RSSS - Earnings call transcript Q3 2019 | Research Solutions, Inc.

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Operator

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Research Solutions' Financial and Operating Results for its Fiscal 2019 Third Quarter ended March 31, 2019. Earlier today the company issued a press release discussing these results and a copy of the release is available for viewing and can be downloaded from the Investor Relations section of the company's website.

Joining us today are Research Solutions' President and CEO, Peter Derycz; and the company's CFO, Alan Urban.

Following their remarks, we will open the call for your questions. Then before we conclude today's call, I will provide the necessary cautions regarding any forward-looking statements made by management. information company's provide financial of also information. will regarding use the non-GAAP I

like that Derycz, a remind be I call company's to Finally, would turn now everyone President Investors of made the and for website. I'll the to recorded available this Solutions' replay in via Peter link over section the Research and will call CEO.

Peter Derycz

to about the operator open in I the exciting several some for Alan comments of outlook I'll call results good pass call the of our then everyone. our fiscal about XXXX. afternoon, and quarter greater Thank will you, to third our then our speak to speak remainder and with detail. initiatives return about

Happiness is functionality. with results are growth its This done Driving to are strong access margin helping expansion. offer. quarter current continued advanced an what account the advantage that the was our excellent additional offering revenue to and seeking support our third The our team of Customer continued Behind business, progress and these marked provides has Platform up-sells, value management. has in users in our greater which platform best job finding up-sell transactions both confirms Platform customer SaaS take and customers our group, these which based

deployments. We platform internal believe, during initiatives two will also major completed support the quarter new we that,

cloud-based, of which the completed migration platform now our unlimited provides near from and scalability. entirely we First, servers internal are

users. with more better the the articulate We potential platform of also of to strategies completed targeted value marketing team the sales new implementing build-out our proposition along to

marketing and to Manager platform including functionality. Gadget promote to its addition, In and to enhancements the value upgrades the incremental unique we Reference campaigns launching made

more we several cases. already give its and live core to platform other Manager to on and wanted broadly gadget this anticipate functions new Gadget months, provide through and will a to go-forward specific these strategy campaigns marketing our investors quarterly has financial We for initiatives press expand follow-on of tools in our have Alan specific having thorough Although strategy the conjunction well use prior operational formal introduce our say highlights I a to walks with several Reference introduction after our in as opportunities, continuing in platform more us detail. the other been to and upon explanation about despite results mentioned them possibly others, and as through Alan? marketing calls.

Alan Urban

everyone. Jumping you, quarter Thank our results. right fiscal afternoon, Peter, good third and into

annual up-selling a press QX revenue how annual This up and platform subscription use quarter in X% for XXX revenue, platform up deployments XX% by XX% in customers $X platform revenue $XXX,XXX recurring Please incremental driven increase sequentially million release increased Our in recurring The year-over-year and year-over-year. net ended into which and XX to with existing to from total see translates QX. was today's in other define XXX. we QX, from and XX% XX% terms. non-GAAP deployments

XXX,XXX Our quarter. to to to transaction count the XXX,XXX. decrease was The million transaction $X.X from in $X.X was due million ago declining same revenue our compared year

of from As we we customers. transactions general our quarter, a mentioned last trend seeing are larger decreasing

XX% Despite customer However, count transactions X% this increasing corporate from delivered and quarter. our down $X.X transactions offset platform businesses same new million Together, customers to slightly to experienced customers these consolidated from and million academic a ago customers with X,XXX, and number in up in total has new year revenue versus growth of customers been including $X.X XXX. XXX partially the academic customers. smaller we by to this, of corporate still

to gross on Moving margin.

the points by to was by same decreases costs. continued third-party margin compared quarter. XX% increase gross ago driven in Our proportional The data platform business year basis to saw XXX increase

low XX% XX.X%, margin cost, primarily of to platform the high lower automation was in XXX in points Transactions increased margin business our gross result target range. improved proportionally remains a up and to Our Gross as XX% the personnel segment basis in processes.

