Research Solutions(RSSS) - 2024 Q4 - Annual Results

Research Solutions Fiscal Year 2024 Earnings Release Financial Highlights The company reported strong revenue and ARR growth in FY2024, though a significant acquisition-related charge resulted in a net loss Fourth Quarter Fiscal 2024 Highlights The fourth quarter saw significant revenue growth and margin expansion, but a large charge for the Scite acquisition led to a net loss Q4 FY2024 Key Metrics (vs. Q4 FY2023) | Metric | Q4 FY2024 | Change (YoY) | | :--- | :--- | :--- | | Total Revenue | $12.1 million | +22% | | Platform Revenue | $4.3 million | +86% | | Annual Recurring Revenue (ARR) | $17.4 million | +84% | | Gross Profit | - | +44% | | Gross Margin | 46.5% | +710 bps | | Net Loss | ($2.8 million) | vs. $376k income | | Adjusted EBITDA | $1.4 million | +70% | | Cash Flow from Operations | $2.0 million | +30% | - The net loss in the fourth quarter included a significant charge of approximately $4.3 million related to an increased projected earnout for the Scite acquisition[1] Full Fiscal Year 2024 Highlights The full fiscal year delivered strong revenue growth and record cash flow, but acquisition-related expenses resulted in a net loss Full FY2024 Key Metrics (vs. FY2023) | Metric | FY2024 | Change (YoY) | | :--- | :--- | :--- | | Total Revenue | $44.6 million | +18% | | Platform Revenue | $14.0 million | +61% | | Transaction Revenue | $30.7 million | +5.7% | | Gross Profit | - | +34% | | Gross Margin | 44.0% | +500 bps | | Net Loss | ($3.8 million) | vs. $572k income | | Adjusted EBITDA | $2.2 million | +11.1% (from $2.0M) | | Cash Flow from Operations | $3.6 million | +5.9% (from $3.4M) | - The full-year net loss of $3.8 million was impacted by the $4.3 million Scite earnout charge and an additional $1.5 million in proxy and acquisition-related expenses[2] Management Commentary Management highlighted FY2024 as a transformational year, with acquisitions driving significant ARR growth and positioning the company for future expansion - Fiscal 2024 was a transformational year due to two acquisitions that helped position the company in vertical SaaS and AI[3] - Operational execution and acquisitions were key contributors to the 85% year-over-year growth in Annual Recurring Revenue (ARR)[3] - Management believes the company is well-positioned to deliver meaningful ARR growth and expand Adjusted EBITDA margins, creating long-term shareholder value[3] Detailed Financial Results Strong Platform segment growth drove higher total revenue and gross margins, but increased operating expenses and acquisition charges led to a net loss Fourth Quarter Fiscal 2024 Performance Q4 performance was marked by strong Platform revenue growth and improved margins, offset by higher operating expenses and a significant acquisition-related charge - Q4 total revenue increased 22% to $12.1 million, primarily driven by an 86% increase in Platform subscription revenue to $4.3 million, boosted by the Scite acquisition and organic growth[3][4] - Total gross margin improved by 710 basis points to 46.5%, attributed to the revenue mix shifting towards the higher-margin Platforms business[4] - Operating expenses increased to $5.0 million from $3.7 million YoY, mainly due to the added cost base and non-cash amortization from acquisitions[5] - A net loss of $2.8 million was recorded, compared to a net income of $376,000 in the prior-year quarter, primarily driven by a $4.3 million expense related to the Scite acquisition earn-out assumption[5] Full-Year Fiscal 2024 Performance The full year saw double-digit revenue growth and margin expansion, though acquisition-related costs drove up operating expenses and resulted in a net loss - Full-year total revenue grew 18% to $44.6 million, with Platform revenue increasing 61% to $14.0 million and Transaction revenue growing 5.7% to $30.7 million[6] - Total gross margin for the year improved by 500 basis points to 44.0%, driven by the revenue mix shift to Platforms and pricing initiatives in the Transactions business[6] - Total operating expenses for the year rose to $20.4 million from $14.5 million, due to acquisition-related costs, including non-cash expenses and proxy/acquisition fees[7] - A net loss of $3.8 million was reported for the fiscal year, compared to a net income of $572,000 in fiscal 2023[7] Key Business Metrics Key metrics show substantial growth in the subscription platform, highlighted by an 84.5% surge in Annual Recurring Revenue (ARR) Annual