Bridgeline Digital, Inc. (NASDAQ:BLIN) Q1 2024 Earnings Convention Name February 14, 2024 4:30 PM ET

Firm Contributors

Thomas Windhausen – CFO

Roger Kahn – President and CEO

Convention Name Contributors

Howard Halpern – Taglich Brothers

Operator

Thanks for standing by, and welcome to Bridgeline Digital’s First Quarter 2024 Earnings Convention Name. [Operator Instructions] I might now like handy the decision over to CFO, Tom Windhausen. Please, go forward.

Thomas Windhausen

Thanks, and good afternoon, everybody. Thanks for becoming a member of us right now. My title is Tom Windhausen, I am the Chief Monetary Officer of Bridgeline Digital. I am happy to welcome you to our fiscal 2024 first quarter convention name.

On the decision with us this afternoon is Ari Kahn, Bridgeline’s President and CEO, who will start the decision with a dialogue of our enterprise highlights. I’ll then replace you on our monetary outcomes for the quarter, and we’ll conclude by taking questions.

Earlier than we start, I would prefer to remind listeners that in this convention name, feedback that we make relating to Bridgeline that aren’t historic details are forward-looking statements throughout the which means of Part 27A of the Securities Act of 1933 and Part 21E of the Securities Act of 1934 and are topic to dangers and uncertainties that would trigger such statements to vary materially from precise future occasions or outcomes.

These statements are made pursuant to the Protected Harbor provisions of the Personal Securities Litigation Reform Act of 1995. The interior projections and beliefs upon which we base our expectations right now might change over time, and we expressly disclaim and assume no obligation to tell you in the event that they do. The outcomes that we report right now shouldn’t be thought-about as a sign of future efficiency.

Adjustments in financial, enterprise, aggressive, technological, regulatory and different elements might trigger Bridgeline’s precise outcomes to vary materially from these expressed or implied by the projections or forward-looking statements made right now. For extra detailed details about these elements and different dangers that will have an effect on our enterprise, please assessment the stories and paperwork filed every now and then by Bridgeline Digital with the Securities and Trade Fee.

Additionally, please notice that on the decision this afternoon, we’ll focus on some non-GAAP monetary measures when commenting on the corporate’s monetary efficiency. We offer a reconciliation of our GAAP financials to those non-GAAP measures in our earnings launch. You may get hold of a duplicate of our earnings launch by visiting our web site.

I might now like to show the decision over to Ari Kahn, Bridgeline’s President and CEO. Ari?

Roger Kahn

Thanks, Tom. Good afternoon, everybody. Our first quarter of fiscal 2024 had the strongest subscription gross sales since I joined Bridgeline. We signed over $2.5 million in new buyer contracts with 28 license gross sales, including $750,000 in ARR, annual recurring income. Gross sales had been pushed by HawkSearch, with the discharge of Sensible Search and Fast UI creating demand that may proceed to drive new gross sales sooner or later. Search is now nicely over 50% of subscription income for the corporate, and that proportion is predicted to extend. Subscription income general is 82% of our complete income.

Skilled providers income was down this quarter to $670,000 partially as a result of we invested in making our merchandise out of the field with the Fast UI launch final quarter that enables new prospects to put in HawkSearch with no implementation prices. This can be a aggressive benefit that shortens our gross sales cycle, will increase our complete addressable market.

Fast UI expands the whole addressable market to incorporate corporations who search to take a position extra of their budgets into the subscription and the go-to-market extra rapidly than a customized implementation would enable. These prospects can use the state [ph] price range to buy further subscriptions from Bridgeline corresponding to our Sensible Search product or spend money on customized enhancements sooner or later after they launch and go dwell.

Sensible Search is crucial product launch now we have ever made. It delivers a transparent worth proposition to our prospects. It will increase their on-line income by permitting their prospects to search out merchandise to purchase that they might not have realized that they want or wouldn’t have discovered with conventional keyword-based search. 100% of Bridgeline’s over 500 Search prospects can enhance their on-line income with Sensible Search.

Clients can add Sensible Search to their current sizzling search license for a further subscription charge, which supplies Bridgeline a chance to considerably develop our HawkSearch income from our present buyer base above and past the truth that Sensible Search helps us win extra new prospects as a result of together with Fast UI, it permits a brand new buyer to make an instantaneous enchancment to their very own income.

