RSSS - Earnings call transcript Q2 2021 | 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 Second Fiscal 2021 Quarter Ended December 31, 2020.

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Steven Hooser, Investor Relations representative.

Steven Hooser

Thank you, operator, and good afternoon, everyone. Thank you for joining us today for Research Solutions' second quarter fiscal 2021 earnings call.

are Urban, President Chief today Officer; Chief call Alan and Financial the Peter and Derycz, Executive On Officer. quarter results After the the the its company afternoon, XXXX. second for issued a market press release closed of fiscal this announcing website The researchsolutions.com. release at the is on available company's

that with Alan be reference provide useful you that Also, may in forward-looking measures, Securities made financial the filings of the of the earnings Peter of and believe to conditions. We discussion afternoon. and I the certain Litigation which like release to a made today's we this investors. those to projected for to from included refer due of Private results the of those materially detailed results their are measures call, differ begin management Before and the XXXX. measures Reform remarks, recent statements non-GAAP prepared could GAAP on Solutions' issued would implied SEC financial will remind risks company's you some will reconciliation A Actual for more Research variety information impact Act future press today under operating is or a factors.

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

Peter Derycz

impact to everyone the healthy We as and us us and thanks results. remain to hope quarter pandemic you, Thank you XXXX continues all. COVID-XX our of Steven, joining for second all fiscal safe

our of offering The continued model progress planning. our remains strategic reflect at results shift across occurring quarter forefront the our second and business the company. Platform to Our

in for end a mark product $X ago. surpassed million quarter marketing increased are deployments year-over-year annual at the same adoption XXXX continue million our XX from second add, increase despite managed more We pleased we to and pleased excited quarter lower see have year up quarter the XX% the improve now I the that first net even $X.X the am spend. that and new added fiscal the of and enhance and as sales offering. from recurring we this revenue, to We of we a

initiatives I'd speak We results on. is Included than the growing in continue greater pass Platforms strategically we our quarter put the are various to In will business. more becoming are clearly to it quality our on maintain M&A the and Alan on fiscal we quarters, I efficient second walk this we rather the But working in detail. through our financial a plan. more more first, sales of discipline our focus formal like as quantity to marketing on to over and Alan? coming spend. will emphasis

Alan Urban

afternoon, and Peter, you, good Thank everyone.

quarter revenue second was quarter $X.X Second XXXX. compared the total the fiscal to million of in $X.X million

recurring sequentially and for release renewals today's upsell we including sales our low and XX% and how successful efforts, define of annual see recurring Our second $X.X primarily Platform X% XX $X quarter million subscription in revenue, quarter. including a deployments increase up last The ended press subscribers. year-over-year, non-GAAP continued use the by in reflecting deployments Please and Platform new of year, revenue Platform churn increased of to net million, the annual from with other driven terms. XX% our revenue

in $XXX,XXX. total Total which while It note transaction increasing, to paid in to prior in the count, steadily of transaction important decrease quarter. X.X% was transaction customers continue transaction publisher by unpaid by basis subscription to we transactions large orders. in is direct year more content from open the a transaction amount customer million XX transactions The SMB customers' count is customers we the primarily amount and steadily of platforms. revenue is $X.X $X.X increasing quarter deploy and the on Platform as Our includes paid decrease token our prior that paid as transactions, higher-margin million decreasing decreased year access revenue increased unpaid away Total active and compared new a such favor prepaid is of transition transaction and driven count to is X,XXX. year-over-year from as to

at XX academic customers of of XXXX. customers active by total and the to corporate the XXX, for Within sequential a customer a X on count, increased total by XXX increased basis end

