RSSS - Earnings call transcript Q3 2022 | 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 Third Quarter ended March 31, 2022.

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

Steven Hooser

afternoon, good operator, you, everyone. Thank for And Solutions’ today Research us Quarter thank Fiscal you Third XXXX for joining Earnings Call.

On website Roy quarter XXXX. available W. release announcing Officer me of afternoon, the today fiscal and closed results at a the with the Chief on Executive press issued After Nurthen, and the Chief is Bill for this That Officer. market its researchsolutions.com. release company Olivier, company’s call President Financial are the second

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

the Roy. that, I available Finally, company’s With on replay now link this will turn via the I call be recorded would like for call and Roy? made remind to that to everyone website. over will a

Roy Olivier

joining thanks to us Thank today. you, Steven. everyone And

record been in the XXX% was good quarter, with a terms upgrades is of we’ve progress in the strong had sign in second for to helped are business. up-sell a up-sell of investing second over growth of ARR are platform generally churn also now quarter customer our in year-over-year net four XXX,XXX business recognized platform revenue. quarter a quarterly that We was record quarters. continued and The three maintain number The and product customers. We growth, also over revenue. It company pleased growth the net ARR and and XX% in and which our last valuable the row growing a our over us to posted a

Our company, provide means new are a new deployments new, walks trailing was some month I’ll more and call what new the on customer deployments context not XX they upgrades. basis after Bill? through additional which detail. XXX of majority results we the to Bill are net customers in these quarterly you

Bill Nurthen

quarterly Platform a of and driven platform fiscal primarily and X.X the net X.X of new good was XX in quarter, revenue performance. everyone. a and revenue deployments current by million, strong of previously last customers. third to million, Total noted of the fiscal XXXX compared third you, afternoon Thank quarter a Roy quarter as XXXX net record company revenue increased including from to for increase third X% platform Roy for up-selling deployments year, the XX% increase

best XX% by period increasing ever of last over the the is quarter bookings up-sell quarter year. for our biggest third quarter and The its experienced up-sells seasonally third company renewals

XXXX. XXX,XXX a X.X XX% at increase a March of customer increased result million and in XX, as recurring the a of revenue sequential This increase. ARR at annual by represents As result this or and quarter new bookings X% stood year-over-year

sequentially unchanged quarter and see the months our over non-GAAP and revenue We to for for ARR recurring Transaction the today’s six X.X XX annual nearly definition Due year have QX. was generated been prior to while I year. this flat million expect release strong other or QX the the of revenue the seasonality, that last terms. were we the year-over-year revenue of and X.X last performance period level a this X up transaction has of from of over Please to added essentially in is as million, was $XXX,XXX revenue note that platform quarter. decline we result, in million seasonally use also for QX about will transactions press months. a XX% from our in

has more Transaction will hard quarter. grow would as setting The to expectations like definitively However, we second quarter ‘XX platform to the again think the any predict. to basis. begin But by for to of year-over-year revenue on the increase was continue this over that for in the a that will count happen, add we quarter X,XXX a that it’s X,XXX in ago customers versus the driven fiscal transaction time customers. was year-over-year changed. corporate we see increases to and few before growth customer year quarters X,XXX trend consecutive in When

focus here As is wanted we this important a the as points and turned fiscal we improvement we more another have XXX one quarter internal spend for record performance. of the corporate over XXXX gross to believe XX%, point margin, heavy which and communicating company a some a one third metrics was Gross the first the few margin for basis to on. quarter time I of

towards favorable taking record expand primarily is prior labor XXX business the are platform basis XX% of and XX% platform transaction increase customers. new of platform our margin within this know to leverage to also the margin costs point gross servicing great platform The target each XX.X%, margin from a lines of it of and margins a to actions above gross related range a the related quarter due segments. to those important to higher the both revenue business, shift within While a deal is product we that of mix to

some XXX points savings business XX%. said to we In headcount to still permanent have we last end range to back were quarter lighten some of Similar All in will less platform think the to able addition, did the we quarter, in costs reserves. reduced app in likely see going some transaction margins will top material forward. be that margin as related Gross I open the and while the revert basis XX% increased we those copyright quarter. to our XX%

some data However, the analysis ongoing result margin particular also the on impacted by to optimize have steps we taken was transactions. through

