- Earnings call transcript Q1 2023

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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 First Quarter Ended September 30, 2022.

As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, John Beisler, Investor Relations.

John Beisler

Thank you, operator, and good afternoon, everyone. Thank you for joining us today for Research Solutions’ first quarter fiscal 2023 earnings call.

are today call the Roy W. On and Financial Officer. President Chief Executive Chief Nurthen, Bill and Officer; Olivier,

After closed first release the announcing XXXX. the a release company’s its issued market The results this website, afternoon, researchsolutions.com. for available the is quarter fiscal company of on the press

Actual financial the Before Bill those the discussion variety expressed Act be SEC or will of that operating forward-looking prepared factors. implied condition. made under detailed begin may Solutions’ and the due remarks, the to of Reform to would We a like results today refer Roy you statements recent impact you that from Research XXXX. more made Securities future materially and could Private the with of Litigation remind filings risks for a some company’s to results their I of differ the and

management Also is release we information afternoon. provide useful which on certain numbers issued today’s GAAP measures, A these call, non-GAAP earnings financial press believe in of the to investors. will for this reference reconciliation included measures

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

to Roy? now turn over would W. call Olivier. like I Roy to the

Roy W. Olivier

Thanks, first results. us thanks everyone for John, and quarter for joining to our fiscal XXXX

for in above was million exceeding revenue XX% see Platform quarter which Platform to is XX%, with and was respects. $X the first going rate, great The first five-plus we million ARR strong XX% quarter years. and was revenue transaction boosted excited ARR many the The a overall revenue time. by $X were revenue growth up back up highest

gross additional net with quarter. do then and through like like results to wrap continued fiscal of are up detail to EBITDA, income very about walk contributed and I details drove in to share Bill? But which this I’d margins, of records. comments I’ll improvement additional to both which XXXX in comments. our to quarter first, some I’d some and over Bill have our pass first financial the All strong

Bill Nurthen

Thank quarter was good first million, from everyone. fiscal you, revenue Total XXXX increase a fiscal the the XX% first Roy, XXXX. $X.X afternoon, quarter and for of of

revenue in for quarter. upselling churn and $X The million Platform in growth a first last XXX X% year-over-year annual surpassed subscription including over Platform driven the time XX in net by and XX% We the increase first was of the the XX% trailing increased up recurring primarily our XX with Our deployments quarter the over months, sequentially, of platform months. $X.X and XX existing subscribers. low ended efforts revenue, and sales and reflecting quarter continued million a

other today’s how for press define items. recurring annual and non-GAAP Please release revenue use see we and

transaction million. to the of increased Our fiscal XXXX first revenue $X.X X% quarter almost from

in release, this year our increase fiscal percentage in As the press revenue noted largest XXXX. since quarter was transaction the second year-over-year our of

primarily The XXXX. we our combined was in due of in to of undertook paid increase the half fiscal an pricing initiatives with transactions year second the some increase

to from was the customers quarter active period year a past net increase same for The customer was of XX Our total months. more X,XXX, the a the XX due count ago. increase over corporate

our This and Platforms to basis quarter to business. towards for up over shift right moving revenue trend the XXX first first Gross continues margins XX.X%, continued gross point of quarter a mix higher-margin our improvement the the margin of XXXX. the was as the

segment. costs quarter. the primarily recorded points The Platform costs as higher Platforms Despite lower in business This the well software the being gross the gross due target only XX% associated was XX.X% XXX revenue, XX% personnel contributed lower above as the our year prior with approximately of margin range basis the Platform quarter. of than and gross of profit to margin segment

the royalty our in reserves, our business copyright is did increase sequential some pricing of do which basis down we margin initiatives. The had was some our from not quarter. where in lightened year-over-year to margin two XXX Transactions this slightly of XX.X%. to mainly points prior increased due The quarters Gross we

in of QX also QX below last they year below expenses that, increase compared on expenses in they where modest the offset prior operating only a the XXXX. Total well and to come that were where were onetime initiatives to loss product environment. the to fiscal quarter as and year our basis development increased of were achieved I on fiscal mentioned our The they year. us in the to prior expected in due items This some in year not primarily cost at reflects largely to of some million as impacted as technology count $X due last increase million quarter. well XXXX and call year end in of $X.X year the taken in XXXX foreign last of was fiscal were I in but as operating currency of a currency for present QX that head foreign QX

we will old stock stock compensation item associated plan. expense with compensation year some the the uncertainty our long-term be implemented this plan executive move this with to Recall replace to forward, we stock noncash Note that as that equity related one the operating plan. expenses

executive we year, X,XXX,XXX November to stock shares restricted the On of team. issued X of this

