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Good day, everyone. Welcome to the Bridgeline Digital second quarter 2026 earnings call. At this time, participants have been placed on a listen-only mode. It is now my pleasure to turn the floor over to your host, Thomas Windhausen. The floor is yours.

Thank you, good afternoon, everyone. Thank you for joining us today. My name is Thomas Windhausen. I'm the Chief Financial Officer of Bridgeline Digital. I'm pleased to welcome you to the fiscal 2026 2nd quarter conference call. On the call with us today is Ari Kahn, Bridgeline's President and CEO, who will begin the call with a discussion of our business highlights. I'll update you on the financial results, and we'll conclude with some questions.

Before we begin, I'd like to remind everyone that our remarks and responses to your questions today may contain forward-looking statements that may be based upon the current expectations of management that involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including without limitation, those identified in the Risk Factors section of our most recent annual report on Form 10-K and our most recent 10-Q filing in the company's other filings with the Securities and Exchange Commission. Such factors may be updated from time to time in our filings with the SEC, which are available on our website. We undertake no obligation to publicly update or revise our forward-looking statements as a result of new information, future events, or otherwise. Be advised that today's results should not be viewed as an indication of future performance.

The call will also include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. We jointly refer to these as non-GAAP financial measures and reconciliations of the non-GAAP financial measures, the most comparable measures calculated and presented in accordance with GAAP are available in the earnings release. I'd now like to turn the call over to Ari Kahn, Bridgeline's President and CEO. Ari.

Thank you, Thomas. Good afternoon, everyone. I'm happy to say that we tripled last quarter's sales and delivered the most new logo sales of any quarter in the company's history. We won 19 sales this quarter, nearly $2 million a week, closing $2.8 million in TCV with $1.2 million in annual recurring revenue. We also signed over $1 million in professional services agreements. The average sales price took a massive leap this quarter to $44,000 in ARR compared to $30K last quarter and $21,000 a year ago in Q2 of FY 2025. Above and beyond the increase in our new SaaS customer average license price, our existing customers bought an average of $28,000 in ARR for add-on products like our AI Visual Search.

The increase in sales price of is largely due to the new AI add-ons that our customers are choosing, as well as the fact that we're selling to larger companies with massive catalogs and web traffic requirements. In addition to new sales, we continue to have outstanding customer satisfaction proven by our renewal rates and license expansions. This quarter, our core products had a net revenue retention of 107%. Bridgeline's core products, led by HawkSearch's suite of AI products, now represent 65% of the company's subscription revenue, compared to 61% in Q2 last year. This was the best quarter ever for customer acquisition. The majority of our wins came from B2B manufacturers and distributors, a large total addressable market where Gartner ranked HawkSearch number one in their Critical Capabilities Report.

Some recent customer wins included a leading global gas provider selecting HawkSearch to power search across three e-commerce sites in one of the most technically complex implementation in HawkSearch's history. The site required multilingual search, customer-specific pricing, entitlement-based access, dimension-based search, and multi-site management. A wholesale distributor selected HawkSearch to power five sites on its Oracle Commerce platform with a clear path for HawkSearch to power eight of their sites as the relationship expands. HawkSearch was chosen on the strength of its B2B capabilities, including keyword management, entitlements, personalization, product recommendations, unit of measure, and analytics. A national industrial supplier selected HawkSearch to power search across its large specification-driven catalog of metal and specialty materials with unified search and concept search, driving their online revenue by improving conversion rates and reducing friction for specification-driven customer searches. Another important part of our growth strategy is partnerships.

HawkSearch lends itself naturally to both agency and software platform partners that generate sales. HawkSearch received multiple 2026 honors from the Info-Tech Research Group, including Leader in Enterprise Search, Top Product Catalog, Top UX, Top Features across eight additional categories based on verified user feedback. In terms of partnerships, HawkSearch and Znode announced a partnership bringing AI-powered search, merchandising, and personalization to manufacturers and distributors on the Znode B2B e-commerce platform, helping buyers find their right products faster, navigate larger catalogs more easily, and improve conversion across multiple store and multi-portal experiences. Partners are a big part of our go-to-market strategy, traditional marketing also drives leads for us. We're presenting at in-person conferences more and more like B2B Online Chicago and hosting customer conferences to drive sales. I'm really happy to announce that we recently added a new SVP of Marketing to our team, Kelly Maltman.

