RSSS - NASDAQ

Good afternoon everyone and thank you for participating in today’s conference call to discuss Research Solutions’ Financial and Operating Results for its Fiscal Third Year Ended March 31, 2023. As a reminder, this conference is being recorded. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to your host John Beisler, Investor Relations. Please go ahead.

Thank you, operator, and good afternoon everyone. Thank you for joining us today for Research Solutions’ third quarter fiscal 2023 earnings call. On the call with me today are Roy W. Olivier, President and Chief Executive Officer; and Bill Nurthen, Chief Financial Officer. After the market closed this afternoon, the company issued a press release announcing its results for the third quarter of fiscal 2023. The release is available on the company’s website at researchsolutions.com. Before Roy and Bill begin their prepared remarks, I would like to remind you that some of the statements made today will be forward-looking and made under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed or implied due to a variety of factors. We refer you to Research Solutions’ recent filings with the SEC for a more detailed discussion of the risks that could impact the company’s future operating results and financial condition. Also on today’s call, management will reference certain non-GAAP financial measures, which we believe provide useful information for investors. A reconciliation of those measures to GAAP measures is included in the earnings press release issued earlier this afternoon. Finally, I would like to remind everyone that this call will be recorded and made available for replay via a link on the company’s website. With that, I’d now like to turn the call over to Roy.

Thank you, John, and thanks to everyone joining us today. I’m highly encouraged and excited about breaking the $10 million revenue for the quarter, our year-to-year revenue growth rate, our net income, EPS, and adjusted EBITDA results. These results spotlight the outstanding efforts our team puts in every day, helping our customers optimize their research costs and the efficiency of their research teams. It is truly a reflection of all the hard work that went into migrating several hundred new customers without requiring us to onboard new support or operations resources. I think it reflects positively on the scalability of our model and the diverse nature of our revenue streams that we are able to show strong year-over-year growth combined with a strong bottom line in this challenging economic environment. After Bill takes you through the results in detail, I’ll be back with more details about the quarter. Bill?

Thank you, Roy, and good afternoon everyone. Total revenue for the third quarter of fiscal 2023 was $10.3 million. This was the company’s first ever quarter over $10 million in revenue, and it represents an 18.1% increase compared to the third quarter of fiscal 2022. Platform revenue increased 26% to $2.2 million, primarily driven by both upselling of current platform customers and a net increase of platform deployments from last year, including 25 net new deployments in the third quarter. Annual recurring revenue, or ARR, at the end of the quarter stood at $9.1 million, up 4% sequentially and 24% year-over-year reflecting our continued sales and upselling efforts and low churn of existing platform customers. Please see today’s press release for our definition and use of annual recurring revenue and other non-GAAP items. Transaction revenue for the quarter was $8.1 million compared to $7 million from the prior year quarter, a 16% increase. I will remind everyone that our fiscal Q3 is typically seasonally the best time for our transaction revenue, and this quarter in particular was really strong. The increase is due primarily to organic growth complemented by the transaction revenue associated with the assumption and transfer of contracts from FI

Thanks, Bill. As I stated previously, there’s a lot of great news in this quarter’s results and we continue to believe that we will end the year on a strong note. That said, I remain frustrated by the slowing in our platform growth. As a reminder, we have multiple areas involved in sales and upsells. We continue to see market headwinds associated with the general economic situation that shows up in slower onboarding of new customers, fewer upsells than we have seen in the past and more churn than we have seen in the past. Only one logo was lost to a competitor during the quarter. The remaining churn was due to our customers being acquired bankruptcy or cancellation or downsizing, the spend due to the overall economic pressures in their business. As I will discuss in a minute, we continue to release enhancements and continue to have strong NPS scores with our customers. We’re focused on improving our sales process, our sales teams, and our overall sales activity levels to capitalize on the upswing as the economy starts to recover. I continue to expect that we can grow the platform business at greater than 30% year-over-year, and I’m confident that we will return to those levels as the economy improves. In the meantime, the actions we took over the past year to impact our transaction growth is driving material improvements in our revenue growth, profitability, and cash flow. We continue to make great progress in many areas of the business. During the quarter, we dropped three release updates to the product, adding many new features including RSS feeds, updated search capability, save searches, dual currency invoices, and much more. All of these updates have been well received and are generating pipeline opportunities for upgrades. You can learn more about our releases on our website under the resources tab in release notes. Some of our recent releases are utilizing AI in our workflow for the first time. As a reminder, we use AI, NLP or Natural Language Processing in our Cure Data’s product today. That products allows a user to set up a search and then use our AI, NLP technology to read and score documents in the search results. Our April release included an AI tool to recommend scientific articles that are related to articles the user is viewing. For example, if you are reviewing an article related to peanut allergy, our recommendation tool will show you other articles that are related to that article. We will be releasing some additional AI technology in our late May release, and we will continue to focus on integrating AI and NLP into our workflow to help researchers to the extent that the results are accurate. As we all know, many of the AI tools generally available today are learning from publicly available content, which is in many cases not accurate. We’ll continue to focus on tools that provide accurate and relevant results to our users. On the sales front, we’re working on several exciting opportunities that we think will materializes revenue in the near future. As Bill reported, we are excited about the impact that the FI

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Allen Klee with Maxim. Please go ahead.

Hello. Nice to talk to you guys. Just on a couple of your products, I had some questions first on Article Galaxy Reference and Reference Pro. And any comment on how that performed during the quarter? Last quarter, you mentioned you signed I think 125 accounts. I was wondering if you could give an update on the quarter?

Yes, I don’t think I’ve got that number off the top of my head. Let me just check real quick. But we do see a material percentage of new customers coming on board buying the Pro product, and we do see a pretty nice upgrade – percentage of customers upgrading to the product. But I don’t know the numbers off the top of my head. If you’ve got more questions, go ahead and I’ll see if I can find something while you’re asking me the next question.

Sure. For Article Galaxy Scholar, any commentary on how it performed in the quarter?

Yes. Again, I don’t have numbers in front of me, but it’s performed pretty well. We’ve had a number of the freemium installs. But actually we’re selling more paid than we’re delivering freemium both of which are contributing to the transaction year-over-year growth because we’re seeing a significant uptick in transaction revenue based on the trailing 12-month AGS installs. We refer to Article Galaxy Scholars, AGS, whether it’s free or whether it’s paid, they typically do generate a material amount of transaction revenue year-over year.

And on Curedatis, any update on how that performed and customers?

Curedatis was a little slower than we expected. I think we’ve discovered some feature sets or some feature things that we need to add to the product. But we’re cautiously optimistic about the product, but I think our quarterly results were a bit slower than we would like them to be.

Yes. One more question and then I’ll get back on the queue. Just – could you just tell us what your share count is as of today? I didn’t see your – usually that’s in the 10-Q, but I didn’t see the Q, if the Q [indiscernible].

Bill?

Yes. It’s around 29,500,000. I could get you the exact number here in a sec. Yes, 29,501,000 call it.

Great. Okay. Thank you so much.

And Allen, I don’t have the Pro standard basic numbers off the top of my head, so we’ll look into that and provide some color on that topic.

Thank you so much.

[Operator Instructions] At this time, there are no further questions. This concludes our question-and-answer session.. I would like to turn the conference back over to Roy Olivier for any closing remarks.

Well, thanks everyone for joining us today. As a reminder, we will be participating in the Three Part Advisors virtual conference in June. For more info on this event, please contact Three Part Advisors. We look forward to speaking to you in September to discuss our fourth quarter and full year results, and hope you have a great evening.