margin. gross to Turning

XX.X%, Our was over quarter. product shift quarter year loss now year margin per a quarter $XXX,XXX XX% prior a Gross Net to year The general high improved The point $X.XX EBITDA decrease were costs. in of XX Platforms due the positive basis ongoing the mix share increase XX.X%, year to total business point or costs, transaction decreased due of offset The quarter. and $XXX,XXX costs Platform towards which gross prior low second were a million, and to XX expenses the increase margin recorded is to gross primarily a decrease compared marketing, of revenue was compared the labor or decrease operating $X.XX our business partially basis gross administrative to higher-margin per $X.X XX% approximately overall a sales of margin costs. negative copyright in decrease of margin basis The a is from within quarter Adjusted margin in proportional in and a total our improvement our quarter. in a Lower loss by attributable the for the $XXX,XXX compared the in range to business, higher target dollars. increase XX%. still and $XXX,XXX the allocation points in was to Total labor quarter. of the gross to proportional our development the XX.X%. quarter net prior but ago XXX XXXX. generates share $XXX,XXX to

debt September equivalents an and the December increase cash the of the unchanged as credit, Cash fiscal XX, XX, to we XXXX, have There and Peter? and were quarter under no XXXX. XXXX, I'll million, our $XX.X versus Peter. back reported line balance sheet. of revolving at $X.X turn Turning to $X.X were outstanding our million ending from or call long-term of now end liabilities. the borrowings no million

Peter Derycz

Thanks, Alan.

price greater of all small overall. revenue market market indicate, life and results segment the strategy. Article the benefits our us our remains Platforms opportunity. It about excited we really and proposition sciences smaller to Article our We're deployments We relaunched for time value for The and opportunity offers our Article as pretty carry to is saving In customers, sizes. our average easily As of offer find and but money growth January, prospects centerpiece understand Galaxy long-term the researchsolutions.com is growth and engine a the creating website. solutions larger optimized segment Galaxy within business both and large Galaxy+ medium broader, prospects and searching help a Internet the small sales this it search customers designed the greatest clearly. our than the SMB organizations. to believe of highlights value

We their researchsolutions.com. you studies me organizations let Galaxy I and describe our their have Article that information think, by to including in mission what know encourage case links quick to capabilities, enterprise. within easier deploying benefited you how a research-intensive about take to look understand

new the partnerships integrations In as Dialog We These we other a thereby us as welcomed well Japan in addition develop conversations our lead help as with help website, generation in a prospects, new community announced to engine. ProQuest partner, customer whole, U.S., recent partner Europe, create our partnerships, Israel. are joining we and the new expanding our quarters. as network that feeding

Let's speak a bit about product.

our team The partnership development to program. customers in designed Galaxy our the product getting developing provide inside-out, with which our platform established improve to what's can strategic Platform This help of participating and a preview During as with we Article us to customers program framework well a directly. by members program within a quarter, is as chance engage gives improving coming product. development engaging know

life We have primarily enterprise XX far, joined have that the sciences. in customers so

feedback improve looking determine our receiving much advice additional from applications products. forward and our very receiving are are to to to We ways customers direct and

Article had connectivity quarter, functionality our improvements host in Bibliogo all particularly workflow Widget to support user deliver Article stage reduce Galaxy. as designed enhancements the efficiencies, set queries of security, modules. in version an whole are customer as during the and improved Additionally, These customer experience, well automation, and experience of for of reporting, Galaxy as well a the we product areas, as next

our formed you a department's strategic can newly busy, product As few been creation. see, into group months just has the development

our earlier, are count second behind increased, revenue decreased mentioned transaction quarter primary As quarter. There to the while this movement. prior factors the similar in X Alan transaction

customers. signing targeting new large transaction-only moved in have SMB from we new favor Platform First, away of customers

as included and transactions the produce part transactions, content direct transaction unpaid publisher Galaxy access, many token not such platform Second, these and are subscription open Article as unpaid do revenue. offering, of

versus our transactions. higher have a we However, platform XX% on gross on of much paid margin XX%

Over results. M&A our quarters, in Platform two-pronged, the the plan. this so Platforms strategically capital it can when growing past on remaining a corporate use many focus has done only In disciplined emphasis be Included business. and quarters, growing our and focused we on formal doing in our while business our greater of efficiently been more with will coming is put

on consider our in stock broaden the sheet With like to growth and we balance combined cash efforts, improvement the medium-sized trends. to a our half past of our we position over we strong. year, and ensures strong of debt-free and lead pipeline the balance of we Overall, that, stronger doubling delivery, NASDAQ, demand With we of to opportunities through library the sales effective position the our through potential fiscal much providing over deliver to across to positioned our as capabilities management with businesses the to are operator Q&A. growth well are in to remains to back committed in including now our believe uplisting We efficient and reach customers back And the way available. Operator? deployment the and This, XXXX grow the of the the generation we and access I'd acquisitions, and possible. future. can knowledge remain smaller our our product believe call our creation thanks build knowledge knowledge our for sheet, most expanding for turn into to additional revenue in