Kelly is a marketing exec with over a decade of experience leading B2B software sales, and is working closely with our EVP of sales, Carl Prizzi, to grow our sales pipeline. Our pipe grew by 82% compared to Q2 of FY 2025, with over 500 qualified leads and more than $5 million in ARR to drive ongoing revenue growth. HawkSearch has been an AI-based product suite since long before the new wave of large language models and neural networks in AI that are making headlines today. This has allowed us to quickly adopt the latest AI technology faster than our competitors are able to. This quarter, we released the Hawk AI Shopping Assistant. B2C shopping assistants are starting to appear, with Amazon Rufus and Walmart Sparky leading the way.

Most B2C sites are building their shopping assistants off their support chatbot, which is designed to answer questions about products, but not designed to drive online sales. HawkSearch's entire product suite has always focused on driving online sales for our customers, and it empowers companies to define merchandising rules to promote products that grow, with full personalization, recommendation, and promotions at its core. The Hawk AI Shopping Assistant is built upon HawkSearch's AI merchandising infrastructure to truly align it with an online store's revenue goals. If you promote a product in Hawk, the AI will automatically promote it in Hawk's Assistant and vice versa. Because HawkSearch has full B2B support, the Hawk AI Shopping Assistant is empowered to handle the complexity of B2B online sales.

Everyday B2C concepts like pricing, catalog, and shipping are more complex in the B2B world, as they're negotiated per customer and shopping is performed by teams. Each customer has pre-negotiated contracts that define which products they can access, custom pricing, freight schedules, credit lines, et cetera. The HawkSearch AI Shopping Assistant understands our customers' B2B contracts and merchandising rules, so it can make commercially intelligent recommendations tailored to each individual customer. Here's an example of what the Shopping Assistant looks like in practice. One of our customers is a master B2B distributor for electronics. It has a massive inventory, and its customers are also B2B companies. Its customers are local distributors covering a smaller territory to supply individual electricians. With HawkSearch Shopping Assistant, a local distributor can log into the master distributor's Shopping Assistant and make a query like, "I have 50 electricians as customers.

My electricians build two to three houses a year, each one $750,000, approximately 5,000 sq ft. "Give me a plan for stocking circuit breakers and panels in my warehouse." Our Shopping Assistant can then advise, "Given that you're covering Southern Ohio where AC is required, you need 500 70-volt breakers, 600 100-amp breakers, et cetera," It then suggests a 20% overage for backstop and surplus orders, surprise orders. It will say that since the distributor has a $10,000 credit line, it recommends quarterly replenishment and to add 5,000 foot cable and bundle it with the breakers to increase its sales. The Shopping Assistant then asks if it should place the order.

That entire experience, the same type of experience you might have with an intelligent salesperson in an office, can now happen online at scale, automated, and it happens in the complex B2B world where pricing, catalog, everything is custom negotiated on a per-customer basis. We support that. HawkSearch supports that. HawkSearch is unique, and this is gonna drive a ton of sales for our business. The dialogue that can continue from this can configure the total warehouse for our master distributor as a customer for its customers, local distributors, and drive their revenue. With new products like the Hawk AI Shopping Assistant, we expect to see continued acceleration in HawkSearch Suite. Frankly, it's a great time to be in marketing technology because AI has empowered smaller businesses like HawkSearch and Bridgeline to leapfrog larger incumbents and reset the landscape with innovations in AI, like the AI Shopping Assistant.

With that, I'll turn it over to our Chief Financial Officer, Thomas Windhausen, to share additional details. Thomas?

Thanks, Ari. I'll provide an update on our financial results for the second quarter of fiscal 2026, which ended on March 31st, 2026. Total revenue for the quarter ending March 31st, 2026 was $3.9 million, an increase compared to $3.9 million in the prior year period. When we look at our components of revenue, we'll start with subscription revenue, which is comprised of SaaS licenses, maintenance, and hosting. For the quarter ending March 31st, 2026, its revenue was $3.1 million, also increased from $3.1 million in the prior year period.