compared same the ago As a points year margin consolidated XXX result, gross basis quarter. to to increased XX.X%

of to $X.X The in ago compared to $XXX,XXX operating same total a per or product continuing same our quarter. the year development were million to loss primarily Net the $X.X the and expenses negative was to share ago year ago year increase Adjusted $X.XX or compared negative spend totaled EBITDA technology share business. in $XXX,XXX in Platforms million, Our negative compared $XXX,XXX net per operations $X.XX totaled quarter. loss $XX,XXX, increased in due quarter. from

remain on Cash $X.X versus our equivalents XX, XX, XXXX under no turn XXXX. Peter? borrowings clean all revolving to the outstanding all representing back revenue nearly balance line and receivables the expenses were call now summary. Moving comprising and cash with and liabilities. credit our payable to Peter. balance of and completes were This million at June accounts million nearly financial our March our cash of deferred and I'll assets continues at accrued sheet our of to sheet. $X.X There

Peter Derycz

highlighting various those like business the coming in planned progress along more we and months. initiatives, the our Thanks have with time I'd spend Alan. to Platform made with

mentioned As user focused on earlier, up are sign-ups, option. through ramping particularly our very we new self-registration

content Note, count, able videos microsites, about our XXX the to blogs, in we conversions. XXX process, customer a to collect Through that this quarter, per do marketing, a to leads are we useful the in free on our tools and pre-platform month drive customers pool this considered month successful but doubling sign-ups, marketing sign-ups data. very prime of in our quality and lot February offering digital they of were pre-platform per in represent are these high studies white are papers. as case not March. on trial To about SEO well During used we at these for as mission, subscription including like

our organizations we lot that or into research to greatly sign-ups deeper by In enterprise would new look institutions as Platform. academic realized employed data, a benefit the these fact, we from upgrading of were

ramping the will This are we campaigns to marketing for a including provide significantly be offering. along even that us potential various result, number up with and launch. data the digital enterprise media channels, our leads social programs, revenue-generating initial analyze across successful more with larger particularly a user proved to for As of in

is in to to a this new ramp-up of goal month Our rate pre-platform. run phase our per add approximately XXXX sign-ups

traffic to proven a of which we almost quarter, as part our As up year quite our for the SEO accelerated was successful to compared marketing will continue also strategy, initiative, and to enhance website XXX% has ago. optimize be

to multiple as we I in To conversion. sales have and team functionality, build completed from messaging their log-in touch out users so, box mentioned we sales a sophisticated While sales obviously of our we'll reps, tailored is call as accelerating also on do posts, website when the of the provide to earlier, suggestions, chat users focus, more product interested a number techniques to media first and as plan social implemented product our implement and including center user the retargeting. post-session points begin marketing increase well support

the not presence. our them solid also reps in growth, benefits only to the key We users foundation capture enterprise up now target sales and marketing of Platform. selling believe have each implemented full not processes laid a ramp our markets sales with that have markets fully to team as user We in all partners ensure as are and might have reengagement with the of additional key well the help we but sales our necessary our upgraded

up-to-date new the bolstering addition we most teams upgrades incremental and In tools always our continue ensure have marketing we to our users. also new users, potential sales for current research and and to attract to make customers to innovative

fact, core gadget our In most focus important of of our gadget one stream factory. during multiple steady Providing a gadgets Reference upgrades quarter. Manager a this is the to improvement of had

the year sorting user a areas launched fresh the including focus. new page to provides better to explain this to various The a summary, live. our and gadget our we properly support functionality. and Platform. Reference that quarter, we more as will interface page customers, release and of is and amounts Subsequent having improved not one those our notes research. ability of its Platform also anyone We A employees, interested to prospects when is exceptional an investors, campaigns. interface introduced applications experience of our only through Manager and the subscription which but easily layout important This the to feel track will the for now utilize capabilities. remainder full allow premium who begin of and one successful how microsite be converting and searching the enhancements on Last from frequent launched the plans of week, subscribe more a resource is hinges overall introduce basis. the even the also growth more new new we forward gadget We user as state-of-the-art users for user Maintaining focused upon gadgets powerful through very look fixes simple progress to large and be this Platform, can to. improvements user-friendly to most our introducing intuitive making believe look a web we valuable that show In marketing everyone a for bug Platform make on remains access efficient releases our targeted we experience will and will business users to new all a to and

infrastructure for believe entire as deliver to invaluable turn to the With back operator now place the in also to and and We R&D thousands an over further like organizations of Platform our worldwide. committed We and gadgets remain that, the we tool call for the growth providing the enhancements I'd powerful many people to have innovative to Operator? well necessary as Q&A. accelerate Platform. research