Sensible Search is an AI-based enhancement to HawkSearch that enables the patron to search out merchandise with extra clever pure search. First, whereas buying, you’ll be able to take {a photograph} together with your smartphone and discover merchandise on a Sensible Search-powered web site.

Secondly, on a Sensible Search-powered web site, you’ll be able to describe your aim to create a buying listing slightly than must specify the person gadgets that you just need to purchase. And thirdly, you are able to do all of this in additional than 50 languages.

Here is an instance. As an instance in case you have a camper planning a visit. That camper can merely ask the web site, “What ought to I deliver on a 2-week tenting journey for cooking?” Sensible Search response will embody all of the anticipated merchandise corresponding to a cooking cylinder propane tank and also will embody merchandise corresponding to a meal ready-to-eat meals pouch, which the camper might not have thought of within the first place.

The camper might then see an individual on the road with cool mountain climbing boots that they like, and so they can rapidly snap an image with their digicam, and the Sensible Search-powered web site to take that image and instantly discover these boots and permit that particular person to purchase these, search from the web site.

These expertise should not doable with out Sensible Search. Sensible Search leverages the most recent developments in AI, together with giant language fashions, transformers and vector databases to deeply perceive your on-line catalog, together with what merchandise appear like, how merchandise can be utilized and the way merchandise are associated to one another.

The way forward for on-line buying is for web sites to change into clever gross sales advisers, who can perceive your wants and advocate options. Sensible Search empowers your website to see and converse with prospects right now to assist them discover merchandise that they might not have even realized that they want it.

From a aggressive perspective, Sensible Search presents pure and clever capabilities that don’t exist elsewhere available in the market. And together with Fast UI, it presents these skills with out the necessity to make investments hundreds of {dollars} and weeks of time in website redesigns or information integrations.

As a result of Sensible Search is out of the field for current HawkSearch prospects, they will improve with no sophisticated technical funding or the politics that accompany modifications to their buyer expertise and branding.

HawkSearch gross sales are largely pushed by way of our platform partnerships with BigCommerce, Salesforce and Optimizely. We even have company companions, together with Xngage and AmericanEagle.com that assist drive HawkSearch gross sales.

Gross sales within the first quarter consists of Schaedler Yesco, {an electrical} distributor with 29 places and 1,000 manufacturers. Yesco selected Sensible Seek for its distinctive half quantity search performance that enables consumers to make full and partial half quantity searches whereas robotically performing unit of measurement conversions. Sensible Search will go additional for Yesco and permit an electrician to take an image of an element whereas on the job and instantly discover that half of their catalog.

One other electrical distributor chosen Sensible Search to reinforce their e-commerce by bringing over 700 to permit contractors to seek for merchandise with photos or describe extra complicated must the positioning to search out electrical elements. The overall contract worth for this enhancement is greater than $875,000.

A number one nationwide insurance coverage supplier chosen HawkSearch for its customized analysis portal and smartphone app. The insurance coverage firm used Fast UI to right away resolve their purchasers’ wants to search out details, coverage data and paperwork within the useful resource library.

Saviynt, a pacesetter in cloud id and entry governance, chosen Sensible Search to assist its prospects help workforce to search out data throughout a number of third-party information bases. And that is an instance of what’s referred to as federated search, the place HawkSearch indexes data for a number of repositories.

A retailer specializing in agriculture and farming merchandise, selected HawkSearch and Sensible Search to spice up gross sales throughout their 25,000-product catalog. Sensible Search will analyze their brochures and pictures to permit consumers to search out merchandise utilizing pictures or pure language. The client examined Sensible Search with lots of of photos taken within the discipline from a smartphone to make sure that their prospects might discover elements within the real-world eventualities.

A number one constructing supplies retailer chosen HawkSearch to reinforce their e-commerce website, together with product discovery of their catalog of over 5,000 merchandise, Rainbow Useful resource Middle, a high academic retailer, chosen HawkSearch to energy e-commerce website. HawkSearch’s functionality for keyword-triggered promotional campaigns will enable the retailer to focus on particular presents and featured merchandise.

Nail Gun Depot, a number one residence enchancment retailer, selected HawkSearch to auto-complete and granular relevancy tuning that may develop its income considerably and streamline product discovery course of for his or her giant, complicated product catalog.