As a percentage of total revenue, subscription revenue was 80% for the quarter ending March 31st, 2026. Our services revenue was $799,000 for the quarter ended March 2026, compared to $823,000 in the prior year period, and that's the 20%. That covers 20% of total revenue. Our cost of revenue was $1.4 million in the quarter ended March 2026, compared to $1.3 million in the prior year period, and our gross profit was $2.5 million for the quarter ended March 2026, compared to $2.6 million in the prior year period. Our overall gross margin was 64% for the quarter ended March 2026, broken down into subscription revenue of 69% and services gross margin of 47%.

Our operating expenses were $2.9 million for the quarter ended March 26th, down from $3.4 million in the prior year period. Our net loss was $0.4 million, down from $0.7 million in the prior year period. Finally, our adjusted EBITDA for the quarter was -$43,000 compared to a -$239,000 in March of 2025. Moving to our balance sheet, at March 31st, 2026, we had cash of $1.4 million and receivables of $1.4 million. Our total debt was down to EUR 182,000, about $209,000, with a weighted average interest rate of 3.2% in principal payments due through 2028.

We have no other debt or earn-outs from our previous acquisitions. Our total assets at March 31st, 2026 were $15.3 million, with liabilities of $6.1 million. Moving to the cap table, at March 31st, 2026, we had 12.6 million shares outstanding, just over 800,000 warrants, and 2.2 million options. The 829,000 warrants consist of 167,000 warrants at $2.85, which expire in May 2026, and 592,000 warrants with a $2.51 exercise price, which expire in November 2026. Bridgeline looks forward to continued growth and success in 2026 and beyond as we continue our focus on revenue growth, product innovation, customer success, and delivering shareholder value. Thank you for joining us on the call today.

At this time, I'll share some questions that were sent in in advance. Our first question was about the capital raise last year, and how is that driving current sales? Ari?

Okay, that's me. All right. This quarter that we just closed was the best quarter in the company's history for winning new logos, and that's exactly what our goal was when we raised capital at the end of March 2025, to inject $2 million, put that into marketing, get our name out there with all the great technology that we already have, let everybody know about it, and win a bunch of deals. This quarter is directly the result of that raise. We raised the money, call it, April 1st. That's more or less what happened in 2025. Three months to deploy the capital. You gotta sign up for conferences and so forth. This gets you more or less to July 1st.

Give yourselves a 120-150 day sales cycle. All of a sudden, you're in January of this year, the first month of the quarter that we just closed. This really bodes well for our ability from a marketing organization to generate leads that convert from our ability as a technology company to create products that there is demand for and solve real-world problems. This is above and beyond what I'm super proud of, our customer retention. Remember, we also drive an excellent net revenue retention rate of 107%. That means our existing customers renew their subscriptions and buy the new stuff that we're innovating every day. We're generating leads. We're going to the right places. We know how to deploy marketing capital, and our customers are super happy.

Excellent. Another question came in about pipeline. Let's form that as what does the pipeline look like, and how fast is it growing?

All right. Well, we have nearly doubled our pipeline since last year. I think it's an 82% year-over-year growth, Q2 of FY 2026 versus Q2 of FY 2025. When I talk about our pipeline, I'm talking about qualified leads. Qualified leads are not subjective qualification, where a sales guy feels good this morning about the lead, and he might not feel so good about it next day and so forth. For us, we've got a metrics-driven marketing organization that qualifies its leads based on objective behavior. Did the lead attend a webinar? Did they get a demo? Are they returning phone calls, and do they have a pulse, right? Clear, measurable things that define a lead objectively.

We've got 82% growth of that, and that rate of, or that scale at which we're measuring, the 82% growth, that's what we call an AQL. Our AQLs tend to have a 20% close rate. The AQL level today is 5 over 500 leads today with nearly $5.5 million in ARR. That lead pipeline by itself at a 20% rate has got $1 million in ARR right there in itself. With the sales cycle of 120-150 days and the fact that this pipeline is twice as big as it was last year, and we measure it the same way, I think that really puts us in a healthy position to continue with the momentum that we've got now. Okay, is that it? All right.

Yeah, there are no other questions. That's it.

