Research Solutions(US:RSSS)2024-11-16 14:32Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $12 million, a 20% increase from Q1 2024 [11] - Platform subscription revenue increased 67% to $4.3 million, driven by the acquisition of Scite [11] - Net income for the quarter was $669,000 or $0.02 per diluted share, compared to a net loss of $988,000 or negative $0.04 per share in the prior year quarter [18] - Adjusted EBITDA for the quarter was $1.3 million, a margin of 10.6%, compared to negative $441,000 in the year-ago quarter [18] - Cash and cash equivalents as of September 30, 2024, was $6.9 million, up from $6.1 million on June 30, 2024 [19] Business Line Data and Key Metrics Changes - Annual Recurring Revenue (ARR) reached $17.6 million, up 60% year-over-year, with B2B contributing $12.2 million and B2C contributing $5.4 million [12] - Transaction revenue for Q1 was $7.7 million, a 3.4% increase from the prior year quarter [14] - Gross margin for the Platforms business was 87.4%, a 210 basis point increase compared to the prior year quarter [15] - Gross margin in the Transaction business increased 140 basis points to 25.7% [16] Market Data and Key Metrics Changes - The total active customer count for the quarter was 1,390, slightly down from 1,395 in the same period a year ago [14] - Higher-than-expected noncontrollable churn was driven primarily by customer acquisitions and business closures, with over half of the churn attributed to these factors [9] Company Strategy and Development Direction - The company is focusing on enhancing its SaaS and AI capabilities, particularly through the integration of Scite and Article Galaxy products [28] - The management is optimistic about M&A opportunities as valuations are coming down, and they are evaluating businesses that fit their product strategy [24] - The new Chief Revenue Officer is expected to improve sales processes and accountability within the organization [23] Management's Comments on Operating Environment and Future Outlook - Management noted that deployments and incremental ARR were lower than average due to seasonality and longer sales cycles [7] - There is optimism for a rebound in B2C subscriptions as the academic semester begins, with B2C ARR growth expected to be strong in Q2 [13] - The company anticipates a sequential decline in adjusted EBITDA for Q2 but expects strong performance in Q3 and Q4 [21] Other Important Information - The company has generated over $5.1 million in cash flow from operations over the last 12 months, indicating strong earnings quality [20] - The management is focused on improving sales execution and managing churn effectively [45] Q&A Session Summary Question: What caused the decrease in Platform costs? - Management indicated that labor was removed and hosting costs were reworked, leading to a sustainable reduction in costs [32] Question: What are the expectations for M&A valuations? - Management noted that inbound inquiries have increased due to their reputation in the industry, and they are looking for acquisitions that enhance product strategy and offer cross-selling opportunities [36][38] Question: What drove the lower deployments despite the new logo team hitting targets? - The management explained that seasonality, underperformance by the upsell team, and increased churn affected deployments [41][43] Question: What are the priorities for the new Chief Revenue Officer? - The new CRO will focus on learning the business, implementing standardized training, and improving sales execution [46][48] Question: How is Resolute AI performing? - Management acknowledged that Resolute AI is underperforming but sees value in its databases and is pivoting efforts towards more successful products like Scite and Article Galaxy [58] Question: What is the competitive environment like for corporate customers? - Management reported a decrease in churn to competitors but noted challenges with customers reducing budgets or going out of business [68][70]