Total, our advertising and lead era is targeted on slim industries corresponding to constructing provides, the place we are able to change into the business chief to make future gross sales much more environment friendly. We’re additionally effectively promoting to our current prospects with merchandise like Sensible Search to additional drive income with out incurring giant advertising bills.

Though cumulative subscription income is flat as a consequence of legacy product burn, HawkSearch has excellent buyer retention, is profitable new prospects quickly and upsell alternatives inside our buyer base. And it continues to have double-digit progress.

Our partnership with Optimizely and Xngage is a vital a part of our go-to-market technique. In October, we joined Optimizely at their Annual Consumer Convention, the place we introduced HawkSearch’s integration with Optimizely-configured commerce utilizing the Xngage connector.

This announcement was filed with on-line webinars to additional promote gross sales. HawkSearch is now in a novel place to enhance website seek for greater than 1,000 Optimizely-configured prospects, and a number of other have already bought a license.

We lately introduced a reseller partnership with accessiBe, the market chief in net accessibility. accessiBe helps over 180,000 corporations, together with PlayStation, Johnson & Johnson and NBC, to enhance compliance with American Incapacity Act and related laws in Canada and Europe.

Bridgeline will promote accessiBe to our 600-plus prospects, a lot of whom have an lively curiosity in accessibility, which not solely will increase their on-line gross sales, but in addition reduces litigation threat with compliant laws.

HawkSearch has the one BigCommerce connector for search that helps multi-store entrance. This can be a massive differentiator for our BigCommerce partnership. Multi-store entrance provides HawkSearch a bonus within the franchise and chain retailer market and lately led to a furnishings retailer in Europe to pick HawkSearch.

The shop will use HawkSearch’s Fast UI to rapidly go to market throughout a number of nations in Europe and a number of languages, with a novel consumer expertise the place customers can see completely different furnishings colours within the auto-complete drop-down from HawkSearch’s search bar. Bridgeline will showcase the most recent variations of this connector in Might at a BigCommerce — with BigCommerce on the B2B On-line Chicago Convention.

Going ahead, we count on HawkSearch to drive a lot of the expansion for Bridgeline, with investments in AI to result in new gross sales and upgrades in our current buyer base. Sensible Search has been particularly sturdy, with seven gross sales in simply the final two months in a pipeline of greater than $700,000 in annual recurring income. Our go-to-market technique depends on partnerships and concentrating on of slim markets to maximise gross sales per market in {dollars}.

So presently, I would like handy off to our Chief Monetary Officer, Tom Windhausen. Tom?

Thomas Windhausen

Thanks, Ari. I am going to present an replace on our monetary outcomes for the primary quarter of fiscal 2024, which ended December 31, 2023. The overall income for the quarter ended December 31, 2023 was $3.8 million in comparison with $4.1 million within the prior-year interval. Subscription and license income, which is comprised of SaaS licenses, upkeep and internet hosting income, for the quarter ended December 31, 2023 was $3.1 million in comparison with $3.2 million within the prior-year interval. As a proportion of complete income, subscription and license income was 82% of complete income for the quarter.

Providers income was $669,000 for the quarter ended December 31, 2023, a lower from $854,000 within the prior-year first quarter. As a proportion of complete income, providers income accounted for 18% of complete income within the quarter.

Price of income was $1.2 million for this quarter, a slight lower from $1.3 million within the prior-year interval. And because of this, our gross revenue was $2.6 million for the quarter as in comparison with $2.8 million within the prior-year interval. Total, gross revenue margin was 68% for the quarter ended December 31, 2023, in comparison with 69% within the prior yr comparable interval.

Subscription and license gross margins had been 73% for the quarter, in step with the prior-year interval, and providers gross margins had been 44% in comparison with 51% within the prior-year interval. Working bills had been $3.2 million for the quarter ended December 31, 2023, in step with $3.2 million within the prior-year interval.

Shifting under working bills, the change in honest worth of our liability-classified warrants within the quarter resulted in non-cash revenue of $18,000 in comparison with revenue of $300,000 within the prior-year interval.

Internet loss was $0.6 million or $600,000 for the quarter ended December 31, 2023 in comparison with a internet lack of $100,000, $0.1 million, within the prior-year interval. And at last, adjusted EBITDA for the quarter was adverse $117,000 in comparison with a constructive $115,000 within the prior-year interval.