All right. Good. Good. Well, I want to thank everybody for joining us today. We appreciate your continued support and the support of our customers and partners as well. We are really excited about this business. It is an exciting time to be in AI, to be in marketing technology, and to be a growing company that is in a space that is expanding with lots of new technology. We look forward to speaking with you all again on our third quarter fiscal 2026 conference call that is going to be in April this summer. Until then, be well, and thank you.

Good day, everyone, and welcome to the Bridgeline Digital First Quarter 2026 Earnings Call. [Operator Instructions] It is now my pleasure to hand the floor over to your host, Thomas Windhausen. Sir, the floor is yours.

Thank you. Thank you, everyone, for joining us this afternoon. My name is Thomas Windhausen. I'm the Chief Financial Officer of Bridgeline Digital, Inc. We're pleased to welcome you to our fiscal 2026 first quarter conference call. On the call with me today is our President and CEO, Ari Kahn, who will begin the call with a discussion of our business highlights. Then I'll update you on our financial results for the quarter, and we'll conclude with some questions. Before I begin, I'd like to remind listeners that during the conference call, comments we make regarding Bridgeline that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Security Act of 1934 and are subject to risks and uncertainties that could cause such statements to differ materially from actual future events or results. The statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and the internal projections and beliefs upon which we base our expectations today may change over time, and we expressly disclaim and assume no obligation to inform you if they do. The results we report today will not be considered an indication of future performance. Changes in our economic, business, competitive, technological, regulatory and other factors could cause our results to differ materially from those expressed or implied by the projections or forward-looking statements made today. For more information, you can review our filings from time to time on the Securities and Exchange Commission website. On the call today, we'll also discuss some non-GAAP financial measures, and we have a reconciliation of those GAAP -- of our GAAP financials to those non-GAAP measures in our earnings release, which is on our website. I'd now like to turn the call over to Ari Kahn, Bridgeline's President and CEO. Ari?

Thank you, Tom, and good afternoon, everyone. Bridgeline's core products led by HawkSearch Suite and our AI products continue to lead our growth and our customers are having an outstanding experience as they've proven with their pocketbooks when they repeatedly increase their investment into their HawkSearch subscription and purchase add-on products as well. Enhanced hosting, expanded usage packages and the AI suite are all upsells to our existing customer base. Search is the heart of the online shopping experience for both B2B and B2C sites with HawkSearch acting as our customers' online salesperson who intelligently interacts with their customers to increase traffic conversion and order size. Core products at Bridgeline are now 60% of our total revenue, growing 17% to $2.4 million this quarter from $2.0 million last quarter and was $9.2 million on the trailing 12-month basis versus $8.8 million for the prior 12 months. HawkSearch is an even larger percentage of our subscription revenue, now representing 63% of the subscription revenue at $2 million of revenue versus $1.9 million last quarter. Net revenue retention, which includes renewals and license expansion was 107% for our core product line. This demonstrates best-of-class customer satisfaction and how quickly our customers are adopting our new products. These new products include Smart Search, Visual Search, Smart Response and our latest AI agents such as the Search Assistant, Analytics Assistant and Merchandising Assistant. New customer acquisition continues to grow with an average ARR per customer increasing by 12% this quarter to $28,000 from $25,000 last quarter. After customers make their initial purchase, they tend to subscribe to additional HawkSearch products. We have more than 200 customers in HawkSearch with an average subscription per customer of $33,000, up from an average of $30,000 last quarter and up from $25,000 in Q1 of our fiscal 2025. This quarter, we sold 13 new licenses with $1.2 million in total contract value for over $350,000 in ARR and $700,000 in professional services. More than half of our new license sales include one of our AI products in their initial purchase with many customers adding AI capabilities to their license after they go live with HawkSearch. In our first quarter of fiscal '26, we won several new customers, including many B2B manufacturing and distribution customers, where we're growing so quickly and where HawkSearch was ranked #1 in Gartner's 2025 Critical Capabilities Report. Some recent new customers include a national closeout retailer with more than 170 locations and a rapidly expanding e-commerce presence who selected HawkSearch to power their online store. The retailer replaced their previous search software with HawkSearch to increase online revenue because of HawkSearch's AI-driven relevance and filtering capabilities. A leading U.S. distributor of specialty lighting products is leveraging HawkSearch's Smart Search, so their customers can search with images, concepts and questions that enhance their ability to find items quickly and accurately. A Midwest B2B distributor using to optimize the e-commerce platform launched HawkSearch to elevate its online product discovery and delivery with an exceptional digital experience to its customers in the construction, industrial, plumbing and HVAC industries. And a leading wholesale supplier serving both B2B and B2C selected HawkSearch to power product discovery across 5 e-commerce sites. This supplier chose HawkSearch for its B2B foundation, multisite support and AI-driven recommendations. Also, a national industrial B2B supplier selected HawkSearch to improve search relevancy, engage logged-in customers and enable stronger merchandising capabilities. This industrial B2B supplier used HawkSearch's AI relevance tuning and boost and Barry rules to enhance product discovery by providing precise control over how products are ranked and surfaced to customers. Because we made early investments in AI and have a clean product architecture, we're able to rapidly release new products that drive revenue for our more than 200 customers and to win more new customers against less nimble competitors. In Q1, we released Spark, our next-generation user experience platform for administrators. Spark natively integrates Hawk AI capabilities with advanced analytics, including merchandising and analytics assistance. Spark represents a significant step in modernizing the user experience, while enabling scalable AI innovation across the platforms. We've also introduced contextual fields for HawkSearch. Contextual fields enable franchises and chains to provide customer-specific pricing and availability per store. This quarter, a customer leveraged contextual fields to provide contextual information across 120,000 products and 7,000 stores with more than 1,000 real-time update per minute. HawkSearch advanced analytics API was released this quarter, and it allows AI agents to integrate with HawkSearch analytics for greater visibility into customer behavior for automating, merchandising. And HawkSearch launched AI content extractor to accelerate customer adoption by having an agent examine the customers' product catalog and marketing materials to automatically configure HawkSearch. With our pipeline of new products that drive value to existing customers and increase new customer wins, we expect HawkSearch and our core products to become over 70% of overall revenue this year, and that will drive faster, more profitable growth for Bridgeline as a whole. Because of outstanding customer satisfaction, our growth is expected to continue to be efficient, allowing us to invest more in new products that drive customer and shareholder value. Now with that, I'll turn the call over to our Chief Financial Officer, Tom Windhausen, who will share additional details. Tom?

