL”) carryforwards are estimated to be sufficient to offset any potential taxable income for all periods presented. A valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will not be realized. The Company maintains a valuation allowance against its net deferred tax assets. As of September 30, 2025 and 2024, the Company had a valuation allowance on its net deferred tax assets of $11.7 million and $11.3 million, respectively.

Previous wording

The federal NOL carryforward is approximately $36.8 million as of September 30, 2024 of which $29.0 million is subject to the 20-year carryforward and expires on various dates through 2038. The remaining federal NOL carryforward of $7.7 million is indefinite. Net operating losses incurred after December 31, 2017 carry forward indefinitely. Internal Revenue Code Section 382 places certain limitations on the amount of taxable income that can be offset by NOL carryforwards after a change in control of a loss corporation. Generally, after a change in control, a loss corporation cannot deduct NOL carryforwards in excess of the Section 382 limitation. Due to these “change of ownership” provisions, utilization of NOL carryforwards may be subject to an annual limitation on utilization against taxable income in future periods. The Company has not performed a Section 382 analysis. However, if performed, Section 382 may be found to limit potential future utilization of our NOL carryforwards. The Company also has approximately $50.2 million in state NOLs which expire on various dates through 2044.

Current wording

Net operating losses for taxable years beginning after December 31, 2017 carry forward indefinitely. Internal Revenue Code Section 382 places certain limitations on the amount of taxable income that can be offset by NOL carryforwards after a change in control of a loss corporation. Generally, after a change in control, a loss corporation cannot deduct NOL carryforwards in excess of the Section 382 limitation. Due to these “change of ownership” provisions, utilization of NOL carryforwards may be subject to an annual limitation on utilization against taxable income in future periods. The Company has not performed a Section 382 analysis. However, if performed, Section 382 may be found to limit potential future utilization of our NOL carryforwards. The Company also has approximately $51.5 million in state NOLs which expire on various dates through 2045.

Previous wording

Cash used in operating activities was $(0.8) million during fiscal 2024 compared to cash provided by operating activities of $0.3 million during fiscal 2023. The change in cash used in operating activities compared to the prior period was primarily due to a decrease in net earnings and changes in non-cash items, including changes in fair value of warrant liabilities, amortization of intangible assets, and goodwill impairment, and changes to accounts receivable, accounts payable and accrued liabilities, as well as deferred revenue.

Current wording

Cash used in operating activities was $(1.1) million during fiscal 2025 compared to $(0.8) million during fiscal 2024. The change in cash used in operating activities compared to the prior period was primarily due to a decrease in net earnings and changes in non-cash items, including changes in fair value of warrant liabilities, and amortization of intangible assets, and changes to accounts receivable, prepaid expenses and other current assets, accounts payable and accrued liabilities, as well as deferred revenue.

Previous wording

Cash used in investing activities was $(29) thousand during fiscal 2024 compared to cash used in investing activities of $(25) thousand during fiscal 2023. Cash used in investing activities during fiscal 2024 and 2023 was related primarily to purchases of property and equipment.

Current wording

Cash used in investing activities was $(18) thousand during fiscal 2025 compared to $(29) thousand during fiscal 2024. Cash used in investing activities during fiscal 2025 and 2024was related primarily to purchases of property and equipment.

Previous wording

Cash used in financing activities was $(0.2) million during fiscal 2024 compared with $(0.6) million during fiscal 2023. Cash used in financing activities during both fiscal 2024 and fiscal 2023 was primarily related to payments of long-term debt, and in fiscal 2023, deferred purchase price and contingent consideration payments related to acquisitions completed during fiscal 2021.

Current wording

Cash provided by financing activities was $1.4 million during fiscal 2025 compared with cash used in financing activities of $(0.2) million during fiscal 2024. Cash provided by financing activities during fiscal 2025 was primarily related to proceeds from the issuance of common stock, less cash used for the redemption of Preferred Series C shares and used for payment of long-term debt, and in fiscal 2024, payments of long-term debt was primarily used in financing activities.

Previous wording

We have historically incurred operating losses and used cash on hand and from financing activities to fund operations as well as develop new products. We believe that future revenues and cash flows will supplement our working capital and that we have an appropriate cost structure to support future revenue growth.

Current wording

The Company has historically incurred operating losses and used cash on hand and from financing activities to fund operations as well as develop new products. The Company is continuing to maintain tight control over discretionary spending for the 2026 fiscal year. The Company believes that future revenues and cash flows will supplement its working capital and it has an appropriate cost structure to support future revenue growth.

Previous wording

We may offer and sell, from time to time, in one or more offerings, up to $50 million of our debt or equity securities, or any combination thereof. Such securities offerings may be made pursuant to our currently effective registration statement on Form S-3 (File No. 333-262764), which was initially filed with the Securities and Exchange Commission on February 16, 2022 and declared effective on March 4, 2022 (the “Shelf Registration Statement”). A complete description of the types of securities that we may sell is described in the Preliminary Prospectus contained in the Shelf Registration Statement. As of the date of the filing of this Annual Report, there are no active offerings for the sale or obligations to purchase any of our securities pursuant to the Shelf Registration Statement. There can be no assurances that we will offer any securities for sale or that if we do offer any securities that we will be successful in selling any portion of the securities offered on a timely basis if at all, or on terms acceptable to us. Further, our ability to offer or sell such securities may be limited by rules of the Nasdaq Capital Market.

