Summary of Research Solutions (RSSS) FY Conference Call Company Overview - **Company Name**: Research Solutions (RSSS) - **Ticker Symbol**: RSSS - **Industry**: Research and Information Services - **Business Model**: SaaS platform focused on simplifying the research process for organizations Key Points and Arguments 1. **Market Position and Growth**: RSSS operates in a growing market driven by AI and digitization of research, with a focus on non-cyclical demand markets [4][6] 2. **Revenue Composition**: The company has transitioned from a low-margin business to a vertical SaaS platform, increasing recurring revenue from $6 million in ARR in 2021 to over $20 million today [6] 3. **High Renewal Rates**: RSSS boasts renewal rates in the low nineties, with net renewal rates exceeding 100%, indicating strong customer retention [5][36] 4. **Total Addressable Market (TAM)**: The company has a large TAM with a single-digit market share, indicating significant growth potential [7][14] 5. **Product Offerings**: Key products include: - **SITE**: AI-driven search tool for peer-reviewed scientific research - **Article Galaxy**: Manages article entitlements and acquisitions - **References**: Manages corporate libraries and document sharing [8][9] 6. **Customer Base**: Approximately 50% of revenue comes from pharmaceutical, biotech, and medical device sectors, with installations across 60 different verticals [13][17] 7. **Financial Performance**: - SaaS revenue has a gross margin of over 85% and is growing at over 20% [25][26] - Transactional revenue has a gross margin of about 25% and is stable [26] - Adjusted EBITDA reached $5.1 million, with cash flow from operations at $6.7 million [29] 8. **Strategic Focus**: The company aims to grow SaaS revenue from $20 million to $30 million in the next few years, with a focus on organic growth and strategic acquisitions [35][41] 9. **Acquisition Strategy**: RSSS is looking for acquisitions that can enhance its product offerings, particularly in the research workflow space [38][39] 10. **Market Challenges**: Concerns exist regarding academic library budgets due to potential cuts in grants, but corporate clients remain stable [19][49] Additional Important Insights 1. **AI Integration**: The company emphasizes its AI capabilities to reduce "hallucinations" in research results, providing more accurate and comprehensive search results compared to competitors [11][52] 2. **Customer Feedback**: Positive customer testimonials highlight the time-saving benefits of Article Galaxy and the unique capabilities of SITE [14] 3. **Future Outlook**: The management remains optimistic about growth in both corporate and academic sectors, despite potential short-term challenges in the academic market [20][49] 4. **Cash Position**: The company has approximately $9.9 million in cash, which can be used for strategic initiatives and acquisitions [31][32] 5. **Management Experience**: The management team has extensive experience in public companies and private equity, enhancing confidence in execution and growth strategies [43]

Financial Data and Key Metrics Changes - Total revenue for Q3 FY2025 was $12.7 million, up from $12.1 million in Q3 FY2024, representing a year-over-year increase of approximately 5% [8] - Annual recurring revenue (ARR) reached $20.4 million, a 23% increase year-over-year [9] - Gross margin improved to 49.5%, a 430 basis point increase compared to the prior year [12] - Net income was $216,000 or $0.01 per diluted share, compared to $76,000 in the prior year [16] Business Line Data and Key Metrics Changes - Platform subscription revenue increased by 22% to $4.8 million, driven by growth in both B2B and B2C segments [8] - Transaction revenue decreased to $7.8 million from $8.2 million in the prior year, a decline of 4% [11] - B2B ARR experienced net incremental growth of $736,000, a record for the company [10] Market Data and Key Metrics Changes - The total active customer count decreased to 1,380 from 1,426 in the same period a year ago [12] - The company noted that budget cuts in government and academic institutions have not yet materially impacted churn or the sales pipeline [34] Company Strategy and Development Direction - The company is focusing on building a professional sales and renewal team as part of its long-term strategy [21] - Investments in sales and marketing are expected to drive predictable growth, with a focus on both B2B and B2C segments [42] - AI is central to the company's strategy, with ongoing development of AI-based products and features [24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ongoing revenue mix shift towards higher-margin SaaS revenue [19] - The company anticipates a strong finish in the final quarter of the fiscal year, despite potential declines in transaction revenue [19] - Management is monitoring the impact of budget cuts on academic library budgets but views it as an opportunity for their products [34] Other Important Information - The company achieved a new record for adjusted EBITDA at $1.4 million, compared to $961,000 in the prior year [17] - Cash flow from operations for the quarter was approximately $2.9 million, a significant increase from $2 million in the prior year [18] Q&A Session Summary Question: Thoughts on shifting gears to drive faster growth through sales and marketing - Management indicated that investments in sales and marketing are aimed at creating a predictable model for growth, particularly in B2B [42] Question: Potential of AI to streamline operations and lower costs - Management acknowledged the need to utilize AI for productivity enhancements and indicated plans to report on AI initiatives in future meetings [47] Question: Performance of new logo versus cross-sell teams - New logo teams performed well, contributing over half of total new bookings, with strong performance noted in both corporate and academic segments [54]