Great. Thanks, Ari. I'll provide an update on our financial results for the first quarter of fiscal 2026, which ended December 31, 2025. Our total revenue for the quarter ended December 31, 2025 was $3.9 million compared to $3.8 million in the prior year period. As we look at components of revenue, we'll start with subscription revenue, which is comprised of our SaaS licenses, maintenance and hosting. And for the quarter ended December 25 was $3.2 million compared to $3.0 million in the prior year period. As a percentage of revenue, that puts subscription revenue at 81% of total revenue for the quarter ended December '25. Moving to services. The services revenue was $758,000 for the quarter ended December '25 versus $743,000 in the prior year period, and that puts services revenue at 19% of total revenue for the quarter ended December '25. Our cost of revenue was $1.3 million for the quarter December '25 compared to $1.3 million in the prior year period, and that left our gross profit at $2.6 million, an increase from $2.5 million in the prior year comparable period. The overall gross profit percentage was 66% with subscription gross margin at 69% compared to 71% previously, and services gross margin this quarter was 55% versus only 51% in the prior year same period. That resulted in operating expenses of $2.8 million for the year ended quarter, December 31, '25, down from $3 million in the prior year comparable period. And that put our net loss at $100,000 negative loss compared to a loss of $600,000 in the prior year period. And we also ended up with positive EBITDA in the first quarter. Adjusted EBITDA was a positive $122,000 compared to negative adjusted EBITDA of $193,000 in the prior year period. As we move on to our balance sheet, at December 31, '25, we had cash of $1.5 million and accounts receivable of $1.6 million, and our total debt was down to EUR 200,000, which is about USD 236,000, 3.25% average interest rate, and those payments are due throughout 2028. Besides that, we have no other debt or contingent payments or earn-outs remaining from any previous transactions. Our total assets were $15.7 million at December 31, 2025, and liabilities were $6.2 million. Looking at our cap table, at December 31, 2025, we had 12.2 million shares outstanding, 860,000 warrants and just under 2 million stock options. Those 860,000 warrants have 2 primary tranches, 167,000, which expire on May 26 at $2.85 and $592,000 with an exercise price of $2.51, which expire in November 2026. Bridgeline looks forward to continued growth and success in '26 and beyond, and we continue to focus on revenue growth, product innovation, customer success and delivering shareholder value. Thank you for joining us on the call today. And at this time, we'll open up the call to questions and answers. Moderator?