Lastly, final revenue. fluctuations those in One, keep allocate we platform mind see margin. activity to based that transaction points the upon quarter. labor as a gross on two margin And and do you segments overall costs may between in in the revenue result,

this For overall corporate I important heavily a focus more always our to it’s margin. little think reason, on gross

the expect gross to margin we trend overall as each continue year the we primarily and and be the business higher to the long corporate evidencing will our margins record term. Second, quarter experience the the will to to cost quarter while expenses X.X consecutive of to up compared million in expect do continue in thus we properly operating gross continue technology that we not platform ability do product Total due costs. quarter, revenue right million increase scale prior to were G&A and in to development that X.X

to quarter costs consulting a not related costs share the the our product, looking investment was quarter of of M&A costs on early as to Net the development release of loss prior product a XXX,XXX, compensation systems. to efforts per experience strategy, expense legal our included compared Our and as on net upgrade about XXX,XXX some for breakeven yet, basis year. have XX,XXX stock internal XXX,XXX include our additional the fiscal continue new in compared quarter. The next $X.XX diluted to in to well period. or ongoing perspective, result execute related corporate share to announced in the income or we year ongoing G&A From about prior in additional which consulting are but a we to

a we for making fiscal compared in to the quarter ago earlier gross consequence positive first a and as XX,XXX positive quarter the some of of we EBITDA in call. the was in XXX,XXX the strength EBITDA of the expanding I year adjusted experienced number which QX are this adjusted that well as noted of year result is the the as in seasonal which margins, Given investments

turn and equivalents bias we XX,XXX back or towards while ARR In of to growth as tightly conclusion, the and a EBITDA. the XXXX. mix ARR, for flow were our we Roy. There X.X a under will monitoring flow no cash operations. we have the optimize budgeting balance cycle as liabilities. borrowings we success and term March into year, in move same versus outstanding no our credit next I’ll were growth investments to with the adjusted June business long those about to ran between sheet. Cash Cash invest relatively time call in and XX.X as XXXX the at in our now to Turning XX, of from forward of million quarter cash continue XX on fiscal debt burned million million breakeven line XX, for revolving

Roy Olivier

Bill. Thanks,

progress to supports make from offerings tools set on document of a that to robust to continue executing good strategy We researchers. expand our delivery our

has support focus historic customers helping been research Our work. acquire documents their on that

In and to expanding intellectual across half discovery, this broader will reporting intent release our the year, our latter with spectrum management, tools property. calendar analytics develop the proprietary will helping and continue of the and of content customers acquisition, and be We of solution. of research creation we

customers the said is we provide used to chosen the segment leading I serve. intended life research this to previously, in As all of the platform to have have sciences

When released we their reference research. of second manage our leading new It July which two will our them first manage the were have released research helping releases, manager quarter, product, this in delivered year. of is researchers inside believe their During in documents which the the platform. we functionality the helps customers to of terms we complete, of

We also see Early search on we which customers expect strong in very to as product on calendar feature. year. functionality adopt our feedback good this phase, reference we the release and are to to discover manager work or additional optional intend has later this up-sells been continued continuing

we we for the largest work which a research world continue in might go toward are to market as working progress conduct ‘XX expanding China, the how to to partner on on we a sales market [STM] and FY team today. study with We our is second in

We in challenge. expectations have but report. continue I’m a continue M&A, be to have news activity to level to Valuation of high a to no immediate disappointed

efforts standpoint. the in we note, companies markets strategy optimistic fit strong. right impacting continue overall from will these that suffered, the also global fundamentals outlook economic while will I will strategic say company’s are I in materially are and ultimately our in On and have work anything and remain that the result that that final perspective both environment do see aggressively line present not a finding We evaluation a to with opportunities which remains the

quarterly cash is a near to to The are excuse this this But immediate against Bessemer flow guardrails ARR the those of on churn, results, Partners. by a to results and compared forward starting in best is only in category CAC to months. the and monitor we see SaaS addition this in top the perform CAC focused investments me, growth. defined tier improvement. In we quarter are or best and payback LTV Venture at very terms addition and basis where as the year, growth lag We results terms where impressive we of area ARR ratio, bit are to our the