Shifting on to the stability sheet. At December 31, 2023, we had money of $1.4 million and accounts receivable of practically $1.3 million. Our complete debt excellent, as of December 31, 2023, was roughly EUR 585,000 or USD 646,000. That debt has a weighted common rate of interest of 4.68%, with principal funds due by way of 2028. We’ve got no different debt or in any earn-outs from any enterprise, earlier acquisition.

And at December 31, our complete belongings had been $16.6 million and our complete liabilities had been $5.7 million. We did have a lower in money within the quarter, and that was a results of timing of collections of receivables in addition to timing of vendor funds. Particularly, the quarter included over $200,000 of funds to a sure associate vendor, which is not going to recur.

Lastly, I am going to give an replace on our cap desk. As of the tip of the interval December 31, 2023, our cap desk included 10.4 million excellent shares, 39,000 shares from Collection C most well-liked inventory on an as-converted foundation, 1.7 million warrants and 1.8 million choices. In October 2023 through the quarter, 54,000 of warrants expired.

One other practically 900,000 warrants whose exercised value is $4, will expire in roughly 7 months in September 2024. After that, we’ll have 800,000 warrants excellent, primarily together with 180,000 warrants with a $2.85 exercised value, expiring in Might 2026 and just below 600,000 warrants with a $2.51 exercised value, which expire in November of 2026.

We look ahead to continued progress and success in fiscal 2024 and past as we proceed our concentrate on income progress, product innovation, buyer success and delivering shareholder worth. Thanks all for becoming a member of us on the decision right now.

And presently, I would prefer to open the decision for questions and solutions. Moderator?

Query-and-Reply Session

Operator

[Operator Instructions] Our first query down from the road of Howard Halpern of Taglich Brothers. Your query, please, Howard?

Howard Halpern

Good afternoon guys. With all of the current improvements that you’ve introduced, what are we now by way of gross sales cycle and potential deal measurement? And the way that may translate into future progress?

Roger Kahn

Nice. Nice. So this has been an enormous focus of ours. We have made plenty of investments and particularly making our software program simpler to purchase by permitting our prospects to have speedy worth in direction of their very own companies. And the 2 massive releases that occurred final quarter to this finish embody Fast UI and Sensible Search.

What Fast UI does, it permits our prospects to launch their website instantly with out having to buy any skilled providers for a customized implementation. This enables us to take all the expressive energy in HawkSearch that powers large websites like hp.com and make that obtainable for small, medium companies that may’t make investments an enormous amount of cash in a customized implementation.

It will increase our complete addressable market. It additionally modifications the construction of preliminary offers in order that our preliminary offers now are primarily licensed, and lots of of them had zero providers in anyway. This enables us to extend our license charge as a result of now the price range will be allotted that means for recurring high-margin income. It permits us to win prospects we could not win in any other case as a result of they both do not have the time or they do not have the cash to do a customized implementation.

And it decreases our gross sales cycle by permitting us to keep away from having to spec out a customized implementation, which takes plenty of time, and likewise permitting us to only instantly take the shoppers’ web site and provides them a custom-made demo with their very own product catalog slightly than a generic demo round catalog. In order that’s large.

Now along with that, so there’s Fast UI, enhance our TAM, our complete addressable market, lower our gross sales cycle, shift revenues from providers to subscription. What Sensible Search does is, and that is my background, synthetic intelligence, I am actually passionate and enthusiastic about this, it leverages large developments which have occurred within the final 18 months round what are referred to as giant language fashions and synthetic intelligence.

And plenty of us has seen the information round ChatGPT and different corporations which are all enabling pure language brokers to robotically convert and discover data for you. Effectively, these basic libraries value billions of {dollars} to create and what corporations like OpenAI did an excellent job at, was to create interfaces so the individuals that do not have billions of {dollars} can leverage these merchandise with infrastructure.

As a result of we perceive synthetic intelligence very nicely, not simply myself, however lots of the engineers and our workforce, we’re ready to have a look at these capabilities that are actually obtainable, look very fastidiously at our prospects and our potential prospects from a use case state of affairs and join the dots to place that collectively right into a set of capabilities which are very completely different from what you may get from different corporations after which immediately ship worth to our prospects.