Certainly. [Operator Instructions] Your first question is coming from Casey Ryan from WestPark Capital.

Well, so I just want to jump into these ARR figures and make sure that we're understanding them correctly because they're impressive, right? So, I think I have -- and you guys can correct me if I'm wrong, but for '24, we talked about $18.5 million as an ARR number. And then on the last call, we talked about this $25,000 figure, and now we're quoting a $33,000 figure. That trend-wise also tracks with the new customer ARR numbers that you're giving out. I think in Q4, September quarter, you talked about 18 customers doing about $1.25 million of ARR and now you're talking about 13 customers doing $1.2 million. So, kind of the point is it's clear that people are spending more money maybe on a per customer basis. But we're not quite seeing as big a jump yet in the revenue figures. And I just want to talk about the mechanics of how ARR blends into your future numbers and impacts future numbers, I guess.

Yes. So yes, so here, let's -- I'm going to tease out just a couple of details here, starting with the per customer and per new customer sales. We've got -- for winning new customers, an average of $28,000 in ARR this year. It's 12% up -- or this quarter, which is 12% up from the $25,000 for winning a new customer in our Q4. And then after those customers buy things, most of our customers end up investing even more with us. So, if you take a look at our overall revenue divided by our number of customers, we're now at $33,000 per customer compared to $30,000 last quarter and $25,000 a year before. So, those are the numbers, which I think you just pointed out, and I just reiterated.

Sure.

So, net revenue retention is one of our core metrics that we evaluate every month, and our customer success team internally is focused on that and that's 107%. That represents customers renewing, customers buying additional products from us. And then also when customers renew, sometimes they have increased the usage of our product and we'll have to renew to a higher set of limits in their license. So, all of those contribute to our growth. And then, of course, churn, where a customer doesn't renew pulls away from the NRR. So, we feel pretty good about the 107%. It was down from last quarter. I think last quarter it was 116%, but 107% is still very good for the industry, but we had less growth this quarter than we did in our Q4 2025.

I see. And maybe that response sort of leads us into the conversation. And I think the answer is there are lots of targets and customers to go after. But has anything changed? Like has the fact that your average package is going up, has that taken some people out of the market for your services just in that it's a more robust tool? Or do you still feel like there are these hundreds of thousands of people to win still?

Yes. I think that the total addressable market for us has not changed. What we're seeing is that we've -- on the initial purchase last year, people were still not as inclined to buy the AI add-ons they needed to be proven. And that adoption is more ready now, more readily purchased than before. So, our customers that we won last year are now buying -- adding on to their base license Smart Search and Smart Response and the new customers are buying those more often right out of the gate.

Okay. Okay. And so that's good. So, certainly, that can sort of be a tailwind for NRR sort of that like net purchase number as we move through '26. And then sort of the other question I was wondering about is, have things changed competitively? Has anybody seen your success and tried to sort of bring product into the sales channels that you are? Or have people fallen away and maybe said this isn't for us, we're not winning here and HawkSearch is gating us?

Yes, yes. So, in our deals, we're still seeing the same top competitors as we did in 2025. So, that hasn't changed. And we think that one of the ways that we're differentiating now even better than we were last year is through our analytics. So, at the end of the day, you cannot have artificial intelligence without data. There's a saying of you got artificial intelligence and artificial stupidity. And if you don't have sufficient data behind these AI agents, you get dumb agents. So, what we did, which is different than what anyone else has done is we have created a data lake that allows all of our customers to have their data, their analytics, which person clicked on what link and bought what product and so forth, all provided inside of a private lake for them. And then we're creating a library of agents and they can create their own AI agents themselves that are able to monitor that lake and automatically tune HawkSearch for them based on current customer behavior. And this is really driving -- is raising a lot of eyebrows on our prospective customers and existing customers. Everyone is really excited and interested about that, and that is helping to differentiate and win more deals for us.