EV Xx X.X vertically that, that in monitor to SaaS taking during X.Xx valuation EV we valued revenue, quarter market public QX perspective. last of declines, from our TTM We TTM during plenty versus to valuation quarter. X.X have our to we back medium, suggest report SaaS you call third at present are year. the the median group’s the also Q&A. results, the forward addressing at room like fundamentals recent and have. market SaaS Even any you last run turn were With the the SaaS companies may QX for time look M&A focused same In we would revenue Operator? update to software discuss to to considering multiples from Additionally, operator year. questions equity down the to over each appreciate a levels, quarter I’d their

Operator

from come Group. will question first Klee with the Maxim And Allen Instructions] [Operator you. Thank

line open. Your is

Allen Klee

you tool of quarter. what expand those you. this air coming ones very Good. and two year for really the Good It’s ones you Could experience? other what other Thank a was this about how afternoon, you certain out. or breath on interesting later this add said are fresh a a little user coming quarter congratulations. a just It released

Roy Olivier

PDF recently of a is either we in emailed would that have a Sure. The emailed we’ll July, it I second they one our what a mentioned of the that released, or link is a manager call we be acquired. application. references and scientific reference Previously, release customers which article

able several either platform. that it, PDF, or be the other we able will create the One receive folders all process. They research And platform. have just they’ll they’ll application important an the that be an Microsoft mark ultimately to shared Now article It’s really to into like folders folders. applications. on be make up It’s will store a not able that the fully of released that or that individual are to comments previously. inside area They Note markup part product inside

We tools. for have searching other references mentioned, a of product. research in of that one The July. will is way out, bit with come that that’s things. a that the be release we’re does out little couple there’s a in releases, robust researchers more but product two and a work that, new I variety today already are That’ll And of they the then a as that replacing by followed

tools they’re another company. acquiring that are from Some

tools. we in is are PubMed. we’re directly platform. widget those lived had of by are a we’re those the free search details What you popular and which inside article. building allow that Some most Scholar, the into The Google to tools tools pull doing historically that And

search do the the So you platform. in can

can in platform. You the acquire

research robust it You of to mentioned massive thing in that is and receive terms analytics platform platform of we much in And will building. platform. more how building people what customers out I can was a those amount we’re where which which tools manage have it. with are much the we’re the reporting, run doing analytics, money that’s of the an allow then And them, don’t the opposite, third data other underneath saving search along for the article the is them, engine, And technology doing, tools that they’re that will that they have the to where And battery the technology working electric new them with where they press a ultimately, might on. car. say or they’re what tie of let’s fees to mention monitor grants, need subscriptions, help or granted, get even for in apply releases patents we patents, want world for similar analytical

have not that what to doing analytics of to on that a news they’re the what’s doing So internally, it’d in world happening package sources to have but to the able be monitor related they’re external they’ll an top incredible research internally. way only tie to

Allen Klee

Galaxy on Can is you. Scholar us thank great, some give That’s you color how article performing?

Roy Olivier

you doing I but quarter quarters first Article ending through I is the would the for Galaxy say, July the that market which Scholar tell two next the June critical is quarter. of XX, okay, in fiscal also are would September year, academic and our quarter the we’re

spent for and lot two have sales number of the groundwork we laying those So of time a quarters. a

next to report of annual We revenue, a two our a revenue the we not expect the percentage those majority, significant of expect in And our annual I’ll on that quarters. come call. majority from back

Allen Klee

people Can I of you of can have update a an you’ve force? much what Also so other more back goal be this. get queue was? could you that. question, you sales where on ask give after hiring I’ll give, couple this are How on then my will your and additional last done But

Roy Olivier

early We’ve progress mid of during Yes. progress our course on to And majority a which of we this made May. hire Not we’re of in was like feel folks but most track there. some quarter. with the those plan, we’re

we So want progress, but not full at to we we’re the are making at. headcount be

Allen Klee

again, Okay, much. you thank congrats so

Operator

The Artko question of Rabover Capital. will Instructions] come line [Operator next Peter from with

is line Your open.