determine impact however, the improvement price cap if the However, an is our outstanding, will vest we thresholds net should are the shares Keep our are have stock over only they price and income, mind, on attained. life are market while five-year to vest of stock grants third-party but expense evaluation which until on doing not levels certain A not how shares on adjusted EBITDA. grant, thresholds will achieved. much the the that in firm those

income the said, quarter in compared $XXX,XXX was $XXX,XXX per or $X.XX and become revenue. both was for quarter. they a indicative or were a records that to segment ago to scale year $X.XX how think Adjusted a are EBITDA the larger for grow compared loss the $XXX,XXX to All share component profitably Platform quarter. net business. business the per $XXX,XXX the quarter our in the of overall diluted fiscal first of for as continues of our share We prior can year negative quarterly profit These

further profitability to addition, our again. In will transaction if business this starts accelerated be grow

to our royalties. basis. the flow but commission The to the fiscal given close profitability I we mind, or translated a in Turning a behind especially flow. cash slightly be year overall in We significant roughly generated cash. cash I fluctuate This mentioned from also XXXX, bonuses of XXXX has in some $XXX,XXX is to quarter, for accelerators that into first year paid executive in related over operations of large our fiscal our cash flow material expect to at sales quarter-over-quarter, trailing strong and our the of performance on publisher XX-month amount line EBITDA Keep quarter.

were balance reflects and There quarter, – of generated debt flow versus XX, of long-term that as under the revolving XX, no from during XXXX. related previously million on XXXX, $X.X sheet. Cash me, $X.X contracts borrowings our equivalents that excuse Karlsruhe. no credit, balance operations. were customer liabilities. or line we FIZ acquisition mentioned The $XXX,XXX $XX.X payment paid million million $XXX,XXX the our offset Note outstanding from in September we cash to the cash to and by have Turning versus $XX.X million June of ending

QX we from think some were profitability making that transition I not to that while conclusion, to caution I perspective, increase a for our EBITDA reached want assumptions have an hires here. will slated point in each quarter the new were important until adjusted late from against continue quarter. hired In There

additional per the to in cost add team discussed of Mexico, effect Additionally, QX starting structure $XXX,XXX changes will we likely in of will previously quarter. take which some our and over cost

committed in versus result, for will seasonally drop QX with quarter and to which see QX. we remain you in see fiscal the is fiscal are that this year. volume, a it and adjusted we EBITDA that EBITDA EBITDA in likely increase striving All that accomplish QX a transaction and positive for each being is As the year better flow to and decrease cash adjusted said,

to Roy? the turn call back now I’ll Roy.

Roy W. Olivier

Bill. Thanks,

Given the our I comments since topics. time four short focus call, will today’s last on

think First, to update, a XXXX I goals. is which relevant FY product our

on about some I’ll thinking Second, color are we XXXX. provide fiscal how

progress the announced I’ll of And regarding M&A the general provide our efforts. I’ll and recently finally, customer an status asset acquisition. update Third, discuss

I’m will initial tech From and but be product’s adding on a with a product to announce about first the industry, and example, other develop to we a we excited the that product The perspective, ramp customer up pharmaceuticals as did requirements industries, been sign the product. we our continue we for tech ago support month launched company. the Curedatis launch for to has focused German contract med med

the numbers XX,XXX around serviceable total companies market, believe an US$XXX addressable excited Europe this million. American available be for market SAM, We markets or tech believe med about and remain million. to the is These industry in And fee opportunity. North We the platform are very or $XXX XX,XXX based the or companies average do on around about I of US$X,XXX. SaaS about

launch. had we’ve response far, to So a great product the

the new also Article references and and of Galaxy pipeline exiting Article the Galaxy We’ve the Russian-based of Today, built on the or XX in version we’ve Due XX a sold interest references. customers we’ve strong sales. the large management product. also We’ve competitor development customers business, major standard base version. reference Article on for XXX customers continued seen upgraded pro and about a to Galaxy installed our

standard Turning is changing both up we installs product. and is which to The approach – the We to expand product Article that in launched versions. library our standard that we product the transaction Galaxy basically upsells. from paid via then have the just some product a here and The to with let product our to strong freemium product, version and to today concept university basically our increase previously our did we’re land transactional a installed me features based second, or to that take this the back standard go-to-market with revenue of AGS, a is include freemium is increase product on sales the from removed. freemium Scholar,