Operator

with Instructions] first John Capital. comes [Operator The question Basler from Basler

John Basler

question. priorities congratulations million $X and Yes, taking technology Alan, development for thanks revenue. I then those first, Hey, costs? going what the we are on the and should And to recurring ask, the surpassing That's product wanted forward? how and for great. higher model And Peter the

Peter Derycz

lot of information putting terms Yes. future out in not We're spend. a of

resources development created it department, of wasn't a new had creating as all into increasing and group. a a we are, a expenditure. lot filling of new consolidating can department. the was And some bit. We've spend are technology our new We gaps. we sort see, product But by It internally single a you

So say you'll see big some I'd be additional a it spend wouldn't but number. there, in of that

John Basler

also on Platforms Okay. the And can churn is in what you the customer then segment? touch

Peter Derycz

Yes.

We have an interesting phenomena.

what have, call, We we churn. negative

so a negative and call, -- that have so we have, churning churn number. right going now, few we We on customers much what that upselling

So logos XXX% single-digits of but the sort of with that's I We in in have a pretty at the good in SaaS -- churn churn, in do of customers best-in-class of stay, churn. is the logo we're Not some industry logo point the of yes, number this churn. terms terms think right?

to a of pretty willing used, pay it. people that improving next is that year that want value for that's as as good to it so it's the we're long good, confident indicator more keep and the we're it that product even around And

John Basler

transaction great. businesses much medium and of mix the how customers? compared transactions to versus be That's does for and then the how unpaid large -- traditional small And paid

Peter Derycz

yes, transaction large I'd -- internal Well, customers to few have -- general, in large resources. to Yes. organizations, a say have tend more tend

Article box on you on. like being may a try as tokens, their if even like like once by So will, we librarian, onto or transactions. platform. their do archives in tokens users things how control advising capabilities. help on We posit them the control their the their spend to and a on And market SMB archives help internal would help them sort that, and on so I'd and we library them connect or of Galaxy get platform to to, -- that and subscriptions have they they then say to build open even spend to on single including have the subscriptions to those access,

all adopt market SMB gives active trending in volume customers, the the the So do on they I'd able transactions the maybe it to tools say, platform, the nearly way percentage as yet and of is that terms larger once nowhere as but them unpaid because be transaction they're that. to

John Basler

that of number -- transactions. reason down was the I reason transaction thought because the part focus was SMB transaction Okay. the the volume of on the of the customer unpaid the I Maybe missed increase something.

Peter Derycz

Yes.

yes, of finding people And So building we business, over the margin then marketing the marketing let's had in as because just all much were customers up and and shifted clarify platform our was company, out there the transaction. seeking the and our activity higher solely is to on past, we -- we effort that the gross new sales XX% pretty opposed to as XX% on sales the focused transactions. margins emerged bought were platform

who to bit and focus So we're as customers. of a shift on in a there's trying get

and trying small to a or lot about medium-sized buy speaking they because them, is onboard. our and of that we're for shifted they're we're them. buying kind a we've like good we're a of businesses We the really whether can there what the customers fit get platform, of There's lot transactions. that's yes, not so And

John Basler

see. I

it's to So speaking prioritization just your the really Platform business? on the --

Peter Derycz

factor. categories all what of will And there would from that's be be those are of unpaid, then on Then, a dynamics. -- time course, and -- or we the shifting some of versus report and in to those variations time may different paid some big

John Basler

accelerating? it a just Is anything or is there quarter Or variance? changing in

Peter Derycz

paid -- that. in all looked I'd we notice, -- Well, noticed took in depth. numbers and number. more we've the We the yes, in was the increase the at -- but say in a in analyzing a There decrease decrease the paid transactions, overall we're an transactions.