Peter Rabover

kind went positive question, like negative. last the meaning looking be kind I’m not if of I operating in high it for kind expenses, don’t the of have know, I just the that’s pretty results six But that’s and at quarters. So of, a probably to

in is the what not somebody, run that your I’m of you’re seeing gross seeing marginal a you gross XX expense payback goal planning sure, from probably ARR for which not X will XX. already the went big million I almost versus that’s million You million rate I and guess acquiring spent. their assume in acquire are XX growth profit. also to And you’ve really SG&A profit, really you was given just given pretty I’m and a on

out? there’s some, a try somewhere and it just disconnect there’s So to figure

Roy Olivier

that. Bill to on want take you

Bill Nurthen

a I’ll development. really been expenses in has in product technology Yes. of there. increase say couple and the things One,

So some and end, development, in got the one we’ve about tech product on quarter. in development new G&A product this costs going time that to a was related XXX,XXX

think, expenses, of we and We initiatives. G&A similarly, And new I are tamper brought dramatically year. this of also in there’s permanent, sorts going again, to product number can those we to want have it don’t that inorganic which to both down if managers relate us I that been see forward. a prod ramping while up, we earlier organic

those assume When push early organic systems of lot that’s has and of M&A inorganic are if Some you closer to margin stay a diligence you’re do the stuff. million obviously platform some transactions margin and XX look with rate flat ones at and upgrade to to sourcing at the looking our XX%. pricing if some to doing going gross revenue, that on you

You of again see as going think to XX if it these the it, that’s play, Yes. come that. to anything out, some add of we you I tamper profitability ahead you’ll into XX%. term of And as to and that push sort year. Go of to investments somewhat million, unique up to down start goal well sort do were that some model longer of push to again, our this

XX. the currently XX to negative margin, of and EBITDA sales the the I which and on of have organic add would to platform which currently is up previously, XX rule need this Bill concept, are focused comment we The plus other board very thing as that rate mentioned is on I is

are to big accelerate investment, so number these XX number going or negative XX. EBITDA offset this either we’re will that rule total we a making So meet of that enough we dialing to enough generating to EBITDA start back investments to of XX the

we’re see of XX a but material not get rule to able ‘XX, step in So, in the going of FY performance all to to be way rule XX. we expect terms up to in

helps. know So don’t if I that

Peter Rabover

I’m It guidance, like quarters about from you a rate XX looks I in platform’s few profit expenses. run still at few a a in just five, talking translates in ago for the like And about million doesn’t or said, already months gave four to X kind just of ARR. of that added you’ve ago. roughly like million gross million XX about And business few

So with I don’t add know to X need that probably million the I’m acquisitions assuming to you or to X and XXX million they’re more. get going

So gross X all the profit is three in extra is next I know that talking are about years. million like, we’re an like in

Roy Olivier

could would be this we because not I’m X and with offline expenses. million it Well helpful take incremental tracking

that. don’t I on So do track we’re think to

Bill Nurthen

thing. other the Yes,

to is… other The mind keep thing in

Peter Rabover

XX as few of months ago the or quarter…

Bill Nurthen

Yes.

The other in is… to mind keep thing

Peter Rabover

at summary you page. looking were approximately And and which is X.X, on I’m X.X your right Sorry. X. have XX million investor on tracking, they’re now expenses XXX, that and your your

or X I and bit. know, which don’t little take X So up give I’m is, a maybe rounding

Bill Nurthen

Yes.