Here is how we are able to ship worth. So the worth for our buyer is rising their on-line income. And one of many challenges that they’ve is that their prospects do not even know what they need to purchase, typically. They know what they need to do, however they do not essentially know what they need to purchase or they do not know that the net retailer has the merchandise that they want.

I would like to repair this tractor, and I do know that I would like to exchange a sure gear. What I do not know is that I additionally want to exchange sure washers and different issues. Effectively, I am beneath the tractor, I can take an image of the gearbox, have Sensible Search robotically work out what elements within the tractor provide catalog are mandatory for performing that process and inform me which of them I can buy.

I won’t notice I wanted that washer or different part, however now I do. And as a substitute of operating right down to the native tractor provide retailer and shopping for it from TSC, I am truly shopping for it on-line from the shopper that owns Sensible Search.

These capabilities enable our prospects to keep away from income leakage in an enormous means, keep away from their prospects forgetting to purchase one thing and make him do with out it or shopping for one thing from another person as a result of they do not notice that they’ve it. Clear income impression.

Now, one of many nice issues that we have accomplished is that we have made Sensible Search fully backwards appropriate with our normal HawkSearch key phrase functionality. And that is tremendous vital as a result of meaning each single one in all our HawkSearch prospects can push a button and activate Sensible Search.

So our gross sales cycle into our current prospects to improve Sensible Search is tremendous brief. Each single one in all them can derive worth from this. So we have got an excellent market proper there that may enhance our Sensible Search income by over 30% all by itself, along with us being extra aggressive to different search merchandise available in the market.

So these two options, by themselves, we expect, are actually vital. You may see an impression in our monetary assertion. We do have plenty of providers income this quarter than we historically have proven. And our subscription income bookings do not hit the P&L on day 1. However we’re excited that we’ll begin seeing a better income mixture of subscription versus complete income and quicker gross sales cycles, thanks to those two merchandise, and we have got extra within the pipe.

Howard Halpern

Okay. And speaking about gross sales progress, are we going to begin to see now sequential gross sales progress as that legacy buyer has — have they fully wound down in sequential…

Roger Kahn

It took a yr for them to wind down, which was good as a result of we had been capable of get further income alongside the way in which and December was there final month, which had the ultimate lower of particularly $25,000 in MRR. And we have got substantial new gross sales and persevering with momentum that’s to fill that gap, and we count on to begin seeing progress.

Howard Halpern

Okay. And one different query with regard to go looking. Now that’s an impartial product. So when you had been to promote it to a brand new buyer, is that then a possible down the highway to backfill after which promote them your HawkSearch product?

Roger Kahn

Sure. We’ve got — so our prospects, our new prospects can begin with Sensible Search or HawkSearch or each. Both means, what we count on to see is that the majority corporations will both begin with HawkSearch or begin with each.

We do not count on individuals to only do Sensible Search. And a part of that’s as a result of people have skilled themselves over the previous 20 years to seek for issues with key phrases slightly than to only saying what their targets are. And as a consequence, you will not have as efficient outcomes from most websites, when you go away the key phrase get hold of of it for mainly cultural causes. And that is tremendous. And in addition for lots of domains, individuals know, particularly within the B2B world, precisely what product they need. You do not need to miss out on these.

So you are going to get, I believe, most prospects shopping for each, they’re shopping for HawkSearch. And the choice to improve to Sensible Search is, I believe, very simple, and it is actually a monetary one for many prospects, whether or not proper now it is sensible for them and based mostly on no matter their market is.

So if we are able to get a quick sale by simply promoting HawkSearch right now and provides them a bit little bit of time to reap the advantages of that and are available out again in six months and do the improve, that works simply as nicely.

Howard Halpern

And one final query as a result of I do know the search is for the shops and enhance the ROI from buyer inquiries. Is it additionally — are you seeing prospects who need to use it internally to assist their efficiencies?

Roger Kahn

We’ve got, and that is not the commonest use case. However we get gross sales each quarter to that finish. And one of many examples in even the latest quarters is a buyer whose buyer help workforce has an enormous variety of databases with FAQs and different third-party data, and so they use search internally, HawkSearch to search out that.

And an fascinating use case that occurred simply this quarter is a buyer that has hundreds of — tens of hundreds of PDF of product descriptions that they think about proprietary data and so they do not need to share that on-line, however they need Sensible Search to learn all of that data, study extra about their merchandise after which to have the ability to extra intelligently assist their prospects discover merchandise that they want.