Recurring Revenue (ARR) as of June 30, 2024 | ARR Category | FY2024 End | FY2023 End | % Change | | :--- | :--- | :--- | :--- | | B2B ARR | $12.1 million | $9.4 million | +27.7% | | B2C ARR | $5.4 million | $0 | N/A | | Total ARR | $17.4 million | $9.4 million | +84.5% | Platform Deployments and Transaction Customers | Metric | End of FY2024 | End of FY2023 | % Change | | :--- | :--- | :--- | :--- | | Platform Deployments | 1,021 | 835 | +22.3% | | Total Transaction Customers | 1,404 | 1,316 | +6.7% | Financial Statements Financial statements reflect acquisitive growth, with an expanded balance sheet and strong revenue offset by acquisition costs and a resulting net loss Consolidated Balance Sheets The balance sheet expanded significantly, with total assets and liabilities more than doubling due to goodwill and earnout liabilities from acquisitions Balance Sheet Summary (as of June 30) | Account | 2024 | 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $6.1M | $13.5M | | Total current assets | $14.7M | $21.3M | | Goodwill & Intangible assets | $27.1M | $0.46M | | Total assets | $41.9M | $21.8M | | Total current liabilities | $17.9M | $14.5M | | Contingent earnout liability | $12.3M | $0 | | Total liabilities | $30.2M | $14.5M | | Total stockholders' equity | $11.7M | $7.3M | - Total assets nearly doubled, primarily due to a significant increase in Goodwill ($16.3M) and Intangible assets ($10.8M) resulting from acquisitions[15] - Total liabilities also more than doubled, driven by the creation of a $12.3 million non-current contingent earnout liability related to an acquisition[15] Consolidated Statements of Operations The company shifted from operating income to a net loss, primarily driven by a significant charge related to a contingent earnout liability Statement of Operations Summary (Year ended June 30) | Account | 2024 | 2023 | | :--- | :--- | :--- | | Total revenue | $44.6M | $37.7M | | Gross profit | $19.6M | $14.7M | | Total operating expenses | $20.4M | $14.5M | | Income (loss) from operations | ($0.77M) | $0.24M | | Net income (loss) | ($3.79M) | $0.57M | | Diluted EPS | ($0.13) | $0.02 | - The company shifted from an operating income of $238k in FY2023 to an operating loss of $770k in FY2024, due to operating expenses growing faster than gross profit[16] - A $3.2 million charge for the 'Change in fair value of contingent earnout liability' was a primary driver of the net loss[16] Consolidated Statements of Cash Flows Record cash from operations was offset by substantial cash used for acquisitions, leading to a net decrease in the year-end cash balance Statement of Cash Flows Summary (Year ended June 30) | Account | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $3.55M | $3.38M | | Net cash used in investing activities | ($10.10M) | ($0.34M) | | Net cash used in financing activities | ($0.91M) | ($0.10M) | | Net (decrease) in cash | ($7.45M) | $2.94M | | Cash at end of period | $6.10M | $13.55M | - Cash from operations remained strong and slightly increased to a record $3.6 million[2][17] - Cash used in investing activities increased dramatically to $10.1 million, primarily for payments related to the acquisitions of Resolute ($2.7M) and Scite ($7.3M)[17] Non-GAAP Financial Measures The company utilizes Adjusted EBITDA, which increased to $2.2 million, to provide a clearer view of operating performance by excluding certain items - Management believes Adjusted EBITDA provides useful information about the company's operating results by excluding certain non-cash and non-recurring items[11] Reconciliation of Net Income (Loss) to Adjusted EBITDA | Line Item | Full Year 2024 | Full Year 2023 | | :--- | :--- | :--- | | Net Income (loss) | $(3,786,597) | $571,623 | | Other income (expense) | $2,903,983 | $(338,617) | | Foreign currency loss | $21,395 | $(121,953) | | Provision for income taxes | $113,071 | $5,602 | | Depreciation and amortization | $836,271 | $52,649 | | Stock-based compensation | $2,155,461 | $1,849,906 | | Adjusted EBITDA | $2,243,584 | $2,019,210 | Forward-Looking Statements The report includes forward-looking statements based on current expectations that are subject to significant risks and uncertainties - Statements regarding future events, enhanced product offerings, additional customers, and growth prospects are considered forward-looking[13] - These statements are subject to risks and uncertainties detailed in the company's SEC filings, including its Form 10-K and 10-Q reports[13]