Okay. Yes, that's terrific to hear. Sort of just -- sorry if I'm jumping around, I just want to go back to the ARR figure just for a minute. The growth in it has been impressive and very important and obviously paints a good sort of trend line to sort of future growth. Should we expect growth rates like we've seen over the last 18 months? Or has that sort of just been a spike as we've added the AI features and maybe that will start to level off and maybe not be as explosive as it's been or maybe it will continue?

We're actually expecting it to continue. So, our HawkSearch had 17% growth rate this quarter, and our goal is to get that all the way up to 20% this year. So, we expect to see that continue to increase, and it will increase for 2 reasons. One is we've got a very solid pipeline of new customers that we're selling to. And two, as we continue to release products, our existing customers, which we've got more than 200 have a lot -- there's a lot of room inside of that customer base for add-on growth. So, both of those are going to contribute to that growth and allow us to grow even quicker. And kind of going back a little bit to your previous question, the -- our sweet spot market, so we sell to B2B and B2C, but we've really been very strong in B2B manufacturing and distributors. And that marketplace itself is relative to our size, infinitely big and is maturing very quickly with respect to technology adoption. So, we feel really good about that specific market in addition to selling elsewhere, but we want to be very targeted with our marketing dollars and most of them point towards that market because we have such a high win rate there.

Right. Okay. And thank you for mentioning the marketing dollars. I know you didn't call that out specifically, but there were some, I think, indication that last quarter, you guys were saying, "Hey, we want to spend more -- a little bit more on sales and marketing and do it smartly. As we've gone through just this sort of October, December period, have you felt like the spend has matched what your plans were? Or have they been above or below? Or how qualitatively?

Yes, yes. So, we did a pretty good consistency with our cost per lead. So, the marketing dollars are working well. We do want more marketing dollars, but not by injecting capital at bad dollar rates. So, there's a lot of room for growth for us. And the marketing is effective. We're seeing great success at industry conferences. An example of one that we do very well at is B2B online Chicago each spring. We also have our own customer conference that our partners are invited to and they actually do sponsorships. So, about 60% of the cost of that customer conference is actually covered by our partners. Our customers come to that, prospective customers do, and that has a great impact on revenue as well and is very efficient. So, we're feeling pretty good about the marketing dollars, and we need to continue to find ways to invest even more because we know which campaigns work, which conferences work and where to be.

Right, right. Okay. Terrific. One last question. Just on the gross margin line. It's been pretty stable within a few points, I think, for quite a while. And is that something we should expect? I mean, is there any reason to think that maybe with the new products that we're burdening the GM line a little bit or maybe there's some expansion because of the pricing changes. But what are your thoughts about just kind of that mid-60s range, if that would be expected to change meaningfully?

Yes. Yes. So, we do expect to -- the combined gross margin of our services and subscriptions to stay in the mid-60s, 65% to 67%. And we look at that on a line item basis in terms of our professional services gross margin and our subscription gross margin because there's different characteristics within those. This quarter, our services gross margin was unusually high. It was 55% plus another -- and then 69% for subscription. On the services line, the low 50s, I think, is where we're going to continue to be. So, maybe say, 53% running there, which is a little bit better than last year, but it's because the value that we're delivering, especially in the context of a lot of the AI initiatives is so much higher that we are able to bill a higher rate. And then on the subscription side, which is dominated by our hosting costs, should hover around 70% going forward. So for the rest of this year, that's what we should be looking for. And then you combine the 2 of those together and you can call that between 65% and 67%.

Okay. Great. That's a terrific outlook and really very strong trend continuation from last year. So, congratulations on a good quarter and I'll jump back in the queue.

Thank you. [Operator Instructions] Thank you. There are no further questions in the queue.

Well, thank you, everybody, for joining us today. We appreciate your continued support, the support of all of our customers, partners and our shareholders. We're excited about our business and ongoing growth prospects. This is an exciting time indeed. AI is making huge changes to the industry, especially marketing, and we have made the investments to continue to innovate in this area, very exciting time. We look forward to speaking with you again on our second quarter fiscal 2026 conference call, which will be in May. Until then, be well.

Thank you, everyone. This concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.