and to it's all like categories sort we are into -- situation with anything dive specifically different a exist have on. don't a taking in more I so that the articles analysis of we quarter, transactions of report So there this but there deep multivariable of doing are said, and types because

time we'll on in next dig to report the probably detail the So into more quarter data. as that we take

John Basler

the me are when material those go -- University then proposition? is, to the your of agreement the And to with the live? Great. last did how Press one of value Buckingham types for And arrangements

Peter Derycz

Yes.

call So side the supplier I'd agreement. that

with our them we suppliers we be and publishers partners. So information, of consider scientific to and make deals

publisher. So I'd the We've are publisher say medium-size small done publisher that all deals that's be a there large to and done.

with So publishers. of we've hundreds now got agreements

in additions matter deals, tail subject think be I long some working when publisher there general, on you publisher really we're see So now of the may a new deals. interesting from perspective. But

that typically we're going So be after may publishers. publisher deals size small we announcing are or adding

Operator

Billeadeau [Operator Scott Instructions] with comes The question Partners. Walrus next from

Scott Billeadeau

you're was a have they're someone's of guys? revenue? Several And a example, going if you again what a get it, that? little unpaid just as you $XXX,XXX say, got all their revenue doing you something big of forever platforms to that was but to, bigger that those they I my answered, coming there out. want I know of -- mean, them to least what maybe trying an to say, don't transactions non-revenue from where, platform that, $X give do get convert How transaction what you are questions and something generating, versus a transactions XX% million with is don't at will on you -- the understand the the do transaction hey, of to of side, you got breakeven guys to we paid the been you, -- going I'm because, churn XX% that to that So like at on would look couple if you figure what's revenue. never number? -- in, revenue. as convert be you of come in to you're we -- hopefully, doing just but and trying revenue it, one, get a platform do smaller out, long revenue Or -- it because as I assume And number continue to you I'm the get because convert trying of

Peter Derycz

Yes.

bit think of there. there's I -- yes, a needed clarification

clear it's that say, asking let's So want it's really an thanks conversion, convert, expansion. very we, when be to that. for a not I

So onto then a the because our and now. disappear transactions you we customer article your you're it from are ordering transactions you just platform, does not mean because us Platform that upsell

have the transactions. still may You -- elimination help platform but those We lower to buy spend help you spend. on maybe of will the of the no the transactions, some there's

you that. like add now if -- subscription example, purchases we well, -- or when things and to a you, we eliminate So help for platform can you add duplicate the

expansion, think, And So to not stays. I'd I a best it's an the business put way the of really it. transaction say the bulk is conversion,

Scott Billeadeau

Understood.

And so us. a usually where kind in? platform? a where is and transaction clarify, come Okay. someone where would -- something for it of for nonpaid you're the then in Or transaction bundling maybe maybe -- that clarify nonpaid come would into Or

Peter Derycz

Yes.

So a quick a One say that platform. there's are or an can their that's journal, user customer you. is, their over I'd requesting may we examples give subscription. they to to the and in copy subscription detect a get that subscribe I X We X the have journal, that the scientists in to and article

article they sort at the that a it that but sold We're transaction. avoiding that a We It's actually we to logging So had. user connected them. purchase. it's company still that an as already we're article, not of that an article

something we articles there's example from is that archives archive And One company they've purchased example that. articles connect things an of another built. previously have subscriptions, like other that or can or so the like may is that,

out are And open transaction. access. we say the -- then to access source which that call connect sort them instead open that I'd initiating are can that software. paid in of articles business And there of open There's you'd free resources into some called articles that out are software there. some fall are articles, a available So there internal category their articles

the article. we details. not value make about one platform, platform of nuances figuring It and the the all with to information was the It's open have of platform I get a user transaction Do access? paid sort there's may to these and on that little the an just system, can just customer on for worry no it at that free all all We give since to And quick They need transaction connect the the through the so of sorts of of behalf user it's us don't it a others. is easy articles. I for a I you. subscribe and but And these of those listed they few examples cost archive? part right? Is the sort that of nuances out to

Scott Billeadeau

you. front a certain I should to you generate a saved if look, Got them in non-paid of wave you, It's right? and you Absolutely. Yes. extent, probably mean, them that a we what say, transaction, for archived. way but go Fred already bought and we you X the this. out -- had of, In ago hey, that, found already buy our weeks to may it's that it have this system past, have

So value serve -- we're and -- is the providing up, to boom, proposition back here's it this you.