So a Yes. couple points.

basically CFO it. costs at operating we keep triggered as of acceleration the we related are from this a separation Also look in stock have CFO comp. XX mind, as within months well XX onetime at If a bunch call of XX, change we had to expenses year, prior X to were trailing XX, trailing you XX to at XX year this months, which

stock run So, million of of over sort there’s X.X again, of there’s that there within the XX.XXX cost comp. rate

of recur. not that’s going obviously that’s sort So to something

we But some not tally on tamp So again these one nature, incurring be either or chunk [Indiscernible] back, there’s is can we’re sort pulled of development ARR we that we costs I the to could those product see. the a time resulting tapered material of that do that think, in through growth side. back or see of should want

Peter Rabover

way. Maybe Okay, the I’ll this maybe ask I’ll another appreciate color.

to comfortable goals and million, expenses given run rate XX your is enough comfortable support that? what think gross operating you giving guidance enough, are the needed of profit. of Are high You of you XXs

Roy Olivier

think don’t think add color could sitting here we that some call, next I in are the today. I regard. we in But

Peter Rabover

I look, you. on well, picking to mean Okay, be don’t like

the the You’ve significant given been a overly just you’ve what longtime operating about a what’s ROIC does jibe in which I’m increase shareholder. past. But expenses with with to not guess given seem to that’s concerned needed I in

only get my concern. call. that’s I’ll the off So

Roy Olivier

you. Thank enough. fair That’s

Operator

Richard question Instructions] [Operator Capital. comes Our next with Baldry from ROTH

open. is line Your

Richard Baldry

growing ARR growth. is, If doing talked got I heads which it? little had that do XX% feel do at the is people know of bring the that date, month and better proxy feel look think you’ve you you that about the you hiring or discuss hiring you curious, pretty in people feel sort tough are got good don’t Thanks. versus backdrop that already team or like a on? are ARR, serve do to you’ve just of as about adding what How incremental a It’s think, you’ve bit nine you’ve sales Thanks. to a I up I you much your maybe figure, for executing with like capacity keep seats whether their how year-over-year

Roy Olivier

Yes.

quicker. in I with In terms But tougher Germany a next We that contribute and has top up sales that, German speaking and year it’s this We the to been the started the somewhere can new think that year, be resource that so plus, that on next existing of to growth. first base year speed come roll to we last now we of believe productivity do to up current to will with with hiring set seats, previous in gets improvement Japan call a expect growth hires in speed XXs. But plus year. in they’ve hires. do have has most resource resources we a year mentioned that last I’ve percent additional of we improvement some we’ve XX their bigger, can slow the roll with the in I expectations sales bookings teams year. heads. to of do maintain performance and some start buds additional been going, and much I’ve seen obviously, hired we’re hired not four this come And new Japan’s some question,

In there. of But us we’d than anything Compensation were any that leads have be for out software I expectations I them today. environment like probably hiring sales to a be. that’s a common terms higher to the theme there it’s, not think seen concerned bit across company

really with more not the top in about the a about percentage. I’m leads, filling And leads pipeline I’m we for of in have So worried putting specific of can rate. we because to the now folks put seats. the the the worried have a the we very the top consistent several close converted funnel, extent years consistently

of a lead marketing last top it’s So intended we on a is new And qualified improvement both leads. And the sales just improve quarter, address see the to majority marketing to getting the our that, today, a help sales to questions? which of I of more side VP brought we improved. of business. are the qualified on matter but coming your marketing We from want with want funnel Did line leads.

Richard Baldry

is does maybe. me a of like hand. the for one Last government Yes. bit little inflation get look out It letting

being necessarily your on the it’s but So sort universities, whatever. tech shy I are that’s side about thoughts not passing for increases famous or impact on like It price cost. seems on that pricing end your of whether clients am revenue curious pharma,

able got leverage of will lever have maintain you at be least press So Thanks. now? that you you operating feel do to like to how kind much

Roy Olivier

can July increases have complex do on But that, features it than depends minimum double great. We or from formula, kind automatic up typically in That’s on we X%, fX% increasing what percent. anywhere into is have X%. turned renewal, it not, typically into of which at on X, going it is price this More or a year, the pricing. built Yes. they because or X% digit plan range

on XXX%, I base raise really XX% to, materially platform see releases the fee. that are or that the increase, and So current environment take we’re a or advantage platform. we’re XX% of XXX%, And they’ll new comment can’t doing, base frankly, then going to but of be prices the we these XXX% going

call mentioned to that’s strong next year. the a expect to script conference would continue So I see we in us why up-sells that in

going Some price of that’s to increases. come these to

what come of on to if fee plus from from that. your it is times or in which is it going to Some change you more is or features going the want new that’s cases, increase what price to turn these XXX July to XXX them even than base some today