Operator

Corp. Our with [Operator Greg go Equity Silvershein ahead from first question Please Instructions] sir. comes Grand

Greg Silvershein

I I'm great have on few Congratulations questions. curious a quarter. a --

large sales have last the how XX And added those business? is, many been Platform that's first team months? The the how working of in is on the

Peter Derycz

Peter. Yes. is Hello, this

team primarily States. the currently sales seven between members United counts Our Europe divided and

-- Japan are of key as a value-added and I this In -- would active. to one constituted of February, complete as of February. sort addition in we that think sort call network. couple reseller of in been They to there the But that's the particular, basically would have I been consider very outreach team I full resellers of

Greg Silvershein

Okay. being regular to haven't the basis And a or are added tools I'm but gadgets Platform, determine seen additions? many on trying to many I how

Peter Derycz

the a on over Yes. now There's gadgets Platform. XXX

did in of lot fixes is new combination out What improved. following employees gadgets, and a realized customers doing were We what's of investors we and we and a new enhancements. or and are coming that interested

so addition And just we to ability our to launched that. the track recently in resources page,

on what we us bit little Manager gadgets You a like complex. call bigger more see are will Reference that working things

as well a interconnecting enhancements call to again bit and gadgets, of stream a of some, big gadgets. you and in we new gadgets see So what then may small existing gadgets, gadgets constant as reduction but a new existing some medium

So Resources is best of to way it -- on track I page. the on of think that keep the that to our part follow

Greg Silvershein

question profitability? I Okay. business is rate to last at the when increases And the Platform that guess in business current the specifically, you're of expect you experiencing do my hit

Peter Derycz

pretty at perspective and I cash of like have we're our flow line. in that of this primary right affect in flow much that cash this compensation neutral close stock pretty some now. non-cash say this at expenditures But our we We're flow cash point. that's At bottom much in terms terms our point. of breakeven. that things objective We're cash terms point wouldn't pretty

improving growing. gross more more are as is profitable. As become does The product business we Platform the mix revenues those margin company on our add

So at opportunistic and the but really I figuring can to we're be trying on how increase think the point Platform we out also we this business. verge,

So to spend go we're let's crazy of say money kinds going sales and on marketing. and all not

new pertains to campaigns. of our whole crazy to of spend. have us a That about marketing increasing capture a new That see do our spend is You expenditures. bit don't users. bunch talk We marketing part to

doing be campaigns wild money, think anything more more in on unusual front. will see will to or that but you're cost terms I we So expenditures really that don't going of

Greg Silvershein

quarter. again much. and great a very on Thanks you congratulations Thank

Peter Derycz

Really it. appreciate

Operator

[Operator Please question Walrus Billeadeau Partners. Scott comes from go next ahead. Instructions] Our with

Scott Billeadeau

having through certainly could transaction be my that ultimately would that you're if growing influences amount? you the there Hi, is expands transactions can the that certain business you they get the a as that guys. as you you certain on do Platform can eat Thanks. that -- how talk understanding my a about Platform will success be or Maybe all on is for refresh because great? Maybe Platform, memory they business

Peter Derycz

Yes. is yes all-you-can-eat we No I the think a component problem. is -- aspect Hi, Scott. of not This do. what

that platform, and transactions, it's when regard, for the So for you're you're paying you're platform. the paying buying Prime. In buying much you're transactions Amazon when like

Prime anything. you're You going may it buy mean, to member, be a doesn't not

Platform no transactions spend all-you-can-eat there cutting organizations. operations outsourcing do have that on customers bench of medium-sized how capability of talk their larger R&D in some terms been pharma We point, these from and about transaction are the sort type of of large to So is transaction as smaller business.

