Earnings call transcript Q3 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 Third Year Ended March 31, 2023.

As a reminder, this conference is being recorded. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]

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

John Beisler

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

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

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

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

Roy. turn call to now to I’d like the that, With over

Roy W. Olivier

puts our revenue new results several helping that It the research into EBITDA and support breaking excited customers operations migrating new income, net reflection for I’m the every thanks growth to highly us team of you, truly costs in revenue rate, spotlight efforts us adjusted without and is and went all year-to-year requiring hard customers joining our quarter, million research $XX and today. onboard our outstanding These optimize teams. work John, Thank hundred the the efficiency or the results. about their our a day, to their resources. everyone EPS, encouraged of

I scalability to combined of strong of the that the line revenue nature we and show strong diverse our positively able economic bottom with challenging streams year-over-year think it our are in a reflects on model environment. growth this

Bill be back more details After in I’ll the the about quarter. through takes you detail, results Bill? with

Bill Nurthen

of you, quarter was of of XX.X% it to increase in million revenue platform third driven platform Roy, revenue, afternoon first million. $XX compared third XXXX good deployments over net This XX% from of last deployments end at third the annual customers. release the and see use in reflecting revenue other our at revenue, our sequentially churn recurring continued quarter. upselling efforts $X.X existing low sales year, XX Please the by of quarter Thank was primarily represents stood definition and items. XX% the and today’s of Total the and up $X.X non-GAAP current and both including X% Annual ARR, quarter revenue million, an press recurring everyone. $XX.X for increased the net a platform upselling for increase company’s and fiscal of new year-over-year or ever and fiscal quarter to customers XXXX. and Platform million,

a on contracts do everyone XXXX. which a is customers set and FIZ is not $XXX,XXX strong. other quarter, QX the the former due XXX really a customers January The rate $X say the took million from customers Karlsruhe, and run over number a over this there this In organic remind complemented Xst, prior the increase transaction us of to FIZ million a that It was for for in transaction little fiscal in resulting primarily as this hard on our if by effect of to in growth assumption with transaction time of of revenue at our for is typically from is time approximately with quarter a to hand, compared is this and hand come revenue. quarter, was particular had will associated transfer we our XX% one increase. FIZ transaction the QX that best do quarter. have are $X.X revenue, the best seasonally for that on seasonably the I revenue Transaction transactions, did the transaction quarter year time

estimated impact quarter driven FIZ of The you that and to view XXXX. That in advance. to our some X,XXX us, into payment count On have an the may year. The final we come of have very software payments. and the in on we customers QX third are expenses in copyright is that in booked was QX as strong for re-up cash well a performance higher for discussed some upside and our One of have our X,XXX next is our customers normal the transactions account quarterly to prepays accrued upgrading of we keep to converted that corporate of economics versus before the that This earnout take portion fiscal any at sheet, flow mind customer related those was first for the increase quarter transactions total FIZ expenses customers under prepay sooner on the in note Transaction to as platform. by from in having FIZ our that means than may the favorable to said, previously. balance amounts. transaction as increase acquisition these we

trajectory quarters. However, recent the cash it in experienced fundamentally have alters flow is we something in not that

the transaction platforms will basis the fiscal that gross by over margin and XXXX. revenue of a point quarter in quarter. due down I improvement increases margin to third first strength basis, higher our shift the basis revenue on business. of quarter really points, this was note the XX the the XX.X%, slightly Gross margin sequential is for to the was XXX The towards due mix

in be trend, a producing of resulted our XX% to continue and the and the This platform our margin expect dip I we causing profit increase revenue still gross gross time as strength to between overall shift continue margin transaction the experience viewed gross transactions The that will to long-term revenue. should over down slightly. mix and as not

The basis increase margin platform Transaction prior above. continue that business prior platform from recorded can that gross margin from Gross quarter. future to continue the a year year margin XX% the expect foreseeable of XX.X%, in basis maintain we point XX.X%, XXX business or increase to gross at quarter. point was I our for the XX

the successfully to headcount FIZ and our customers without teams. service new customer to We were able adding operations onboard support and

a service As increased. fee uptick in with the result, volumes, our margins

we also in addition, our margins. copyright uptick slight In experienced the

$X.X expenses marketing the quarter the year primarily onboarding compensation. increase in $XXX,XXX million in million quarter, compared and recruiting to in expense as quarter. prior The Total to well $X.X the in primarily sales general to due as costs, fees in to related related administrative operating expenses and and positions increased was higher were two in general administrative stock and new