Current wording

The Company may offer and sell, from time to time, in one or more offerings, up to $50 million of its debt or equity securities, or any combination thereof. Such securities offerings may be made pursuant to the Company’s currently effective registration statement on Form S-3 (File No. 333-285176), which was initially filed with the Securities and Exchange Commission on February 24, 2025 and declared effective on February 27, 2025 (the “Shelf Registration Statement”). A complete description of the types of securities that the Company may sell is described in the Preliminary Prospectus contained in the Shelf Registration Statement. As of the date of the filing of this Annual Report, there are no active offerings for the sale or obligations to purchase any of the Company’s securities pursuant to the Shelf Registration Statement. There can be no assurances that the Company will offer any securities for sale or that if the Company does offer any securities that it will be successful in selling any portion of the securities offered on a timely basis if at all, or on terms acceptable to us. Further, our ability to offer or sell such securities may be limited by rules of the NASDAQ Capital Market.

Previous wording

We lease all of our office space locations. The gross obligations for operating leases and subleases is$0.2 million of which $0.2 millionis expected to be paid in the next twelve months. Debt payments on our various debt obligations total$0.5 million of which $0.3 million is expected to be paid in the next twelve months.

Current wording

We lease all our office space locations. The gross obligations for operating leases and subleases are$0.1 million, with obligations extending through January 2028. Debt payments on our various debt obligations total$0.3 million, of which $0.2 million is expected to be paid in the next twelve months.

Previous wording

We derive our revenue from two sources: (i) Subscription and Perpetual Licenses, which are comprised of software subscription fees (“SaaS”), perpetual software licenses, and maintenance for post-customer support (“PCS”) on perpetual licenses, and (ii) Digital Engagement Services, which are professional services to implement our products such as web development, digital strategy, information architecture and usability engineering search. Customers who license the software on a subscription basis, which can be described as “Software as a Service” or “SaaS”, do not take possession of the software.

Current wording

We derive our revenue from two sources: (i) Subscription, which are comprised of software subscription fees (“SaaS”), hosting and related services, maintenance for post-customer support (“PCS”) on perpetual licenses, and perpetual software licenses, and (ii) Services, which are professional services to implement our products such as web development, digital strategy, information architecture and usability engineering search. Customers who license the software on a subscription basis, which can be described as “Software as a Service” or “SaaS”, do not take possession of the software.

Previous wording

Revenue is recognized when control of these services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services. If the consideration promised in a contract includes a variable amount, for example, overage fees, contingent fees or service level penalties, we include an estimate of the amount we expect to receive for the total transaction price if it is probable that a significant reversal of cumulative revenue recognized will not occur. Our subscription service arrangements are non-cancelable and do not contain refund-type provisions. Revenue is reported net of applicable sales and use tax.

Current wording

Revenue is recognized when control of these services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services. If the consideration promised in a contract includes a variable amount, for example, overage fees, contingent fees or service level penalties, we include an estimate of the amount we expect to receive for the total transaction price if it is probable that a significant reversal of cumulative revenue recognized will not occur. Our subscription arrangements are non-cancelable and do not contain refund-type provisions. Revenue is reported net of applicable sales and use tax.

Previous wording

Payment terms with customers typically require payment 30 days from invoice date. Payment terms may vary by customer but generally do not exceed 45 days from invoice date. Invoicing for digital engagement services are either monthly or upon achievement of milestones and payment terms for such billings are within the standard terms described above. Invoices for subscriptions and hosting are typically issued monthly and are generally due in the month of service. Our subscription and hosting agreements provide for refunds when service is interrupted for an extended period of time and are reserved for in the month in which they occur, if necessary.

Current wording

Payment terms with customers typically require payment 30 days from invoice date. Payment terms may vary by customer but generally do not exceed 45 days from invoice date. Invoicing for services are either monthly or upon achievement of milestones and payment terms for such billings are within the standard terms described above. Invoices for subscriptions and hosting are typically issued monthly and are generally due in the month of service. Our subscription and hosting agreements provide for refunds when service is interrupted for an extended period of time and are reserved for in the month in which they occur, if necessary.

Previous wording

Our digital engagement services agreements with customers do not provide for any refunds for services or products and therefore no specific reserve for such is maintained. In the infrequent instances where customers raise a concern over delivered products or services, we have endeavored to remedy the concern and all costs related to such matters have been insignificant in all periods presented.

Current wording

Our services agreements with customers do not provide for any refunds for services or products and therefore no specific reserve for such is maintained. In the infrequent instances where customers raise a concern over delivered products or services, we have endeavored to remedy the concern and all costs related to such matters have been insignificant in all periods presented.