Richard Baldry

Maybe one M&A got and successful last know one. a I you’ve background prior lines.

entity, trying sitting obstacle? obvious from just macro? do to it as has current in finding another now? seeing become around might How it Thanks. engine. lately And your about seeing Is year and you a you’re the right you challenges you’re bring be disruptions part targets? a valuation that So the that feel what you’re talk and you where the sort about the of uncertainty another that now that environment of current growth Is

Roy Olivier

PE And we our acquire we number in PE, is wrench on Yes. have by either something having. into that of, to raise capital closely of list, original I either acquired run our to big. had challenges something into we invest targets our of investment the were larger throws followed VC behind are course or the kind which that mean, had of a discussions monkey a ability PE kind were then biggest definitely if valuation the by that

that So up entrepreneurial a finding as opportunities the many and the we’re businesses I into But running owned product. we are good strategy that line had in previous we and with life. have don’t enhance kind as what Bill of

fund point get even painted view. over big or ability the our the of either valuation I combination challenge our a think a could of we’re we two. is vision the And to I’ve if from in terms of going always valuation or price where point hurdle product

I’ve some businesses here. us. smaller business we’ve be we where those slow as standalone our to think that of technology worth worth business might from is And to at In frustrated but that we’ll into think looking bolted at been made pace terms continue where than I adjustments a now, a we’ll to platform be year our more work

Operator

[Operator question [Indiscernible]. of line comes a Instructions] from Next

Your line open. is

Unidentified Analyst

taking my thanks Hey, for question.

when some question was in and my there Roy, company, quick were a and deficits observation. Just it that impression the the areas. that moderately It’s culture under you other and and managed join technology

And to to once those up do, on can overcome you scale sort people this leverage. So you of bring you need operating deficits. then board

if marketing But side, where don’t in with I sort far agree wondered technology So the not. and just this you’re place side right that benchmark of level and management? and to of place to a get in your context, represents along you or know in in getting within people are of the it comfortable how that sales you the I

Roy Olivier

Yes. answer that’s made a I to progress. work to we’ve some I difficult we But do have call. But there. would still public on mean, say

tough it’s specific that. be any than more to me for So

Operator

with Group. Our up Klee next a follow will from question be Allen Maxim

Your line is open again.

Allen Klee

hi. Yes,

I Your smaller been average because been the had selling two incremental than quarters flat it where the your expectation down existing price picked up and be customers compared probably the ones. where think last was year-over-year to roughly it had would that

better So attribute what what pricing? expected it you would to than saw is I

Roy Olivier

to push want You on that Bill?

Bill Nurthen

quarter. of was a the a unique It Yes, thing just bit in sure.

we looked you’d had larger if but last were actually, this sales. less they versus at quarter quarter, much we deployment, the So deployments,

of the longer deals closed of as and expect that XX, last quarter. X it of in I the come in will more it over of the the we will it’s ASP sales that team some been have seat range, well. more a this term completed XX. past pushed it’s of had had deployments counts. around number larger down just customer running But customers that nature deals larger were where a this think I so that do And time the over just up quarter kind And had with

Allen Klee

Great, thank much. you so

Operator

questions no your the further with are there turn back Hooser. Thank And to pending. remarks. Please I’ll you. closing with call continue your presentation

Steven Hooser

thanks, And three today. as will Well, for a ideas virtual a advisors in conference be everyone joining June. part in reminder, us we participating

and your look please on speaking contact For that fiscal discuss September fourth to Have more we quarter night. part to three in information a forward good event, our you full XXXX results. And advisors.

Operator

you much very thank participation. call for the will conference for your that all And today. We conclude

now You may disconnect.

Research Solutions (RSSS) 13 May 222022 Q3 Earnings call transcript