headcount marketing includes fees expense discretionary sales ramp to do in expect year-over-year, our both increased them were which – in related marketing is spend. in not quarter unique These and up increases and to and continue. marketing The we this

discussed expense Net or quarter QX which of income share conference full $X.XX in Lastly, a the to prior $XXX,XXX $XXX,XXX in net our loss long-term $X.XX was quarter. call. compensation stock diluted detail in share to equity the for related the is our bonus compared I for per plan, per year

and income The in to was Mexico program, year $XXX,XXX EBITDA both net on includes quarter this impacts in the direct-hire quarter. company expense compared effect the and records of $XX,XXX which new took XXXX. ago X, the EBITDA performance Adjusted adjusted January our represent

fiscal the nine compared of months to approximately of almost have EBITDA first year. loss six $XXX,XXX adjusted months $X.X in We a the year first now our in of the of generated million fiscal prior

to our balance Turning sheet.

continues increase XX, cash million flow. Cash increased on of March XXXX. June to in and profitability equivalents as were $XX.X XX, cash $XX.X million Our XXXX, versus drive

in million no under outstanding line million debt from generated of and There now $X.X cash borrowings our have year. our were of We first long-term flow no have nine of or months fiscal $X.X we operations credit, the revolving liabilities.

to moment Bank. now a about Citizens of Silicon like Bank, with take First to which talk division a is would Valley relationship our I

the required us that of know, cash have continue some may you SVB of our deposits bank. maintain of we for being to time XX% have and As to with a credit the with line

[indiscernible] collapsed, we the substantially result, a position As bank. cash of our in had all

relationships. lending all we as We line the of on of our bank, XX substantially March part and diversification also the and including open strategy to overall new accounts exploring the with deposits with access banking all had that we two services, of access our had new credit, to banks of disclosed that

with More balances and being to of the worked time, of approximately position At recently, of with with cash credit position we our line Bank have this taken the our them to with with the of allocation reduce represents Bank cash threshold remaining X-X, our total cash and cash steps SVB held agreement. lower position our XX%, PNC SVB requirement in have America.

define as potentially as work in further We that our near-term down new strategy. take our low total to of banking will we XX% position the as to

M&A. safety that Our to with well us to will will as our facilities the new of allow include efficiencies deposits our lending on access as strategy balancing operational execute

any material to that said, forward. that options the to how our impacts or state and employees, we All able get I’m for customers, number banking happy have through without were handle vendors, crisis we of good SVB a going to

we strong for we QX, look ahead our to As very a remain year. fiscal track to on finish

adjusted see at likely sequential EBITDA a seasonality will We related the transactions. dip to and

seen I similar have expect to this be results quarters our we fiscal prior However, year. what to in

fiscal as our growth. contributed conclusion, flow our to profit and by business the platform economic fundamentals and year, evidenced environment to have growth cash the started In emerge while this of scale our has strong slowing

while invest the ahead. which We have excites us business, continuing growth this prospects in about achieved our to

I’ll now to Roy. back the call turn

Roy W. Olivier

Thanks, Bill.

lot by our on slowing remain will a growth. I a strong and note. in previously, we great there’s quarter’s end frustrated said, we year that the As believe results platform I to news in of continue That stated the this

multiple reminder, in areas involved and a upsells. we sales As have

We have the in more in upsells new situation customers, the headwinds the past seen we than general have and associated that continue to see past. economic we fewer than up with onboarding in seen churn slower market shows of

competitor due churn acquired lost pressures remaining being economic quarter. business. to cancellation was or due to downsizing, The the a the logo bankruptcy Only was customers or during in to their one our overall the spend

with I we As discuss scores will to continue to continue a strong customers. NPS our and have in minute, release enhancements

year-over-year, on sales continue I and recover. I’m the capitalize to sales teams, overall XX% upswing platform return improving levels our grow to focused at as We’re we the that activity starts that process, the expect our levels on those can to will economy confident economy to greater as and sales our business the than we improves.

profitability, In material the growth the the transaction driving impact our over growth, flow. cash year actions improvements in took past revenue we and meantime, to our is