So organizations is capture our that really supporting the that on to transactions and strategy R&D the go and are biotech medium-size larger small research platform the other and companies emerging organizations. and organizations, are and

know that let's we add customer, buy backfilling say, large in so pharma transactions do decline, And time that some transactions. the has a in they terms every and business we Platform of of been the

hey, let's them really look customers, keep is as selling there well. So a and strategy just, transactions our Platform at more lot

Scott Billeadeau

a basically you the active active you I platform that's just got an organization trying get customers little feel there or to multiple quarter the XXX consider almost there total do of got, kind Give that think, would I Platform? of be could a X,XXX idea platform to And And there to deployments way Great. in customers convert you great. of that mentioned sense Just then you platform -- XXX, a organization? me a for deployments. and the that you're a current have whole deployment think mean Thanks. be quarter does of a you

Peter Derycz

about multiple when customers the total R&D-based Yes. There quarter possibility we're one Remember count. customer, sell active, these a could but are comprise is to we we organization. Platform our count really we organization. I Platforms that talking about an call yes, customer think a the paying Like what of do

more much you now. different of or have company organization the stage different this be example, regions at of if or that we of point operations don't buyer larger different development, they just For this that at a In or geographic medium But right theory, has too have one different in departments could our needs. regions platform. and one see

So it's one really organization. one customer it's

Scott Billeadeau

platform, the problems And the create got platform, idea idea Platform, implement them need whether -- that certain it now is and the be point idea platform, it to platform, increases drive value in find you through able value in, is -- of I extract transactions land-grab, get solve certainly has Great. probably you to on the more with but get mean, then that right price out all upgrades the a the the to provide them, of the the over and now platform, let's of can to extent. a or we the whatever ultimately out get the for this kind into Is strategy at time time?

Peter Derycz

customer like know that they using We Platform, once it. our Yes. a is

stay negative have and and it typically they're We on it churn. trained. Customers once on-boarded like

well customers improving Platform. to entire partly more itself of current new now Platform. challenge up more is, let's We're product customers under as grow. So do and gadgets go our developing will trained our new or on-boarded marketing our get getting through improvements, going that key so keeping our new the hey, initiatives and from sales, partly through aside -- that base and customer And that happy is the as to capabilities using the constantly we them

So useful. the and is stopping, product more becoming itself more it's not valuable

solutions deliver we customers. come help ultimately, going help to be of elements and us think that us successful and those to So sense together that all are make

Scott Billeadeau

kind you seven the to the feed? finishing in you Great. to so what than Okay. better some just get handle XXXst over the first they VAR these last then And And think well? guys so can or Do I speak implementations you efficient a question, kind what mentioned And implementation time I you, off you more for leveraging partners one at to that assume much capabilities as of bring February. have of those was to sales are seven can five. the

getting So those you're as I assume better at well.

Peter Derycz

about doubt No that. Yes.

system. better just We have a more a and a -- lot lot more automation much

So not all. I think implementation the us bottleneck is at for

equipped have. So the well with I we're infrastructure we there pretty think

So be to a that's going bottleneck. not

you have thing reps -- you is, soccer scorers, if to point think have great I at metaphor, we time use that in if this big for we are want the sales really of us responding get of we field the have our in lot had the campaigns. marketing a new can you beginning ball and getting balls to the users a and them, terms to of at people

our soccer big our balls So midfield to right, midfield field can up getting and sales that focus now the reps is of back really the we the go the so forward. the from get through

So, We It's out details to pricing paying the matter and the that's successful figuring we're a with going the really nurturing good. think leads is think good. make the focus really what's of the customers. to is We product just right final now. finding

Scott Billeadeau

Great.

way just there still I And into not you it -- one Is anyone really other else really the running approaching a yet. there off. sorry more Are before same hop are or still and guys something we out so you certain a evangelizing hey really here to kind it's of as solid on? to say foundational the build can that of have extent moving