Peter Derycz

customers. the we avenues provide customer. to reporting And to platform the do value of There's Absolutely. brings that many our

we as we're And document do so what approaching renewal. we those is

the on And that a are occurred have value hey, may value let's renewal. able that users And upon -- bit negative driven in that reasons and one that and share year, we that upsell increase we but created. by the is have renewal, document only was also so upon price during is additional not saying, by of -- really this we to churn and the

Scott Billeadeau

about do that? talked does guys is? on how of a about there funnel? version maybe build some you bring the you leading Are M&A, you Yes. a talk is game more you color M&A. what development Last maybe if plan got -- -- the this or -- little helping books you of Or do outside the is, And Kind to formalized business a how function? question could you put

Peter Derycz

we pivoted sitting Yes. mentioned that are a NASDAQ I here the line. Board. let's being balance a add different but million terms also ago of I we've the we this is, much And we're that on would mark. the detail, a of the you're in just is to situation -- platform in year growing. hit during company won't -- $X X the We into instead sheet, of than where feel sort call on last in pivoted pivot new Bulletin company situation We years, sitting Platforms of over successfully. as we've, in that stock business too were this ARR go terms say, the made say

continue this now do a We're at sort to did to make that that platform. new we've to to continue to it, rate make growth. of better, so we more say, we're be pathway Beyond continue revenue, of have reorganized the to M&A. a more to it. the we lot a more okay, and to And features the acquiring platform, going we've to going sales that sell. future? pivot want customers, want next of of upsell grow And enhance customers additional, in We're a it is business low. accomplished and churn looking then of How it the let's real into right? existing that make this changes, We're going all of to the through doubt, to continue line, are wave to Yes, that, market. acquiring we're And SaaS and made to that. lot make sitting, to changes we're are would going We're going marketing, valuable, customers customers, the going keep

started, we say about allocating I -- so in it. without what that resources first really we're going because to quarter too the are And we've we much into can that specifics

can X transactions up what dedicated It's a transaction to done And transactions on information platform business. the development first will M&A it. see that function. still successful you will will early call M&A of still our endeavor. are are the But to about resources creating we're that stage. serious -- transaction and have And we days quarter early those we we built that as We I are it's side, in that, would we but see believe you X dedicating business the business. We definitely about that really successful yes, resources the it. in be We've side past more

Scott Billeadeau

widgets the the and or is type would platform platform of -- other tools And -- who's to on Great. will awaited how another trust to some different SaaS the platform I the but at it can Is a got that deliver definitely with be we looking customer or -- similar more to or things someone that focus do business. current we customers extend the our extensions there I base. to platform a for other

Peter Derycz

Yes.

XXX have. to paying vanilla also customer start we There's have has if playing things we'd selection Their there buy we yes, capability So XXX, and that using vet customers sort targets of criteria Galaxy that we're acquisition can ability another to improve versus versus there's we platform are acquisition. customers already of what up And particular in that have similar cross-selling jump of, the Article touch to directly mode like selection type of variety we to if like the X,XXX that build have. and identified. accelerating look terms customers right? to Hey, we a we product, criteria an call, a

-- within research into knowledge, focused agenda. and falls It efficient solution that there's few So like it that to but anywhere go makes all R&D providing within more accelerates our from and things customer product the selection count creation knowledge management a could knowledge delivery, -- that, and criteria.

Scott Billeadeau

nice Great. All thanks, right. million guys. Thanks. a to see run Again, Well, rate. $X

So great job on...