Financial Data and Key Metrics Changes - Total revenue for Q3 FY2025 was $12.7 million, up from $12.1 million in Q3 FY2024, representing a year-over-year increase of approximately 5% [8] - Annual recurring revenue (ARR) reached $20.4 million, a 23% increase year-over-year [9] - Gross margin improved to 49.5%, a 430 basis point increase compared to the prior year [12] - Adjusted EBITDA set a new record at $1.4 million, compared to $961,000 in the year-ago quarter, with a trailing twelve months adjusted EBITDA of $5.1 million, representing a 10.4% margin [17][18] Business Line Data and Key Metrics Changes - Platform subscription revenue increased by 22% to $4.8 million, driven by growth in both B2B and B2C segments [8] - B2B segment saw net incremental ARR growth of $736,000, a record for the company [10] - Transaction revenue decreased to $7.8 million from $8.2 million in the prior year quarter, a decline of 4% [11] Market Data and Key Metrics Changes - Total active customer count decreased to 1,380 from 1,426 year-over-year [12] - The company noted that budget cuts in government and academic institutions have not yet materially impacted churn or the sales pipeline [33] Company Strategy and Development Direction - The company is focusing on building a professional sales and renewal team as part of its long-term strategy [21] - Investments in sales and marketing are expected to drive predictable growth, particularly in the B2C segment through digital advertising [42] - AI is central to the company's strategy, with ongoing development of AI-based products aimed at enhancing research capabilities [23][25] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ongoing revenue mix shift towards higher-margin SaaS revenue and expects a strong finish in the final quarter of the fiscal year [19][20] - The company is monitoring the impact of budget cuts on academic library budgets but views it as an opportunity rather than a threat [36] Other Important Information - The company reported a cash balance of $9.9 million as of March 31, 2025, up from $6.1 million on June 30, 2024 [18] - The company is exploring options for utilizing its cash reserves, including potential acquisitions [38] Q&A Session Summary Question: Thoughts on shifting gears to drive faster growth through sales and marketing - Management indicated that investments in sales and marketing are aimed at creating a predictable growth model, particularly in B2C [40][41] Question: Potential of AI to streamline operations and lower costs - Management acknowledged that AI could enhance productivity and is focusing on utilizing AI for R&D and software engineering [46][47] Question: Performance of new logo versus cross-sell teams - New logo teams performed well, contributing over half of total new bookings, with strong performance noted in both academic and corporate segments [52][53] Question: Trends in B2C segment as classes wrap up - Management noted a weakening in trials and sign-ups, but improvements in conversion rates were also highlighted [57][58]

Financial Data and Key Metrics Changes - Total revenue for Q3 FY2025 was $12.7 million, up from $12.1 million in Q3 FY2024, representing a year-over-year increase of approximately 5% [8] - Annual recurring revenue (ARR) reached $20.4 million, a 23% increase year-over-year [9] - Gross margin improved to 49.5%, a 430 basis point increase compared to the prior year [12] - Net income was $216,000 or $0.01 per diluted share, compared to $76,000 in the prior year [15] Business Line Data and Key Metrics Changes - Platform subscription revenue increased by 22% to $4.8 million, driven by growth in both B2B and B2C segments [8] - Transaction revenue decreased to $7.8 million from $8.2 million in the prior year, a decline of 4% [11] - B2B ARR grew by $736,000, marking a record for the company in a single quarter [10] Market Data and Key Metrics Changes - The total active customer count decreased to 1,380 from 1,426 year-over-year [12] - The company noted that budget cuts in government and academic institutions have not yet materially impacted churn or the sales pipeline [33] Company Strategy and Development Direction - The company is focusing on building a professional sales and marketing team as a cornerstone of its value creation strategy [21] - AI-based products are central to the company's strategy, with significant growth reported in the B2B enterprise license segment, which saw an 80% increase year-over-year [5][24] - The company aims to continue shifting its revenue mix towards higher-margin SaaS revenue [19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ongoing investments in sales and marketing, which are expected to yield predictable growth [41] - The company anticipates a strong finish to the fiscal year, despite potential declines in transaction revenue [19] - Management is closely monitoring the impact of budget cuts on academic library budgets but views it as an opportunity for their pay-as-you-go model [37] Other Important Information - Adjusted EBITDA reached a record $1.4 million, compared to $961,000 in the prior year, with a trailing twelve-month adjusted EBITDA margin of 10.4% [17] - Cash flow from operations for the quarter was approximately $2.9 million, up from $2 million in the prior year [18] Q&A Session Summary Question: Thoughts on shifting gears in sales and marketing to drive faster growth - Management indicated that investments in sales and marketing are aimed at creating a predictable model for customer acquisition and growth [41] Question: How AI can streamline operations and lower costs - Management acknowledged the potential of AI to enhance productivity and indicated plans to focus on utilizing AI for R&D and software engineering [47] Question: Performance of new logo versus cross-sell teams - New logo teams performed well, contributing over half of total new bookings, with strong performance noted in both corporate and academic segments [54]