TAM are revenue. going in to strategy U.S. $X.X new with a on where As we libraries in million go-to-market the today the revenue forward. $XX progress focused X,XXX this reminder, transactional Platform million report about or on continue is and market I’ll

very the to FY performance. strong had our exceeded my QX’s want I which do expectations. – want to of upsells, outlook. churn to I We quarter, low Turning for on not both do comment XXXX

in behind platform However, we for our targets QX. new were customers

FY is systems QX of opportunities to the due pulling of some to internal our economy. related the into this some to and and of Some is related QX XXXX, some general prospecting is us retooling us

over and the economy companies mentioned general rates about we and should the impacting to. While the items time, first current resolve second I the themselves I some interest concern sell have potentially

put early pipeline end We clear on as our our We economic some issues may in have of dial a not hold have in total seen this impact QX. our of in spend the QX the or of until environment. said, companies uncertain provide few I’ll updates That calls. opportunities back the a future view

over I be Based the to expect know on $XX continue today, to million our for what ARR we year.

business significant customer updates regarding and previously, we stated flow year. As we month. the for positive not that EBITDA full the the will generate FIZ positive project be any We adjusted onboarding do announced cash last expect have

QX. to between large are see increase this revenues should and customer in new said, and transaction a starting more we have confident XXXX nice we report progressing We online, that That in are coming a in we’ll February. FY project

comment on I’ll our Finally, activity. M&A

our in much valuations ways we’re are last creative deal more actionable As said finally get done. I to and a find to willingness call, that seeing

committed goal confident I window I’m year about we’ll the remain to talk XX-months described and in that about We and over bringing million $X about have to ARR something three hit on ago soon.

attend over for to or IDEAS With now should turn schedule questions, Operator? will operator want that, on the be would Dallas November Qualified that call Southwest at Conference our I back to Q&A. turn the like everyone Three I call Advisors. investors for over contact that firm to I’d remind XX. a IR meeting the do presenting in to Before the Part we like

Operator

The first Group. of from Maxim Instructions] [Operator go ahead. Please Klee you. question Thank Allen comes

Allen Klee

Yes. Good evening and congratulations.

a a little So the transactions. you on over in taking just Could of more this said that Thank of that? And you. then be year. up numbers you explaining expenses just little again strength bit the also, will go

Roy W. Olivier

comments? do Bill, some want add I’ll and to you that take

Bill Nurthen

Yes. Sure.

year, So and actually we are and transaction from some two from starting this increase some see to again, in count. we’re with coming where paid It’s coming pickup transactions strength that’s things.

in an transactions, going up number. and So where us actually people just service paying are a paying fee article actually for

some undertake pricing as thing we last other I the initiatives second The of year, of year. were half did, they sort last is done mentioned, but in

optimistic. like see was in from. there’s said two to there where And start certainly, we of And consecutive I’d a before again, growth that’s say before, here. growth coming I’ve quarter we quarters so remain minimally that’s a cautiously nice trend and transaction to

month I think how out see start in we’re full of but next decent off October over we’ll for the to a the quarter. that transactions, plays

expenses, to first, go talking up. longer to think keep of materially. see those the think, we don’t fill the talk me we had I hires regards we’re position our environment could than about, budget sort cash-related this that With extremely a of expenses. were hoped. There just took number in that I yes, had we in will I

item And quarter well. on and secondly, sort hires the of in some the those long-term – noncash what is that of related gets October there stock-based so standpoint, came bonus in from that that early an the see there comes at have to towards out respect as end plan to some to with comp our the valued at. equity we’ll of the And where and end

before be see where future it saying number or because each it be. will comes out we Once of to expenses for we’ll we operating valuable, period. stable the that know will But before is where want through the think the cautioning sort

will that I be QX. So think in up

again, think in situation us I be, generate EBITDA up that will adjusted still they quarter. positive in a a to the allows modestly and

Allen Klee

$XXX,XXX Okay. Did a I around quarter? hear

Bill Nurthen

not will QX. effectively Jan that until and with is added That is will, those starts related was to that QX it $XXX,XXX changing, that will That Mexico get structure, but happen cost which comment expenses. in again, our X

that – seasonally start, as So a traditionally that quarter the quarter also will but best our from transaction that our is will well. start perspective

QX, kind up down EBITDA transactions again. I back drop could and the then of go see as in go what of sort So the off and then

And so bring will that it probably down again.

around and the make to it to move a bit I year main So through my of the wanted closing my going is point that was in statement.