Peter Derycz

Scott And about so really your and much thank this. excited Yes. all thanks you, We're support excited. for

Operator

comes MKH from with [Operator The Management. Melas next question Instructions] George

George Melas

reaching million ARR. $X on Congrats

I a of right, perspective, it's as seems both is it think you're a the functionality a in platform with the changing? maybe business one. conversation and from perspective, My usability customers like the And customers change? some question real discussion the you've somewhat customers, a with nature conversation from improved is very customers, the and existing is, of pipeline good -- also profile is the that also with potential undergoing

Peter Derycz

conversation. say product. call going and there expand something was I'd that on mentioned are want the Yes. -- some we in change improve helping in One there in involved customers changes the actively us that I

formal them they We're program developing this to a And on making our So partnership team we they of look there, right? with product. sign program. access our us a a commit to team well, development on what's giving Customers giving a commit and program, partner go an the so to them up being for There's as commitments product coming, for at is website it. the on. and preview -- it

sides X So of commitment.

And so a both new that's that's a conversation. based this are we -- conversation on forward. moving product And it's to committed

in I of think that's our so category changing in involvement of And in rapidly conversation that's X prospects terms customer involvement our product. and product

each and as been very of happening started $X a dealing as SMB got the and more R&D that building size large medium of the transaction we're from to whole we're the of companies in the And and spectrum X very see small sometimes, by a ones medium become we one. into and in coming with full platform to larger have We've medium was -- the discussions sort contracts market ones million mark in pivoted past, small ones market, -- especially seeing to and sort -- of ones, very other marketplace, right? and see the this seeing view large large business ones got spectrum with pharma and we become very we were SMBs, our large realizing right? more is, we we business. larger customers other a the the the The of is become or the ones medium And now

And big types the we conversations of organizations with what the organizations. ones the lot we're from that small is so a seeing different than have is the

adept, points with trajectory. I sort them talking discussion and along conversation at in pretty customers points with modifying getting whole the these think, conversations and growth we're so their And our to of be

there been over and starting small a very we're large out can them we've organization. as We a and they So done company, time. and that with grow with adapt,

research view of evolve we their in marketplace. and small can spectrum accelerate because full sort So the our now of grow and customers just have that help we

George Melas

Okay.

customers and ask large the of quite are as probably and enterprise? have lot can you that That's systems elaborate fewer value to the they that provide helpful. seeking on in you opposed sort the within Okay. a customers about you conversation have to their Can I type that and smaller that the of difference with that

Peter Derycz

Yes.

may they or time, nurtured if -- or the organizations, they cases, built they in have that I'd acquire subscribe systems you systems they've So larger have sometimes over many -- say, look internally. they've some at multiple systems that to

we of so internal and for, have external APIs say, and whole suite that that the systems. these customers or let's larger systems like tools things have And connectivity a

for things I customers, working us, an team the like with we're -- larger customer internal it's to at done. so get think for And

to hoc sort each I thing. information multiple tools organization, say think may way the there's managers information figured all out of just company ad or using spectrum you conversations employee I'd with look people get when system maybe go down be an done. of And of the the to certain own small because team the things internal organization, like at small they the their

small the have. well, team like from think have I these don't a companies you we're large okay, saying, internally company so And perspective,

So why to We'll don't help to you make things integrate be you accelerate your us team. consider sense research. your that

team sense, goes that of Article when a along with sense, they they're And getting buy so Galaxy, the in sort in that it.

forward become do and we should their even as integrator, and say what how be it to they the bring to using, suggester have analyzes system together them system connect all they I'd what into future. and out figure so And

system of always sort with box And we're small the companies. information I large I then their a existing for say -- companies, in for integrating we're the sometimes that sometimes So -- box.

Operator

session. like question-and-answer the for concludes conference This to remarks. turn to I back over the closing would Peter

Peter Derycz

here like to Relations those participated your always just who I'd everybody questions to for firm. for separately questions, with joining. thank or And our Investor through answer happy

energy next on assured and sitting commit rest Just growing forward balance the taking that we're sheet, and -- we're looking and time to on further step. resources and to the company product, strong

growth. you the Thank and so pivoted now much. we've continue So to time

Operator

call. today's concludes This conference

day. You a participating, lines. may and disconnect your have pleasant you Thank for

Research Solutions (RSSS) 12 Feb 212021 Q2 Earnings call transcript