So if you consider Sensible Search, what it could do is a few completely different elements. One, giant language mannequin that’s [Indiscernible] so understanding basically, what someone is talking about and asking for. After which two, what’s referred to as a vector database, and that is just like the long-term reminiscence for the primary Sensible Search that enables it to review an current catalog, develop shares about these merchandise and so forth and perceive what’s within the product.

After which we deliver these two collectively, we get extra clever outcomes. So we are able to practice off of proprietary inside data that you do not need to share to the skin world to only make our Sensible Search perceive your merchandise even higher and provides extra clever outcomes in your prospects.

Howard Halpern

Okay. Thanks for the enter [ph] and sustain the nice work guys.

Roger Kahn

Thanks Howard.

Operator

[Operator Instructions] Subsequent query comes from the road of [indiscernible] Jacobson. Your line is open.

Unidentified Analyst

Sure whats up, good afternoon guys. And Completely satisfied Valentine’s, I assume.

Roger Kahn

That is proper. Completely satisfied Valentine’s. Sorry, I’ve obtained to expire down the shop and get some tacos for my spouse. I forgot.

Unidentified Analyst

Hassle abound. I assume I obtained two issues. The very first thing is, I actually need to congratulate the workforce on this entry into AI in clever in a worthwhile method. That is nice to see. I actually recognize it, it is late.

So the second piece is, I assume, are you able to present some colour and perhaps what is the considering right here on the stability sheet scenario with respect to present belongings? I imply, pragmatically — and I did hear the $200,000 caveat that we obtained this gap. However pragmatically, we talked about deterioration of $530,000 I believe, in that vary on the present belongings over one quarter. Is there something that you could inform us about this?

Roger Kahn

Sure. Sure. And Tom can present a bit bit further element, however I am going to present some higher-level colour, which is that at the start, the corporate has ample money, and it has no intention of doing any capital raises to bolster that money place.

And second of all, now we have the power this fiscal yr to change into money constructive for that closed, so there is not a recurring or structural money throughout problem in any respect. Tom can converse a bit bit extra monetary…

Thomas Windhausen

Now we had a lower there of money. For those who look on the — in these present belongings, you may see receivables are up $200,000 or so. So that’s money that we are able to go on the market and gather and convey that in and actually not a lot in short-term belongings, short-term liabilities that drove within the quarter to only play timing inside receivables and payables.

Unidentified Analyst

Okay. I assume sure. Thanks for that. I recognize it. So if now we have an expectation that we’ll change into money circulation constructive, can we kind of like quantify that? When do you suppose that may occur? And may we additionally kind of like perhaps present some colour on — is that pushed by an expectation of elevated gross sales or decreased bills? Or the place that profitability you are going to come from?

Roger Kahn

Proper, proper. Okay. Nice. In order an expectation, it is going to be in direction of the tip of this fiscal yr, and it will be pushed by will increase in gross revenue, not decreases in bills. It is not going to be an enormous constructive money circulation, it will be constructive money circulation. We by no means count on to fall into lower than $1 million in money.

And — however we do not see any want to cut back bills. We predict that strategically persevering with to spend money on R&D and enhance our market place, particularly in synthetic intelligence, generates probably the most long-term worth for the corporate in addition to, in fact, investing in advertising and profitable new prospects.

So have a look at gross revenue will increase. And the gross revenue is primarily pushed by way of subscription at a 73%, I believe, GM this quarter versus providers. And we count on that income combine between providers and subscriptions to proceed to be within the 80s.

Unidentified Analyst

Sure. So I assumed — and the gross margins are fairly good. I imply, that is nicely accomplished. After we have a look at the will increase in license gross sales, are we then projecting kind of a speedy enhance or is it linear from this level out? What are we ?

Roger Kahn

No, it is extra linear, and that is the character of SaaS. So most of our new gross sales are within the $25,000 to $50,000 in annual recurring income for gross sales and usually within the HawkSearch. And infrequently they’re — have an preliminary engagement of 24 months to 36 months in that vary. And we sometimes see 5-year complete lifetime with HawkSearch prospects. So they begin with a 2-year or 3-year renewal, they renew a number of occasions in a row.