Allen Klee

The for numbers both last rates this question. saw of run Okay. the my in quarter just and gross And of increased kind Are decrease the segment forward? then that margins the reasonable you transactions. going Platform

Bill Nurthen

to up I expect to a probably but a and little the – margin come bit, too down not platform the gross much, go little actually then not transaction bit.

in were that go not impact trend transaction quarter negative couple a just I these But a margin had direction, on would we’re think still I So on where it. a will dramatic either up. again, say. There things of the are shifts in

Allen Klee

congrats. Thank you and so much

Roy W. Olivier

you. Thank

Allen Klee

thanks. Yes,

Operator

[Operator Baldry ROTH Instructions] comes Richard The ahead. next question Please of go Capital. from

Richard Baldry

X,XXX Thank. more course. Karlsruhe’s read your big I Could name, XXX recently compared the and acquisition I’m that to little I total base. maybe uttering active, customers, bit about which you But of more something on customer talk probably when think was pretty the a XXX like a is side, number

revenue of own want and could implications customers? what Just of time whatever of to So Are there give those to that? sort of over? look what at. an to when are over magnitude the similar idea us that some the to implications impact period of could How of choose move be – you your

Roy W. Olivier

Yes.

we’ll I any until off, don’t in First revenue January. starting think see impact

about So what about They right and conversations with have doing now we’re we’re is over. customers. onboarding active moving having them XXX do customers

would move be think we the percentage XXX customers maximum of number would obviously. So XXX some I of or

here, revenue Bill, the and I’ve incremental incremental were to run right? Billy, of their is trailing if about them. opportunity, of onboard the want that $X.X I the all I top say think be customers that in But maintain XX-month would of million, terms rate to we have your probably forgotten you numbers head. opportunity

Bill Nurthen

Yes, on you of at number it, that, – – sort if it again, but could than look you more look it be could a how bit a depending be use. to little good is that

Richard Baldry

take parity, on the all sort And for sort functionality that it to for can gauge or the to offer likely – all is base of would want retain do feature way however that comparable how usage about about think you based talk how for customer you us of it? any you you patterns of to like

Bill Nurthen

through your good other It to There customers. They’re what primarily did, is relationship address meet to think question, customer product And we customers. have those created just price. of that we estimate don’t that. the pursuing trying of the XXX%. basically the will a is competitors I these Article FIZ Yes. not definitely needs some are that on would secure we version aggressively Galaxy a that be

functionality into full the getting upsell FIZ couple So then about AG. relationship opportunity we’ve a exceptions a were Galaxy I’ll team a of under to they talk upsell product the package them all in an special of, of get the created our for Article version with rolled there’s to And that a, they and later. It’s the kind minute.

January is we will parity product the currencies. their think fees some transactions to dollar. operated typically view. a from line as I three a we’re that as historically in making have solve did So say X We’ve that in on progress one single currency, we thing up service very by that the the point FIZ – sell well of the well I U.S.

euro the has pound as there XX, the for present actually, of XX a out large days do to Europe, we’re over been dollar. how figure they amount yen well meetings going the last U.S. very to for So as Japan, British

bringing the making that strategic done. a So and I I’m there chance more good got good get customers. we’ve we’ll over of of larger, we’re But progress think sure kind

a in folks we to in pitching just are going slog take that there However, trying are other business. with competitive that price

Richard Baldry

want it for profitability – implications are good sustainable, that to in trying strategic to reinvest product pretty might how a and you to EBITDA line would the sustainable be what look So out But keep look be drive side? drove growth? obviously the if or some sort assuming proves expectations, above transactions or in it of that spending, your side, would that harder plans the strength sustainably number on own you your go-to-market where looks bottom in of strategic figure is. your areas hiring you maybe the prior some cautious alter And to all better Okay. in

Roy W. Olivier

don’t a I don’t have think that – I there. know complete answer accurate I

would the that think most our on bottom intention I to of line. be leave it

investment an that would we think there look we in, at have confidence was I that. certainly

However, make perspective, sure an we do can to throwing we we at like to majority that whatever And in M&A think we off back deal the do M&A, cash, combined more said, I need a from of bottom line. the stays coming organization fund. if the that I

But to – use in of I or drive cash we integrate we’ve But business a to organically, gotten to certainly, a the yes, term. M&A do final we haven’t if invest acquisition, decision drive checkbox different don’t we because that that areas businesses. in type need the made yet. of don’t the business short may There’s think we checked other the to in need growth growth

this being fiscal try We’re year.

Richard Baldry

for questions. my Thanks answering

Roy W. Olivier

you. Thank

Richard Baldry

a lot. Thanks Great.

Operator

question-and-answer turn for the Mr. I conference the W. to would like session. remarks. concludes This Olivier back Roy over closing any to

Roy W. Olivier

in everyone, great today’s second you, Okay. discuss thanks, our forward call. speaking day. to you We Have for look results. on Well, a February quarter and to thank us to joining

Operator

This concludes call. conference today’s

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

Research Solutions (RSSS) 10 Nov 222023 Q1 Earnings call transcript