Peter Derycz

wouldn't I solution against we're out say one specific there. going Yes, up

you overall, their deals think get do really we budget things that these and against that packaging there of that as staff doing doing think just are efficient their with we means can if more at I hey processes There or may dollars and But and out that. it's like so coming a organization look I more so really but things what we in up pricing your situations, compete lot historically, procedures of procedures. additional look competing of buy and Platform competitors this stuff an on. with out when we've fit just really this things and types into people how's think like few I won't on. a making like seeing we're you and experience product at through X own year and own on our with number to run We figure obstacles this all in budget process we're been doing

-- it so content think really more about I people works so think creating letting know our just how of the value Platform I it's on. our highlighting Platform and

we're about So, more just now information and making and content. basically serious our product more investments

Scott Billeadeau

it. great. Thanks Appreciate right, guys. All

Operator

George Our Please ahead. Investor. Private go is Milas next from question [ph],

Unidentified Analyst

Hi good afternoon. Peter, Alan, hi

Peter Derycz

Hello. you? are How

Unidentified Analyst

mentioned And who Peter the March. you. Thank new free some Good. of in think a us tell the about I users you you the happy you the bit talked that little Platform, you've of Platform. that? Are to there the February And early app in onto you XXX the it is Can just about to of self-registered so numbers? any with the lesson is too potential conversion for or product? these Platform what and is premium far, sort they're see using how XXX learned

Peter Derycz

way figure in In What be not we in we wanted up how to more the self-registration a focus a can we having little to Yes. out running it's early. money should months spending where terms resources few and we what marketing -- can of and really was hey on. of do first on

a what months. as We've a -- and more kind lot of learned last systems the and as really well it's what the So, testing tracking work few don't. of the of campaigns marketing kinds in into

XXX was then so every self-registrants experimentation say see And accept. check and that's the and the marketing would let's data messaging I the systems really onto check phase how the month campaign Platform check early going get hey

go volume learned of call And can quintuple we'll data we're that quantities the then enough determinations real start based looking be that, now and users as into -- from we On data. really on making that I real as June. think doubled recently what have to to we to

we can that good and So, users good can are the ramp know we up other it's fits thing we terms we we customers. is a for can we in know profile find that -- know bit us being contacts self-registered early but

Unidentified Analyst

can't I'm with the using amount? And early they tracking -- it? imagine you're Are at what it's help come conclusion, myself. kind sure up they fair sort I'm I just Okay. you asking then any Are to you're that but they a you're I using Is tracking just these how of expected? of trying questions Platform? too

Peter Derycz

early, place. have no. do we it's do Yes tracking in but mechanisms Yes, definitely have reporting. We these

up that let's to at the active I and it's And are looking think a that. well with people people is we're us. many okay free going some for for that analyze of who like time are a Gmail like We that data. -- profiles sign now are the are types did take lot these good aren't. There's up what people those times the or address to they And a generic sign e-mail things

looking qualified we're there But and research So, when their account. us e-mail let's personal of finding are look even with at people in we are if really lot there. professionals they're they're at that a do who say these the candidates

time professional do that's is in free. to And do. so thing are taking have that related an we for register what interested that's the activities good something area they're that They're or in the of involved we probably what to

X,XXX. it we're So, closer XXX good from ramp we're to now that feeling why going and to to to now XXX that's about up --

Unidentified Analyst

Sounds good.

Sounds exciting. Thank you.