We many to business. great continue make areas of in the progress

the save quarter, many search more. updated During dropped feeds, RSS the including and currency product, we dual to invoices, new much release adding updates three features capability, searches,

updates for well All upgrades. have are of opportunities been pipeline and generating these received

under more can You releases notes. website tab the resources in learn our about release on our

of our time. for in our first recent Some utilizing are releases AI the workflow

in NLP today. set As AI, then allows the to and That or NLP user our technology a results. read Language Data’s search Natural AI, documents our in product to a a search use reminder, Cure Processing use and we up score products

tool AI an included related the scientific viewing. articles that to release April is recommend are to user articles Our

if that reviewing to related recommendation are related tool allergy, article. other show to peanut an that articles our article you you For are example, will

will to will we late focus the results releasing May We AI technology release, NLP some help accurate. and researchers the our on in extent continue our are be workflow and to integrating additional into AI that to

generally many relevant learning tools users. know, today provide available available results in are We’ll of As accurate our on focus continue to publicly is from we content, all to and not the which accurate. many cases that AI tools

future. near front, materializes several on exciting we’re will sales that the revenue think in On opportunities the working we

As impact related and key business, that customers. on customer having we to excited about the our base is are the Bill reported, forward initiative upgrading FIZ go to customers those a is platform

upgraded in to related referral other worked we amount year, of the relationships product. research and launched. it publishers customers Article hard to directly Galaxy, material to with the about platform are not solutions our of competitive. that reminder, past a In core resulting As the Those are develop products we’ve XX% partners traffic after a

working publisher been paywall priorities. will opportunities customers publisher’s publisher. from world. that through from to the have and buying are, Going marketing around we are few ultimately converting sales transactions platform purchased transactions where The website In words, forward, or what part also for signed our sales key all platform of a traffic that directly purchased call sales transaction we larger will on articles and all examples team A sales the manage would paywall. and the is and directly their we the deliver deal other our the publisher’s I

deal We the platform includes country. country. both the all to were transactions a This service recently in deal within awarded country that and libraries

year. We has will deal revenue of annual like run and for get potential this early the as to onboard days, future up to report this more feel we rate. a is deal the customers $X It per upside on in our revenue but the impact of a actual the million the

and opportunity in us in may of to this a large the half year. working calendar about transaction platform second I’m are for We Asia. business what excited our that this would customers expose many do on partnership

to marketing in marketing front, digital sales of activities great the On we marketing, new leads process. NQLs sources qualified a content, make and variety or our including improving through continue webinars, progress driving of

we’re this, Xx we by our The total which in in an example, massive which year-over-year. to expect drive pipeline followers of generating result year-over-year. sales in improved are has improvements seeing growth, quarters. as our XX% up a resulting MQLs, future sales content, And impressions are LinkedIn new As

bottom-line process always these as forward. things into go remain improvement are continued line confident top there we operational and While translated about we opportunities, and performance

to and that in hope That our financial and opportunities report work soon. we is on have execute continue On only several with to will front, to we M&A something a the said, deal strategic long-term goals. alignment

to call for like to turn the With over operator the Operator? I’d back that, Q&A.

Operator

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

Allen Klee

Hello. you talk Nice guys. to to

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

Roy W. Olivier

that Yes, off I got don’t top I’ve my of the number think head.

real new the upgrade material I my customers and the to check customers buying know see of product. do on just we quick. me off upgrading the see a pretty product, – nice percentage coming But the we don’t But Pro head. of a Let of do board percentage numbers top

see got If while if question. more questions, you’re find go and the I can asking something I’ll you’ve ahead next me

Allen Klee

Sure.

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

Roy W. Olivier

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

Allen Klee

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

Roy W. Olivier

a was we than expected. slower Curedatis little

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

Allen Klee

question more and One the then on queue. back I’ll get Yes.

– your what I if you share that’s Q, just of Q XX-Q, see the count Just today? tell didn’t us – usually [indiscernible]. as I didn’t see could but your the the is in

Roy W. Olivier

Bill?

Bill Nurthen

a call exact you number Yes. It’s it. sec. here XX,XXX,XXX. I XX,XXX,XXX around Yes, the in could get

Allen Klee

Great.

you Thank Okay. so much.

Roy W. Olivier

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

Allen Klee

much. you Thank so

Operator

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

Roy W. Olivier

Well, today. thanks us everyone joining for

As in Part a virtual Three reminder, will be June. the participating we in Advisors conference

to Advisors. hope discuss full look September year speaking results, fourth you more great We and For Three Part contact this quarter info event, forward you in a have to please our evening. on and to

Operator

The concluded. attending for Thank is presentation. now today’s you conference

disconnect. now may You

Research Solutions (RSSS) 11 May 232023 Q3 Earnings call transcript