Now as a result of that preliminary deal is basically subscription, it will get acknowledged as income professional rata over the lifetime of that preliminary contract. So we do not get spikes. And our present quarter, which was excellent and really enthusiastic about it, is just not going to have the ability to simply generate an enormous spike in our Q2, from a income perspective, even know that was from a reserving.

Now an vital part to income progress is internet income retention, NRR. And Bridgeline’s merchandise broadly fall into two classes. We have got our progress merchandise, which is admittedly HawkSearch. Our — after I discuss search, I discuss HawkSearch. However Celebros, which is our different search product and most of these prospects are migrating over to the Hawk platform, is admittedly sort of one effort. And that group of merchandise have a internet income retention within the excessive 90 percentiles. And once we have a look at a few of our legacy merchandise, they’ve decrease income retention and enormous prospects which have perhaps $20,000, $30,000 in month-to-month recurring income, $300,000 in annual recurring income.

And one of many causes we do not promote these anymore is that entire market is so costly. It is dominated by bigger gamers like SAP or a Salesforce that may demand these merchandise, and so they have lengthy gross sales cycles. However these kinds of merchandise will bleed down, and so they create a bit clips of income due to simply the scale that they’ve, and people clips can be extra obvious.

Now that Hawksearch is — I believe it is over 56% of our subscription income and rising very quickly, these clips change into increasingly more buick [ph]. So that is the yr, 2024, once we actually began to affix the domination of our search platforms, plenty of smaller prospects, regular progress, predictable progress and the power for us to proceed to make investments in advertising and [Indiscernible] predictable income streams and subsequently, predictable money flows.

Unidentified Analyst

Okay. Sure. I recognize that, and thanks for offering that data. And with respect to the change of the product combine, I imply, that is truly actually nice. So with respect to the brand new value — excuse me, the brand new contracts, regardless of the time period is that the place we reached a brand new benchmark within the time no less than that you’ve been right here, what was the comparable within the final quarter on that? Do now we have any thought of that?

Roger Kahn

I am sorry, I broke up a bit bit there. The comparables within the final quarter on new buyer wins?

Unidentified Analyst

Sure. So I consider that within the press launch and likewise within the name, you referred to — I consider the quantity was $2.5 million in new one thing. And what was the…

Roger Kahn

So this most up-to-date quarter was a bit bit higher than twice as massive as our earlier quarter and annual recurring income that was one. So we gained about twice as a lot as we did within the earlier quarter. And one of the vital thrilling issues that we noticed was that lots of the gross sales that we had this quarter began in our first quarter and led to our first quarter. In order that speaks to the size of our gross sales cycle being lower than 90 days for a lot of of these gross sales.

After which additionally, Sensible Search was solely pre-released in late October, and plenty of these gross sales occurred in December. So we expect that we have got one thing right here that’s going to permit us to develop at a unique degree. And we have to spend money on gross sales and advertising, not simply in innovation. We have to — as a result of they do not feed again, and it’ll pay for R&D. So we have to stability these investments and proceed to hit these markets.

And being environment friendly in buyer acquisition prices is an enormous focus, and that’s the reason we particularly search for markets which are underserved, that we are able to win and attempt to change into a dominant participant in there like this area of interest market {of electrical} distributors that, frankly, wasn’t even on my radar 18 months in the past, that now we simply — right now, we’re on the New York Construct Convention on the Javits Middle, speaking to electrical distributors. So these slim markets are an environment friendly means for us to win new prospects.

Unidentified Analyst

Okay, thanks very a lot. That’s all I obtained. Thanks.

Operator

Thanks. I might now like to show the convention again to administration for closing remarks.

Roger Kahn

Effectively thanks, all people, for becoming a member of us right now. I’ve to say, this can be a very thrilling time in pc science. It is a chance for individuals to know synthetic intelligence to do thrilling issues for individuals who perceive their prospects and their markets and what these particular wants are to make an actual impression. And I believe that we’re there to try this.

We recognize the continued help from all of our prospects and our companions and, in fact, our shareholders. We’re excited concerning the enterprise’ ongoing progress prospects. We look ahead to talking with you once more on our second quarter fiscal 2024 convention name, which can be in Might. Be nicely.

Operator

And this concludes right now’s convention name. Thanks for collaborating. You could now disconnect.