Operator

next Please with Our ahead. Equity from Greg is Corp. Grand question go Silvershein

Greg Silvershein

Yes, how I wondering seems pharma I've there might but and outside Platform like are businesses and earlier expand if that? plans I'm you accomplish other of It questions, is R&D couple. into to another that have pharma-driven primarily asked

Peter Derycz

agnostic. that a way say historically in I'd – pretty we're Yeah.

aerospace If potential and that a have you're help can and the of you're company you. like organization the Platform our not customer science-based paying in customer R&D to sciences ours pharma was we if I'd that, company. an fact you're highlight first tools on

far So directly but be It be could would in or in in how so of property surrounding and the regulatory. I could our sciences. sciences the customers be you to obtained intellectual a R&D. at life It related could XX% sciences good them look history are XX% involved life the life that all we if in do have customers that, segments, we've say

more are will that, listen science likely right in capabilities a be to it's But life lot science of and said that look life heavy. customers you're there. out tools more So we point And there and more customers as having that tools. very requesting to develop we

agnostic is gadget Manager of industry. terms Reference Our really in

Our all learning go areas. table of our content across subject scientific capabilities

but yeah, And our life R&D look do the would so benefiting do sciences related. most seem of that expertise is they're types customers I – like general to say be -- we're have

Greg Silvershein

then could to guess sheet if confused balance And that speak you would it. prepaid item just Got that be I by royalties the I'm the also, on great?

Peter Derycz

I'll to pass Yeah. it on Alan.

Alan Urban

Yeah.

typically, we to arrears. So pay publishers our in royalties

However, and there a large do royalty. that is prepay publisher rather publisher one that's we our

have if after We a and if the that prepaying that's this And of end cash prepay changes, on, happened exactly quarter royalty. we the the affect nothing quarter. but that for depending agreement change bit certain that calls out amount of ordinary. obviously, before a or flow might quarter to end royalty And it's what prepaid that's going number

number. I a for quarters that always same number high, around a and little you'll few think even low, few you look or see the but a approximately if go it's sometimes it's back looks a years at sometimes little

Greg Silvershein

you. Thank Great.

Peter Derycz

Sure.

Operator

session. At our this question-and-answer this concludes time,

good achieved. that proprietary events future that maintain be statements regarding company's marketing statements. The that as Exchange Harbor as execute the company's that XX-K today's and for cause non-GAAP the uncertainties its defined financial of in presentation today's Accepted included made the would Accepted information obligation undertakes measures expressed and develop from to this and that contain statements Report this respect obligation should to by and report information, results differences forward-looking Form relating global company's company's otherwise limited or Generally Safe information also terms in and non-GAAP competitive products and and and Accounting include, forward-looking conclude and/or those expansion measures including not presentation Important expected described to during important new conditions, the deployments non-GAAP the because of cautions as in the events subject expected Such to growth. future revise referred the in or events future statements call of They The economic made ability Before like changes the to or company's our success SEC and be company's of future well statements their Statements and The on update information management quarterly the accurate we I assumes to call, its Research use suggested accordance financial statements not the and refer provide that forward-looking its of prepared risks business include are achieving are growth product the financial and intended by of of could the whether nearest Form today's the and forward-looking new as such about few in also at development, or products The general success technology limited contained software statements risks to revenue earnings in revenue today's by guarantee and results factors regarding time indications the release. presentation. include Platform with and forward-looking in to substitute discussion to the the information. cause in as performance but to any could during call company's use deployments, that strategy and will statements the of include, interpreted sales of as and no cautionary market, made and time. is forward-looking by reconciliation otherwise. time-to-time company Principles market on at GAAP. services, information performance Examples in statements from to this the presentation performance. financial be necessarily and statements all or company are acceptance the will Please measures the in were detailed plans, Transaction continued executing financial or results financial Securities continued or presented which acceptance forward-looking not company company provided information of information or factors, Statements continue obtaining will isolation successful times Commission to press not as be Solutions' differ the belief regarding on in more not to SEC. measures the Today's company's at barriers but the filings that the future publicly with operating in customers materially improvement financial faces new greater Annual the management's related the are based those will and and performance XX-Q. and in actual model related to available faith is and considered company's to interim strategy be with update company GAAP the the U.S. in no the and Platform information in

remind XXXX. like release I recording replay dial-in presentation. for the today's the X:XX and press Eastern for Thank for after Finally, that call through available p.m. you be May instructions. joining today for Please to would XX, of us to will everyone today's refer

may now You disconnect.

Research Solutions (RSSS) 15 May 192019 Q3 Earnings call transcript